Engineering services refer to the creation of a new product or processes. This includes designing equipment, infrastructure and processes involved in manufacturing these kinds of products or services.rder for companies to remain competitive they must be dynamic and open to change. Engineering-services outsourcing has doubled since the 1980s from scanning and digitization of drawings to new product development, valued engineering and engineering consulting.

Engineering-services outsourcing is a large market. The spending on engineering services reached $750 billion in 2004, and is projected to increase to $1.1 trillion by 2020. Engineering is already being done on a global basis, like many other business functions.

Thirty-six percent of companies surveyed by Booz Allen Hamilton and Duke University’s Center for International Business Education and Research sent some of their engineering offshore, while 31% offshored some Research and Development (R&D) and 16% outsourced a portion of their product design.

The competition for these advantageous opportunities is expected to be fierce among Asian countries, especially between India and China. Previously, companies focused on cost reduction by offshoring lower-value business services. Now, decisions about locating engineering capabilities will turn to strategic drivers to access growing markets and an expanded pool of skilled labor. This will help increase productivity on the whole. Locating engineering services in emerging markets also provides access to a growing market of customers, and can decrease time to market.

For example, in the automotive sector companies such as GM use offshoring as a strategic tool to help reduce overall costs. Companies such as Toyota, on the other hand, view the globalization of product development as a way to help open new markets and boost overall productivity and quality. This strategic view is expected to become more popular as a reason for outsourcing in the future. Executives in many industries are starting to believe that sending product development offshore is a smart way to reduce the price tag of creating new products. In turn there is an increased speed to market and an addition to the total quantity of innovation.

Looking at the market today, the cost differential between professionals in both advanced and developing countries is declining. Wages for highly skilled professionals are rising in most of the emerging markets. This is important as it highlights the fact that outsourcing vendors will have to compete without a drastic cost advantage against service providers in other low-cost countries and with countries such as the U.S.A., Germany and Japan.

There are some similarities between engineering-services outsourcing, ITO and BPO; however, engineering-services outsourcing requires highly specialized talent pool. Therefore, increasing the number of engineers to deal with a problem is not a solution. For example, an aeronautics engineer has a different kind of expertise than an automotive engineer, and neither would be able to aid in the designing of a utility plant. Thus, vendors must develop programs around the needs of particular sectors, and planners will have to correctly anticipate what kinds of expertise will be needed most.

Global spending on engineering services has been growing at an increasingly fast pace in order to keep up with the augmented emphasis on new product development and innovation. The high consumption of engineering services is a function of growing demand, higher number of engineered parts (for example, electronics in cars, products to improve safety in the automotive and aerospace sectors) and a consumer base with ever more demanding consumers.

The engineering-services market can be broadly divided into five sectors: Automotive, Aerospace, Hi-Tech/Telecom, Utilities and Construction/Industrial. These sectors together represent a high percentage of the funds spent on global engineering.

Automotive engineering encompasses the designing, manufacturing, operation and maintenance of automobiles, buses and trucks and their respective engineering subsystems. Some of the top cities for automotive engineering outsourcing are:

Aerospace engineering includes research, design, production, manufacturing and operation of aircraft, spacecraft, aerospace equipment, satellites and missiles. This sector can be sub-divided into defense, engine, avionics and structure. Some of the cities that are superior for aerospace engineering outsourcing are: