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Global engineering services outsourcing market is expected to record a revenue of US$ 6,802.92 Bn by the end of the year 2031, up from US$ 1,439.97 Bn in 2022. The market is growing at a compound annual growth rate (CAGR) of 19.67% during the forecast period of 2023–2031.
The engineering services outsourcing market is growing rapidly due to several factors that are driving demand for these services. One key factor is the implementation of Industry 4.0, which refers to the trend towards automation and data exchange in manufacturing and other industrial processes. This trend is driving demand for engineering services outsourcing because companies need to develop new technologies and processes to keep up with the changing landscape of modern industry.
Apart from this, another factor driving growth in the engineering services outsourcing market is the reduction in overhead costs. By outsourcing their engineering services, companies can reduce their labor costs, machine costs, space costs, skill training costs, and other technology-related costs. This enables them to save a significant amount of money, which they can then reinvest in their business to fund development projects and other growth initiatives.
Outsourcing engineering services also allows companies to distribute knowledge and risk among a network of connected companies. This can help them to reduce their exposure to risk, while also benefiting from the knowledge and expertise of other companies in the network. This can be particularly beneficial for companies that are looking to expand their operations into new markets or that are operating in industries where there is a high level of technological change and innovation.
The implementation of Global Business Services (GBS) has also played a key role in driving growth in the engineering services outsourcing market. GBS is a model that provides integrated governance, locations, and business practices to all shared services and outsourcing activities across an enterprise. This enables companies to standardize their operations and improve their efficiency, while also reducing costs and improving their ability to scale.
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Growing Emphasis on Cost Reduction to Drive Market Growth
Outsourcing engineering services is an excellent way for companies to reduce costs. Outsourcing firms have the necessary infrastructure, equipment, and workforce to complete tasks efficiently and at lower costs.
Outsourcing engineering services is an excellent way for companies to reduce costs to a great extent. As per a survey conducted by Astute Analytica, 59% of companies outsource to reduce costs. Outsourcing firms have the necessary infrastructure, equipment, and workforce to complete tasks efficiently and at lower costs. By outsourcing these services, companies can save money on labor costs, infrastructure costs, equipment costs, and other related costs in the global engineering services outsourcing market. The saved cost can then be invested in core business functions, such as research and development, marketing, and sales, which can help them grow and expand their operations.
Rapid Technological Advancements to Spur Demand for Engineering Services Outsourcing
The rapid pace of technological advancements is also driving demand for engineering services outsourcing. Companies need to stay up-to-date with the latest technologies and tools to remain competitive, and outsourcing engineering services can provide them with access to these technologies without the need for large investments. Outsourcing firms often specialize in specific areas of engineering, such as software development or mechanical engineering, and can provide companies with the expertise and knowledge they need to implement new technologies and processes.
Growing Quality Concerns in Engineering Services Outsourcing Market
Quality concerns are a significant restraint in the market. Companies that outsource their engineering services often worry that the quality of the work may not meet their expectations or the standards required for their products or services. Poor quality work can have negative consequences for a company's reputation, and can also result in delays or other issues that impact their operations.
According to a report, quality concerns are one of the most common reasons why companies choose not to outsource their engineering services. In a survey of US manufacturing companies, 29% cited quality concerns as a reason for not outsourcing their engineering services. While outsourcing firms often have a team of experienced and skilled engineers, companies may not have direct control over the quality of work being done. This can lead to concerns about the accuracy and consistency of the work, which can ultimately impact the success of a company's operations.
To overcome quality concerns, it is crucial for companies in the engineering services outsourcing market to conduct thorough research and due diligence when selecting an outsourcing partner. They should look for outsourcing firms with a proven track record of quality work and positive client feedback. Companies should establish clear expectations and guidelines for the work being done and regularly monitor the quality of work being produced. Communication is also crucial, and companies should have frequent discussions with their outsourcing partner to ensure that quality standards are being met.
Based on type, the product designing segment is projected to capture more than 20% revenue share of the global engineering services outsourcing market. This growth can be attributed to the increasing demand for innovative products and the need to reduce time-to-market.
Product design services outsourcing involves the entire process of designing a product, from concept development to the final design. It includes activities such as design analysis, product specification, concept generation, and 3D modeling. Outsourcing product design services can provide companies with access to specialized expertise and reduce the time and costs associated with in-house product design.
The engineering services outsourcing market can also be segmented based on location, including onshore, on-site, and offshore outsourcing. Among these, the onshore segment is projected to capture around 46% of the global engineering services outsourcing market. This growth can be attributed to factors such as cultural and linguistic compatibility, proximity to the client's headquarters, and the ease of communication.
Onshore outsourcing involves outsourcing services to a third-party firm located within the same country or region as the client. This type of outsourcing offers benefits such as reduced communication barriers and cultural compatibility, making it an attractive option for companies that require frequent communication and collaboration with their outsourcing partners.
By Pricing Model
The market can also be segmented based on pricing models. Wherein, the staff augmentation segment is projected to capture over 24% of the global engineering services outsourcing market.
Staff augmentation involves outsourcing specific engineering roles or functions to a third-party firm on a short-term or long-term basis. This model offers benefits such as increased flexibility, cost savings, and access to specialized expertise. Staff augmentation is particularly useful for companies that require additional engineering resources to meet project deadlines or address short-term resource gaps.
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The Asia Pacific region is rapidly emerging as a hotspot for the engineering services outsourcing market. In 2022, the region generated more than 36% of the global revenue for the market. One key driver is the rapid expansion of the manufacturing and engineering sectors in countries such as China, India, and Japan. These countries have significant engineering capabilities and are home to a large number of skilled engineers, which makes them an attractive destination for outsourcing engineering services.
Another factor driving the growth of the engineering services outsourcing market in the Asia Pacific region is the increasing adoption of digital technologies. According to a report by NASSCOM, the Indian IT industry, for instance, is expected to grow at a CAGR of 7.7% from 2021 to 2025, driven by the increasing demand for digital transformation services.
Furthermore, the Asia Pacific region has a cost advantage over other regions in terms of labor costs, which is another factor driving the growth of the market. According to our study, India and China are among the countries with the lowest labor costs globally, which makes them an attractive destination for outsourcing engineering services. India's market is expected to grow at a CAGR of 18%. The growth is being driven by factors such as a large pool of skilled engineers, cost advantages, and the increasing adoption of digital technologies. China is also rapidly emerging as a key player in the engineering services outsourcing market. The country has a large and rapidly growing engineering sector, with a focus on manufacturing, automotive, and aerospace engineering.
Furthermore, both countries are investing heavily in digital technologies such as artificial intelligence, automation, and the Internet of Things (IoT). According to a report by the World Intellectual Property Organization, China and India are among the top 10 countries globally in terms of patent applications in the field of artificial intelligence, which demonstrates their strong capabilities in this area.
List of Key Companies Profiled:
Global Engineering Services Outsourcing Market: Segmental Overview
Global engineering services outsourcing market is segmented into following categories:
By Pricing Module:
|Market Size Value in 2022||US$ 1430.7 Bn|
|Expected Revenue in 2031||US$ 3,803.21 Bn|
|Unit||Value (USD Bn)|
|Segments covered||By Type, By Location, By Pricing module, By Industry, By Region|
|Key Companies||Accenture, AKKA Technologies, Altair Engineering, Inc., ALTEN SA, ASAP Holding GmbH, Assystem, AVL List GmbH, Bertrandt, Capgemini SE, Cognizant, Cyient, EDAG, ESI Group, Ferchau, Genpact, Geometric, HCL Technologies Limited, IAV, IGate, Infosys, IBM, ITC Infotech, KPIT, L&T Technology Service, Neilsoft, QuEST Global, Ranal Inc., Segula Technologies, Semcon, Tata Consultancy Services, Tata Elxsi, Tata Technologies, Tech Mahindra, Wipro, Other Prominent Players|
|Customization Scope||Get your customized report as per your preference. Ask for customization|
Engineering outsourcing is the transfer of responsibility for an engineering, organization's architecture, and construction functions to a third party.
The global engineering services and outsourcing market generated a revenue of US$ 1,439.97 Bn in 2022.
The global engineering services and outsourcing market is segmented by type (8 subsegments), by location (3 subsegments), by pricing module (5 subsegments), and by industry (13 subsegments)
Product Designing, Prototyping, Process Designing, System Integration, Testing, Quality Control, Product Lifecycle Management and Plant Automation & Enterprise Asset Management.
North America and Europe holds the highest share in the global engineering services of 33% each across the globe.
Industries like Aerospace, Automotive, Computing Systems, Construction, Consumer Electronics, Energy, Heavy Machinery, Healthcare, Industrial, Medical Devices, Semiconductors, Telecom and Others.
Accenture, AKKA Technologies, Altair Engineering, Inc., ALTEN SA, ASAP Holding GmbH, AVL List GmbH, Cognizant, and many other
Factors like reduction in overhead cost and implementation of Industry 4.0. are some major factors boosting the overall growth of the global engineering service and outsourcing market.
Loss of managerial control over connected outsourcing companies is a key hindering factor impacting the global engineering service and outsourcing market.
HCL Technologies, Altair Engineering Inc., Orthogone, Flatworld Solutions and QuEST Global are some companies leading in the global engineering service and outsourcing industry.
The market is estimated to grow at a CAGR of 19.67% during the forecast period 2023-2031.
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