Product engineering BPO to boom

Outsourcing in the product engineering sector is all set to be next in line in the Business Processing Outsourcing sector as its market is expanding globally, especially in India, according to US market research analysts.

"Outsourcing engineering services is a small but growing offering from outsourcing service providers", AMR research analyst Lance Travis said.

According to AMR Research's 2004 BPO survey, 15 per cent of manufacturing companies hired outside companies to handle parts of their research and engineering activities and another 10 per cent of manufacturing companies had plans to do the same by the end of 2005.

Thirteen per cent of the outsourced engineering work was being done in India while 19 per cent was being accounted for by other Asian countries including China, it said.

"The market for outsourced engineering services is expanding globally," Travis wrote in a research note.

The report also suggested that companies re-examine their product development life-cycle and take judicious advantage of outsourcing services to reduce costs and time-to-market.

The market for outsourced engineering services will continue to grow at a healthy rate, AMR Research said, citing a recent agreement between IBM and Nortel to set up a joint development centre.

"This represents one of the first major contracts for IBM's 1,200-member engineering services group," Travis said adding that over the next five years, the deal could save Nortel $ 2 billion.