Engineering Outsourcing Services to Soar Despite Regulations

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With ongoing concerns about regulations affecting engineering outsourcing services and other outsourcing services providers, the industry has continued to innovate to improve efficiency and beat bearish market expectations.

With a steady rise in the number of businesses seeking to enhance core operations, IT and BPO outsourcing services continue to see growth, especially in countries like India. Technavio predicts a CAGR close to 8% in the Indian IT and BPO services industry (see image below). Meanwhile, engineering outsourcing services providers are also witnessing a period of very rapid growth, despite fears of the opposite happening. Engineering outsourcing in 2020 will grow at 26% CAGR, when taken from 2016 global figures (source).

Global engineering outsourcing market growth
Illustrated is the expected year on year growth of the engineering outsourcing services market

A key growth area, product engineering is seeing high demand with requirement for high volume output from human resources as well as automation tools. This requirement is being catered to by a fragmented competitive space with the presence of several regional as well as international players in the engineering outsourcing services industry. The development in IT education and the prevalence of engineering as a commonly sought after educational degree has helped create a large available workforce for the engineering outsourcing services industry, especially in countries like India which have since grown in global stature as service providers. Process engineering, design automation and product design are just some of the engineering services now being outsourced, in addition to the more regular IT jobs.

India as a services exporter

Engineering outsourcing servicesAlong with their buzzing engineering outsourcing services industry powered by growing national digitization, India now stands as one of the leading providers of the IT and BPO Services industry. Businesses are choosing to focus on their core competencies, while outsourcing IT and BPO services to India, helping them achieve digital transformation goals while also allowing business as usual to flourish. Customer service is one of the main goals of the overall IT and BPO outsourcing services providers. Also driven by these international requirements, global BPO business analytics service providers have found a flourishing market. Engineering outsourcing services, combined with business analytics offer clients an integrated solution for their business, and brands in India have capitalized on the available resources to strive to provide this.

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Technavio expects the BPO business analytics market to grow at almost 34% CAGR in coming years. With the demands for specialized engineering outsourcing services such as cloud computing and enterprise resource planning (ERP) increasing, India continues to operate as a solid base for outsourcing service providers. Companies like IBM and Accenture, along with Indian counterparts Tech Mahindra and Wipro have made big names for themselves in the industry.

The APAC scenario

As India continues to serve as the stronghold for IT, BPO and engineering outsourcing services, China is not too far behind with catching up. With a large workforce of highly skilled engineers, China provides the perfect example of a growing powerhouse for engineering outsourcing services. With both these Asian countries providing digitally equipped, technologically developed services to the world, APAC is a veritable powerhouse in the global outsourcing market and can continue to see such development for the next few years to come. With the engineering outsourcing services market requiring approaches that are agile, innovative and most of all allow scaling of client operations with the least margin for error, there remain challenges to be addressed in the overall processes, but with the technology development in APAC, especially in India and China, the outsourcing services market need not fear the loss of its current status any time soon.

Outsourcing services, especially engineering, IT and BPO services, showcase a thriving industry, and this industry is backed by technological advancement and know-how in certain regions. Technavio expects the market to grow at a steady pace over the next few years. Although regulations are forcing countries like the USA and the UK to review alternative options, a majority of companies still find value in the APAC region when it comes to services that are not necessarily their core functions, and a well-developed market in China and India allow them to invest in outsourcing in the region.

Read our latest market report about engineering outsourcing services here.