Market outlook of engineering services outsourcing
ESO refers to the outsourcing of specific engineering services. Engineering services are considered as a critical part of different verticals. Technavios market research analysts expect the global engineering services outsourcing (ESO) to grow at a CAGR of close to 27% until 2019.
Due to the lack of expertise and increasing pressure to reduce costs, companies have started outsourcing their engineering services requirements. The inherent benefits of cost advantages offered by engineering services outsourcing is a key criteria for businesses, and India being able to offer both of these due to its people strength with good match of skill sets required for engineering services has a emerged as an attractive destination in this market.
Market segmentation by outsourced destinations
Countries such as Philippines, Thailand, Malaysia and Singapore among others are also considered as emerging, dominant outsourcing destinations in the market. China is another major destination for ESO, and it held a market share of close to 15% in 2014.
China offers a stronger infrastructure and manufacturing base compared to India. However, a large English-speaking population, liberal economic policies, a favorable political and legal system, and a relatively stronger protection of IP are some of the reasons why India is still a dominant player in the market.
Key challenges faced by the global engineering services outsourcing market
Protecting IP is one of the major challenges confronting the Global ESO market. Outsourcing engineering tasks to other countries raises IP concerns, given the several risks associated with theft, or misuse of trade secrets, or loss of IP rights.
ESOs just work on the products of their customers and they dont own them. Any innovation that emerges out as a result of the work carried out belongs to the third-party service provider. Therefore, the enterprises that outsource their engineering services to third-party vendors always have concerns for IP loss as the service providers serve multiple customers that can be competitors. In addition, various types of IP assets such as trade secrets, trademarks, industrial design, patents, and copyrights are put into use in an offshore outsourcing agreement.
Leading vendors analyzed in the report
The other prominent vendors of this market include Aricent Group, Tata ELXSI, Infotech Enterprises and Luxoft.
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