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Conquering the Last Bastion of Outsourcing!

Ashwin Gayatri talks about a new form of outsourcing— outsourcing of product engineering in consumer electronics

India’s reigning status as the global outsourcing hub is no longer a matter of international contention. Few, however, are aware of the country’s proven product engineering capabilities within the outsourcing arena. As consumer electronic companies try and bridge the gap between long product development cycles and the need for a speedy go to market strategy, it is time to take a serious look at the outsourcing of product engineering in consumer electronics.

Product engineering, a quintessential activity at every product company is the result of a need to tap new markets, evolve consumer tastes and preferences or to enhance existing products in order to serve customers better. Achieving this requires an amalgamation of ideas and product concepts from all over the world. The process must embrace world class capabilities, advanced technology and evolve mechanisms for global teams to engage seamlessly to create an effective pool of skills and expertise.

Why outsource?

Not a long while ago, many companies did not believe in outsourcing their engineering activities as the conformist school of thought deemed engineering to be a core technology that should be conducted within the company. But today, product engineering is headed for a spectacular take-off and touted as the next wave in outsourcing. Product Engineering Services (PES) is defined as services, which are linked with the creation of a new product that helps in optimizing the productivity and duration of a product. Corroborated by Nasscom, PES outsourcing, which encompasses implanted software and offshore product development, is anticipated to be an approximately $8-11 billion industry by 2008. In the PES segment, the sector that is shining brightest is consumer electronics.

According to the industry estimates, the global sales of consumer electronics is estimated to exceed all expectations and soar to $158.4 billion in 2008.

The consumer electronics industry is ushering in the dawn of convergence. It is the confluence of hitherto separated markets of digital-based audio, video and information technology. No longer is Consumer Electronics a purely hardware domain. Software solutions are now key to digital entertainment, with emerging technologies such as Bluetooth, Wireless LANs, PDA phones, driving a flawless union between hardware and software. Moreover, the boost in the sale of digital consumer electronics products such as DVD players, video game consoles, Internet audio players and digital camcorders, and the rush to beat competitors to market, are increasing the time-to-market pressures on vendors. These vendors now need to deliver a wider range of products in a shorter time-frame, to an extremely discerning consumer base.

Therefore embedded technologies will have to provide compelling software that provides value-added information, interactive entertainment services with an interweaving of audio, video and data services. For manufacturers, survival is determined not only by product differentiation, but by how quickly products can be brought to market in a new geography or category. Consumer electronics companies have begun to look beyond the borders of their companies to design and integrate these new technologies into their products and complement their own engineering and product design teams. Take for example, Hewlett Packard which entered the camera market and in a few years carved out a place for itself. Dell is targeting smart phones and televisions.

Dell and HP are examples of companies who have used offshoring as a competitive weapon to change the rules to define success as illustrated by their forays into the consumer electronics industry.

Offshoring to India

Inscribed as the most advantageous outsourcing destination in the world, India is on the brink of proving its mettle in the burgeoning vertical of offshore outsourcing—product engineering services outsourcing. Recognizing the potential of this vertical, Indian information technology majors among others have dug in their heels and are expecting the vertical to contribute significantly to their revenue pies.

India’s advantage lies in its knack to deliver technology services to global customers at enormous value and speed. India also has a tremendous pool of engineering and scientific talent which can be exploited for the intensification of the sector. Access to cutting-edge technology through global alliances with product companies, availability of prototyping and testing facilities, and sourcing domain skills through collaboration with the domestic industry, give Indian companies the edge in consumer electronics off shoring.

From design to production and maintenance, most engineering functions can be outsourced successfully. It’s the hottest trend in outsourcing, and for excellent rationale. Continuing this trend, Collaboration will be the key to improving business value, reducing costs, and ultimately unlocking success in the market.

The author is the Vice President, Product Engineering Services, Patni ashwin.gayatri@patni.com