Engineering Services Companies in 2020 – How COVID-19 is Impacting the Engineering Services Outsourcing Industry

Engineering services companies

What Challenges and Opportunities are Engineering Services Companies Facing due to COVID-19?

Engineering services companies are impacted by COVID-19 just like every other industry around the world. Demand has slowed in many areas as countries slow or shut down operations, companies postpone or cancel projects in order to focus on staying afloat during the pandemic, and supply chains suffer delays, shortages, and uncertainties. In addition, there’s always the challenge of maintaining their own operations safely during the pandemic — adapting processes, equipment, and technology to ensure teams can work smoothly from home and making on-site and office environments as safe as possible.

However, engineering services companies have the advantage of being part of an essential industry, and one that governments will use to bolster the economy when things are slow. Developing nations continue to build infrastructure for necessities such as transportation and utilities, and new engineering and construction projects are common in countries around the world. The types of projects being undertaken may change during and after the pandemic — for example, fewer shopping centers and other commercial projects and more public health infrastructure — but the projects will still exist.

In general, businesses in the engineering services sector are finding that while projects are being delayed, they largely aren’t being cancelled outright. Project backlogs are at a high point as companies face various operational setbacks, but the fact that projects remain in the pipeline means that business will continue and firms can expect to continue to have work down the line. Some countries will also introduce more infrastructure projects in order to help stimulate economies that are struggling under the impact of COVID-19, which will provide more opportunities for engineering services companies.

Introducing New Technologies and Processes

The pandemic has forced engineering services to adapt. Large firms with healthy budgets and strong IT infrastructure have an easier time than some, able to provide resources and modified processes that allow the majority of their staff to work remotely and client meetings to continue online. Perhaps more surprising is the fact that many smaller private firms have see little financial impact from the pandemic. A few months in, many reported no changes in their finances, while some even saw an improvement.

That doesn’t mean engineering services companies haven’t made changes to their financial strategies to help them through the pandemic, however. Many are freezing pay increases and some are even decreasing executive pay. Companies are collecting account receivable collections and holding off on non-essential purchases, and some have decreased their office spaces as so many employees are currently working from home. While some of these are temporary measures some, such as smaller offices and working remotely, will likely continue even after the pandemic ends, leading to lower fixed costs for firms and greater flexibility for workers.

A Look at the Global Engineering Services Outsourcing Industry

The market for engineering services outsourcing is valued at over $316 billion according to Grand View Research, and is expected to grow at a CAGR of more than 29% by 2027. While this growth may be hindered somewhat by the pandemic, particularly in 2020 and into 2021, in the long term the industry can still be expected to grow substantially. Engineering services companies had already begun to adopt and integrate more digital technologies and offer global delivery services, and COVID-19 will accelerate this movement to operate more online and through the cloud.

The engineering design services segment is expected to grow at a faster rate than the market as a whole, with an estimated CAGR of 31% by 2027. Visual and architectural design is being valued more highly than ever as companies and governments alike look to stand out and make a statement, while maintaining functionality and efficiency.

Engineering Services Outsourcing Trends

Onshore and offshore engineering services both have their own merits and challenges, with each segment being popular for its own reasons. While onshore services may be more expensive in developed countries than services outsourced to developing countries with lower costs, they offer many advantages, especially with the global pandemic currently limiting business travel and hampering supply chains. Onshore engineering services companies are more likely to be experts in the laws, regulations, and resources of the country in which the project is taking place, and there are fewer concerns over information security and privacy when both firms are operating in the same country. However, popular offshoring locations such as India, Malaysia, Brazil, and many others offer highly skilled engineering services companies for considerably lower costs, and the segment is expected to grow significantly over the next several years.

Asia-Pacific was a leading region in the global engineering services outsourcing industry in 2019 and is expected to maintain that position in the coming years. Lower costs and skilled professionals make countries like China and India popular sources for engineering services, and as the region is also home to many manufacturing and construction projects, there is substantial demand from within the region as well as outside of it.

Latin America is also a center of infrastructure development, with many multinational companies expanding into the region and driving demand for engineering services. North America continues to be a significant market as well, with major automotive, aerospace, and construction projects requiring the expertise of engineering services companies.

Top Engineering Services Companies

The global engineering services outsourcing industry is highly fragmented, with no individual companies holding a commanding share of the industry. This makes for healthy competition and a wealth of choices for clients, but can make it challenging to successfully stand out and compete in the global market.

Some of the top engineering services companies are:

  • Altran Technologies
  • Alten GmbH
  • Fluor Corporation
  • HCL Technologies
  • Infosys Ltd
  • Jacobs Engineering Group
  • Tata Consultancy Services
  • Tech Mahindra
  • Wipro

Which Engineering Services Companies Lead the Market Near You?

For more on the global engineering services outsourcing industry and to connect with top engineering service providers from around the world, check out BizVibe’s global marketplace.

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