Engineering service outsourcing
Product safety certification facilitates Engineering Service Outsourcing companies to comply with various product standards throughout the design life cycle
Apple had just invented the innovative iPod to revolutionize the personal music players. To consolidate its position further in the market, Apple planned to unwire its iPod to make it more user-friendly with wireless headsets and earphones. It shopped around the world and zeroed in on an unknown firm that specialized in Bluetooth technology in Bangalore. The company Impulsesoft not only executed the job to perfection, but drew the attention of Original Equipment Manufacturers (OEMs), particularly in software and hardware design for portable devices. The phenomenal growth of this private firm led to its acquisition by Nasdaq-listed SiRF Technology (now a company owned by Cambridge Silicon Radio). Impulsesoft’s wireless technology is found in most of the portable personal devices these days. Impulsesoft is just one of the unheralded successes of India’s engineering services prowess.
Today, several Indian IT companies are engaged in high-end outsourced engineering services. Be it designing the landing gear for some of the latest commercial aircraft or advanced anti-collision technology, most of the work – from design stage to execution – is happening in India. Some of the large and small IT companies are looking at engineering services as one of the major revenue streams. Consequently, today, engineering services are at the same inflexion point as the IT management systems were in the 90s.
A combination of large pool of engineering talent, a competitive engineering ecosystem and drive for innovation among Indian companies has played a crucial role in India garnering a significant share of the global outsourced engineering services. Large MNCs, particularly those in the hardware and semiconductor domains, have realized the potential of India’s engineering services coupled with the low cost of development. As a consequence, a number of MNCs have either set up captive centers in India for their engineering services or have outsourced projects to third party service providers.
According to Nasscom, the premier trade body of IT-BPO industries, the next wave of outsourcing to India will be engineering services. The Nasscom-Booz Allen Hamilton (BAH) Study report reveals that the spending on engineering services in India is expected to reach USD 1.1 trillion by 2020. Engineering services is considered a highly fragmented market in India at present with the Automotive sector accounting for 19 per cent, Aerospace at 9 per cent and Utilities at 4 per cent. The other domains in engineering services include Construction and Industrial Machinery, Telecom, Industrial and Farm Equipment and other high-tech industries.
Automotive sector
The Indian IT companies have already started working on some of the most complex engineering design. Nasscom notes that Automotive sector holds a lot of promise with Indian companies managing such critical engineering services as electronic systems, green technology and safety to reduce the manufacturing cost in the developed nations. Further, high-end design services for engine systems, body electronics and air conditioning are being carried out right here in India. Some of these technologies have not even been adopted by the Indian manufacturers, but Indian IT companies have already mastered the technology.
Global auto majors like General Motors, BMW, Toyota and Ford Motors have outsourced a large chunk of their engineering work to Indian companies. IT behemoth TCS even won a contract from Ferrari to take part in the design of the F1 car. A large number of Indian IT companies are focusing on Automotive sector for growth as worldwide economic recession has forced automobile companies to come out with cost-effective and viable models for the mass market. There is a huge opportunity waiting for Indian IT companies. According to Nasscom, Automotive sector alone is expected to account for USD 8 billion of outsourced engineering services by 2020 in India.
Aerospace & defence sector
Aerospace and Defence is considered the sunrise sector of the engineering services outsourcing. Initially, Indian companies handled low-end work like testing, validation and design services. But in the last two-three years, the complexity of the projects has increased. As engineering services continue to mature, high-end work is being outsourced to India. Now, Indian companies are working on large projects for major aircraft manufacturers. They range from engine control system to simulation, cockpit support software and composite structuring. More than 10 companies active in the Aerospace and Defence sector have set up captive centers to handle their engineering services in India. Top firms like Boeing, Airbus Industrie, Northrop Grumman, Raytheon, Pratt & Whitney and BEA have signed outsourcing deals with Indian companies for engineering services. Nasscom predicts this particular sector to touch USD 11 billion by 2020.
Traditional HI-TECH industry
Another sector in engineering services that is fast gaining a significant market share is the traditional high tech industry encompassing consumer electronics, semiconductors and telecommunications. In this sector, the time-to-market for products is faster. Consequently, more and more of engineering services are being pushed into India due to the cost advantage. According to Nasscom, the potential market for this category of engineering services is tipped to be around USD 14-18 billion by 2020.
The Utilities and Construction sector worldwide is also looking at India to outsource engineering services such as structural design, construction engineering, architecture services, drawings, visualizations, and infrastructure design. Though the appropriate market size for this sector is not available, the Nasscom-BAH study points out that this is an important sector that can expand quickly. Many Indian companies have already started this particular engineering service.
The road ahead
India is on the right path to take advantage of the increased outsourcing of engineering services to expand their business. With this impressive growth rate, India is expected to gain a significant share (about 25 per cent) of the worldwide engineering services outsourcing market or USD 40 billion by 2020. The figure currently stands at USD 15 billion or 12 per cent of the worldwide market.
An estimated 35,000 engineers are engaged in outsourced engineering services in India at present. This number is expected to increase three times over the next five years as a vast pool of engineering talent will enter the market from educational institutes. India already has an edge over China and Russia in engineering services because of the number of engineers involved in complex projects. If India has to maintain this critical edge over its competitors to garner a significant share of the worldwide outsourced engineering services, it has to overcome a few critical challenges. Some of them include improving the domain expertise, strengthening the ecosystem for engineering services, improving the quality of the work force, and aligning government priorities with business development. These have to be taken up on a long-term basis and also at the institutional level. But a major paradigm shift is also necessary if the IT companies have to fully utilize the benefits of the outsourced engineering design services.
Partners in progress
The true potential of global outsourced engineering services can only be leveraged by transforming from a global sourcing company to a global partnership mindset where business value or strategy in setting up a partnership plays an overarching role over the pure cost benefits for multiple benefits. For instance, it has been observed that at the end of the design cycle for most of the projects that are outsourced to India, there has been increased requirements from end customers based in US, Europe and other parts of the world for testing and validation (EMC, Safety, Performance) and Product Certifications, which involves obtaining marks such as UL, CE, FCC, GS, CTick etc. This is an area that has not been addressed effectively by the Indian IT companies engaged in engineering services.
Therefore, it becomes imperative for Indian companies to partner with agencies that specialize in product safety certification as they help Engineering Service Outsourcing companies comply with various product standards throughout the design life cycle. At the same time, such partnerships help Indian IT companies to access new markets and tap business opportunities for growth. As Product Certification becomes an industry standard, Indian IT companies can opt for such certifications to score over competitors from others geographies.
One of the agencies that specialize in product safety certification is Underwriters’ Laboratories (UL). The agency helps identify most common construction pitfalls and/or historical test problems; offers design consultancy from concept stage to final certifications; tests products to various standards be it safety, performance or EMC; provides Preliminary Investigation Services to identify gaps in product in various stages of product life cycle such as board design, pro-types etc. All these are critical for engineering services in Automotive, Aerospace & Defence, Traditional Hi-Tech Industry and other growing sectors. Indian IT companies have to take the lead in engaging product certification agencies to become partners in progress. Joint efforts will be critical for the Indian companies providing outsourced engineering services to achieve their business goals.
About UL:
Underwriters Laboratories (UL) is an independent product safety certification organization that has been testing products and writing Standards for Safety for over a century. UL evaluates more than 19,000 types of products, components, materials and systems annually with 20 billion UL Marks appearing on 72,000 manufacturers’ products each year. UL’s worldwide family of companies and network of service providers includes 64 laboratory, testing and certification facilities serving customers in 99 countries.
For more information, visit: www.ul.com
