Ability to collaborate and work in an integrated manner would be the key to success in this industry.
The manufacturing industry has responded to globalisation far earlier as compared to many other industries. Companies looked at different countries initially for market access and later expanded their intentions to manufacturing. The challenge was to bring the best value product at the least cost to customers. Improving customer response and service satisfaction became the next priorities in global expansion. Companies started looking at engineering services outsourcing to reduce product development time and bring more customer focussed, differentiating products. The industry is constantly demanding value and specific needs in a product. Variety and options in a product influence customer choice. Companies suddenly found that it was just not optimising manufacturing and being an efficient producer that would help them sustain in the market but bringing innovative products ahead of competition. Hence, globalisation was extended to product and R&D services. India’s predominant position in remote services, earlier acquired through the evolution of IT, availability of qualified personnel in abundance and the process maturity has helped the expansion of R&D and Engineering services.
Recently, NASSCOM identified “Engineering and Industrial Services” as a new service sector, separate from IT Services and BPO/KPO, and constituted an Engineering Services Forum to focus on the nurturing of this new sector. TCS is an active participant of this forum and has contributed substantially to the recently released NASSCOM commissioned Engineering Services Report authored by Booz Allen Hamilton. According to the report published by NASSCOM and Booz Allen Hamilton, India has the potential to acquire around 25 percent of the global ESO pie, estimated to be US$ 40 billion by 2020. India currently enjoys a strong position in the automotive and high-tech/telecom engineering services.
The areas that are emerging into big opportunities include Aerospace, Utilities, Minerals and Metals. In the automotive sector, we could draw the world’s attention to Ferrari selecting TCS as a partner for providing engineering support for their Formula1 car. This deal got engineering and industrial services from India in the limelight and everyone including Indian organisations acknowledged the existence of a great industry in the making.
Primarily India’s strengths in the ESO field include
1. Robust manufacturing and service sector: We have a very good established manufacturing sector that is growing and catering to domestic and export markets. This provides a high degree of understanding of different verticals such as Automotive, Aerospace and Industrial machinery.
2. Availability of huge potential talent pool: We have a strong base of established engineering institutions and they produce close to 300,000 engineers annually. The spectrum of these engineers is also varied—covering mechanical, electronics and also focussed verticals.
3. 24x7 Design: Given the time zone differences with most western countries, the design teams can virtually work on a 24 hour cycle. This is a huge advantage in the sense that the design work that was progressing at 8-10 hours calendar time per person per day can virtually progress at 16-20 hours calendar time in this model. This alone should provide a cycle time reduction of close to 40 percent for Product Development. To effectively establish this process, TCS has created a tool called EDGE (Excellence in Design through Global Engineering) for enabling collaboration for product design through 24 hour cycle.
4. Cost: Given the cost arbitrage between the countries in western world and India, the ability to control product development costs is one of the primary advantages that India enjoys.
There are two main areas of focus in product-related outsourcing and they are quite dependant and mutually connected. These are services related to New Product Development (NPD) and Product Realisation at the Plant/Shop floor. Process Engineering, Plant Automation and Enterprise Asset Management (EAM) services are part of the latter and they form an integral part of the overall product. It is not just designing new products that is important; helping companies in quickly realising the same in the most optimised manner is becoming a key factor.
TCS, through its Tata Research Design and Development Centre (TRDDC), has invested heavily in the Process Engineering, Plant Automation and Asset Management space. We have now integrated them as part of Engineering and Industrial Services and they are leading the market in this space. Process modelling and optimisation, process planning, integrated manufacturing execution and lean process implementation are the key areas we focus on.
In Engineering Services, this is the most significant factor in the industry. The understanding of what can be done in India and how the same can be managed successfully is still weak. Also, initiatives such as Global Engineering need a strategic focus from the company and a high level of executive commitment and appreciation from the interested outsourcing companies. Certain steps have already been taken in this direction. For example, NASSCOM’s forum on Engineering Services helps in providing visibility to Indian companies. They have conducted several forums across the globe in different cities but that still needs to be scaled and expanded. Participation by Indian industry can also help. Participating in certain international forums that focus on outsourcing initiatives will help in creating visibility.
Government efforts and incentives will also help in attracting high profile work to India. The recent offset policy in the aerospace sector proposed by the Government of India mandates 30 percent offset (local sourcing or investments) of the business. Due to this, overseas majors have decided to set up manufacturing / assembly / maintenance facilities in India. They are also looking at engineering services outsourcing. The offset policy has created huge opportunities. Further, such policies, along with incentives in R&D and innovation, are definitely going to help. Also, we need to develop domain expertise, focus on infrastructure, quality education and technological innovation for strengthening the brand image.
The typical challenges relate to customer understanding of the value product development outsourcing can bring and being able to create a strategic roadmap. Tactical and short-term approaches would not bring the complete value creation and that would impact the whole proposition. Indian companies should continuously push their engagement maturity to the highest levels of product development that make huge difference to the customer’s business. Continuous innovation and improvement are the key factors that enhance value.
In order to evolve in product design, Indian companies will have to provide complete end-to-end support —from “Design to Prototyping and Manufacture”. The availability of good infrastructure for prototype development and for testing is fundamental to the growth of this industry. We must also align our curriculum and the industry needs very closely with our academic institutions. Never before has India seen the level of product development that we are seeing currently. This poses major challenges in terms of getting deployable engineers with practical design expertise. The engineering function is also becoming very multi-disciplinary. We need to have state-of-the-art facilities in institutions covering new technologies and solutions.
Cultural and language challenges in non-english speaking countries is another constraint. To combat the language barrier, TCS has taken up the foreign language initiative wherein it has created a special foreign language learning centre to train its employees in foreign languages. Also, TCS recruits people of various nationalities.
India faces competition from other low cost countries like China, Taiwan, Russia etc. China has already established itself as a leading manufacturing destination. It also enjoys the advantage of a well developed nation with strong infrastructure. As I said earlier, in India, we need to improve infrastructure. India also needs to invest in quality education and domain expertise and needs to build a strong manufacturing base to support its services sector. However, India still enjoys a strong position due to availability of English speaking engineers, low cost structure, an encouraging business environment, a functional democracy with strong focus on IPR & information security. We need to go up the value chain and focus on value-added services that will fetch long-term relationships and not just end services.
TCS has been working successfully with Ferrari since 2004, delivering IT and engineering services and assisting in the development of F1 and GT cars. This industry needs a high degree of fast response, dynamic and agile support. The services depth and the above factors were key in Ferrari selecting TCS. We will be working with the F1 team before, during and between races, continuing to provide innovative and agile Engineering and IT-based solutions.
Ability to bring out more models, reducing cycle time, urgency to address emission impacts, fuel-efficient vehicles, and future technologies like Hybrid are pushing automotive manufacturers to the edge. With limited resources at their disposal and severe cost pressures, they are actively exploring the Global Engineering opportunities. As per recent reports, revenues from auto design and engineering offshoring services to India are expected to cross US$ 1 billion by 2010. Ability to collaborate and work in an integrated manner would be the key to success in this industry. Areas such as safety systems, infotainment systems, engine control and hybrid electronics are some of the new areas where India can play a major part. Addressing the complete value cycle is important. With right infrastructure for intense collaboration, I am quite optimistic that automotive industry will emerge as a strong platform for Global Product Development.
In the automotive sector, companies are also looking for sourcing and manufacturing services. TCS provides services spanning from concept designing to component manufacturing. TCS’ Asia Sourcing Network (ASN) formed in collaboration with A.T. Kearney Procurement Solutions and UGS Corp. enables manufacturers to connect companies from low-cost countries to their global innovation networks through a first-ever integrated solution of information technology, software and consulting services.
