As India completes its 60th year of Independence, the vibrant growth seems unstoppable and is aggressively pushed ahead by a population that is hungry to savour the huge opportunities that are before it. The country now has access to opportunities it has never had before. This article seeks to give a picture of the evolution of the Indian engineering and the engineering services outsourcing (ESO) industry in India.

The early days of Indian Independence, with a strong governmental mindset of leading the country into prosperity, saw some visionary decisions. Enormous investments went into large engineering and manufacturing infrastructure. The government took strong strategic steps of setting up various bodies such as CSIR, PSUs, DRDO etc. Massive projects in the areas of power, defence were started, for a good engineering base to evolve.
Indian policy makers erred when it came to supporting the private sector. The engineering industry did grow but innovation, technical excellence, implementation of manufacturing practices etc suffered. Complex labour law, company law and lack of support for entrepreneurs left India to play the catch up game instead of taking  lead. However when the Indian government finally decided to take steps to liberalise the economy in the early 1990s two things happened: 1) GDP and, as a consequence, per capita income began to grow. As a result purchasing power of India went up pushing demand levels to new highs.  2) Competition ensured that quality levels were constantly pushed up

Local manufacturing
As a result of the above, no serious player could afford to ignore the large Indian market that was emerging. This led to the raise in local manufacturing of white goods, machinery and the latest automobiles. This brought in ‘global best practices’ into R&D and manufacturing in engineering organisations. As engineering practices evolved, the success of IT as an offshore service and the large talent pool in India made ESO a logical area for evolution.

Currently Nasscom reports suggest that ESO is really the next big wave waiting to hit India. It suggested that this market is poised to become a $12 billion market by 2020 and that India is well poised to lead. There are a number of factors that will contribute to the strong growth of ESO in India. While at a very broad level, there are so many industry verticals that will grow in this industry such as telecom, avionics, embedded systems etc, for the purpose of this article, only factors that influenced the emergence of core mechanical engineering industry and aspects of product development are discussed. Factors that contributed to the emergence of ESO include:
 
*Growth of domestic auto industry
*Pressures on global auto industry
*Aerospace industry
*Other manufacturing industries
*Workforce availability in India
*Mature offshore practices

But ESO is extremely complex because of the complex nature of engineering design. Sound engineering services delivery revolves around technical skills, domain expertise and good engineering judgment. Engineering design work, centres on product IPs of manufacturing companies. Most of the services outsourced are related to design services around patented products, design specifications or customised interiors of a total engineering solution. 
As the economy opened up, many MNCs entered India and set up manufacturing plants, JVs and design centres. Our own industry rapidly started adopting global best practices to adapt to the change. It moved up the value chain, into heavy engineering, architecture and plastics and now the aerospace industry.

Advantage India
India will need to employ about 250,000 engineers for this space. There are around 2,000 automotive suppliers of which 500 are major manufacturers with a turnover of $10 billion and they are growing exponentially at more than 15 per cent every year. Since 18 per cent of their output is for the export market it has provided space for technology to grow, to make R&D better, have more space for design engineering etc. India has a large talent pool with about with 35,000 engineers passing out each year. Most developed countries are facing a problem of an aging workforce while India has a talent pool, which is young, trained with domain expertise and available at a lower cost. However, huge amount of training is needed in reaching the productivity factors of the West.

India has all the right ingredients to become a significant player in the global ESO space. The automotive, aerospace and other engineering sectors have major players lining up with strategic plans. Engineering services outsourcing in India is poised to become the next big “wave” after IT.

The writer is the CEO of CSM Software. He can be contacted on email: info@csmsoftware.com