The maturing of the Engineering Services industry in India- The Infotech Experience

Sakshi Education

Mr. Reddy, Chairman & MD, Infotech Enterprises Limited, tells us how to contend with the inherent challenges in the industry by putting together a robust training process.

How do you see the Engineering Services segment growing in India? What are some of the factors that have contributed to it and how has it evolved?
The Engineering Services business has been growing at a CAGR 15% for the past 4 years. For FY 2007, Engineering services business for Indian companies was at 5.2 billion USD and for FY 2010 it is estimated to be 9 billion USD. Customers came to India (as was in the case of IT services), because of cost arbitrage. They remained in India on account of Indian Companies’ ability to deliver on time with the best quality. Indian companies have strengthened customer relationships on account of their capability and capacity. As the relationships matured, we are seeing Indian companies moving up the value chain and delivering substantial value to customers. They have also been in a position to take up full cycle product design opportunities and deliver end to end solutions.

The significant factors that contributed to this growth have been availability of highly skilled and committed young work-force who were willing to learn and deliver under extremely challenging situations, domain knowledge and fairly good eco system.
What were some of the challenges you faced during the journey? What are the major challenges that you expect to face in the future? How are you preparing for these?
Infotech, was established by an Engineer and hence has Engineering as part of it’s DNA. All the same, we did not have domain knowledge. Our ability to assemble the best of breed domain expertise was a key challenge in scaling up our Engineering Services business. By an accident, our first foray was in the hardest of the Engineering businesses – Aerospace – which has most advanced technologies where design is very safety critical. Our ability to get the best of the engineers has delighted the customer to scale this relationship to over 1000 engineers in a span of 10 years.

Most of the key challenges I believe we met have been centered around people. Wage Inflation and attrition are certainly concerning. One way, we can address this is by putting together robust training process.
What are some of the learnings from being part of this journey? What advice do you have for other engineering services companies?
Domain is the king in Engineering Services. You can command customer’s respect only when you can speak his language and deliver to his expectation. Engineering companies have to focus on domain knowledge to build lasting relationships with the customers.
For companies that are new to Engineering services, it is important to understand that this space is different from IT and BPO services. The infrastructure requirements for Engineering Services (hardware, software and training) are higher than other service based industries. The diversity of skills is higher and the cross-deployability lower.

Companies must have a longer-term strategy to build relationships with customers. ‘Scale’ and ‘Scalability’ of relationships in Engineering services business is very different from IT/BPO services. This segment is also investment intensive (whether in technology or tools or training or people) and by very nature of product design, this segment also has high customer involvement in managing relationships.
In your view, what are the “must-haves” and “nice to haves” for a company to succeed in this space?
a. “Must haves”: Domain Knowledge; Design process compliance; adhering to quality standards; ability to deliver on time, follow best security systems, best in class IP protection and being part of the industry eco-system (prototyping, manufacturing etc.)
b. “Nice to haves” Flexibility to adopt different business models, network of design centers across different cost zones, Proximity centers to customers in their geography, ability to collocate with customer, ITAR compliance design center and In-house labs.