Engineering Design Sector, the Second Sunrise for Indian Inc.!!

Oflate one attention grabber was there in almost every news source and it made me tinkle for a while, before I came up with this article, on this theme. Be it ABB, Quantech, Schneider or EFI related news items; all were singing only one tune in accord. The crux of the symphony was only one: Engineering service- product design will give India a remarkable boost only second to the one given by IT sector. Let’s get into juicy details to find out what exactly is into store.

The Vignette, under gaze

Indian Engineering services-design segment had started showing promises since last few years. Flood gates to the field were pushed open by the MNCs, majorly from automobile sector, with establishing their product design facilities into India in late nineties. The drift was devotedly followed later on by design service providing outfits like Quantech Global services Ltd, EASi and Plexion Technologies etc.

The global engineering services market is currently estimated to be around whooping USD 7 Bn to 15 Bn, the major chunk (USD 5 Bn-10 Bn) of which is from automobile related services. Roughly USD 0.05 Bn to 0.1Bn is spent on yearly basis by global players in these budding services, creating enormous opportunities to service providing firms mentioned above. The general trend seen in companies from Automobile, Aerospace and Industrial machinery field is to contribute 2.5 to 6% of revenues to R&D. Out of which almost 25 to 40% will be directed purely to the domain of design.

Observation under Magnifying glass reveals Source: www.economictimes.com

The most of the firms are divulging the same reasons behind the move of getting into India for engineering services-design. The vital ones are:

Promising market growth is predicted in Asian region (India-China etc.)

By having foothold in India the company is moving closer to the consumers so as to identify the pulse of the market quickly and correctly in order to make full use of it.

Easy access to the cheaper local intellect, i.e. USD 25-30 /man-hr, which is quite cheap when compared to rates prevalent in other developed countries including USA it self.

India, as a Regional Marketing Hub, is suitable for most of MNCs, which use quick model of "DESIGN–-- DEVELOP –- MARKET".

India is now at par with global standards, as far as medium of communication infrastructure is concerned, hence players entering India would only be benefited by doing so.

Well known manufacturing giants like Schneider, EFI and ABB as well as the service providers like Altair and Quantech both are blowing their balloons in terms of human assets, which is perhaps the most vital resource in the engineering design area. The expected growth in the work force over approaching few years is really triggering. The apex of this list is captured by US-based product design consulting and technology company, Altair Engineering. The company's probable growth in work force over next few year is mindboggling 400%. Asean Brown Boveri or rather more known name ABB is the second on the list by announcing its workforce expansion plan which involves a growth of around 300 % over the coming three years. Quantech would n’t miss the second position and would raise its head count by 250 % and at the trail Schneider, a German MNC, would be adding around 200 % headcounts over next 2 years for its Indian operation of product design. Lastly another international business gun, EFI would raise its headcount by 50 % within next year. So the undisputed conclusion could be drawn: the area of engineering services (design) is rising with high-speed and will prolong the growth rate for the coming few years at least. This elaboration is also assisted by a graphical representation in FIG 1.

Elite list

Service Providers (India) Source: Company websites

Company / Area of expertise

TCS, Tata Technologies: Aerospace, Automobile, Industrial machinery etc.

Satyam, Rolta, QuEST: Auto mobile, Aerospace, Power generation etc.

Infosys (2-4% of revenue from Engg segment): Auto mobile, Aerospace, Heavy Engg, Architecture, Engineering & Construction (AEC)

HCL Technologies & Infotech enterprises (43% revenue from Engg segment): Automobile, Aerospace, Machine tools and Industrial machinery

Axis: Heavy machinery and Automobiles

Pelorous: Automobile, Aerospace

Geometric & Virtuale3D: Mechanical design & mfg. segment

Idola fori: Aerospace, Automobile, Heavy Engg & Consumer Durables

ECAD: Electrical & Electronic sector

Onwards (81% revenue from design segment): Automobile, Toys, General Engg industry

Quantech: Automobile

Companies Owning Design centers (India)

Emerson: Power generation and distribution equipment design

G E: Industrial systems, Human machine interfacing

Schneider: Electromechanical design, electronic design (digital and analog)

Caterpillar: Construction equipment design

Electronics For Imaging (EFI): Printing Industry

ABB: Software development and industrial information technology

Ford: CAD, CAM

Bright side, Outsourcing is the mantra Source: www.avendus.com

Major design Areas:

1) Aerospace

-> 1.5- 2% design spend *

-> 39 % outsourceable #

2) Automobile

-> 1.5% design spend *

-> 33-45 % outsourceable #

3) Electrical & Electronics

-> 1.5% design spend *

-> 40 % outsourceable #

4) Others

-> 1-2 % design spend *

-> 35-40 % outsourceable

* % of total revenue, # % of total design spend.

To sum it up, it can be said that engineering services segment is into process of becoming land of hope for BRAND INDIA. India as a brand- a brand famous for its knowledge enriched human assets- would ride high on cloud number-9 like Bryan Adams must have felt with those lines from his famous song through this kind of growth from various promising segments of service sector.