Globalisation Of $1.1Trillion Engineering Services - How much India can bite?

NASSCOM, National Association of Software and Service Companies (of India) and management consulting firm Booz Allen Hamilton,  released some of the key findings of a study “Globalisation of Engineering Services – the Next Frontier for India”, that assess the evolution of the engineering market between 2005 and 2020.  The report estimates that an additional US$ 40 billion opportunity for the Indian IT industry by 2020, from offshoring of engineering services alone. The report also suggested some strategies for success in realizing the dream. 

While it is a great outlook, it can be only a positive and highly optimistic estimation. We have some serious roadblocks to be cleared to realize any considerable portion of that $40B. Here are few serious challenges, in my opinion that might spoil the dream, if not taken care of with right strategy and in time:

  • Narrowed Focus: All the top IT/ITes companies in India have been heavily focusing on North American market alone. It will be a bigger challenge and a big question whether Indian IT companies can keep up the momentum in European, Asian and domestic markets. 'English speaking community' will not be an advantage too. Many European countries have been very successful in the recent months and gaining momentum in providing IT/ITes. Recent win by IBM to provide Telecom services to India's larget private mobile operator Bharti does not look good many aspects and raises serious concerns of strategy employed by Indian IT firms.

  • Infrastructure: There were heated debates and serious accusations about the problem with infrastructure and how to fix it. But there was no concrete strategy or commitment demonstrated from corporate India and Government alike. Key hurdles will be roads, electricity and political instability.

    • Most parts of India, including metros and big cities have no plans of building enough roads to take the rising traffic, owing to setup of new companies and migration of skilled workforce towards these islands of prosperity. The silicon valley of India, Bangalore already turned out be to a nightmare for daily commuting. Anybody who visited Bangalore recently can vouch for it.

    • The backbone of Indian Economy, the Agriculture sector is getting only 13 hours of electricity per day in the best part of the year. In summer, it is just around 8 hours. There are no plans or efforts to meet the demands of electricity YET.

    • The commitment of the Government is highly doubtful towards building infrastructure. The priorities have been seriously misaligned.  Corruption, instability and lack of clear strategy can cripple any efforts and prevent from doing any thing rational and strong that truly serve a common purpose than their own political gains.

    • The new face of the economy of India, the corporate, have been only vocal regarding building infrastructure; no corporate is YET ready to contribute towards building infrastructure. They are very busy in grabbing the real estate from government.

  • Brain drain in Engineering Services to Software: Most, if not all graduates from Engineering disciplines have joined the IT bandwagon and ignored their Engineering disciplines. So it will be quite difficult to get the same momentum and impetus that has been received by Software services in other Engineering services particularly in Auto/Aerospace, Telecom and manufacturing. Paradoxically, Indian Engineers have less Engineering services skills than Software.

  • Sustainable Growth Ecosystem: Barring the top 5 IT services companies, India has very few successful software services companies that made their mark. And particularly in Engineering services, the scene is more disappointing.  Recently we have been witnessing excellent momentum in terms of Startups and Entrepreneurs that are firing all cylinders to make the 'Made in India' a true brand. While the momentum and spirits are high and very promising, the number is still very small. We need more small businesses and entrepreneurs to create the 'Made in India' brand. 

  • Dilution of India Brand: Every major firm in Software, Aerospace, Automobile and Engineering services sectors have already had their R&D offices setup in India and have been increasing the man power at exponential rates. And these outfits are set to eat a bigger portion of those $40B competing directly with India' owned companies. While one may argue that India is anyway benefiting from it, irrespective of who gets is (India's own IT or India office of global firms), it will not do any good in the long run to the image and brand. These R&D offices are still will be seen as extensions to thier respective corporate offices elsewhere, than true Indian outfits.

Read full NASSCOM press release for more on the key findings of the study.

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