What is offshore engineering? (Pros, cons, top countries)

by Andy Nguyen
Offshore engineering

Engineering processes demand the latest technology and advanced skills to deliver the best results. To meet these demands, firms often offshore these processes to foreign countries.   

This is because firms get access to the best technology, skill, and productivity at low prices when they offshore engineering services.

But can all industries offshore engineering services?

In this article, we’ll discuss offshore engineering, its advantages, and its challenges. We’ll also cover the top countries for offshore engineering and important points to consider while offshoring. 

Let’s begin!

Table of Contents

What is offshore engineering?

Offshore engineering is when you relocate or extend your engineering services to a foreign country. You can either hire an offshore engineering agency or set up your own team in a foreign country. 

But why offshore engineering?

Companies typically offshore engineering services to increase cost savings through faster turnarounds, skilled labor, and superior technology. Some popular destinations for offshore engineering are Germany, India, Vietnam, etc.

Now, let’s look at some industries that offshore engineering services:

A. Shipbuilding industry

Companies in the shipbuilding industry offshore engineering to cut costs, minimize the production cycle and accelerate the speed at which products reach the market.  

Popularly offshored engineering disciplines in the shipbuilding industry are:

  • Structural engineering.
  • Naval architecture.
  • Marine engineering.
  • Civil engineering.

B. Oil and gas industry

Offshore engineers in the oil and gas industry typically have a solid knowledge of structural designs, fluid dynamics, offshore control systems, etc.

That’s because this industry involves expensive processes like building subsea vessels, drilling rigs, underwater technology, pipelines, offshore structures (wind turbines and offshore platforms), etc. 

So companies offshore these services to where their offshore oil and gas fields are located to benefit from the local expertise. Popular offshore oil and gas engineering areas are:

  • Petroleum engineering.
  • Subsea engineering.
  • Chemical engineering.
  • Geotechnical engineering.
  • FPSO (Floating Production Storage and Offloading) engineering.

C. Wind power industry

Renewable energy sectors like tidal, solar, and wind energy are growing in popularity due to their positive environmental impact. 

The wind energy industry requires wind turbines design and manufacturing, wind farm setup, offshore wind structure building, installation of offshore wind turbine foundations, etc.

Here are a few offshored engineering areas of this offshore renewable energy industry:

  • Ocean engineering.
  • Structural engineering.
  • Mechanical engineering.

D. Electrical industry

Electrical engineers design and build everything from power generators to microchips. 

As this field requires skilled engineers and advanced equipment, companies often offshore engineering services to countries with a skilled talent pool and excellent offshore technology partnerships. This way, companies can boost productivity, reduce employment costs, and access the latest technology. 

These engineers play important roles in various fields such as communication systems, navigation systems, robotics, etc.

Next, let’s check out some benefits offshore engineering can bring to your business.

3 incredible benefits of offshore engineering

Here are three reasons why you should offshore your engineering services:

1. Reduced costs

Offshoring engineering services reduces labor costs and overhead costs like office space, software, infrastructure, etc.

Specialized engineering services like petroleum engineering and structural engineering can be expensive in countries like the US, the UK, Canada, etc. For example, the average annual salary of a petroleum engineer in the US is USD 97,100, while it’s only USD 4,793.60 in China.

Offshoring engineering services are especially beneficial for firms that offshore other processes to foreign countries. For example, an oil and gas company with offshore fields in China can hire an offshore engineering team or an offshore engineer from the same country to increase cost savings.

Additionally, offshore engineering firms use the latest technology, software, and tools to deliver the best service to their clients. So you can access it all without investing in them yourself. 

This way, you’ll increase cost efficiency with quality infrastructure, better skills, and the latest technological tools at affordable prices, delivering the best outcomes.

2. Fast turnarounds

You can leverage the time gap between your home and offshore countries by turning your business into a 24-hour development lifecycle.

For example, an American company with offshore software engineers in India can send their Indian team tasks at the end of their work hours. The India team can then work during their local work hours and send results at the end of their day – which would be the next day in the US.

It would have taken an additional day if the home team had worked on it. But with an offshore engineering team, the company can operate continuously without breaking its workflow. This’ll help companies get their products and services to the market faster.

3. Flexible engineering team

Some projects demand advanced technical knowledge that your onshore full-time on-site engineering team may not be able to meet. The on-site engineering team can be inflexible, may not always have the necessary skills, and are expensive to maintain. 

In such cases, you can choose to employ an offshore engineering team on a project basis instead of hiring them full-time, helping you cut costs. You can also easily hire offshore special skilled engineers on a contract basis at an affordable price to fulfill your project requirements. 

So by offshoring engineering services, you can build a team that quickly adapts to industry and client demands, helping you deliver excellent service without much risk, cost-efficiently.

To learn more, check out our article on the incredible benefits of offshoring. 

But offshoring engineering services have a few setbacks as well. Let’s check them out.

2 key challenges of offshore engineering

Here are two disadvantages of offshoring engineering:

1. Different work culture

You may find it challenging to convey instructions and tasks while offshoring engineering services to countries like China, Mexico, etc., due to language differences. This can lead to changes in productivity standards, affecting the service quality. 

Additionally, the offshore engineering team’s national holidays and festivals may not match your work schedule, disrupting your workflow and delaying service delivery. You may also have to hire offshore legal services in some countries because of their complex laws and taxations that could be difficult to navigate.

To avoid such hassles, it’s always best to do a thorough study of the offshoring countries to see if they’re viable for your business.

2. Security concerns   

Offshoring engineering projects may require you to share sensitive data that gives you a competitive edge, such as product prototypes and blueprints. You can sign non-disclosure agreements to protect such sensitive data. But you’ll have to check if they’re valid in your offshoring country. 

Additionally, ensure that your clients’ personal information, such as names, account details, addresses, etc., is well protected while offshoring engineering projects.

Check out our article on the challenges of offshoring to learn more about it.

With that said, let’s look at some vital points to consider when offshoring your engineering projects.

3 important things to do before you offshore engineering

Here are three essential things to remember before offshoring engineering services. 

1. Offshore the right engineering project

Firms usually offshore their most expensive projects hoping that it’ll reduce production costs and boost productivity. 

However, not all projects can be offshored based on production cost. Some may need additional monitoring, which may be difficult to do if offshored. 

For a hassle-free experience, offshore engineering projects that:  

  • Offer easily explainable hardware, software, roles, and responsibilities.
  • Need fewer face-to-face interactions.
  • Don’t need interaction between offshore engineering teams and customers.
  • Have clearly outlined tasks and testing procedures.
  • Don’t carry sensitive information like clients’ personal information, company details, etc.
  • Allow you to establish a strong governance structure.

Choosing the right project can increase cost savings without compromising quality and security.

2. Choose the appropriate offshore model

Usually, offshore engineering teams are either run by third-party vendors or are a subsidiary of the parent company. But as offshore models depend upon projects’ requirements, you can choose an appropriate model that suits your projects’ needs.

A few common offshore engineering models include:

  • Captive with staff augmentation: The parent company runs its own engineering team but offshores some of its team members.
  • Closed joint venture: The offshore engineering team exists just for the client company.
  • Tripartite joint venture: This is a three-party agreement involving the parent company, offshore company, and its engineering team.
  • Open joint venture: These offshore vendors take up multiple clients’ projects along with your company’s.
  • Build, Operate, Transfer (BOT): An offshore vendor staffs and runs the offshore engineering team for some time before selling it to the parent company.
  • Reverse BOT (R-BOT): The parent company builds, recruits staff, and runs the offshore engineering team for some time before selling it to a vendor to continue its operations.

3. Create performance-check metrics

Most engineering companies are partial to the lowest bidder while offshoring. But the low prices can result in some serious quality issues. So it’s essential to have other assessment criteria to judge the quality of the offshore engineering team’s skills, technology, and service.

You can do a performance analysis through a Request For Quotation (RFQ) or Request For Performance (RFP) that includes:

  • The number of resources needed to complete the project.
  • The offshore vendor’s expertise and experience in the field.
  • The number of full-time employees and their skills.
  • Employee attrition rates.
  • The vendor’s pricing structure, business model, etc.
  • The offshore engineering team’s resources to tackle cultural and language differences.

Additionally, you can create two types of metrics for offshore project management, known as: 

  • Service Level Agreement (SLA): Includes incentives and penalties based on performance regarding offshore project time, budgeting, product quality, etc. 
  • Key Performance Indicator (KPI): Judges offshore engineering employees’ or teams’ performance based on employee attrition, problem-solving, project completion time, etc.

The parent company and offshore employees or teams should finalize these performance checks and agreements before signing the final contract.

Now that you know the right way to offshore engineering projects, let’s look at a few countries that could be perfect for your company.

4 top offshore engineering destinations

Here are four incredible countries you can offshore your engineering projects to:

1. Vietnam

Vietnam is an emerging offshore location for engineering. The Vietnamese government aims to increase its engineering force by one million in 2030. This means that companies will have access to a massive talent pool at affordable rates.

For example, you can hire a mechanical engineer for an average annual salary of USD 8,443, which is low when compared to the U.S (USD 86,500).

Vietnam is favored as an offshore engineering destination by companies like Canon and IBM.

Offshoring to Vietnam?

Check out the average salary in the country. 

2. Germany

Germany is a reputed destination for offshore mechanical engineering, especially the automotive engineering industry. A third of the country’s expenditure is on R&D, resulting in innovative technology, products, and development centers.

Companies like Tesla and Geely have offshored to Germany to take advantage of their innovative automotive industry.

3. India

India has the largest number of engineering institutions producing around one million engineers in 2021. 

Companies can employ English-speaking engineers, benefit from 24-hour development cycles, and enjoy a business-friendly environment by offshoring to India. The country is favored by companies like Microsoft and General Electric for its diverse engineering services.

Looking to offshore to India? Check out these articles on:

4. Romania

Popular among giants like Thales and Porsche, Romania has excellent engineering institutions that fuel the growth of skilled engineers. It’s also closely connected with Europe. This means that companies in the UK and US can offshore engineering services with minimal barriers in travel and communication. 

Popularly outsourced engineering services are software, structural, and civil engineering. 

Interested in knowing more about offshoring? Check out:

Wrapping up

With access to better technology, skilled engineers, and cost efficiency, offshore engineering services are growing popular among businesses. 

However, companies must carefully monitor service quality and ensure data security for a smooth and productive offshoring experience. This can be achieved by offshoring the right project to appropriately experienced offshore vendors or engineers.

The bottom line is that you need to do a thorough analysis of your company’s needs and offshore engineering services. You can use this offshore engineering services guide to decide for your company today!

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