दृष्टिकोण – Indra's Viewpoint

An article in NewYork Times, ‘Japanese Fret That Quality Is in Decline’ by MARTIN FACKLER on September 21, 2006 shows how manufacturing has gone in the industrial culture of Japan. How deeply are Japanese concerned about the quality of the Japanese goods? Without any elaborate management education as in America, the Japanese produce the best quality. Without following a formal six-sigma quality practice of American origin, the Japanese achieve a quality level better than the one who follows it.

Perhaps, the Japanese have reached the level of the quality standard because of the overall concern for quality over the years and their practices of quality circles, kaizen, 5S, TPM (Total Productive Maintenance), QFD (Quality Function Deployment), lean manufacturing, and unique TPS (TOYOTA Production System).

Perhaps only in Japan could a television series like “Project X” have become one of the most popular TV shows. No, it isn’t a science fiction thriller. It’s about product quality. More specifically, it’s about a bunch of corporate engineers whose hand-held calculators and ink-jet printers helped turn this nation into an industrial powerhouse.

It is all due to the worry about their completitive strength. It is little wonder that a recent surge in recalls of defective products has set off national hand-wringing and soul-searching here, in radio talk shows, on the front pages of newspapers and in the hushed corridors of government ministries.

Even in local noodle shops, the conversation turns to the bruised pride and fears that Japan may be losing its edge at a time when South Korea and China are breathing down its neck.
“Craftsmanship was the best face that Japan had to show the world,” said Hideo Ishino, a 44-year-old lathe operator at an auto parts factory in Kawasaki, an industrial city next to Tokyo. “Aren’t the Koreans making fun of us now?”

Indian auto sector have learnt a lot from the Japanese about their quality control practices and overall Japanese way of manufacturing management. Many have gone for the coveted Deming Prize. And that is one of the reasons that the sector is doing wonderfully well.

This is a country that has been obsessed with perfection. Tokyo’s sprawling subway and train networks run like clockwork, accurate to the minute. Television factories assign workers with rags to wipe down every new set, lest a Japanese consumer find a single fingerprint and return it. In supermarkets, many apples and melons are individually wrapped in protective plastic foam.

In the last two months, the national angst increased after large-scale recalls of defective products made by Toyota and Sony, the country’s two proudest corporate names. In the United States, product recalls occur so frequently that most are barely noticed. And that is the reason that US has almost given up manufacturing lead in sectors after sectors. Today, even Ford and GM have closed most of the manufacturing activities in US mainly because it couldn’t compete on quality with the Japanese.

In Japan, the news has created something of a crisis in a country where manufacturing quality is part of the national identity. Some say young Japanese are too lazy. Others say American-style management is to blame.

Can Indian manufacturers take some lessons from this story? Let Japan be the model to emulate and not the China for the manufacturing sector. Let the Indian manufacturer not go down on quality by indiscriminately using Chinese parts in their products. On long run it may prove too costly.

The concern shown by the Japanese shows its built-in strength of the quality of their manufactured products. Perhaps, it will not go the US ways in manufacturing.

After many years, there is some good news about Bihar that gives some hope of resurgence. Bihar has recently played host to a number of big names of corporate India, like Ratan Tata of the Tata group, Max Healthcare Chairman Analjit Singh and Ashok Ganguly of ICICI OneSource.

To start with, the Tata group may be exploring the possibility of investing in low-cost hotels in the state. Some well wishers of Bihar are also toying with the idea of offering better concessions for Tata’s pet project- Rs 1 lakh car plant in Bihar that is facing a lot of political problems in acquiring land at Singur in West Bengal. Bihar will certainly be a better location with the militant unionized workforce of Bengal. Max Healthcare is looking to set up a super-specialty healthcare centre and hospital in Patna. It is not only that the maximum numbers of patients come from Bihar to Delhi; Delhi also must be having the maximum number of doctors of Bihari origin.

Anand Mahindra on his visit to Patna announced a slew of investments in Bihar that includes a satellite assembling plant in Patna similar to its units in Rudrapur and Jaipur, an investment business to tap rural savings, an agro-processing unit for lichis and mangoes of Bihar, investments in IT, a Mahindra resort in Bodh Gaya and Rajgir and investment in a non-polluting transport system. The Nitish government has already worked out elaborate plans to promote Rajgir-Bodhgaya-Gaya circuit on the international tourism map along with an International University. Mr Ratan Tata supported the state government’s plan to set up golf courses near Rajgir-Nalanda, besides setting up of five-star hotels to promote tourism in the area.

Bihar has also accepted the proposal by a Tamil Nadu-based firm, M/S Indian Gasohol Limited for setting up four maize-based industrial units in Bhagalpur, Muzaffarpur, Begusarai, and Vaishali for an estimated investment of Rs 2,500 crore. As stated by Ratan Tata, chairman of the Investment Commission, ‘the commission stands committed to facilitating Bihar’s development and to promoting it as an investment destination’.

With the change in the perception of investor-friendliness, the Bihar government has received a large number of investment proposals for sugar mills, malls, multiplexes, hospitals, and particularly educational institutes. A good percentage of them have got the approval too. Proposals for setting up eight new multi-purpose sugar mill complexes in Madhubani, East Champaran, Saran, Muzaffarpur, Madhepura, Begusarai and Nalanda districts with the capacity of crushing 65,000 tonne sugarcane per day involving an estimated investment of Rs 2,157 crore are in hand of the government.

The aggressiveness of the government is clear from the appointments of the reputed persons such as NK Singh, the former revenue secretary and planning commission member as the chief of state planning commission and Muchkund Dubey, former Foreign Secretary to head the Common School System Commission, a high level team comprising two Secretary level officials on Sunday to Hong Kong on a “brand Bihar mission” to participate in a four-day conference on tourism, and the planned major meet early next year to woo non-resident Indians (NRIs) from the state.

The state is under a process of image building for an investor-friendly state. It promises certain advantages over already developed states in terms of cheap real estate prices, limited labour-related issues and a large educated manpower at nearly one-third the cost compared to cities like Bangalore or Chennai. However, Bihar is still to go miles before it does some significant improvement in infrastructure, socio-economic backwardness, and law and order.

Will the interests shown by so many of biggies translate into actual investment in Bihar? It will certainly depend on the initiatives and assistance provided by the government over the time. CM and his team will have to work hard to make it. Many are watching the three states of eastern India- Bihar, Bengal and Orissa. It is for the time to judge who proves really better.

Read the article To achieve a turnaround in Bihar by Shaibal Gupta
‘India could handle 30% US banking process’

A MUST READ: The challenge for the new republic that is Bihar

India has emerged as the world’s fastest growing economy. Boston Consulting Group’s Global Wealth 2006 study shows in 2005, high growth in India’s (15.9% in local currency terms, compared to China’s 14.8%) assets under management (AUM) – comprising cash, shares, assets in the country and oversaes and money market funds, and excludes wealth attributed to investors’ own businesses, residences or luxury goods. The steady growth, estimated at nearly 16% in 2000-2005, has meant that India’s AUM has more than doubled from $268 billion to $559 billion, helping it move up the ladder from the 27th place to number 19 during the five-year period.

Growth rate is projected to taper off a little – to 13.3% between now and 2010. However, India is seen to be the fastest growing member of the BRIC (Brazil, Russia, India, China) club. The global rate will be 5.6%. India will join the $1 trillion wealth club by 2010, accounting for 1% of the global pie of $115.8 trillion in 2010. Are these figures not inspiring for the entrepreneurs of India?

Arvind Panagariya, presently professor at Columbia University in an article, ‘Is India finally flying?’, has further provided some interesting facts on Indian economy that are all showing a consistency in economic growth.

In the last three years, the economy has grown a phenomenal 19% per annum in current dollars. In 1990-91, the GDP in current dollars was $317 billion. During the last three years, the GDP has increased by $327 billion. To put the matter even more dramatically, given the US inflation rate of 3%, the GDP in real dollars grew at the annual rate of 16% in the last three years. If this momentum can be sustained, the Indian GDP would rise from its current level of $800 billion to cross the current US GDP of $12.5 trillion in just 20 years!

1990-91 exports of $18.1billion took nine years to double. In contrast, the recent doubling has taken place in just three years: from $52.7 billion in 2002-03 to $102.7 billion in 2005-06.

Services exports were multiplied by a factor of 3.7 in just five years between 2000-01 and 2005-06, whereas during ten years between 1990-91 and 2000-2001 it were multiplied by 3.5.

The ratio of goods and services exports to GDP rose from 11.6% in 1999-00 to 15.6% in 2002-03 and to 20.5% in 2005-06.

The total foreign investment flow has risen from $6 billion in 2002-03 to $20 billion in 2005-06.

Remittances from abroad have risen less dramatically. But they too have gone up from $17 billion in 2002-03 to $25 billion in 2005-06.

In 1990-91, India had just five million telephone lines in total. Currently, telephone lines are expanding at the rate of more than five million per month. In urban areas, teledensity has reached 31%. Teledensity in the rural areas at 2% remains low. But to put the matter in perspective, as recently as 1991, urban teledensity was below this figure. The communication sector as a whole has been growing 24% per year in real terms since 1999-00. Its share in the GDP has more than doubled from 1.6% in 1999-00 to 3.5% in 2004-05.

The sales of passenger vehicles have risen from 707,000 in 2002-03 to 1.14 million in 2005-06. The total turnover of the automobile industry rose from $12.3 billion in 2002-03 to $19 billion in 2004-05.

Many sectors are doing tremendously well. We can see hope all around. And no sane Indian is sceptical about an honourable tomorrow for India. Let us work a little harder and be honest to our work; ‘Yogah Karamshu Kaushalam.’

Yesterday was Mahalaya. I get reminded of our childhood when my grandfather would get up to hear the wonderful narration of the Goddess on radio early in the morning. There was no TV those days. The sublime narration accompanied with songs, as I know from ‘Durga Saptashati’ used to fill the air in early morning. Perhaps Mother has all the superlative traits that one can think of: The Supreme Lady (Paramesvari), Mother of the World (Jagdamba), personification of the transcendental knowledge (visuddha jnanadeha), and the cosmic energy (saktisvarupini). She got all in her ten hands the best of weapons and implements given by all the gods. Surprisingly, on the last day of pitripaksha (fortnight of the deads), the final offerings for the deads of the family are made with a bath in river; Goddess arrives to stay on this earth among her devotees for nine days or nights (navratri).

These nine days (or nights) are now becoming the ultimate of festivities in India. In North India from Delhi to Varanasi, main attractions are Ram Lilas (folk dramas based on the life of Rama) that are organized in every colonies and localities. Gujarat celebrates Navratra with Dandia dance with exhhilarating music and orchestra. That is becoming the main attractions of the younger generations. And eastern India, particularly Bengal is busy with celebrating Durga Puja. And each of the three is now encroaching in every region of the country to make it a great festival of the people of all ages and perhaps of all communities. With month of Ramzan, Muslims also are also busy in celebrations ending with Eid.

I wish this gets a recognition as national festival season and the governments promote this for attracting tourists from all over the world in large number, as the climate is also pretty mild.

Sarvasvarupe sarvese sarvasaktisamanvite

Bhayebhyas trahi no Devi, Durge devi namo’stute

O Durga! Assumer of all forms! Sovereign of all beings! Possessor of unlimited power! Save us from fearful uncertainties. Salutation to Thee!

Read
Divine Feminine
Celebrate India

Some Interesting News
BHEL, RIL among 12 firms in Forbes list of ‘Fab 50’
Hyundai to pump Rs 41.91 billion in India

The latest issue of ‘The Economist’ is special on emerging power and world economy. A graphical presentation of the body count from one of the articles is presented above. Is it not great that on body count India leads even China and all other developed nations too? And that is the potential and strength on which the country can build and compete. However, many have apprehensions about the quality of these students and their employability.

I give a quote from the article: ‘The McKinsey Global Institute estimates that only one-tenth of engineering graduates in China and one-quarter in India would meet the standards expected by big American firms.’ It may be true today. But the whole lot of administration of the institutions, educationists and the industry are aware of this weakness of our education and working to improve it. For institutions, improvement to the world class only will decide their survival. The forthcoming FDI in education will provide another boost to the quality of the country’s human resources.

The shortage of good teachers is critical. However, it is heartening that many from industry are willing to play the double role of teacher cum executive. Recently former CEO and mentor of Infosys expressed his wishes to work as teacher. There must be many with similar wishes. I wish the institutes could exploit that potential to take care of the shortage of quality of teachers. It will improve better interactions with the industry too that the institutes intend to serve. The government must also encourage. Successful practitioners of technology and knowledge in industry must turn teachers. While institutes must be open to the offers, the CEOs must encourage the employees interested in teaching and facilitate the system to make them go to the institutes and help effectively in improving the standard of teaching and researches.

‘A report by the World Bank also points out that a large share of engineering graduates in China and India become civil and electrical engineers, needed for the boom in domestic construction. There are not enough engineers and scientists to produce high-tech goods across the board.’ The curriculums must emphasise on the innovation of technology. I remember something from our days of IIT, Kharagpur. In the final year of Mechanical engineering batch, the best students were offered production engineering under Prof. R.Misra as special specialization. Machine design, mechanical handling, hydraulic engineering, and heat power engineering were for the lower rankers based on the scores from the third year. Machine design must come on the top today. The country need more and more of competitive product designers with the cutting edge technologies to come on the top of the industrial nations. The industry must also accordingly appreciate the work of the product innovators and change the compensation and reward system.

I am sure we have the potential to become the largest innovators globally, if we make certain changes in attitude and facilities. But IITs and all our research labs in government or in private enterprises must endeavour to see that the innovators shine and their talents get recognized.

I don’t understand the real intention of IIM-A giving so much importance to Bihar by calling two of the main rival politicians of Bihar to IIM-A to make students of the prestigious institute learn from their experiences as managers in government. Does the institute treat them as successful CEOs of the department or the state they run? How will the rustic management guru will fare and what will the suave one will offer, as he is still to prove in his new role?

Would not a better option would have been to discuss the questions arising out of the case study prepared by the IIM-A professor under the chairmanship of the two stalwarts- one who is claiming the whole credit himself and the other who was the boss before the later took over and carried the legacy?

Is it really the Railway minister Lulu Parsed euphemism such as ”If you do not milk the cow fully, it falls sick,” that improved the performance? I am sure the students and faculty of IIM-A would have got the answer from the horse’s mouth. IIM-A also would have studied the case and come out with its own conclusion. I wish they made it public for the managers of the country to learn the trick if there is one.

However, I have some questions and queries. As we all know Lazuli was too busy with Bihar’s assembly election till last year and the ministry as reported was practically run by the officers there or PMO. Did he really contribute or was it a handiwork of the chairman of Railway Board or some other dedicated heads? Did he create a fear in the railway bureaucracy because of his humiliating way of handling the subordinates and that made them work hard to give performance?

I don’t here mean that a person like Lalu can’t do it. What I only expect that the credit must go to the person who deserve. What I didn’t like was the dogfight reported in media. And there even Nitish appears to be lacking the magnanimity that many expected him to show, when he is reported to have said, “Lalu is reaping the benefits of steps initiated by me during my stint as Railway Minister from 2002 to 2005. I am unable to understand how the media said the Indian railways was running at a loss,” However, here also Lalu is at the worse when he said to the press, “Nitish Kumar is a liar. I knew you would ask me this question, so I have brought with me a copy of his 1999 budget speech in which he had admitted that the railway was in doldrums,”

Has our culture taught only this? Is this the way to behave in public?

Even if I consider this programme organize by IIM-A as one in interest of Bihar, I have two requests to make on behalf of the people of Bihar.

Can IIM-A and other IIMs send its students and faculty members to Bihar to study its problems as project and come out a road map on the line of the one prepared by Mc Kinsey for West Bengal?

Will one of the IIMs open an extension center in Patna or Muzaffarpur to train students from Bihar near at home?

Will Laluji request IIM-A on the behalf of the people of Bihar? May be as remuneration for the presentation made by him, IIM-A agree to the request. I wish when Nitish presents his lecture at IIM-A, he did propose IIM-A to come to Bihar and offer all assistance to have a campus.

Press Reports
Lalu gives management lessons to IIM grads
‘Lalu Yadav a posterboy of the media’
Lalu comes to IIM-A with new image
Lalu Prasad charms IIM-A, announces railways chair
Lalu applies tickle theory – Mutual admiration flows after IIM lecture

When IIM bachchas learnt all about Lalugiri
Subir Roy: Lalu Prasad deserves only two cheers
How Lalu turned the railways around: the IIM-A case studies
The Lalu lesson
How one tonne more became Rs 500 crore annually
Management lessons for CEOs from a new 21st century CEO: Lalu Prasad
Latest ‘Manager Lalu’<

A story appeared in media.

After the J. Jayalalitha-led AIADMK crash-landed in the May ’06 assembly elections, Jaya TV reporters conducted an informal survey among the fisher folk of the tsunami-battered Nagapattinam and Cuddalore districts. “Amma gave you everything after the tsunami: house, boats, nets, provisions, stoves. Why didn’t you vote for her?” The reply was piercingly frank: “True, she rebuilt our lives. We’ll always be indebted to her. But she did not give us a TV. Karunanidhi was offering us that and more. So we voted for him.” Many had lost their TV sets too in the tsunami.

This is the way our politicians promise and our people who really matter vote. The DMK as promised in its manifesto is distributing 30 lakh free CTVs this fiscal at a cost of Rs 750 crore already allocated in the state budget. It will distribute 60 lakh more in next two years. Each set costs Rs 2,965. With the present 76.2% TV penetration, the highest in the country, perhaps, Tamil Nadu will soon be the first state whose entire population will own TV sets. Surprisingly, 60 of 100 TV sets have cable connections too. With DMK gifts, many who already have a TV set will get one extra but that will be coloured one. Are Tamilians so crazy about the entertainment? Perhaps with film personalities mostly in CM chair, it is so.

No one can challenge or question the prudence of a veteran such Karunanidhi in a state that tops the development indices and where the people are considered better educated in the country.

Many question, however, whether it would have been better to provide toilet in every household, as in 92 lakh households out of 142 in TN don’t have toilets. Others see the scheme to offer business potential for Sun Network of the CM family with so many more cable connections, even if it gives Rs 100 per month.

And there is another little known Dalit party that has another agenda and free offering plan. VCK (Viduthalai Chiruthai Katchi) are promising free computer to class XII students and even have distributed some 40 among dalits. Is it not a competition of a sort that other states may envy?

I feel instead the state and the government would have facilitated the ownership of a cellular phone to all able-bodied persons in the state with certain skill and willingness to work. The state must also develop few websites, something like shaadi.com where every skilled person can register his name, trade and skill, and cellular number without any fee. That could have given better employment to the people. The government could also have spent this huge amount on crating trade schools to provide some sort of trade training to each and every person in working age to face the job market with confidence.

However, it is for the politicians and their voters to decide and demand. Politicians will go the way they wish, and we can only go on grumbling.

Read
Now, your friendly neighbourhood mechanic a ring away

Six Indian-American innovators figure in MIT’s Technology Review (TR) journal’s honours list this year for their contribution in providing tech solutions in various fields. It is great achievements for the emigrants. It also indicates the priorities of this ethnic group.

Since 1999, the Technology Review (TR) journal of the Massachusetts Institute of Technology has been selecting young innovators below 35, whose innovations they find most exciting and creative. As Jason Pontin, editor-in-chief of TR says: ”TR35 is among the most prestigious honours that can be bestowed on a young innovator.”

The editors of the magazine select these innovators. A panel of judges from major institutions like Boston University, Hewlett-Packard Labs, Caltech and Applied Materials etc help in arriving at the finalists. The list has now been brought down to 35 from the earlier 100 innovators.

TR estimates Indian-Americans comprise just under 1% of the country’s population, but their contribution to innovative technology is 12% to 17%. The inclusion of six Indian-Americans means there is a 50% rise over the previous year, and a 70% rise since 2004.

NRIs have made it to the list every year since its inception. The first-year winners included Sabeer Bhatia of Hotmail fame, Amit Goyal for his research on semiconductors, and Akhil Madhani, the creator of Black Falcon robot that performs remote minimally invasive surgery.

Later winning innovators were like Sangeeta Bhatia who used microchip-manufacturing tools to build artificial livers and Shuvo Roy who built tiny machines that could warn of impending heart attack and monitor healing after surgery. In 2004 list had Chaitali Sengupta who oversaw the architecture of communication chips used in advanced cellular systems, and Smruti Vidwans who developed a drug against TB.

This year’s list has six Indian-Americans.

Jay Shendure, 31, HARVARD MEDICAL SCHOOL
A second-generation NRI, biotechnologist and medical student, Shendure is revolutionising genetics with a new way to sequence DNA. He developed a novel method of DNA sequencing that is substantially cheaper than the conventional method. His goal is to bring the cost down to a point where it costs around $1000. He plans to use the technique to sequence the genome of a lung tumour to identify the mutations that cause it.

Prithwish Basu, 31, BBN TECHNOLOGIES
This Kolkata genius is making waves with his networking innovation. Even the US Defence Department wants to test his network designs to help keep soldiers in touch on the battlefield. Basu grew up in Delhi and studied at DPS. After B.Tech from IIT Delhi, he enrolled at Boston University for PhD. There he proposed a wireless parking meter network for discovering vacant parking spots.

Ram K Krishnamurthy, 33, INTEL
Ram is from Hyderabad, a REC-Trichy graduate, who did his PhD at Carnegie Mellon University has invented high-performance energy-efficient circuits for PCs that “could enable PCs with significantly improved energy-efficiency and performance per watt of power consumption.”

Sumeet Singh, 31, CISCO
Singh studied at mayo school and did his PhD at the Computer Science & Engineering University of California. He was the co-founder of NetSift Inc, which was acquired by Cisco this June. Singh has changed the method for tackling e-viruses. He has automated virus detection in such a way that defenders are on the same footing as attackers. He hopes the technology will be able to scan more than 20 GB of data per second.

Anand Raghunathan, 34, NEC LABORATORIES AMERICA
Raghnunathan’s innovation will make all mobile devices secure from viruses. The supplementary processor, dubbed Moses, does security functions on mobiles.

Ashok Maliakal, 31, LUCENT TECHNOLOGIES, BELL LABORATORIES
Born in the US, Maliakal’s parents migrated from Kerala to the US in the ’70s. As a materials scientist at Bell Labs, he has designed nanostructured composite materials for optical and electronics applications. If mass-produced, it could lead to a new generation of flexible display screens.

I don’t know frankly how many of these innovators are proud of their Indian origin, but I am sure 100% Indians, particularly old technocrats like me get elated to hear their success stories and pray for their successful endevour to reach the top of the world in their area of activities. Who knows one of them one day get a Noble? They may feel great by calling themselves Americans rather Indians, but still they can’t take away the right of ours to feel proud about their achievements. They must also not forget that somewhere these wllwishes of some millions would have worked.

According to the 2000 Census, the median household income of Indians was $70,708-far above the national median of $50,046. The Census Bureau says that 63.9% of Indians over 25 hold at least a bachelor’s degree, compared with the national average of 24.4%.

An Asian-American hospitality industry advocacy group says that Indians own 50% of all economy lodging and 37% of all hotels in the U.S. AnnaLee Saxenian, a dean and professor at University of California, Berkeley, estimates that in the late 1990s, close to 10% of technology startups in Silicon Valley were headed by Indians.

You’ll find Indian physicians working in almost every hospital as well as running small-town practices. Indian journalists hold senior positions at major publications, and Indian faculty have gained senior appointments at most universities. Last month, Indra Nooyi, an Indian woman, was named CEO of PepsiCo (PEP) (see BusinessWeek.com, 8/14/06, “PepsiCo Shakes It Up”). Census data show that 81.8% of Indian immigrants arrived in the U.S. after 1980.

Vivek has provided the clearest logical viewpoints on the success stories of Indians in US. Read the full article of Business Week. It is inspiring. It is not just luck, but perspiration that has brought Indians where they are.

Indians parents are crazy to see their children as engineers. For sometimes, it appeared there is going to be saturation soon in the demand. However, the success and growth rate of Indian IT and BPO sectors have kept the demand of properly educated engineers increasing. Today, many studies have predicted a shortage in near future. With changing business model, any number of engineers with good knowledge of their core domain subject (electrical, mechanical, civil, electronics, metallurgy, chemical, and for that matter any stream) and communication capability will remain in demand. It is because the companies, world over today are willing to contract out elements of their engineering, design, and research and development that were earlier exclusively kept in-house. Smarter the companies, more is its outsourcing of high end processes. Outsourcing will no more be limited to non-engineering information technology, manufacturing, and business processes. Innovation and R&D that had been a company’s competitive edge, and serve as the engine for growth are going out for outsourcing to capable service providers.

The worldwide sourcing of innovation is going far more rapidly to such nations as India, China, Thailand, and Brazil. Can Indian business leaders and its engineers compete and remain at the top? According to a study, current global spending on offshored engineering is $15 billion. By 2020, the figure will expand by an order of magnitude to $150 billion to $225 billion. More and more companies realize today that the decision to offshore engineering processes can lead to real gains in cost, quality and productivity over in-house levels.

The market for engineering services – product and component design, plant design, process engineering, and plant maintenance and operations – covers across a number of sectors: automotive, aerospace, technology/telecommunications, utilities, and construction and industrial machinery, which together account for the bulk of the world’s corporate R&D spending.

The rapid pace of global spending on engineering services is due two main reasons 1) the growing demand for ever more complicated consumer and industrial products and 2) the increased electronic and software content of everything from toys to airplanes that makes for more offshorable engineering work. And the older practice of retaining innovation in-house is no more sustainable.

Engineers are in short supply in Western economies. A 10-year-long pattern shows that fewer students in the United States and Europe are choosing engineering as a profession. India produces 95,000 graduates a year in electrical, information technology, and computer-science engineering that are the kind in highest demand, while the U.S. turns out 85,000 a year.

A Booz Allen/NASSCOM study estimated that as many as 6 million engineers are available in emerging markets to take on R&D assignments of all sorts. Twenty-eight percent are in India, and 11 percent are in China. India enjoys an advantage over China and others, as India has already optimized the business of IT offshoring that can be easily adapted to serve the engineering sector too. India could expand its revenues from engineering services by 25 to 30 times, reaping a market potential of $50 billion in 2020. However the forthcoming competition will be fierce. Within the next decade, the low-cost position currently held by India could shift to countries such as South Africa, Philippines, and Vietnam. India must gear up its competitive advantages.

A host of industry leaders are already expanding their innovation activities in India. At the automotive R&D innovation site of one major automotive component supplier in Bangalore, 3,000 employees are working on high-end electronic control units, tools, and diagnostics. A second facility is planned for Coimbatore by 2010, where 6,000 employees will work on software and engineering. Cisco is winning the most U.S. patents for new products developed at its Indian R&D operation. One automotive supplier that offshored 20 percent of its engineering found that 5 percent more often than American designers, its Indian contractors came up with designs that met specifications the first time out and did not need to go back to the drawing board. And they did that despite having a decade less experience on average than the auto supplier’s own team. One major automotive company that took part in the Booz Allen/NASSCOM study expects to save as much as 50 percent by outsourcing its power-train engineering and is seeing real improvements in quality. An industrial machinery maker is saving 60 percent by offshoring its electronics engineering and has quadrupled its rate of new product introduction.

Can India maintain its competitiveness? It must to absorb the talents produced by thousands of engineering colleges. And in turn, the engineering colleges and institutes must ensure the knowledge levels of the graduates it produces.