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Inaugurating the Engineering Services conference in Bangalore, Nasscom president Kiran Karnik offered a true pearl of wisdom when he mused, in the beginning the success of the industry was the conversion of atoms to bits with more and more processes going digital. Then in the recent past, the rapid rise of analytics and intelligent systems has seen the repurposing of bits into more useful bits and with the great new hope that engineering services offshoring now brings, the application of bits to atoms will probably bring this industry full circle to put power back into manufacturing processes.

The conference itself attended by over three hundred delegates shows how many lives are now being affected by the wide sweep of IT-many of the participants came from the erstwhile blue collar sector, eager to understand the opportunities for organizations as well as entrepreneurs to ride this new wave of outsourcing. And ideas abounded starting with the team from Booz Allen Hamilton, the global consulting firm that helped Nasscom put together the first definitive study on this segment of the industry. And what a segment-as the business press so gleefully reported, here is an industry that is today over $15 bn in size, with India having less than 12% share and the projections talk about a growth to over 200 bn by 2020, with India's potential being to capture a quarter of the share resulting in a whopping $15 bn opportunity for the country!

As Bluesten and Dehoff, the Booz consultants pointed out, the qualitative attractiveness of this segment goes beyond the numbers, attractive though those may seem. While the traditional IT outsourcing and BPO segments have largely focused on job substitution, the engineering services segment offers tremendous scope for strategic value creation through product development speed and efficiency improvement providing excellent return on R&D investments and real top line growth.

Of course, no great opportunity comes without the attendant challenges-engineering services outsourcing will need a much higher level of preparedness on the part of the vendor community with capabilities for sector-specific education and research and high familiarity with specialised hardware and software. But the revenue has crossed the billion dollar mark which shows that the appetite is there for making a mark globally with engineering services.

The good news about the innovation movement that has spread through the Indian IT services and BPO provider community in the last couple of years is that it is not just engineering services but also a number of new innovative and high value adding segments that many companies are focusing on to increase the quantity and quality of revenue and the penetration into relatively underexploited markets.

The focus on innovation and the ambition to aggressively develop these new segments makes the need for an innovative eco-system even more urgent and the development of innovation clusters an imperative for various cities and states. In the National IT group of the CII, we have already identified the automotive, pharmaceutical and textile sectors as immediate focus areas where Indian IT can partner with fast growing companies in the country within these segments to build best of breed clusters of capability and demonstrable customers. These will then motivate international firms within these industries to put their toe in the water of offshore outsourcing.