15 July 2010 | Angeline Albert

Aerospace and defence companies across the world say pressure to reduce costs is the prime reason to contract out engineering services during the next three years.

The research by global consultancy firm Accenture revealed 61 per cent of executives are buying engineering services to better manage production costs.

Some 65 per cent cited the need for improved efficiency and productivity. This was more than the 55 per cent who said they needed to better manage talent or lacked resources.

“What is changing as a result of mounting cost pressures and efficiency demands is the way aerospace and defence companies are driving engineering services activities, including where these services are sourced and the spectrum of activities sourced,” said Damien Lasou, managing director of Accenture’s aerospace and defence business practice.

He added: “Until now, companies have tended to buy services locally – close to their locations. Going forward, they will buy more often from global locations in other parts of the world. As long as doing the work costs less and improves efficiency, companies will be less concerned about localisation.”

Ninety per cent of the executives quizzed said cost reduction pressures was their chief challenge, followed by supplier consolidation (52 per cent) and increased competition from new players (36 per cent).

The main barriers these companies face in sourcing engineering services are confidentiality (ranked as important by 97 per cent of the respondents), the impact on quality (ranked important by 94 per cent) and flexibility for fluctuating demand (81 per cent).

The study, conducted earlier this year, consisted of interviews with 31 executives in aerospace and defence companies based in the UK, other parts of Europe, the US and Latin America.