Indian IT industry has an opportunity to grab $40 billion opportunity from offshoring of engineering services, according to a recent study “Globalization of Engineering Services - the Next Frontier for India” by Indian IT trade body, Nasscom, and management consulting firm Booz Allen Hamilton.
The total offshore engineering spend is expected to grow to $150 - $225 billion by the year 2020, and India with its talent pool and existing experience in engineering services, is well suited to realize 25% of this opportunity.
Spending on engineering services was $750 billion in 2004 and is projected to increase to $1.1 trillion by 2020. The report also indicates that the market is highly fragmented by industry with Automotive at 19%, Aerospace at 8% and Utilities at 3% in 2004. High-Tech / Telecom is the dominant and fastest growing sector, with 30% of the market, and the traditional engineering powerhouses - USA, Germany and Japan have a lead in engineering spend.
As per the report, India enjoys a relatively strong position in the automotive and high-tech / telecom engineering services market with a US $25 billion opportunity by 2020. Aerospace offers the greatest potential for expansion - though it is also one of the toughest opportunities to tap because of its close association with the defense sector.
Locating engineering services in emerging markets also provides access to a growing market of customers, and can decrease time to market. While in FY05, only $10-15 billion of engineering services was offshored, the market is expected to grow to $150 - 225 billion by 2020.
India’s current share of the offshored engineering services market is about 12% - relatively small as compared to its information technology and business process outsourcing sectors: The study also found that India is well-positioned to increase its market share of engineering offshoring from 12% to 30% by 2020.
Report further states that engineering offshoring could help create 150,000-200,000 additional jobs - up to 1,000,000 with multiplier effect.
