India’s outsourcing industry is pegged at $150 billion and has been hailed as an engine of job creation and plays a key role in driving the economy to greater heights. The trajectory of growth started around the year 2000 and led to the country building capabilities in the areas of Information Technology (IT), Business Process Outsourcing (BPO) and Engineering Services Outsourcing (ESO). This presented India with a natural and acquired advantage in terms of talent availability, putting it on the global map as a destination for high-quality and competitive technology skills.
Today, the Indian ESO sector is well-poised to shift away from the traditional back-office services to more high-end technology work and serve growing sectors such as the global Aerospace & Defence (A&D) industry.
Strengths and Opportunities Galore There are some key strengths that India inherently possesses as a potential growth destination of high-end engineering services. At the top of the list is the widespread availability of a highly skilled talent pool. While India has the highest volume of diverse, employable talent (the country currently boast of over six million graduates, with over 3.7 million being a part of the IT-BPM industry in FY16), the data from the US Labour Department shows shortage of talented and skilled professionals with as many as 2.4 million STEM jobs expected to remain vacant till 2018.
Also, with India being the IT hub of the globe, the country has been able to successfully blend IT knowledge with engineering know-how to drive digital transformation across industries making the country the world’s fastest growing ‘digital hub’. Growing internet penetration and mainstream adoption of frontier technologies such as artificial intelligence, machine learning, robotics, automation and virtual reality, has paved way for further development of the ESO sector by going up the value chain. By virtue of serving the IT and ESO sector, several mid-sized companies have also equipped themselves with industry-aligned processes required for a seamless and good quality of service to the industry.
Taking into cognizance the global A&D industry, which is facing mounting challenges today, ranging from talent shortages to offset requirements and cost pressures, it is not only the best opportunity but also the need of the hour for Indian ESO sector to upskill and move up the value chain to play an active role in helping the industry meet its target without compensating on quality, delivery and service timelines to the end customer.
Also, with India’s focus on achieving self-reliance and indigenisation through initiatives like Make in India, which aims to make the country a global design and manufacturing hub, the opportunity for the ESO sector is as much domestic as it is global.
Some Challenges, Nevertheless
Along with quite a few strengths, India faces substantial challenges as well. Rapidly evolving technology needs, Brexit, changes in immigration and visa norms and the rise of protectionism has lent an air of uncertainty to the growth potential of the sector.
Perhaps, another critical concern for multinationals is to have well-defined policies around Export Control Clearance to and from India, the lack of which constrict the flow of leading technologies to India.
Infrastructure continues to hamper the sector’s growth. While India has been able to develop good IT infrastructure at par with global needs, the country still lags when compared to other key Asian countries in areas such as speed and cost of Internet access, physical infrastructure as well as telecom infrastructure. Smaller countries like Thailand, Malaysia, and Singapore are well ahead of the game.
Driving Greater Growth
Growth of the engineering services outsourcing sector is also linked to investments in other sectors such as power, infrastructure, automobile and auto components. A higher expenditure across areas like component manufacturing, establishment of system and sub-system assembly lines through Transfer of Production and Transfer of Technology, development of MRO/refurbishment centers could further boost the growth of the sector.
Furthermore, today the scope of engineering services has expanded to include a broad range of new product development, value engineering and product support functions.
This changing role of engineering service providers is driving the industry’s growth substantially. This strength can also be leveraged for driving high-end engineering services across new growth sectors like Aerospace and Defence, Computing Systems, Energy, Infrastructure, Industrial Automation and Medical Devices, to name a few.
For India to drive greater growth for high-end engineering services, it needs to bring all key stakeholders including government, academia and industry together on one platform. The need of the hour is to create competitive advantage by going up the value chain and building an ecosystem with highly-skilled and employable talent, world-class infrastructure and increased investments across key growth industries. Venturing into unexplored geographies, building core innovation capabilities and adopting changing technologies such as Cloud, AI and IoT are also expected to drive growth in the sector.
- By Dr. Kurichi Kumar, Head of Engineering, Rolls-Royce India
The thoughts and opinions shared here are of the author.
Check out our end of season subscription discounts with a Moneycontrol pro subscription absolutely free. Use code EOSO2021. Click here for details.