Engineering Service Outsourcing Market by Services (Designing, Prototyping, System Integration, Testing, and Others), Locations (Onshore and Offshore), Applications (Aerospace, Industrial, Healthcare, Consumer Electronics, Automotive, Semiconductors, Telecom, and Others), and Regions (Asia Pacific, North America, Latin America, Europe, and Middle East & Africa) - Global Industry Analysis, Growth, Share, Size, Trends, and Forecast 2021–2028

The global engineering service outsourcing market was valued at USD 1.31 trillion in 2020 and is projected to reach USD 5.52 trillion by 2028 expanding at a CAGR of 22.7% during the forecast period, 2021 – 2028. The growth of the market is attributed to the growing alliance between engineering service providers (ESPs) and original equipment manufacturers (OEMs).
 

Engineering service is required at each stage of a product lifecycle and include its applications from conceptualization to product completion. The engineering functions include product design and development, which has been made effective due to advancement of Information Technology (IT) through tools and databases as well as the automation of certain processes.

Engineering services outsourcing is a marketing model that enhances the firm’s efficiency while reducing the operational cost and lowering the time consumption for developing a product or other business operations. The services outsourcing market is constantly evolving owing to the rising demand for reducing service cost dealing with clients. Increasing demand for integration of technologies to improve product offering, growing interest to reduce cost, and shorten the production time are expected to boost the global market.

Majority of the companies are focusing on enhancing their services to serve and fulfill the needs of customers. Moreover, engineering as a service is widely adopted across various construction and manufacturing industries to provide better products and infrastructures. Companies have started offshoring to reduce costs and enhance their commitments for a more strategic approach. At present, the automotive sector offshores engineering is a popular trend in the market. For instance, Toyota uses offshoring service for product development to help open up new markets by improving overall quality and productivity of its vehicles.

Market Drivers, Restraints, Trends, and Opportunities

• Increasing demand for automation and rise in adoption of integrated solution for analyzing and designing engineering systems are the key factors driving the market growth.
• Growing consumer inclination towards mobile phone that lead to easy access to engineering software, thereby, boosting the market growth.
• Rising adoption of cloud-based engineering software, growing penetration of smart manufacturing tools, and rising the demand for advanced industrial solutions based on robotics, AI, and machine learning are some of the key drivers for the market expansion.
• COVID-19 pandemic has adversely affected the global engineering services outsourcing market in 2020 due to temporary closure of industries and industry verticals such as automotive and construction. This is expected to hamper the market growth. However, sales of personal vehicles are anticipated to grow during the forecast period, as people are avoiding public transport owing to the COVID-19 pandemic.
• High cost of maintenance and license cost along with different regulations across several regions are key restraining factors for the market growth.

Scope of the Report

The report on the global engineering services outsourcing market includes an assessment of the market, trends, segments, and regional markets. Overview and dynamics have also been included in the report.

Global Engineering Services Outsourcing Market Segment Insights

Testing segment anticipated to account for a significant market share
On the basis of services, the market is segmented into designing, prototyping, system integration, testing, and others. The testing segment is anticipated to account for a significant market share during the forecast period owing to the rising demand for the service in the development and redesigning product models that offer higher compatibility and bug-free operations. Original equipment manufacturers (OEMs) are specifically hiring software testing services from engineering service providers to install bug-free and user-friendly software. Moreover, the rising demand for outsourcing testing services to decrease manual intervention is anticipated to spur the segment growth. On the other hand, the designing segment is expected to expand at a rapid pace owing to the growing complexities of designing and increasing demand for cost reduction by outsourcing for designing to a skilled but relatively low-cost workforce. Growing consumer inclination towards industrial, architectural, and graphic designing for innovative solutions and equipment are expected to drive the segment growth during the forecast period. The rising demand for consumer-centric products is projected to boost the segment growth.

Onshore segment expected to represent a considerable share
Based on locations, the global engineering services outsourcing market is bifurcated into onshore and offshore. The onshore segment is expected to represent a market share of more than 50% during the forecast period. Onshore services refer to delivery of services to an OEM based in the same country with the ESP. The onshore outsourcing is widely favored as it avoids certain challenges such as political and geopolitical barriers, time zone barriers, and language & cultural barriers that are present in the offshore service. Moreover, onshore outsourcing enhances communication between OEMs and service providers, which in a way enhances the delivery of products and services. On the other hand, the offshore segment is projected to register an impressive growth rate in the coming years owing to the global inflation rates and high training costs. Offshore services refer to cross-border delivery of product and services due to factors such as availability of cost-effective resources and easy availability of a skilled professionals in developing countries. However, a major challenge for offshore engineering service providers is that they need to follow various government regulations mentioned in the outsourcing contracts while serving the clients across various countries.
 

Asia Pacific expected to hold a large market share
In terms of regions, the market is classified as Asia Pacific, North America, Latin America, Europe, and Middle East & Africa. The market in Asia Pacific is expected to account for a market share of more than 35% during the forecast period. The region is a major hub for industrial goods manufacturing and offering cost-effective services that are delivered by highly skilled professionals. The increasing demand for technological innovation and the continuous integration of embedded software into the previously existing models is anticipated to drive the regional growth. Meanwhile, Latin America is expected to exhibit a healthy growth rate during the forecast period. This region is preferred for an offshore outsourcing location for U.S.-based manufacturers and suppliers. Additionally, stable wage inflation in this region as compared to other offshore locations is driving the regional market growth.
 

Segments

Segments Covered in the Report
The global engineering services outsourcing market has been segmented on the basis of

Services

• Designing
• Prototyping
• System Integration
• Testing
• Others

Locations

• Onshore
• Offshore

Applications

• Aerospace
• Industrial
• Healthcare
• Consumer Electronics
• Automotive
• Semiconductors
• Telecom
• Others

Regions

• Asia Pacific
• North America
• Latin America
• Europe
• Middle East & Africa

Competitive Landscape

Some of the leading manufacturers in the global engineering services outsourcing market are Infosys Limited, Tata Consultancy Services Limited, ALTEN Group, Altair Engineering, Inc., Boston Engineering Corporation, and Altran.

Companies are focusing on catering client requirements to develop customer loyalty and maintain long-term alliances. Moreover, leading vendors are also entering into full-time consulting to establish strategic relationships with end-users by assisting them in their product offerings that can enhance their operational performance.