Pareekh, how do you see this market evolving and what are the key drivers for engineering services?<\/strong><\/span><\/p>\nEngineering services outsourcing, over the last decade, has evolved from simple drawing and drafting to complex end-to-end product design. Now an enterprise which wants to enter a new market segment can partner with some leading engineering service providers, that can not only deliver complete new product design but that can even collaborate with manufacturing partners for additional benefits. Some engineering service providers are also collaborating on high-end R&D projects with the world’s leading research institutions and filing patents both on behalf of their customers and the service provider.<\/p>\n
We have observed six key demand-side drivers transforming the engineering services outsourcing market. First, product life cycles are getting shorter which means more product design work and faster time-to-market requirements for enterprises. Second, enterprises are looking to adjacent markets for growth but rather than do it all themselves they are partnering with engineering service providers. Third, enterprises are entering emerging markets and leveraging engineering service providers to do value engineering and to develop frugal versions of the enterprises’ products that can compete at the different price points in these markets. Fourth, the long tail of products created when technology companies merge (and they wish to maintain all existing revenue streams) is increasing the demand for the external help to manage the lifecycle management requirements of legacy or low growth products. Fifth, demand for smart products with the combination of software and hardware is driving enterprises to leverage engineering service providers which have developed expertise over the years across software, hardware and embedded solutions. Sixth, availability of composites and lightweight material is enabling enterprises to rethink the design of their products with the help of engineering service providers.<\/p>\n
What was the scope of this Blueprint?<\/strong><\/span><\/p>\nThis Blueprint is focused on the product engineering segment of engineering services. The other two segments of engineering services i.e. software engineering and product lifecycle management (PLM) package implementation were excluded, and we will look to cover them in future Blueprints.<\/p>\n
How did the Blueprint turn out?<\/strong><\/span><\/p>\nEngineering services is a diverse market spanning across many different verticals and industries. While the value chain element of product development is common across this diversity the skills for designing a car are very different than the skills for designing medical equipment. We analyzed key engineering services outsourcing market dynamics and evaluated the capabilities of 14 service providers at the organizational level, the vertical level, and the service level. We evaluated both specialist service providers as well as broad-based service providers which also offer engineering services. All 14 service providers are leaders in at least one of the verticals.<\/p>\n
Our analysis shows four clusters. The first cluster includes leading broad-based IT service providers which also have scale in engineering services. The second cluster consists of leading specialist service providers with strong expertise in few verticals. The third cluster includes broad-based IT services firms that are relatively late entrants in engineering services and building their scale and capabilities. The final cluster consists of specialist firms which have strong expertise in one or two verticals.<\/p>\n
There are four service providers in our Winner’s Circle – HCL, Infosys, TCS and Tech Mahindra that have four things in common: scale, scope, investment in future capabilities and strong customer references.<\/p>\n
The eight High Performers in our study are Capgemini, Cognizant, Cyient, Genpact, IGATE, L&T Technology Services, QuEST Global, and Tata Technologies. They are on the right path and building their capabilities.<\/p>\n
In this Blueprint, we also focused on benchmarking and operations improvement. This is first of its kind of engineering services study where we tried to collect important operating data from engineering service providers and arrived at the aggregate or the average engineering services industry metrics. This should help each engineering service provider and captive to benchmark their operations and identify their strengths as well as areas or levers of improvement.<\/p>\n