Articles
The outsourcing of key engineering services has long held appeal for UK companies, thanks to the combination of low costs and high throughput that it has provided. In recent years, the trend has continued for large companies across a range of sectors, from automotive and aerospace to infrastructure and energy, to draw on the engineering skills of overseas partners.
However, while cost was, perhaps, the chief incentive behind outsourcing, it’s now just one of the factors motivating a partnership with an outsourcing provider. A study by Booz*, on behalf of Nasscom, which represents the Indian software industry, highlighted that, increasingly, Western companies are recognising the role that outsourcing providers offer in driving innovation. It highlighted that Indian engineering services providers are “moving up the value chain by offering high-complexity services”.
In the automotive sector, for example, this would comprise services around design automation, integrated system design, hardware and chip design.
A number of key trends have brought about this shift in the role of the service provider. One of these is the evolving patterns in high-quality, experienced talent. Every new project requires a team of skilled engineers, but sourcing these engineers and technologists within Europe and North America is becoming increasingly difficult. Changing demographics mean that there is a shortage of experienced workers, a shortfall in new engineering talent coming through, and a retiring skilled workforce.
In contrast, young engineering strength is now coming through from developing countries. India and China alone produce 10 times more engineering graduates than the US each year. The skills shift is enticing businesses to leverage the pool of talent abroad.
At the same time, economic factors and competitive pressures to contain costs mean that innovation is driving a new era of partnerships. This is something that we know from our own experience as clients now require a more consultative approach for high-end design engineering work – whether it’s re-engineering existing processes or applying a fresh approach to deliver efficiencies, reduce costs or enhance a product.
The trend has been towards more diversity in the range of projects that are outsourced from concept and detailed design right through to manufacturing and sourcing support.
Another emerging trend is that of leveraging the contacts that the outsourcing provider can offer with customers and manufacturers to help build a local market presence. For companies looking to expand into new, emerging markets, forming a partnership with an outsourcing provider can give a strong foundation in establishing a business presence overseas.
With many organisations looking to grow, and gain, a foothold in emerging markets, local know-how can bring distinct advantages. Outsourcing, of course, also provides access to engineering talent which can be scaled up and scaled down accordingly to meet project demands.
The role of the outsourcing provider is evolving and this trend looks set to continue. Of course, it’s not all one-way traffic and the UK continues to produce high-calibre engineering talent that is in demand overseas, particularly in niche areas such as nuclear engineering.
However the growing overseas talent pool, and the need to contain costs through innovation, is heralding a new era in partnerships which can deliver benefits for all parties.
- *Global ER&D: Accelerating Innovation with Indian Engineering. Nasscom. Booz & Co. See www.booz.com