The market potential for outsourced engineering services is estimated to be
$7-12 bn and around 20% of the value is being outsourced to third-party vendors
in countries like India, Taiwan and China, that highlights significant untapped
potential for Indian companies to establish a strong presence in this area.
According to Nasscom, Content development, Animation and CAD/CAM/GIS services,
which accounted for revenues of $465 mn (approx Rs 2,139 crore) for 2002-2003
are estimated to grow to $2.5-3 bn by 2008 (approx Rs 19,550 crore, a growth of
over 800%. The three major public companies, which operate in the CAD/CAM/GIS
and engineering services segment, include Geometric Software, Rolta and Infotech
Enterprises. Other listed companies that have significant revenue contribution
from these services include TCS, Wipro, Satyam Computer Services and Patni
Computer Services. Since data relating to their CAD/CAM/GIS business is not
available, these have not been included.
Geometric Software
Geometric Software Solutions provides end-to-end Product Life Cycle
Management solutions for mechanical design, manufacturing and industrial markets
through the three strategic business units namely Geometry, Information
Management and Collaborative Engineering. The company also offers services based
on CATIA, eMatrix and other CAD/CAM/CAE/PDM software platforms. Geometric along
with Dassault Systemes have formed a subsidiary company, 3D PLM Software
Solutions, to provide software development services for the Dassault Systemes
group, wherein the former holds 70% of the stake. The company is also a 80%
shareholder of Teksoft which develops CAD/CAM software products for use in the
metalwork industries.
While revenues grew 28%, net profit dropped by 46% for the quarter ended
September 2005. The slowdown in profits for the quarter is due to a number of
factors including increases in staff salaries, appreciation of the rupee as well
the impact of consolidation of Teksoft performance in its results. However, the
company believes that the performance will improve in the coming quarters.
During the quarter, the company added two new customers in the product
development space and two clients for its subsidiary Nestlib. The company also
launched Application Maintenance Services (AMS) that would provide regular
income to the company. Geometric shares change hands at Rs 91.
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Rolta (India)
The Mumbai-based company provides services in the CAD/CAM/GIS conversion
area, manufactures and sells engineering workstations in addition to providing
Internet services. The company earns majority of its revenues from domestic
operations providing CAD/CAM solutions to central and state government and their
agencies.
Rolta's full year performance for 12 months ended June 2005 was quite
encouraging (see box). Rolta recently entered into a strategic alliance with CA
for providing e-security services in North America. Rolta will be providing
implementation of CA's Unicenter as well eTrust, BrightStor and other custom
integration solutions. The company also signed with Intergraph Corporation, to
provide expert services to GIS customers worldwide. Under the agreement, Rolta
will provide specialized GIS services for its clients in North America. Rolta
currently trades at Rs 178.
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InfoTech Enterprises
Infotech Enterprises is a software services company based in Hyderabad that
delivers with strengths in geographic information systems (GIS), engineering
design and IT services. It has also developed IPR relating to spatial products
and technologies. The company has several centers of excellence in engineering
services with specific focus on the aerospace industry in addition to providing
design analysis, manufacturing and after-market support.
Infotech's performance was encouraging for the quarter ended September 30,
2005. While revenues grew 20% to Rs.82.4 crore, the net profit was up 46% to Rs
9.7 crore. The company's performance has improved both due to the revenue
growth as well as slight improvement in margins and the share of profits from
its subsidiary. The company was awarded a major contract from KPN Telecom and
Alstom for GIS conversion and engineering design respectively. During the
quarter, the company added 11 new clients. The share of Infotech Enterprises
currently trades at Rs 435.
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