SWOT Analysis of Offshore Services: The strength of offshore industry is its cost effectiveness, large pool of trained engineers, well established engineering industry, time zone advantage for real time solutions, good IT infrastructure, reputed affordable IT education, English-speaking professionals, government incentives, influx of talent from other educational streams.
The weaknesses of offshore industry is the low promotion of Indian capabilities lack of local presence of the Indian engineering industry, low level of knowledge on international standards and codes, non-adherence to contract schedules and deliverables, low lifestyle image in India, data security etc.
The opportunities of offshore industry are India’s edge in outsourcing market with its ability to combine skills with cost. India has a long history in the sector of automobiles and aerospace.
These are the sectors where India has demonstrated its manufacturing capabilities. In addition, there is the presence of the local talent pool in the manufacturing sector. India perceives a situation where cross-functional teams-IT engineers understanding design capabilities and plant and process engineers trained in IT- will operate in this segment.
The threats of offshore industry are China, which is likely to emerge as a strong competitor for India China has demonstrated its capabilities as an offshore destination for manufacturing of automotives, cellular phones and consumer durables. European clients still prefer European consultants due to the locational advantage. The challenge faced by Indian companies operating
e engineering service markets is trained talent in the sector. Since the sector requires some practical knowledge which is normally not imparted by colleges, it is up to the various companies to train these individuals who are already well-versed in domain knowledge.
Industry Drivers : The major drivers which are promoting offshore services from India include growth in Indian economy, excellent communication facilities, abundant Indian hu excellent advancement in outsourcing technologies, cost effectiveness and adherence to standard
abundant Indian human resources, quality.
Engieering Outsourcing from United States of America: US has market-oriented economy,ate individuals and business firms make most of the decisions, and the federal and state governments buy the required goods and services predominantly in the private marketplace.
US foreign trade and global economic policies have changed direction dramatically during the several years that the United States has been a country. The US economy though a lot better than other economies, faces some other long term challenges.
Outsourcing of engineering services from US to low coast countries has been going on for many years, particularly in the oil and gas industry. Outsourcing services from US alone is estimated at US$ 1.6 trillion. The construction sector has a share of 15%.
The outsourcing includes a wide range of services including design and architecture. Other services that lend themselves to outsourcing continue to be those that are of repetitive and data processing nature, such as Computer Aided Design (CAD), mapping and GIS.
The potential manufacturing sectors wherein the offshore consultancy opportunities exist include electronic design automation, automotive and infrastructure.
Engineering Outsourcing from United Kingdom : The United Kingdom is the world’s leading trading power and financial centre. The economy of United Kingdom is the strongest in Europe and it was this relatively good economic performance that had complicated the government’s efforts to join the European Economic and Monetary Union (EMU).
The potential manufacturing sectors wherein the offshore consultancy opportunities exist include aerospace, construction, automotives, chemicals, power, oil and gas engineering.
Engineering Outsourcing from Japan : A member of OECD, Japan is the second largest economy in the world, with a per capita Gross National income of US$ 34510 (2003). In terms of purchasing power parity, manufacturing has been the basis of Japan’s economy since the 1960s and today accounts for just over 20% of current-price GDP.
The potential manufacturing sectors wherein the offshore consultancy opportunities exist include telecommunication, microelectronics, biotechnology, information communication technology.
Recommendations and Action Plan
The overseas companies have assessed that they can improve their bottom line further by taking advantage of lower labour costs through offshore activities. A broad spectrum of opportunities is available to Indian companies providing services in areas of engineering design, development and delivery of specialised components; offshore product development opportunities.
The tax benefits available to IT firms should also be extended to engineering design offshore firms to build synergy between the two which would enhance export of engineering design services
The key strategies and actionable plans are broadly categorised into four following categories : 1. Market understanding includes detailed field based studies of the identified sectors in the
2. Promotion includes delegations/mission to target countries, tax benefits and identification
and strengthening of a nodal agency for promotion of Indian engineering capabilities.
3. Focused marketing includes strategic alliances with local consulting firms, negotiate
against trade barriers, credit facility and support creation of world-class infrastructure facilities in the form of engineering offshore city which could be an integral part of existing
4. Quality assurance includes recognition of Indian qualifications.
Q.6. Give the impact of consultancy services/export service in the e world economy.
Ans, Construction is one of the oldest industries which provides in rastuces India industries. It constitutes one of the largest services sectors in the economy bow contribution to GDP and employment. In most developed and many developing counce tal GDP ranges between 5-7 per cem the Philippines and Thailand) the share of construction in total GDP ranges bet In countries, such as Japan and Korea the share of construction and consultancy 10 per cent of GDP. In the United States, construction activity grew from
ted investment in construction in $420,6 billion in 2000. In the European Union (EU), the estimated investmen o 1999 was 781 billion Euro (9.7 per cent of GDP) which was around 48 per cent capital formation. Construction and consultancy services are labour-intensive services and contribute t substantially towards employment. The share of construction in the total employmen countries is presented in Table A1 in Appendix A. During the period 1990-99, employment in US
d construction services sector increased from 7.7 million to 8.98 million. Construction, arme, and engineering services are the largest industrial employer in Europe, accounting for more than 28 percent of the total industrial employment. In 1999, there were around 1.9 million enterprises engaged in construction activities in the EU, which provided direct and indirect employment to approximately 26 million workers. Since architectural and engineering services are often integrated with physical construction activities and/or other business services, it is difficult to obtain separate data on these services. The employment pattern in architectural and engineering services varies across countries. In the USA, engineering is one of the largest and most diverse of all professions, while architecture is comparatively small. The situation is just the reverse in Europe where there are more architects than engineers.
Construction, architectural and engineering services are primarily traded through commercial presence, that is, the establishment of foreign affiliates and subsidiaries of foreign companies. International supply of construction services involves the movement of unskilled, semi-skilled and skilled workers and professionals to perform a wide range of work, including designing, management, and physical construction work. Increasingly, with developments in communication and the internet, cross-border supply is becoming an important component of trade in some of these services. These include the electronic transmission of designs and blueprints and online consulting services. However, given the capital-intensive nature of the services, the requirement of specific skills and technical know-how, which may not be available locally and the strong client-oriented focus of these services, the bulk of trade would continue to take place through the commercial presence and the movement of natural persons.
Global trade in construction services is estimated to be over US$120 billion. It is extremely difficult to estimate the share of different regions/countries in the total trade since disaggregated sectoral trade data for cross-border trade and supply through commercial presence is not available. The US is the only country which publishes data on:(i) cross-border trade in architectural, engineering and construction services, and (ii) sales of majority-owned affiliates of US firms and purchases from majority-owned affiliates of foreign firms. The US is a net exporter of private construction, engineering, architectural and mining services. The US trade data shows that the exports of these services have increased nearly fivefold from US$867 million to US$4071 million during the period 1990-99. During the same period, imports increased from US$170 million to US$530 million. Between 1991 and 1996, cross-border exports of US architectural, engineering and construction services increased at an average annual rate of 15 percent from US$1.5 billion to US$3 billion, while imports increased from US$315 million to US$489 million (that is, a nine percent increase). Countries in the Asia/ Pacific region are major importers of US construction and consultancy services, followed by Latin American countries.
Developed countries are the major exporters of construction, architectural and engineering services while developing countries provide the major markets. Construction services supplied internationally are typically related to large-scale projects, such as airports, harbors, and petrochemical plants and are often undertaken by specialized contractors with local sub-contracting, Prior to the 1950s, most construction and consultancy companies in the industrialized countries serviced the needs of their own economy. In the 1950s and 1960s, these companies diversified their operation and ventured into Asian, African and Latin American countries. A majority of the projects were related to infrastructure building and were supported by multilateral funding, such as the World Bank or International Development Association. In the 1970s, the oil price boom in the Middle East and Gulf countries and consequent infrastructural developments significantly increased exports to those countries. Since the late 1980s, the decline in oil prices, Iran-Iraq War and the Gulf War slowed down the development process in the Middle East, and South Asian, African and Latin American countries started emerging as important markets for construction and related services. With the development of a single, European market, trade among the European countries increased substantially.
International supply of construction, architectural and engineering services involve large movement of workers at all levels of skills. Although, the exact data on movement of such workers is not available, a large proportion of movement of workers into the industrialised countries and the Middle East from developing countries of Asia and Latin America are construction related.
In the recent years, increasing competition among companies and the growing size and technical sophistication of projects have encouraged construction companies to enter into partnership agreements and strategic alliances in bidding for and implementing construction projects. The construction sector is also affected by increased privatisation of public utilities and reduction in financial assistance from the government.