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More defence, aviation spending spells growth for software cos

More defence, aviation spending spells growth for software cos
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First Published: Tue, Feb 20 2007. 12 15 AM IST
Updated: Tue, Feb 20 2007. 12 15 AM IST
Indian software firms say they are well placed to grab a bigger share of the aerospace market as airplane makers and defence companies look to control costs by outsourcing design and management systems.
India is already a hub for global corporations to outsource software services from application development and system integration to supply-chain management.
Global spending on engineering services was $750 billion (Rs33,75,000 crore) in 2004, with aerospace accounting for 8% and could rise to $1.1 trillion by 2020, according to the National Association of Software and Service Companies (Nasscom).
The total offshore engineering spend is expected to grow to $150-$225 billion by 2020, and India, with its talent pool and experience in engineering services, could pick up 25% of that, according to Nasscom.
“Aerospace as a vertical is being focused more than the others, especially by companies like ours, whose core strength lies in engineering,” M. Ashok Kumar, executive vice-president of HCL Technologies Ltd’s aerospace practice, said.
HCL Technologies, India’s fifth-ranked software services exporter, has more than 30 aerospace customers, including plane-makers Boeing Co. and Airbus.
“Given the current business scenario, we’re highly optimistic that the future is bright and the sky is the limit,” Kumar said.
Boeing will use Indian companies increasingly to get technology work done cheaper, said Dinesh Keskar, senior vice-president of Boeing’s commercial airplanes division, at the Aero India 2007 show earlier this month.
The services provided by Indian software companies to aerospace firms include aircraft design, development of on-board electronics systems such as flight control and engine control and ground systems such as air-traffic management.
Analysts say India’s offset policy of 2005, which requires foreign aerospace firms to spend a percentage of the value of any Indian orders in India, such as in establishing a training centre or buying services and supplies from local companies, was also likely to boost outsourcing.
India has said it plans to buy 126 fighter jets, valued at close to $10 billion.
Airbus expects Indian firms to place orders for 1,100 passenger and freighter aircraft valued at about $105 billion over 20 years.
US defence contractor Lockheed Martin plans to send some technology work to India as it eyes large contracts in a country that has stepped up investment on civil aviation and defence.
“We are today looking at at least one, if not more, company in India that can be part of a team that provides IT infrastructure to support Lockheed Martin,” Orville Prins, vice-president of the firm’s India business, said at Aero India.
Analysts say India, where wages are still about one-fifth of Western wages, is well placed to service the aerospace industry.
“There is a certain shortage of such engineers in the US and in Europe,” said V.R. Venkatesh, senior vice-president of embedded systems at Wipro Ltd, India’s third-biggest software services exporter. “If they have to launch a new aircraft design or do a lot of modifications, there are not enough engineers available to do it in a short time-frame. That crunch can be satisfied by having India as a resource base for them.”
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First Published: Tue, Feb 20 2007. 12 15 AM IST
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