In this article we will see an overview of the engineering design market and the potential that India has to become a leader in this market. We will look at the key industries requiring engineering design, the range of engineering design products on offer, the potential global market, and India as the outsourcing destination.
Facts
- Global Engineering design services market = USD $7 billion per year.
- Automotive design = 68%
- Aerospace design = 16%
- Electronic machinery design = 12%
- 20% of design services are outsourced to 3rd party players.
- Major players for outsourcing: India, Philippines, China, and Taiwan.
- India has emerged as a major global design center, with global majors like Airbus, Caterpillar, Boeing, Emerson, Whirlpool, Ford, Snecma, GM, DaimlerChrysler, BMW, Mercedes Benz, Toyota, Honda, Nissan, John Deere, United Technologies, Johnson Controls, and Ingersoll Rand outsourcing their engineering design requirements either to in-house centers or 3rd party vendors.
- Indian IT companies with substantial presence in the engineering design space include: TCS, Infosys, Satyam, NIIT, and HCL Technologies. Some of the focused engineering design players in India are: Infotech enterprises, Rolta, Axis, Geometric Software, Quest, Plexion Technologies, Quantech and Easitech.
Key Industries Requiring Engineering Design
Engineering design has a key role to play in the following industries:
- Aerospace
- Automotive
- Electronic and Industrial Machinery
Aerospace
Aerospace has three basic industry segments: defense, commercial aircraft, and space.
The major players in the defense market are Lockheed Martin, Northrop Grumman, Boeing, Raytheon, BAE Systems, General Dynamics, EADS, Thales, and United Technologies.
Major players of the commercial aircraft market are GE Aircraft Engines, Pratt & Whitney, and Rolls Royce.
Major players of space market are Boeing, Lockheed Martin, Alcatel Space, Astrium, Orbital Sciences, and Arianespace.
Some domestic players are NAL and HAL.
Automotive
The major international players in the automotive market are Toyota Motor, Honda, Nissan Motor, Mitusbishi, Opel, DaimlerChrysler, General Motors, Ford, Volvo, Hyundai and Johnson Controls.
Some domestic players are Maruti, Tata, Hero, Mahindra, Escorts, Royal Enfield, Bajaj, TVS, LML, Kinetic, and Hindustan Motors.
Electronic and Industrial Machinery
The major international players in the electronic and industrial machinery market are GE Group, Caterpillar, Terex Vectra, Deere and Company, Emerson Electric, Sony, LG, Samsung, Whirlpool, Nokia, and Sanyo.
Some domestic players are TAFE, JCB, Ashok Leyland, BHEL, Punjab Tractors Limited, and DCM.
Engineering Design Products
Engineering design products broadly fall into two categories – one that facilitates creating the actual design and the second that allows engineers to collaborate and manage design. The former type includes the traditional tools of Computer Aided Design (CAD), Computer Aided Manufacturing (CAM), and Computer Aided Engineering (CAE), and the latter category includes Collaborative Product Commerce (CPC) and Product Data Management (PDM) tools. However, the focus has now shifted to Product Life Cycle Management (PLM) solutions that integrate the design, collaboration, and data management aspects.
Leading Product Vendors
PTC
PTC’s Pro/ENGINEER is among the world’s leading Mechanical Computer Aided Design (MCAD) softwares. The latest release of Wildfire has PLM capabilities.
Autodesk
Autodesk has product solutions for design and drafting, land development, architectural design, mechanical design, graphic information systems, design visualization, production, editing, visual effects, and animation. Autodesk AutoCAD, Architectural Desktop, Autodesk Inventor Series, and Autodesk Map Series are some of the company’s leading products.
Dassault Systemes
Dassault Systemes is a global leader in the market for PLM software using 3D technology. Dassault Systemes has solutions that provide a 3D view of the product’s lifecycle, from creation to maintenance, including manufacturing and startup. Dassault Systemes first launched CATIA that is one of the world’s most pervasive 3D modeling softwares in the world. Then came the 3D PLM solution with DELMIA, its manufacturing solutions package. ENOVIA and SMARTEAM completed the 3D PLM offering. SolidWorks Corporation - a Dassault Systemes company - helped a large number of 2D users to make transition to 3D modeling techniques.
Siemens PLM (Formerly UGS)
EDS launched PLM Solutions by combining the former Unigraphics Solutions (UGS) and Structural Dynamics Research Corporation (SDRC), both of which were acquired by EDS and were sold to become UGS. Products are I-deas NX Series and Teamcenter.
Global Market
On average, the global aerospace, automotive, and industrial machinery companies spend around 3-5% of their revenues on R&D. For instance, in fiscal year 2002, Boeing spent US$1,639 million on R&D on revenues of US$54,609 million. Toyota and Caterpillar spent US$4,423 million and US$854 million on R&D on revenues of US$130,806 million and US$20,152 respectively. Of the R&D spent, about 30% constitutes money spent on design. This figure would vary marginally across industries. Of this spending on design, about 40% is potentially outsourceable. A company may keep the core design work while outsourcing the non-core design work. This is primarily on account of apprehensions regarding Intellectual Property (IP) misuse. Ultimately, companies have to make a call as to what percentage of the overall design work has to be outsourced.
(All figures are from Yahoo finance and Nasscom)
It is estimated that the global market potential for outsourced engineering design is in excess of US$7 billion per annum.
To sum up, the following are key trends that are noticeable in the engineering design sector:
- Outsourcing is the need: The overall global slowdown in the aerospace, automotive, and industrial machinery sectors is resulting in Fortune 500 companies squeezing costs and exploring lower cost geographies.
- Global players are setting up their own design centers in India. Ford, Caterpillar, Snecma, Emerson, Whirlpool, and GE are some of the global corporations that have set up subsidiaries in India for design.
- Global players are outsourcing design work to Indian IT services players and specialized engineering design outfits. For example, both Airbus and Boeing outsource their design work to Infosys.
- Infrastructure and Software is improving: The advent of PLM tools and the rapid improvements in the telecommunications infrastructure in India are allowing companies to setup virtual design teams. This is allowing Fortune 500 companies to set up their design subsidiaries in lower cost geographies like India.
- Acquiring stakes in Indian IT Companies: Companies that do not want to set up subsidiaries but still want to maintain adequate control over the outsourced work are taking up strategic stakes in companies to whom they are outsourcing. For example, Pratt & Whitney outsources design of aircraft components to Infotech Enterprises and has taken up 18% in the company.
India as an Outsourced Engineering Design Destination
Globally, software product companies dominate the software landscape. In case of the Indian market, it is the services-based companies that dominate the scene. A major reason for this is the high-risk profile of the product segment. This segment typically involves huge research and development investments; enormous marketing networks; and the chances of product success are rather limited.
Until now, the work that has been outsourced to India was mainly high volume, low value work like scanning drawings and converting them into digital format, markup of old drawings and migration of CAD data from one package to another. This kind of service fetches around US$ 10 to 15 per man-hour. However, in recent times, with data connectivity between India and rest of the world improving vastly and Western companies facing tremendous cost and time to market pressures, high-end engineering design work is being outsourced to India - tasks like 3D modeling, finite analysis, computational fluid analysis, and plant design. These tasks are paid anywhere from US$25 to US$35 per man-hour in India.
Article Date: year 2004
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