Discussion with Ajit Prabhu

Transcription

1 Discussion with jit Prabhu Chief Executive Officer, QuEST s the CEO, jit Prabhu provides the vision and strategic direction for the growth of QuEST. His main focus is to integrate global resources to provide the competitive edge to QuEST. seasoned entrepreneur, jit co-founded QuEST with ravind Melligeri in 1997 with the vision of developing expertise that ranges from concept to product realization. jit is known for his determination, dynamism and his passion to understand customer challenges. His mission is to improve the profitability of customers through effective utilization of QuEST's global resources. He is a Six Sigma Greenbelt certificate holder and also the recipient of the Young Investigator ward from the International ssociation for Dental Research. He gained practical experience at General Electric's Corporate Research and Development Center, in Schenectady, NY, while working on power generation, aircraft engines; appliances and locomotive related engineering problems. jit holds a Bachelor's degree in Mechanical Engineering from Karnataka University, India, a Master's degree in Mechanical Engineering from Old Dominion University, V and a Master's degree in Bio-Mechanical Engineering from Rensselaer Polytechnic Institute, NY. Tholons: What are the emerging industries in the area of Engineering Services Offshoring? jit Prabhu: Key sectors that dominate global engineering spends include telecom, high-tech (including consumer electronics, computers & accessories, etc.), automotive and aerospace accounting for over 55 percent of the total. Other sectors include power generation, industrial products, utilities and civil structures.

2 Tholons: What kind of activities can be termed as "Engineering Services" in the industries mentioned above? jit Prabhu: Engineering services are those that manage or augment processes that are associated with the creation of a product or service, as well as those associated with maximizing the life span and optimizing the yield associated with a product or asset. This not only includes design elements of the product or service itself, but also encompasses the infrastructure, equipment and processes engaged in manufacturing/delivering them. Tholons: What are some of the key drivers for the offshoring of Engineering Services? jit Prabhu: The primary drivers for offshoring are cost and shortage of engineering talent. Companies then expand their commitments for more strategic reasons. For instance, companies are now seeing that sending product development offshore is a smart way not only to reduce the cost of product innovation, but to accelerate speed to market and add to the magnitude of innovation. There are drivers particular to each sector also. For example, the erospace industry is growing at 30-40% per year. The current revival of the aerospace industry also coincides with firms going in for newer designs and aiming at producing a better and fuel-efficient aircraft for their customers. They also need to reduce time to market while continuing to reduce cost. In India alone there will be an unprecedented growth in air traffic (50% passenger and 300% cargo). India has said it plans to buy 126 fighter jets, valued at close to $10 billion. irbus expects Indian firms to place orders for 1,100 passenger and freighter aircraft valued at about $105 billion over 20 years. The offset clause which will come into play for each of these purchases will drive aerospace related business worth about 30% of the order values to India Tholons 2 of 5

3 Tholons: What would be the key parameters for a firm to decide to pursue a Source and Build (captive) option for offshoring? jit Prabhu: The need to control and safeguard IPR (Intellectual Property Rights) is the primary parameter driving the decision to have captive centers. nother important factor would be the need to ensure knowledge retention within the operations (outsourcing would not enable this as efficiently). Yet another factor would be the ability to have lower costs if the scale of operations were sufficiently large (more than 500 engineers). In some cases, the decision could be based on the need for a person of say Indian or Chinese origin working in a parent company in the US, to return to their homeland and control a sufficiently large operation here. India is also considered as a potentially a large market down the road and having an operation gets them closer to potential customers of the future. Tholons: What kinds of activities are the most amenable to offshoring? jit Prabhu: ctivities in the design process which are repeat/runner are most suited to be offshored in the early stages of engagement. s the processes are established and trust is gained in the collaborative product development, more activities upstream in the design could be offshored. Typically customers like to keep a control on system level design and concepts, and other activities are all amenable to be offshored, This includes, but is not limited to, activities ranging from concept and definition, to high level and/or detailed design, and finally to testing, production, and support stages. ctivities in these stages include industrial design, reverse engineering, system engineering, conceptual CD work, mechanical design (layout and component),electrical design, embedded software, drafting and documentation, derivative products, auxiliary functions (piping, cabling, controls), component testing, test equipment design, prototyping, mechanical analysis (FE, CFD, Thermal dynamics), electrical analysis, technical manuals, manufacturing engineering, tooling design and build, value/cost engineering and CD automation software. These are activities that would be non-core to the customer and can be easily offshored or outsourced, thereby giving the customer benefits from the GPD model Tholons 3 of 5

4 Tholons: What are the unique challenges in Engineering Services offshoring? jit Prabhu: There are challenges both on the customer end and on the supplier end. On the customer end: unlike IT services, Engineering is core to any company and offshoring engineering services must be done with thorough upfront planning. Customers who are not used to outsourcing or offshoring have to spend time upfront planning and redefining the process and new way of working. Without this commitment, customers don t see the advantage that offshoring has to offer. On the supplier or partner end: developing a world class product requires significant knowledge of product and design skills. Low cost countries such as India, China and Eastern Europe have access to low cost talent, but their experience-base developing world class products is limited. So the primary challenge becomes how to impart design knowledge to a young work force, yet help customers develop cutting edge products. The work force tends to be very mobile in low cost countries and knowledge retention is another big challenge to create value to the customer. However, these challenges can be overcome through a collaborative approach with the customer, building a global team and developing a well coordinated Human Resource framework to retain and nurture the key differentiating talent. Tholons: How is Engineering Services offshoring different from IT/BPO offshoring? jit Prabhu: Both industries have diverse differences. The biggest difference is that ESO is the CTO or VP of Engineering s business, while IT/BPO is the CIO s business. Failure to develop world class products, or not releasing a product on time has a significant impact on a company s performance and image, hence customers tend to be very conservative when it comes to outsourcing engineering services. Some of the other differences are: engineering services starts off with smaller projects and lower annuity and is also very change centric, whereas BPO projects are very large, with high annuity and do not change once specified. There is a high degree of knowledge transfer requirement from the customer in ES, whereas a very low degree of core knowledge transfer is needed for BPO projects. Engineering outsourcing requires knowledge of mechanical engineering, physics (in FE/CFD), multiple other areas like electrical / electronics / instrumentation / engineering, domain knowledge (e.g. erospace), sub-domain knowledge (e.g. aero structures), product specific knowledge (e.g. Boeing's 7X7 platforms), tools knowledge (CTI, Pro/E, UGS PLM, etc.), customer product development processes, customer drafting and design standards, high bandwidth communication lines, PLM skills, etc. There are not so many different parameters in BPO outsourcing -usually knowledge of a software tool and software development concepts is enough Tholons 4 of 5

5 Tholons: What is your vision of Engineering Services offshoring for the coming five years? jit Prabhu: Companies around the globe are looking at better ways to develop their products, get them to market faster, and spend less money on each new product they develop. These two drivers require companies to leverage low cost global resources. Engineering outsourcing can be very powerful for companies in building differentiated products, and getting them to the market more quickly. Large and medium sized companies such as GE, Pratt and Whitney, Danaher, Rolls Royce, Ford, GM etc have leveraged low cost global resources and have benefited enormously. Other companies shall follow their footsteps over the next 5 years. The market opportunity in outsourced engineering services is large. recent Nasscom-Booz llen study estimates that it will go up from the present $10-15 billion to $ billion by It s easy to see why the market is exploding. significant number of companies across the world are increasingly looking at companies like QuEST to augment and support their engineering and product development teams. I think there are two reasons for this. One, there is a genuine shortage of engineering talent in these countries. Two, outsourcing helps companies to innovate and improve their time to market products must now reach diverse markets quickly and they must be relevant to those markets. Companies like QuEST, with their focus on engineering, are ideally positioned to take advantage of these specialized and fast paced opportunities Tholons 5 of 5