Engg design,a $20-bn break

Economic Times, Mumbai , February 17
The hype about engineering design services is taking centrestage if the conclusion of a panel discussion on day two of the Nasscom Leadership Summit '06 is any indication. There's talk about a more than $10-$20bn opportunity in India.

BVR Mohan Reddy, chairman & MD, Infotech Enterprises, said that the engineering technology (ET) outsourcing segment is a fairly big market, though he didn't talk about numbers. However, in the next 3-5 years, Mr Reddy said, $10-20bn of ET would be outsourced to India against $3.5bn currently. Mr Reddy's company has been working with Booz Allen Hamilton for the past 8-12 weeks to work out the details of outsourcing.

Ketan Bakshi, founder & MD of Neilsoft, said that the high investment level in R&D is a big challenge "so companies should partner and put in place high-class labs". This will fuel growth. However, Christopher Disher, partner, offshoring advisory services, Booz Allen Hamilton, said companies spend about $700bn globally on R&D.

Kaushal Aggarwal, executive V-P, Avendus, said engineering services should be included in the outsourcing definition. "I believe that anything that can be engineered in the world, can be engine-ered out of India." He identified change in existing business models as a priority area to cut costs. Currently, the cost of one seat in ET outsourcing is 5-6 times higher than in the software sector.

Steve Torok, partner, offshoring advisory services, Booz Allen Hamilton, said that risk and quality are two issues that companies need to address before they take work from the client because in this field, a small error could put the company out of the market. Wilfred Aulbur, MD & CEO, DaimlerChrysler, which has an R&D office in Bangalore and a sales & marketing office in Pune, said that companies outsourcing work to India are under pressure due to falling margins and changing customer behaviour - customers want variety without letting R&D costs going up.

Ravi Gopinath , VP, engineering & industrial services, TCS, said Indian companies should also look at moving from outsourcing to product development as the envelop expands further. This would be possible if Indian companies learn global practices and apply them here. V Sumantran, consultant advisor, said this was a small market so companies should specialise heavily in order to stand out of the global crowd.