EADS to Outsource Components, Systems and Software to Indian SuppliersNovember 20, 2008
The European Aeronautic Defence and Space Company (EADS) plans to outsource to India about $5 billion worth of aerospace components, systems and software over the next 10 years. Those contracts come in return for the Indian military's purchase of planes and jet fighters from EADS. India's defense-offset policy requires that foreign companies outsource to Indian vendors at least 30% of the value of India’s military-related purchases from those companies, according to an article in Mint an India-based business publication. Defense contractors are eager to tap the expanding military budget in India — the world's third- largest weapons buyer. The article noted that India's military hardware and software imports could reach $30 billion by 2012. Enterprises like EADS and Boeing already use vendors and suppliers globally to outsource electronic components and systems, while retaining the role of overall manager and integrating the components and systems into the end product. (See our recently posted research article on this topic: Outsourcing in Defense and Aerospace.) EADS outsources $126 million worth of aero infrastructure and engine components each year to Indian vendors and expects that number to rise to $1.3 billion annually by 2020, according to Mint. Some of the companies EADS works with in India include state-run Hindustan Aeronautics and software firms like Tata Consultancy Services, Infosys Technologies and HCL Technologies. "We have learned that the business model of making something in Europe and exporting to the rest of the world [will] not work in the future," EADS vice-president Matthias Gramolla told Mint. He went on to note that instead, EADS needs a presence in its global markets. |
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