With the airline industry continuing to struggle, aircraft manufacturers such as The Boeing and Airbus are expecting to cut costs by sending some of their software development and engineering work offshore.
Increasingly, offshore providers realize that they must cater to vertical market segments, and establish more technical expertise in areas such as aerospace, telecommunications, and oil and gas. Recent moves by Indian IT providers such as Tata Consultancy Services and Wipro Technologies underscore the trend.
Tata, which offers specialized services for 11 vertical industries, which include banking, energy and utilities and insurance markets, is adding one more vertical market to its roster. Earlier this month, Tata announced a partnership with India's state-run National Aerospace Laboratories to develop the expertise needed to service the aerospace industry.
The two organizations say they will jointly offer services for aerospace firms, which include design, testing and advanced computer-aided technologies. In addition, Tata last week announced the launch of its Flosolver Mk6, a parallel-computing Xeon-based machine that runs Linux and specifically is designed to support aerospace applications.
Tata executives say they see growing demand for services and technologies in the global aerospace community.
Evidence of that came earlier this month when Indian IT services firm HCL Technologies announced a multiyear, multimillion dollar contract to provide software and hardware development services to Boeing for its new 787 Dreamliner project.
Aerospace has been a key vertical market for HCL since the late 1990s, but the deal with Boeing illustrates the move into more critical IT projects. Under the agreement, HCL will provide a hosting platform for Boeing's flight test computing system, and software development services to Boeing and its Tier 1 partners.
"If you examine ... the tumult of airlines at the present time, it's no wonder that members of the supply chain are adversely affected," says Dane Anderson, program director, technology research services, at Meta Group.
He says by looking offshore -- and pinpointing what areas of IT can best be offloaded -- aerospace firms can increase cost efficiencies.
"As airlines continue to struggle with managing cost on a day-to-day basis, elements supporting the airlines need to do so, as well," he says.
Indeed, results of a Merrill Lynch & Co survey of 50 CIOs in December found that a key driver for moving jobs offshore is the expected cost savings. According to the survey, more than half of the CIOs polled said they expected to see between 25 percent and 49 percent cost savings as a result of moving jobs offshore.
In order to respond to the demand for more advanced services, IT firms have to step up their vertical market expertise. For example, Wipro Technologies earlier this month announced a partnership with TestQuest to provide test automation services for Wipro's growing customer base in the wireless and mobile industry.