Mastering Engineering Service Outsourcing in the automotive industry

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Mastering Engineering Service Outsourcing in the automotive industry
Snapshot of aerospace R&D outsourcing
Compared with the automotive industry, engineering outsourcing is much more
commonly practiced in the aerospace and defense industry today, where it
accounts for slightly below 30% of total R&D spend. Offset obligations 1) are the
major driver for outsourcing and offshoring to emerging markets. Annual growth
of 7.2% for aerospace engineering outsourcing spending is fueled by long-term
increases in air traffic in light of stricter regulations (including offset requirements)
that demand new airplane concepts, higher flexibility, the use of new
technologies/materials and modularization approaches. Due to the long-term
nature of R&D projects in aerospace, overall revenue-weighted spending levels
in aerospace engineering remain relatively constant compared with those in
the automotive industry. Individual projects may generally be postponed for a
couple of months, but the overall spend level must be more or less maintained
throughout the project phase.
1) Offset ratio is a concept whereby companies that win projects for commercial aviation and
defense orders are required by the government to invest a certain portion of the amount spent
in the country that awarded the contract.