Bangalore: India’s second largest software services firm by revenues, Infosys Technologies Ltd, will help build through local vendors aircraft components and systems for customers such as Boeing Co. and Airbus SAS on rising demand for the entire spectrum of services from design to product development from the country.
Calling the model “virtual manufacturing”, Infosys says it will be an extension of the work it does for aerospace and automotive customers: design of components to transfer of production drawings to manufacturers. “If we have designed a solution, they want it manufactured in India. The customer doesn’t want to go to another place to manufacture,” said S. Valmeeka Nathan, global head of product lifecycle and engineering solutions unit at Infosys.
Infosys would not build these components on its own, but source it through local vendors. The Bangalore company would manage production quality and delivery of the components and is working with vendors to improve capabilities in certification and training manpower, besides expanding their capacity to make aerospace components in larger volumes.
Competent partner: An Airbus A380 plane. Airbus SAS and Boeing Co. are among Infosys’ customers. Aircraft makers are outsourcing to vendors in India to reduce the design time and cost of new planes. (Bloomberg)
“We are trying to build a model on how do we work with manufacturing centres, represent them as part of the value chain (in) Infosys to our customers,” he added, but did not name the vendors. It has worked on a similar scale for some automotive customers, which the firm did not name.
Airbus and Boeing, two of the biggest passenger plane makers, are among customers at Infosys. Aircraft makers are increasingly outsourcing to vendors in countries such as India to reduce design time and costs of new planes and product extensions.
“We have designed a component that weighs 25% less (than the customer’s own prototype),” said B.S. Madhusudhan, head of strategy and initiatives in aerospace engineering at Infosys. Aircraft makers focus heavily on reducing aircraft weight to help it carry more people or cargo.
India can tap a potential $40 billion or almost Rs1.6 trillion offshore opportunity over the next 15 years in engineering services, particularly in the automotive and aerospace businesses, said a 2006 report by software lobby National Association for Software and Service Companies, or Nasscom, and consultant Booz Allen Hamilton.
The report focused just on design-related work that Indian firms provide to customers in the US and Europe and did not include manufacturing.
In the years to 2011, Indian companies are expected to get offset orders from global military equipment makers worth nearly Rs40,000 crore, according to the ministry of defence. The biggest of such orders will come from local sourcing in a purchase of 126 fighter aircraft, estimated to cost Rs42,000 crore.
The market for the new end-to-end services is “booming,” said Nathan of Infosys. Sharing their development plans five years into the future, Infosys’ aerospace customers have asked it how else it can differentiate itself from rivals, he added.
Infosys’ next-ranked rival, Wipro Ltd, plans to build electronic warfare systems, radars, aviation electronics, and flight simulators locally for US defence contractors, such as Lockheed Martin Corp. and Northrop Grumman Corp., Mint first reported on 4 February. The firm is setting up dedicated units for these systems anticipating bigger revenues from defence customers from the middle of next year. The company also has a tie-up with Britian’s largest defence maker BAE Systems Plc., to build sub-systems for aircraft engines that power business jets.
Another Bangalore engineering services firm, Quality Engineering and Software Technologies Pvt. Ltd, or Quest, builds small components that it designs for top vendors of Airbus and Boeing.
“We are moving towards risk reward kind of partnership,” said Vijay Menon, vice-president for marketing at Quest. “If you have to engage in a long-term meaningful relations with customers, it is natural to take some of the costs.”
Even as the trend gathers momentum, outsourcing firms will limit their involvement in identifying top-notch manufacturers and stop short of entering production themselves, an analyst said.
“Clearly, clients are seeking very close collaboration by engineering services team with the manufacturing company or the end assembly. I have not come across anyone asking an IT vendor, you should lead the manufacturing programme,” said Milan Sheth, partner at consultant Ernst and Young for business advisory services. “For manufacturing, you need a different mindset and it is a challenge.”