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The US engineering services outsourcing market size is estimated to grow by USD 93.95 billion between 2022 and 2027. The market size is forecast to increase at a CAGR of 23.34%. The growth of the market depends on several factors, including cost savings from lower labor wages, access to high-quality manpower of engineering services outsourcing services, and lack of in-house expertise.
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The market share growth by the offshore segment will be significant during the forecast period. The term offshore outsourcing describes the transfer of all or a portion of the engineering processes to a different organization located abroad. This segment's nominal growth can be attributed to the ease of access to skilled and talented human resources in the US as well as the availability of resources that are both cost-effective and readily available.
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The offshore segment was valued at USD 14,229.25 million in 2017 and continued to grow until 2021. However, due to a number of factors including the rate of global inflation, the high cost of training employees, high churn rates, and a growing preference for outsourcing to onshore partners, it is anticipated that the offshore segment in the US will grow more slowly than the onshore segment.
In the US, there is an increasing amount of opposition to offshore outsourcing, which claims that offshoring is to blame for the loss of job opportunities. The US government has already erected a number of onerous trade restrictions against its significant trading partners. During the forecast period, this is predicted to slow down international trade. These limitations would have a negative effect on the expansion of the US outsourcing market for engineering services. During the forecast period, it is anticipated that value-based or collaborative partnerships between customer organizations and outsourced ESPs may experience significant growth.
The cost savings from lower labor wages is notably driving the market growth, although the risk of intellectual property theft and misuse may impede the market growth. Our researchers analyzed the data with 2022 as the base year, along with the key drivers, trends, and challenges. A holistic analysis of drivers will help companies refine their marketing strategies to gain a competitive advantage.
Cost savings from lower labor wages will drive the growth of the market. The cost savings from assigning work to a low-cost workforce and the decrease in associated costs of maintaining additional infrastructure, office space, operations, and staffing are the main factors propelling the growth of the market in the US. Due to the US economy's expansion, labor arbitrage has emerged. This practice focuses on moving business operations to less expensive locations. By maintaining a lean workforce and spending less on hiring and retaining staff, businesses benefit from labor arbitrage.
Employing outsourced engineering services allows businesses with a labor shortage to easily and directly access the skilled labor and cutting-edge technologies found in other nations. Additionally, outsourcing enables businesses to scale operations in accordance with demand and their operational needs. Engineering services are typically outsourced by companies or organizations in industrialized or developed nations where the cost of labor is very high. Thus, during the forecast period, the market will grow due to the cost savings from lower labor costs.
Innovation in engineering services outsourcing services is the primary trend in the market growth. Many businesses in sectors like automotive, manufacturing, and pharmaceutical have outsourced a wide range of tasks, from unimportant back-end work to creative work. Comparing the US to China, which made significant investments in innovation and R&D, the US innovation capacity was stagnant for a while. As a result, a number of US businesses, particularly startups, outsourced creative tasks to other nations that offered cheap labor.
Numerous industries frequently outsource the development of cutting-edge technologies like cloud-based delivery, cognitive process automation, quantum cryptography, security, and augmented reality. For businesses in sectors like manufacturing, aerospace, banking, financial services, and insurance (BFSI), outsourcing functions that require innovation has emerged as a financially and strategically viable option. The market in the US will expand due to these factors over the forecast.
The risk of intellectual property theft and misuse is a major challenge to the growth of the market. One major obstacle that the US market must overcome is the risk of intellectual property (IP) theft. While sharing or outsourcing their operations, the majority of US organizations maintain strict non-disclosure policies and procedures and keep their R&D operations confidential. These businesses would benefit from being able to stop the theft or leakage of important product designs and solutions. Many businesses won't outsource any work associated with engineering design and product development to other businesses due to the risk of theft of confidential designs and information.
Moreover, theft of intellectual property or other important data by businesses could lead to losing a competitive advantage. As a result, companies are hesitant to share any information with outside service providers about their next-generation products and solutions. The majority of the time, engineering service providers or vendors work under contract with their clients, and any data, designs, or developments produced or derived as a result of that contract belong to the client. Customers consequently worry about the potential loss of intellectual property (IP) technology and designs, data theft, and improper use of these technologies. For organizations that outsource, IP theft can have serious business, legal, and financial repercussions. Therefore, during the forecast period, these factors may limit the growth of the US outsourcing market for engineering services.
The market report includes the adoption lifecycle of the market, covering from the innovator’s stage to the laggard’s stage. It focuses on adoption rates in different regions based on penetration. Furthermore, the report also includes key purchase criteria and drivers of price sensitivity to help companies evaluate and develop their growth strategies.
Market Customer Landscape
Companies are implementing various strategies, such as strategic alliances, partnerships, mergers and acquisitions, geographical expansion, and product/service launches, to enhance their presence in the market.
Atos SE: The company offers engineering services outsourcing which modernizes knowledge and collaboration management.
The research report also includes detailed analyses of the competitive landscape of the market and information about 20 market players, including:
Qualitative and quantitative analysis of vendors has been conducted to help clients understand the wider business environment as well as the strengths and weaknesses of key market players. Data is qualitatively analyzed to categorize vendors as pure play, category-focused, industry-focused, and diversified; it is quantitatively analyzed to categorize vendors as dominant, leading, strong, tentative, and weak.
The market report forecasts market growth by revenue at global, regional & country levels and provides an analysis of the latest trends and growth opportunities from 2017 to 2027.
The engineering services outsourcing (ESO) market demonstrates significant trends, reflecting the global engineering services outsourcing market. It involves Engineering Service Providers (ESP) catering to Original Equipment Manufacturers (OEM) with a focus on R&D developments and product lifecycles. The market embraces embedded engineering solutions, analytics, and Internet of Things (IoT), leveraging technological advancements like robotics, artificial intelligence (AI), and machine learning (ML). It addresses various industry verticals such as automotive and aerospace, emphasizing cybersecurity issues amidst global digitization. Key players like Alten Group and Infosys Limited offer expertise in technology and project management, ensuring compliance with quality and safety standards.
The engineering services outsourcing model market thrives on leveraging technology expertise to meet the diverse needs of end application enterprises. From freight management to grade assurance, outsourcing firms offer specialized solutions, enhancing operational efficiency. Robust data security measures and stringent regulations ensure the protection of personal data and intellectual property in an increasingly digitalized landscape. With a focus on digital twin simulations and designing in the manufacturing segment, ESO providers streamline processes while maintaining market concentration. In the healthcare segment, they facilitate testing and implementation, driving innovation and compliance. Despite competition, strategic partnerships foster growth, ensuring companies benefit from cost-effective solutions and stay competitive in an ever-evolving market.
Market Scope |
|
Report Coverage |
Details |
Page number |
143 |
Base year |
2022 |
Historic period |
2017-2021 |
Forecast period |
2023-2027 |
Growth momentum & CAGR |
Accelerate at a CAGR of 23.34% |
Market growth 2023-2027 |
USD 93,984.53 million |
Market structure |
Fragmented |
YoY growth 2022-2023(%) |
22.21 |
Competitive landscape |
Leading Vendors, Market Positioning of Vendors, Competitive Strategies, and Industry Risks |
Key companies profiled |
Alten SA, Atos SE, Backoffice Pro, Capgemini Service SAS, Cognizant Technology Solutions Corp., Cyient Ltd., EPAM Systems Inc., FEV Consulting GmbH, Genpact Ltd., HCL Technologies Ltd., Honeywell International Inc., Infosys Ltd., Quest Global Services Pte. Ltd., Siemens AG, Sonata Software Ltd., SSA Business Solutions India, Tata Consultancy Services Ltd., Tech Mahindra Ltd., Wipro Ltd., and Flatworld Solutions Pvt. Ltd. |
Market dynamics |
Parent market analysis, , Market forecasting, Market growth inducers and obstacles, Fast-growing and slow-growing segment analysis, COVID-19 impact and recovery analysis and future consumer dynamics, Market condition analysis for forecast period |
Customization purview |
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1 Executive Summary
2 Market Landscape
3 Market Sizing
4 Historic Market Size
5 Five Forces Analysis
6 Market Segmentation by Sourcing
7 Market Segmentation by End-user
8 Customer Landscape
9 Drivers, Challenges, and Trends
10 Vendor Landscape
11 Vendor Analysis
12 Appendix
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