Engineering services outsourcing: Perception vs. Reality

To be published in March 2010

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With the gradual recovery of economic conditions globally, the engineering services industry saw some large deals being signed in past few months. Some of the recent deals in the past six months are:

The Infotech Enterprises-Hamilton Sundstrand Corp. four year multi-million dollar avionics contract announced in Jan 2010
Mahindra-Satyam Saab deal worth $300 million signed in Nov 2009
QuEST Global- SABCA 10 year $100 million deal announced in Nov 2009
General Electric’s multi-million dollar three year contract extension with Mahindra Satyam announced in Sep 2009
Bombardier’s decision to outsource engineering services worth $200 million overseas over the next few years announced in Aug 2009

Such deals indicate the prospect of a strong growth potential in the ESO industry in the coming years. With several deals being signed and umpteen market size estimates being thrown by research firms, as mentioned in our earlier article ‘Engineering services outsourcing - Silver linings’ on the industry, ValueNotes decided to do a reality check on the situation by conducting an industry-wide survey ESO survey 2010: 'How does the engineering industry feel about outsourcing?”. The purpose was to assess the global reaction to outsourcing in the engineering services segment. The analysis helped us understand the level of satisfaction of the industry in terms of sourcing, quality, cost savings, delivery, etc. The survey also provided us insights on the future of outsourcing in engineering services.

Research Methodology
The survey was taken by over 200 participants globally across industries. The participants included engineering service buyers (manufacturers), service providers and industry analysts. We further cross tabbed buyers & service providers responses on the following:

Industry
Geography
Size of company and
Services

This break-down provided us with granularity on various aspects such as challenges faced, satisfaction levels, sourcing levels, cost savings, sourcing expectations, etc. This has helped us develop a comprehensive understanding of outsourcing sentiments within the engineering industry.

Table of contents (indicative)

1. Foreword

2. Research Methodology

3. Participant demographics
Participant demographics - buyer demographics, service provider demographics, analyst demographics by profession, geography, industry, revenue and manpower

4. Buyers needs and challenges
Buyers service needs matrix that includes - top engineering services needed by buyers across industry and geography by company size, major challenges that buyers are currently encountering across industry and geography by company size, analysts viewpoint on buyer challenges

5. Outsourcing perception- buyer vs. service provider
Buyer perception on challenge mitigation via outsourcing, which buyer is outsourcing?, service provider perception on what is outsourced? The perception gap

6. Satisfaction levels and expectations
Buyer perception on cost savings across industry, geography, company size, outsourcing destination, services outsourced etc., which destination offers best cost savings?, buyer perception on quality of outsourced work, buyers satisfaction level with current outsourcing, service provider perception on buyers satisfaction levels, service providers perception on their USP- is it a misnomer?, analysts viewpoint on services providers' challenges and cost savings offered

7. Will outsourcing grow?
Will answer questions like; will buyer continue to outsource?, which services will be outsourced more, where will demand growth come from?, which geography will increase outsourcing?, from which industries will increased sourcing come from?, which will be the most preferred sourcing destinations?, analysts viewpoint on growth of engineering services outsourcing

8. Annexure
Sourcing Prism (ValueNotes proprietary vendor rating methodology)

9. About ValueNotes
Research Publications
Recent Custom Projects

All the above chapters will be supported by more than thirty detailed exhibits-charts and tables from the survey data.