Engineering Services Outsourcing (ESO) Market Analysis By End-Use (Aerospace, Automotive, Construction, Consumer Electronics, Semiconductors, Pharmaceuticals, Telecom), And Segment Forecasts To 2020

Published: August 2014 | Report Code: 978-1-68038-236-5 | Report Format: PDF

Industry Insights

Engineering Services Outsourcing (ESO) refers to outsourcing certain non-physical engineering tasks such as designing, simulation, and consultation, called as engineering services, to specialized vendors or engineering services providers. Numerous factors such as enhancement of efficiency, improvement in processes, cost advantage and lowered time-to-market for the products have been responsible for firms resorting to outsourcing their engineering services. Increased need for cost reduction is a major driver for market growth.

Increased global competition has given rise to the need for cost reduction among companies across several industries. Global companies have realized they can augment their capabilities with resources provided by IT services firms specializing in engineering design, instead of using expensive in-house resources. Outsourcing engineering services can thereby allow companies to get the most out of constrained budgets and increase concentration on more critical matters, such as executive management decisions. Shorter product life cycle is another key driver impacting market growth.

Increased global competition has given rise to the need for cost reduction among companies across several industries. Global companies have realized they can augment their capabilities with resources provided by IT services firms specializing in engineering design, instead of using expensive in-house resources. Outsourcing engineering services can thereby allow companies to get the most out of constrained budgets and increase concentration on more critical matters, such as executive management decisions. Shorter product life cycle is another key driver impacting market growth.

Increased competition coupled with the ever-changing consumer buying behavior have forced companies to continually innovate and develop new products at a faster pace owing to which the existing products get obsolete quicker, thereby shortening their life cycles.Companies look to harness the expertise of engineering service providers by outsourcing their R&D to launch new products faster and at a lower cost.

Furthermore, automotive and aerospace OEMs have increased their tie-ups and associations with ESO vendors owing to constrained budgets and the need to focus on more critical R&D activities. This is expected to further boost ESO market growth. Confidentiality and security threats, primarily revolving around intellectual property (IP), are a restraint for market growth. Companies have to exert a high degree of vigilance to avoid the theft of IP, as legal enforcement, especially in a few offshore locations make it difficult to prosecute firms who allegedly misuse patents and confidential data. IP theft may result in significant losses for the business.

End-Use Insights

Several end-use industries which include aerospace, automotive, construction, consumer electronics, semiconductors, pharmaceuticals and telecom outsource specific engineering tasks to ESO vendors. Some of the solutions provided by ESO vendors for the aerospace companies and OEMs include aero engines design, aero structures design, aero systems and interiors, avionics and manufacturing. Automotive firms and OEMs outsource certain engineering services such as design and value engineering, simulation, electronics and embedded systems, product lifecycle management (PLM) solutions, powertrain, and infotainment to the ESO vendors. Numerous civil and construction engineering services such as CAD, structural designing, building information modeling and project management are provided by ESO vendors.

Consumer electronics is expected to be the fastest growing industry catering to the services provided by ESO vendors Certain important engineering services required for production of consumer electronics devices, which include custom algorithm development, design and implementation, development and testing, embedded software development, hardware design, product development services and system level architecture, are provided by ESO vendors.

Typical solutions provided for the pharmaceutical sector by ESO vendors include ideation, concept design & development, product engineering of Volatile Organic Compounds (VOC), engineering simulation, prototyping, packaging, plastics engineering, validation and verification, value analysis, and pre-clinical testing. Revenue generated by ESO vendors from carrying out telecom engineering services was the highest in 2013. Typical solutions offered by ESO vendors in telecom include design, implementation, deployment and support of Geographic Information Systems (GIS) systems, network testing, network provisioning, cloud engineering services, value added services, and product lifecycle management (PLM).

ESO market share by application, 2013

ESO market

 

 

Regional Insights

Asia Pacific dominated the market in 2013 and accounted for over 50% of the market in terms of revenue. It is also expected to exhibit the highest growth rate from 2014 to 2020. Combination of factors such as presence of a large talent pool, strong manufacturing base, emerging local demand and cost arbitrage have been responsible for the aforementioned countries, particularly India and China to be the most sought after destinations for offshoring engineering services. Europe followed Asia Pacific in terms of market revenue share in 2013.

Competitive Insights

A majority of ESO vendors are business units of large IT services organizations such as Wipro, Infosys and Tech Mahindra. Other firms which provide engineering services include Aricent Group, Calsoft Labs, Cybage Software Pvt. Ltd., EPAM Services, GlobalLogic, HCL Technologies Ltd., Infosys Ltd., Infotech Enterprises Ltd., IGATE Corp., KPIT Cummins Infosystems Ltd., Luxoft, Mindfire Solutions, MindTree Ltd., QuEST Global, Sonata Software Ltd., Symphony Teleca Corp., Tata ELXSI, Tata Consultancy Services, and Vanceinfo Technologies Inc.

Key question answered by the report
  • What was the market size from 2013 to 2015?
  • What will be the market growth till 2024 and what will be the resultant market forecast in the year?
  • How will the market drivers, retraints and future opportunieties affect the market dynamics and a subsequent analysis of the associated trends?
  • What segment and region will drive or lead market growth and why?
  • A comprehensive mapping of the competitive landscape and the market participants behavior.
  • What are the key sustainability strategies adopted by market players? An in-depth analysis of these strategies and their impact on competition and growth.
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