IT firms target $8bn aviation engg market

Big and small domestic IT firms are busy positioning themselves to snap up the $8 billion market opportunity that the aerospace sector has created.

A recent Booz Allen Hamilton report states India's aerospace offshore engineering services market, excluding the defence offset opportunities, has the potential to reach about $4 billion by 2020. This could bring an additional $4 billion opportunities in the form of offset requirements, during the same period.

The figures are arrived at from the hundreds of defence orders and the diktat of the offset regulation in this regard. If an order by a defence entity or state-owned civilian carrier to a foreign supplier is worth at least Rs 300 crore (Rs 3 billion), the supplier will have to offset (reverse purchase) at least 30 per cent of the total purchase value by either procuring components by partnering with local firms or by availing of engineering services, rules the offset policy.

Hence, every order worth Rs 300 crore is expected to create an opportunity of at least Rs 25 crore (Rs 250 million) for.

Engineering services revenue for IT leaders like TCS, HCL Technologies, Satyam, Wipro, Infotech Enterprises and emerging ones like QuEST and CADES is in the $15-$60 million range.

TCS, claims that 13 per cent of its total engineering services revenue (about $40-45 million) comes from aerospace engineering. HCL Technologies, says 6 per cent of its total revenue i.e. $60 million, comes from aerospace practices.

"Companies are looking at India as a design and software hub by bringing their entire spectrum to the table," says Krishna Bodanapu, vice president, Infotech Enterprises.

R Suresh Babu, head, Aerospace Practice, TCS, concurs: "Companies have moved up in the value chain to become sub-integrators. This is also distributing the risks associated with design and development of aero-engines and aero-structures."

Satyam is soon going to apply for a registration with the Defence Offset Facilitation Agency under the department of Defence Production, according to Pinaki Dasgupta, vice president and Global Head for Aerospace & Defence Practice.

Apart from the design capabilities, the IT majors are now bundling their services with manufacturing and BPO services.