India's next big job grab: Engineering services

But this time it might not be so easy to offshore

India's tech companies, interested in capitalizing on their success in drawing IT outsourcing business from US and other Western companies, are examining what they need to do to capture a broader range of the engineering services business.

The National Association of Software and Service Companies in Delhi, India's leading IT trade group, commissioned a study by Booz Allen Hamilton, the US-based consulting firm, to examine the country's potential to gain a larger share of the offshore engineering services business, going beyond software engineering to a swath of industries, including automotive, aerospace, utilities, construction and industrial.

The Booz Allen report is almost breathless in describing India's potential to provide engineering services, but it also details two problems the country has to address to make it happen: the quality of its infrastructure, including ports, roads, airports and telecom, and the quality of its education.

"A new window of opportunity is opening now for India," wrote Booz Allen, of the engineering services market.

Worldwide, about US$750 billion is spent on engineering services, the report said, and the figure is expected to reach $1 trillion by 2020. Of the amount now spent on engineering services, only $10 billion to $15 billion is done by offshore vendors, with India getting about 12 per cent of that offshored work, according to the report.

Today, about 35,000 engineers in India work in engineering services, but by 2020, the country may need as many as 250,000 to reach its potential as an engineering services provider, the report said.

Vikas Sehgal, a partner at Booz Allen, said the need for offshore engineering services in India will be driven by demand for people with these skills. In Europe, and in Germany and France, in particular, aging workers and attrition are creating a gap in available engineering skills, he said. This is happening at the same time that companies need more engineers to build products, even as productivity tools improve, he said.

For instance, Sehgal said it takes more engineering time today then it did a decade go to build a car because of increasing complexity and electronics, pointing out there are "more electronics in a toy car today than a reasonably good car had in the 1990s."

Although India and China, for that matter, are often said to be outproducing the US in engineering talent, the up-close picture produces a different set of results. The Booz Allen report points out that "although India has almost 1,400 engineering schools, only a handful of schools are recognized as providing a world-class education." Moreover, "interviews with vendors suggest that recruiters consider candidates from only a fraction of these schools."

Although India was producing 220,000 engineers with bachelor degrees in 2005-06 compared with 129,000 in the same year in the US, a recent study in the Journal of Engineering Education found it is not an apples-to-apples comparison when the quality of the graduates are considered.

Similar to the point raised by Booz Allen, the journal notes that despite the higher numbers of engineering graduates in India, "many large companies complain of difficulty in finding qualified graduates."

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