Atoms, Bits and Opportunity Bytes

Inaugurating the Engineering Services conference in

Bangalore, Nasscom president Kiran Karnik offered a true pearl of wisdom when he

mused, in the beginning the success of the industry was the conversion of atoms

to bits with more and more processes going digital. Then in the recent past, the

rapid rise of analytics and intelligent systems has seen the repurposing of bits

into more useful bits and with the great new hope that engineering services

offshoring now brings, the application of bits to atoms will probably bring this

industry full circle to put power back into manufacturing processes.

The conference itself attended by over three hundred

delegates shows how many lives are now being affected by the wide sweep of

IT-many of the participants came from the erstwhile blue collar sector, eager

to understand the opportunities for organizations as well as entrepreneurs to

ride this new wave of outsourcing. And ideas abounded starting with the team

from Booz Allen Hamilton, the global consulting firm that helped Nasscom put

together the first definitive study on this segment of the industry. And what a

segment-as the business press so gleefully reported, here is an industry that

is today over $15 bn in size, with India having less than 12% share and the

projections talk about a growth to over 200 bn by 2020, with India's potential

being to capture a quarter of the share resulting in a whopping $15 bn

opportunity for the country!

As Bluesten and Dehoff, the Booz consultants pointed out,

the qualitative attractiveness of this segment goes beyond the numbers,

attractive though those may seem. While the traditional IT outsourcing and BPO

segments have largely focused on job substitution, the engineering services

segment offers tremendous scope for strategic value creation through product

development speed and efficiency improvement providing excellent return on

R&D investments and real top line growth.

Of course, no great opportunity comes without the attendant

challenges-engineering services outsourcing will need a much higher level of

preparedness on the part of the vendor community with capabilities for

sector-specific education and research and high familiarity with specialised

hardware and software. But the revenue has crossed the billion dollar mark which

shows that the appetite is there for making a mark globally with engineering

services.

The good news about the innovation movement that has spread

through the Indian IT services and BPO provider community in the last couple of

years is that it is not just engineering services but also a number of new

innovative and high value adding segments that many companies are focusing on to

increase the quantity and quality of revenue and the penetration into relatively

underexploited markets.

The focus on innovation and the ambition to aggressively

develop these new segments makes the need for an innovative eco-system even more

urgent and the development of innovation clusters an imperative for various

cities and states. In the National IT group of the CII, we have already

identified the automotive, pharmaceutical and textile sectors as immediate focus

areas where Indian IT can partner with fast growing companies in the country

within these segments to build best of breed clusters of capability and

demonstrable customers. These will then motivate international firms within

these industries to put their toe in the water of offshore outsourcing.