Description

The global engineering services outsourcing market size is expected to grow at a CAGR of 22.9% from 2022 to 2030. The ESO market has witnessed significant growth in emerging countries. There has been a shift in ESO requirements from being more mechanical and non-core to lately requiring core competencies in niche markets.

Telecommunication firms have been outsourcing services such as product designing, hardware designing, system architecture, applications development, test automation, network designing, deployment, performance engineering, and supporting subscriber demands in new technologies with differentiated products.

For a long time, the engineering outsourcing services were primarily aggregated under the information technology services or the engineering business process outsourcing services. Due to rapid technological advancement and its growing demand, the ESO market has evolved to expand its telecom, aerospace, automotive, healthcare, and other major verticals that spend heavily on product development and engineering services. The off-shore outsourcing services from the developed markets have increased in the recent past with growing confidence in vendors present in the emerging countries.

Global Engineering Services Outsourcing Market Definition

Engineering Services Outsourcing (ESO) refers to outsourcing certain engineering activities such as designing, simulation, and consultation, called engineering services, to specialized vendors or engineering services providers.

Global Engineering Services Outsourcing Market Dynamics

Drivers: Increased tie-ups between automotive OEMs and suppliers

Automotive engineering services have evolved significantly due to the OEMs' rapid alignment with global mega trends, including the increased emphasis on superior performance, safety, fuel efficiency, and self-driving. Increased need for innovation, adherence to high environmental sustainability and safety standards, designing automobiles catering to diverse market segments with shorter time-to-market has gained prominence. With a view to addressing the trends above, automobile manufacturers worldwide have increased collaborations and partnerships with firms specializing in engineering services.

Traditionally, automotive innovation has been concentrated around the R&D centers of leading automakers and tier-one suppliers, with the largest OEMs making the most significant R&D investments. The contemporary model has witnessed an automotive evolution where OEMs are lacking the skills set, and it is not cost-efficient for OEMs to invest in technologies where it lacks expertise.

Restraints: Intellectual Property (IP) confidentiality and security threats

From a legal standpoint, Intellectual Property (IP) comprises four types- patents, trademarks, copyrights, and trade secrets. Companies who wish to outsource their R&D to firms specializing in engineering services have to undertake several measures, including:

• Sending people to inspect the security check-in procedures on the premises of the firm
• Examining the functioning of networks, protecting critical data with access codes
• Understanding the legal system of the countries involved
• Negotiating in a manner that makes the contracted company responsible for its employees’ actions
• Maintaining an original copy of the source code or design of the IP

Companies have to exert a high degree of vigilance to avoid IP theft, as legal enforcements, especially in a few off-shore locations, make it difficult to prosecute firms who allegedly misuse patents and confidential data. IP theft may result in significant losses for the business.

Segments of Global Engineering Services Outsourcing Market

The study categorizes the engineering services outsourcing market based on location type, service, and application at the regional and global levels.

By Location Type Outlook (Sales, USD Million, 2017-2030)

• On-shore
• Off-shore

By Service Type Outlook (Sales, USD Million, 2017-2030)

• Designing
• Prototyping
• System Integration
• Testing
• Others

By Application Outlook (Sales, USD Million, 2017-2030)

• Aerospace
• Automotive
  • Designing
  • Prototyping
  • System Integration
  • Testing
• Construction
• Consumer Electronics
• Semiconductors
• Pharmaceuticals
• Telecom
• Others

By Region Outlook (Sales, USD Million, 2017-2030)

• North America (US, Canada, Mexico)
• South America (Brazil, Argentina, Colombia, Peru, Rest of Latin America)
• Europe (Germany, Italy, France, UK, Spain, Poland, Russia, Slovenia, Slovakia, Hungary, Czech Republic, Belgium, the Netherlands, Norway, Sweden, Denmark, Rest of Europe)
• Asia Pacific (China, Japan, India, South Korea, Indonesia, Malaysia, Thailand, Vietnam, Myanmar, Cambodia, the Philippines, Singapore, Australia & New Zealand, Rest of Asia Pacific)
• The Middle East & Africa (Saudi Arabia, UAE, South Africa, Northern Africa, Rest of MEA)

The off-shore segment accounts for the largest market share, by location type

The global engineering services outsourcing market is divided into on-shore and off-shore based on location type. In 2021, the off-shore ESO market accounted for higher revenue than the on-shore ESO market throughout the forecast period. Off-shore market estimates refer to the revenue generated within a country by sources that are not domestic but international. When a company of foreign origin outsources its engineering services to a company based in a foreign location, the revenue generated in that country is a part of the off-shore ESO market.

Asia Pacific accounts for the highest CAGR during the forecast period

Based on the regions, the global engineering services outsourcing market has been segmented across North America, Asia-Pacific, Europe, South America, and the Middle East & Africa. Globally, Asia Pacific is estimated to hold the highest CAGR of 33.3% in the global market of engineering services outsourcing during the forecast period. India, China, Japan, South Korea, Australia, Southeast Asia, and the Rest of Asia-Pacific are all part of the region. Strong economic growth in domestic emerging countries like China, Indonesia, Malaysia, and India is driving the region's expansion.

After the Asia Pacific, South America is the fastest-growing region with a CAGR of 30.3% during the forecast period. The region has become one of the most popular off-shore outsourcing destinations for American manufacturers and suppliers. As a result, several major market players attempt to establish themselves in South America. Another important factor driving the regional market growth in South America is the relatively stable wage inflation compared to other off-shore locations. Furthermore, the paperwork required for outsourcing activities in the region is extremely detailed, which is beneficial, making it a profitable market for both parties.  

Key Market Players

The engineering services outsourcing market is mildly concentrated, with few global players operating in the market such as Infosys Limited, Boston Engineering Corporation, Tata Consultancy Services Limited, ALTEN Group, Altair Engineering, Inc., and ALTRAN. Every company follows its own business strategy to attain the maximum market share.

Recent Developments

• In 2017, AVL established new standards for managing and processing large data volumes with their new generation of software- AVL Team SUITE, AVL SANTORIN MX 2, and AVL CONCERTO 5.
• In October 2016, IAV Automotive Engineering, Inc. presented its latest methods for developing cost-efficient, reliable, low-emission powertrains at the 25th Aachen Colloquium Automobile and Engine Technology.
• In September 2016, EDAG opened a new development center in the Warmenau district at Wolfsburg.
• In August 2015, Bertrandt Group presented the most recent market trends - the driving feel simulator and the gesture control system under the umbrella theme of “Engineering mobility solutions” at the International Motor Show (IAA) Cars 2015 in Frankfurt.

Key Issues Addressed

• What is the market size by various segmentation of the outsourcing of engineering services by region and countries?
• What are the customer buying behavior, key takeaways, and Porter's five forces of the engineering services outsourcing market?
• What are the key opportunities and trends for manufacturers involved in the engineering services outsourcing supply chain?
• What are the fundamental dynamics (drivers, restraints, opportunities, and challenges) of the market?
• What and how are regulations, schemes, patents, and policies impacting the market's growth?
• What are the upcoming technological solutions influencing market trends? How will existing companies adapt to the new change in technology?
• The market player positioning, top winning strategies by years, company product developments, and launches will be?
• How has COVID-19 impacted the demand and sales of engineering services outsourcing in the global market? Also, the expected BPS drop or rise count of the market and market predicted recovery period.
• Detailed analysis of the competitors and their latest launch, and what are the prominent startups introduced in the target market? Also, detailed company profiling of 25+ leading and prominent companies in the market.