GenAI yet to turbocharge engg firms as caution slows adoption
Deal book is at all-time high for most engg services cos (ER&D firms), which tread carefully amid evolving tech, weak mfg demand
image for illustrative purpose
Bengaluru: Impact of generative AI (GenAI) on engineering services companies (ER&D firms) is not as significant as compared to their counterparts in IT services space. Experts are of the opinion that GenAI adoption has been slow in the engineering services space because the technology is still evolving.
“Players in the engineering services space usually adopt new technology slowly. That has already happened in cloud. So, the impact of GenAI on engineering services companies is not as prominent as it is in the case of IT services companies,” Pareekh Jain, an IT outsourcing advisor and founder of Pareekh Consulting, toldBizz Buzz.
With faster adoption of AI tools, IT services companies have started witnessing part of their revenue getting cannibalized owing to automation. IT firms have to pass on some of the savings to clients coming from AI-led productivity improvements.
However, given the evolving nature of AI, companies operating in the manufacturing, defence and auto sectors are cautiously treading in terms of their adoption in core engineering areas.
According to experts, engineering services space globally is going through a slowdown due to macroeconomic issues arising from the US tariffs.
“Growth is not happening because of macro issues, which vary from geography to geography. In the US, the subsidy cut on electric vehicles (EVs) has impacted the spend on engineering services. In Europe, they are facing the heat from Chinese players,” Jain of Pareekh Consulting said.
“There is slowdown in manufacturing. That is part of general trend. However, the deal book is at all time high for most engineering services companies,” he said adding that deal conversion is slow for all players.
As compared to IT services, the volatility in the engineering services’ earnings is less due to steady spend in research and development (R&D) space despite near-term hiccups.
In the second quarter of FY26, revenue growth of most engineering companies remained tepid as many verticals continued to face headwinds.
Especially, the trade tensions arising from Trump’s policies has led to a slowdown in manufacturing sector. However, spend on critical areas like defence remained robust.
Meanwhile, clients are looking at higher offshoring to save cost. Currently, the onshore portion of engineering services companies stays more than 60 per cent. Higher offshoring to locations like India can help saving costs for engineering services clients.
