Analyst AMR Research says the next big area of outsourcing for IT suppliers will come in product engineering.
An AMR study into the outsourcing market found that 15% of manufacturing companies hired outside companies to handle parts of their research and engineering activities last year and that a further 10% planned to do the same by the end of this year.
AMR said the market was growing globally, with 13% of the work being done in India and another 19% in other parts of Asia, including China.
AMR said companies embarking on outsourced product engineering and research were looking for the sort of benefits gained from outsourcing IT functions and business processes – namely reduced costs, added flexibility and improved capabilities.
The analyst said “staffing flexibility” was a well-established benefit reported by firms that had already outsourced their product engineering and research.
Nortel Networks and IBM recently announced the establishment of a joint product R&D centre, with IBM’s 1,200-strong engineering services staff taking a much larger chunk of the work.
This move is designed to bring both companies cost savings although Nortel is expected to save more.