Graphic Designing
One of the prominent sectors that have led to the stupendous growth of the Indian economy is the IT Business Process Outsourcing (BPO) sector. According to NASSCOM, BPO exports have been the fastest-growing segment of the Indian IT sector growing at a compound annual growth rate of around 37 percent over the past few years. This segment has grown from approximately USD 3.1 billion in FY 2004 to an estimated USD 11 billion in FY 2008. The BPO sector currently accounts for around 37 percent of the global business process offshoring pie. North America and the United Kingdom together account for about 87 percent of the sector’s export revenues. North America, primarily the United States, alone accounts for roughly two-thirds of the market.
The major nations contributing to the IT - BPO sector, the UK and the US, are currently facing threats of recession and have been impacted by the credit crunch as is the case with every other nation. This has led to the companies in the region implementing methods to reduce their costs and jump on to the outsourcing bandwagon. One such sector is the newspaper sector that is looking at outsourcing work to other countries in an effort to execute their cost cutting strategies.
According to a recent study conducted by ValueNotes Database on leading vendors in the newspaper industry, advertisement revenue of newspapers in the US and the UK have had a substantial fall due to the remarkable rise in online ads. This in turn has led to huge job cuts and the industry is trying to rationalise with outsourcing options. Further, the burgeoning newsprint prices are also compelling publishers to outsource various jobs. Due to these pressures, Indian graphic designing firms are likely to benefit from this sector and can gain up to USD 120 million by 2012.
The study further stated that Indian firms operating in the graphic design sector and BPOs in the publication segment stand to gain nearly USD 35 million in 2008 from the USD 3.5 billion newspaper outsourcing market. India’s current share in the emerging sector is about one percent which is limited to a handful of service providers. If players in the graphic design sector and publishing BPOs focus on the opportunity and acquire necessary skills, the volume of outsourcing business could increase by almost three times from the current size; this will also increase India’s share in the global outsourcing pie.
Engineering Services Outsourcing (ESO)
Another sector showing promise in the Indian BPO industry is the engineering services outsourcing (ESO) sector. India is fast emerging as a hot destination for global automobile and aerospace giants who are increasingly outsourcing engineering services such as designing and drafting processes to Indian BPOs. India is expected to garner one-fourth of the global Engineering Services Outsourcing (ESO) business by 2020, and generate a whopping USD 40 billion by the same period.
A recent report by NASSCOM and Booz Allen Hamilton, a strategy and technology consulting firm, predicted that the engineering services market will be approximately USD 1,100 billion by 2020 - higher than the USD 746 billion reported in 2004. Of this, the outsourced component could be worth around USD 200 billion in the same span of time. Currently, the ESO market is worth around USD 15 billion with India garnering a healthy 12 percent share. The major verticals based on spending on outsourcing are hi-tech/telecom (30 percent), automotive (19 percent) and aerospace (8 percent). According to the report, in 2020, there would not be any major shifts in the vertical spends, except a slight increase in hi-tech/telecom spend, which can help India earn substantial profit.
Of the above mentioned sectors (hi-tech/telecom, automotive and aerospace) in the ESO space, automotive can prove to be a big opportunity for Indian players. The report states, “Automotive engineering service is a true ‘knowledge-based’ industry with a viable future, as opposed to ‘call centers,’ which are more on arbitrage play that could possibly dissipate with time”. Tata Technologies is amongst the few Indian early movers in this space with its acquisition of a UK-based engineering and design services company INCAT International Plc in 2005. On the other hand, auto majors like General Motors, Ford, Toyota, BMW and others are already outsourcing engineering work to India through captive centers or third-party vendors. For example, in 2007, TCS won a contract to provide IT and engineering services to Scuderia Ferrari for the development of its Formula 1 car.
The factors that are encouraging ESO in India are similar to those that made ITO (IT outsourcing) and BPO (business process outsourcing) thrive in this country, namely, costs and talent-pool. While cost arbitrage is not the key factor in the ESO space, it may be a major one. However, the expertise required for the project influences the charges for outsourcing. India can provide premium services since the country has a huge number of educated professionals: currently around 35,000 engineers are working in engineering services. In fact, India has an edge over its competition (read China and Russia) because of this scale-up (in terms of people numbers) factor. However, in the ESO space, quality factors many notches over sheer numbers; the quality of the engineers coming out of around 1400 institutes could be a crucial issue over the coming years. Infrastructure is another key inhibiting factor. Countries like China, Thailand, Malaysia and Singapore have scored over India in developing their infrastructure. Also, the facilities and overheads required for ESO are relatively hi-tech and hi-end in comparison with those required for the BPO and ITO sectors
There is also the caveat in the end - the clock is ticking and the lucky chance would not be available indefinitely. The market will get progressively difficult to break into with each passing day and the loss could also possibly impact current service relationships in the ITO and BPO segments. Quite a few players like Neilsoft are campaigning for engineering services to be segregated and formed as a different BPO-like entity to give weightage to the segment, tipped to match the other outsourcing sectors.
Medical Outsourcing - Adverse Event Reporting Systems (AERS)
Outsourcing in the medical sector commenced with medical transcription when professionals listened to audio files from overseas doctors and converted them to text; this was shortly followed by clinical trials. The latest wave in medical outsourcing is adverse event reporting systems (AERS). Dedicated groups study the effects of new drugs to verify their after-effects and compliance with the US FDA (Food and Drug Administration) regulations and report back to the company and the FDA. AERS is a computerised information based database designed to support the US FDA’s post marketing safety surveillance program for all approved drug and therapeutic biologic products. The objective of AERS is to improve public health by providing the best available tools for storing and analysing safety reports.
Major players in the sector are Patni Computer Systems, Accenture and TCS. Arjun Bedi, Global Lead of Accenture’s Health & Life Sciences R&D practice, stated that non-core medical outsourcing is the latest trend. The scale of operation is enormous and there is tremendous potential in development activities like clinical trials, evaluation of clinical trials, components of data collection, medical writing etc., which are being outsourced. He added that AERS provides huge opportunity for emerging economies like India and China.
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