BANGALORE: At a time when revenues from application development and maintenance are shrinking, Indian tech firms are seeing newer opportunities emerge from engineering services outsourcing (ESO) market, estimated to be worth around $1.8 billion today and expected to reach $50 billion by 2020 for the country.
Tech companies such as TCS, Quest Global, Infotech Enterprises and Tata Technologies are finding new opportunities , because their top customers including Airbus, Boeing, Bombardier and EADS are changing their business models to cut costs with more outsourcing , bring in new risk-sharing partners and get closer to growing markets such as India and China.
Besides increase in volume from aerospace customers, these companies are seeing growth in number of customers from life sciences, healthcare and energy conservation verticals.
“We believe that the recent structural changes in the automotive industry will drive increased demand for ESO, and specifically outsourcing to India,” says Tata Technologies president and global COO Warren Harris. The company is in the process of securing a full vehicle programme for a major Asia-Pacific automotive OEM, “which will be a first for an Indian ESO provider,” according to Mr Harris.
Frost and Sullivan’s automotive and transportation senior director VG Ramakrishnan said that companies from Europe and US are looking to increase their activity in India because of cost arbitrage and talent. “The cost arbitrage is like $25 per hour in India and $75 per hour in US. The value of contracts that will come to India typically start from Rs 200- Rs 300 crore” .
“India can expect to win about 25% of this offshore engineering spend, about $50 billion due to various reasons, like availability of skilled and trained English speaking manpower, cost advantages, excellent offshore management processes,” says Quest Global chief marketing officer Bejoy George. “We expect to cross $100 million in revenues this current year,” said Mr George.
Infotech Enterprises is eyeing opportunities in the auto-sector , rail transportation, heavy engineering, oil and gas. “We are seeing new work coming to us in auto sector for fuel-efficient cars, clean technology-based engines for aerospace, developing medical electronic devices,” said Infotech Enterprises chairman BVR Mohan Reddy.