What catalyzed India to become a global force in IT? Can the lessons be used to turn India into a similar power in engineering? The answer to that depends on several factors – ranging from process management to availability of skill sets to grabbing a unique opportunity that knocks on India’s doors. But the parallel between India’s growth into a formidable IT hub and the drivers for engineering design outsourcing are uncannily similar. In fact, there is an added twist to the argument for India as a sound destination for outsourced product design and engineering.
The question is: Is India ready to assert itself as the leader in the unfolding story of outsourced product design and engineering?
India’s journey into outsourcing began with an unexpected twist: when panic spread about the Y2K threat. An ignominiously low-level fix – repetitive, requiring little or no skill – changed the IT landscape. India became an IT giant as it quickly understood the IT application space and by 2000, when newer technologies like Java and the web evolved, India moved into developing low-cost high-volume applications for customers. This quickly transformed from India providing “techno-coolies” to providing jagged edge of innovation. From ISVs and Software Enabled Companies we’ve moved to Embedded and now to OEM product development. What has this done for us as an outsourcing destination? I’d say it has built into us an enormous knowledge transfer capability – the key to efficient outsourcing.
The engineering design story has the propensity to take the same course. Manufacturing is ailing in the West. European and American companies, who are witnessing flat growth, have found a solution in emerging markets. Not just for their products, but also for cheaper development as a survival strategy. As the crisis in the West acquires unmanageable proportions, manufacturers – aircraft, automobiles, white goods – are gravitating towards Asia looking for newer markets as well as cheaper development and design solutions.
There was a time when BMW would ship to India. Today it has a design centre here. It’s the same with GM, Mercedes, Volvo, GE, Bombardier, Boeing and many more. This is a great market to be in, and also to begin building a pipeline for cheap engineering design. But it may be interesting to note that it’s not just about the transfer of wealth or knowledge. India is also a recognized hot bed of innovation. Leaders like GE, GM, Honeywell, have already taken the initiative to push a considerable amount of their development to Indian shores, leveraging the talent pool and the cost advantages available.
There is a compelling build-up here that is difficult to ignore. Take the case of Airbus and Boeing. These aerospace giants with a presence in India have massive offsets as a consequence of their local operations. They have to transfer work to Indian companies equivalent to the billions of Dollars in offset amount. The engineering design landscape is transforming itself rapidly. We have a healthy automobiles and even semiconductor practice, but commercial aircrafts design has been, until recently, unheard of. Of the global demand for numerous flight physicists in the world, India will have 200 - 300 in the next two years. Indian engineering is on a good flight path, so to say.
Product design is an expensive pursuit and constitutes a significant cost input for a new product. Managers were earlier reluctant to hand this over to an outsourcing partner. But the trend is changing -- primarily because India has managed to understand process rigour, has excellent communications to back it and has developed result-oriented governance models, needless to underscore the success in knowledge transfer of high-end areas like flight physics. Now add domain knowledge and skill availability to this and we have a pretty strong argument for outsourcing engineering services.
There is a fascinating twist to this tale. China, traditionally considered the hub for manufacturing, should be the logical destination for outsourced engineering design services. However, history written in 1966 retards it from making the quick logical leap from manufacturing to designing. Mao Zedong’s Cultural Revolution 40 years ago had such a severe impact on education, that it has today unfortunately resulted in a generation denuded of well-educated and qualified people. While China is cheaper – thanks to its focus on reverse engineering, low-level manufacturing and availability of low educated workforce– it has not had the opportunity to learn from technical collaborations like Maruti Suzuki in India. That probably is the key difference – India believes in collaborations, not reverse engineering, and hence the offsets not only will help Indian companies but also the companies that are selling high volumes of high technology gear to us. Additionally, thanks to the Cultural Revolution, China today relies upon the expatriate community to run industry. It has not throw up leaders of the stature of Lakshmi Mittal or Indira Nooyi. And yes, with more focus on education, cheap labor in China will eventually vanish; India, on the other hand should emulate what China did – create large manufacturing bases in states where jobs, wage-rates and literacy-rates are low.
So, I’ll come back to where we began: will the IT story repeat itself with engineering? We have every indication to believe so.
Alok Sinha is Senior Vice President, Professional Services & Support and Engineering Design Services, Symphony Services