Whos Who and Where
How major companies look at this opportunity articulates their overall positioning. Among the big three of Indian IT, TCS happens to be in almost all the areas. Wipros positioning on other hand needs a bit of explaining. It may come as a surprise that in our study of engineering services, Wipro ranks relatively low. That is because Wipro draws most of its engineering services revenues from telecom and semiconductor, industries that we have excluded. Wipro is more of an R&D services player than an engineering services player. The clear tilt towards telecom and semiconductor is because R&D constitutes a significant part of these outsourced services. However, with the acquisition of Quantech, it should strengthen its position in automotive, aerospace, and consumer products as well. Infosystraditionally not known as a product engineering companyranks fairly high. Almost all of its revenue from engineering services comes from manufacturing. But the contribution of engineering services to the overall revenue is on a steady decline.

Tier-2 Looks Serious
The most interesting story in engineering services pertains to the next tier IT companies. The next three multi-services firms in DQ Top 20 have, without exception, identified engineering services as the differentiator. Satyam, which does not boast about its engineering services capability, fares quite impressively with as much as 6.5% of its revenue coming from this area. Also, Satyam, like TCS, has a balanced portfolio with automotive, aerospace, consumer products, and construction all contributing significantly. HCL, the next player, is the other extreme. It draws more than 85% of its engineering services revenue from aerospace. But by far, Patnis engineering services is the most mature. Not only has it a balanced portfolio in terms of industries addressed, its geographical presence is also most diverse. Japan, which according to the 2006 Nasscom-Booz Allen Hamilton report on engineering services, accounts for 21% of global engineering services spend, is not penetrated well enough by anyone other than Patni.

The real surprise comes in the form of the No 2 ranked Tata Technologies. This specialized engineering services firm started as an in-house IT and engineering services division of Tata Motors. Tata Technologies grew impressively by virtue of a single large acquisitionthat of INCAT. The estimated revenues exclude that from India and other businesses like training and ERP implementation. INCAT is extremely strong in training.

The next specialized firm, Infotech Enterprise, comes at No 7. The company that boasts among its clientele, aerospace players such as Boeing and Airbus, is a fairly low profile so to speak. Like Infotech, most niche players are focused on one industry or two. For example, Neilsoft is fairly focused on construction and industrial automation. L&T Infotech is focused on construction and Geometric Software is focused on automotive and consumer products.

Captives are a big story by themselves, be it GEs Jack F Welch Technology Center, GM, Ford or Delphis captive design centers. These are among the better known. Many of these are engaged in high-end design work. Though unlike telecom and semiconductor, there is very little of holistic product design, these captives are slowly moving up the value chain. The availability of skilled manpower has been a major issue behind slower ramp-ups.

The spin-offs of Indian manufacturing and automotive firms have so far not been able to make a mark, with the notable exception of L&T. L&T Infotecha division of L&Tis a mature IT organization by itself and engineering services is just part of its overall portfolio. The non-Indian service providers are largely restricted to the construction industry.

Over a Billion, and Counting
The total third party engineering services export market from India is estimated to be around Rs 4,209 crore. Though Dataquest has not studied the captive market; its size is pegged by analysts to be between Rs 1,800 to Rs 2,500 crore. Dataquest believes it to be on the higher side of the range, at around Rs 2,250 crore. Put together, Indias export of engineering design services is Rs 6,459 crore (about $1.4 bn).

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