Outsourcing is the business practice of hiring external parties or organizations to perform specific functions, services, or processes that were traditionally handled internally by the company's own employees.

The story of service outsourcing to India is one that transformed not just a nation, but the global business landscape. It all began in the 1980s, with real momentum building in the 1990s as telecommunications advanced and the Internet age dawned. The Indian government played a smart hand early on, prioritizing computer education and establishing NASSCOM (National Association of Software and Service Companies) in 1988 - a move that would prove pivotal for the industry's future.

The Y2K challenge turned out to be a defining moment. As Western companies scrambled to address potential software issues, they discovered India's technical capabilities. This period saw cities like Bangalore, Hyderabad, and Pune emerge as thriving IT hubs, setting the stage for what was to come.

The early 2000s marked a period of rapid expansion. Companies like American Express and General Electric were among the first to recognize the potential, establishing substantial back-office operations in India. Their success created a blueprint that many multinational corporations would soon follow.

By the 2010s, India had evolved far beyond its initial role in IT services. The country became a comprehensive service provider, handling everything from software development to medical transcription and customer care. Healthcare, finance, and human resources all found their place in India's growing service portfolio.

Today's numbers tell an impressive story. The Indian Business Process Outsourcing industry generates revenue of approximately $38Bn, employing around 2.8 million professionals and contributing meaningfully to India's GDP. And this is poised to increase. According to research by Bain, the majority of engineering executives intend to increase their outsourcing activities in the coming years. While engineering companies have traditionally outsourced less than 20% of their R&D work - significantly lower than the IT sector's 46% - this is poised to change dramatically. The shift is driven not just by cost considerations, but primarily by the need for specialized expertise: engineering leaders cite significant talent gaps in crucial areas such as data engineering, analytics, artificial intelligence, cybersecurity, and IoT technologies. And India is well-positioned to benefit from this increased demand.

Outsourcing has already created giant companies, such as Tata Consultancy Services, Infosys, and Wipro, to name a few. TCS, a frontrunner in IT services and consulting, serves various sectors including banking, finance, insurance, manufacturing, and retail, and boasts a market value of around $170 billion, with TTM revenue of almost $30Bn. Infosys, specializing in next-generation digital services and consulting (focusing on financial services, retail, communication, energy, and healthcare verticals), has a market value of $95Bn with revenues of $19Bn.

Therefore, you might be wondering: what about architecture&engineering? Is there an opportunity to build a generational company here? Let's dive.

Something to love: a ready market

A great thing about this space is that it's a buyer-ready market: architectural firms routinely partner with external professionals to handle technical tasks, from basic drafting to 3D visualization and more.

A buyer-ready market is an environment where potential customers are actively looking to purchase specific products or services and have both the means and intention to make a purchase.

Indeed, companies are already outsourcing A&E services in Asia and LatAm. Not just that: major engineering firms like AECOM, WSP, and Jacobs have established their own back offices in Asia, often organizing teams by geographic regions they serve (e.g. California Team, New York Team, and so forth).

The growth in this sector has been remarkable. Just five years ago, the global market counted merely 40 outsourcing firms. Today, that number has surged to approximately 750 companies worldwide, with India alone hosting over 100 firms of varying sizes. This expansion reflects not just market demand, but also India's unique positioning in the industry (likely the result of India's 100+ engineering colleges training architects, and generally better English proficiency than other countries). The United States has emerged as the primary beneficiary of India's architectural and engineering service outsourcing, for example in the realm of architectural visualization and design (e.g. 3D renderings).

The cost benefits of outsourcing architectural and engineering services are pretty much obvious. The model also offers remarkable flexibility in resource management: firms can quickly adjust their workforce based on project demands without navigating the complexities of hiring and training new staff. Perhaps most significantly, outsourcing enables architectural practices to concentrate on their core strengths.

In a way, it sounds too good to be true. Is it, though?

The hidden costs of cheap: outsourcing challenges in A&E

If you run a quick Reddit search, you will soon find out that outsourcing A&E work is not without challenges. As a matter of fact, there seem to be many arguments against it. Let me copy-paste some of the comments from Reddit users who have had negative experiences (mind you: non necessarily exclusively in India):

Outsourcing is a trainwreck waiting to happen.

It's awful. But, how could it not be awful? Language barriers, time changes, different standards of care, and no actual oversight means productivity is extremely low and extremely spotty. By the time you're done making redlines detailed enough for someone on the other side of the world you could have done it yourself twice over.

India was a disaster for us. Our engineering team wasn’t very knowledgeable and certainly wasn’t versed in things like heating hydronics, I suppose for obvious reasons.

Every company I've heard who have tried this have come back to say that it didn't work. The level of quality checking just doesn't work.

My Indian employees are... not great. I once hurt their feelings by calling them designers despite them having engineering degrees. But they seem incapable of actually engineering anything. They only want to copy + paste things from other projects. They never ask questions when they don't understand something. I still catch them doing things that I told them never to do for the last 6 years. They'll even say a task is done and when it's checked, I'll find that they never did any calculations. It's very frustrating. On top of that, they expect raises every year. They also take a long time to do anything and when they you tell something will be done that day, I need to expect it in 3 days. The only reason to keep them employed is that checking their work and them correcting it is still cheaper than hiring a US employee to do it right the first time. They also lie a lot.

Our firm tried outsourcing some drafting work, mostly details, and it was a big mistake which we gave up on immediately. Terrible quality drawings, poor understanding of assemblies, and bad communication so they wouldn’t even understand the emails telling them what to fix.

Regularly outsource RC detailing to companies who work out of India. Tried it with actual drafting - specifically Revit modelling - and it was a total disaster. No consistency, no real modelling, no proper use of tags and parameters etc. Every shortcut and bad habit known to man was employed. But worst of all the draughtsman clearly had no concept of how such a building should work.

Ironically, the extra billing alone that the "outsourcer" charged is more than I would have charged to complete the drawings along with all revisions myself; years back I had a gig preparing similar drawings and can confidently say I could undercut them by simply using basic AutoCAD (there's better/faster programs depending on your discipline).

Not painting a positive picture, right? Despite promising cost reductions of 40-60%, architectural outsourcing indeed often presents challenges that can outweigh its financial benefits.

First, there is a structural problem in the outsourcing industry: many outsourcing companies are established primarily to capitalize on the market demand as a quick cash grab, and lack the necessary expertise and infrastructure to deliver professional architectural services. This results in a service model that prioritizes cost reduction over quality delivery, sooner or later compromising project outcomes and client satisfaction.

Communication stands as a significant obstacle, with teams struggling across time zones and language barriers, frequently leading to misinterpreted instructions and project delays. Quality control issues persistently undermine outsourcing efforts.

Technical proficiency presents another significant concern. Outsourced teams often lack understanding of local construction methods, building codes, and system integration. This knowledge gap leads to impractical or non-compliant designs.

Ultimately, the promised cost advantages frequently prove deceptive when accounting for quality control and revisions. Additionally, organizational issues within outsourcing firms compound these challenges. Many operate without robust quality guidelines or proper infrastructure, e.g. using unlicensed software. High staff turnover rates and accountability problems further compromise project consistency and outcomes. The result is a service model that, while appearing cost-effective initially, often leads to compromised project quality and increased client frustration.

Let's not forget the impact of the recent elections in the US. While outright bans on outsourcing might seem far-fetched, the push for "Buy American" policies could create real hurdles, especially for firms working on federal projects. However, despite these potential roadblocks, the basic math of outsourcing still makes sense: even if we factor in a hefty 35% border tax, the substantial wage differences between countries like India and the United States mean that outsourcing would still remain financially viable.

Cracking the code: reimagining A&E outsourcing

Based on some of the above feedback, you might think that building something in the space is a dead end. Allow me to disagree: you can always find that there are negative experiences posted online about any new theme that startups are working on. Isn't solving the negative experiences the purpose of the startup? Ultimately, the key thing here is to nail the quality of execution, and for that, the outsourced services market also has plenty of success stories:

We've done it for years and I know of several other Architects that do as well. With proper oversight it works great. Outsourcing doesn't mean you don't still check the drawings and have control over the production. We got really good at it during Covid and have kept growing. We have local staff that handle things that need to be done locally and remote staff to help with production.

We currently use an outsourcing firm to pick up redlines when we are absolutely slammed with work. [...] Mind you we have only used India as drafters not as engineers performing design but it has been instrumental in our growth and ability to meet certain deadlines.

At my previous firm, We had an amazingly positive experience outsourcing.

The way I see it, this is not just an incredibly exciting opportunity space, but one that has generational potential. I think there are two models to go about it.

The first approach takes a "technology-first stance", starting with traditional outsourcing services but with a crucial twist. Instead of merely arbitraging labor costs, you want to use outsourcing as a stepping stone to develop proprietary automation technology. The beauty of this model lies in fact in its unique positioning at the intersection of service delivery and technology development. By actively performing outsourcing work, you gain privileged access to an invaluable resource: real-world architectural and engineering project data at scale. Each project generates a rich dataset of inputs, outputs, revisions, and feedback – essentially creating a closed-loop learning system for AI development. You can observe and document common patterns, errors, and inefficiencies in real time, directly informing which processes are ripe for automation. Additionally, the continuous flow of client projects provides immediate opportunities to test and refine automation tools in a production environment, allowing for rapid iteration and improvement. The regular client feedback also serves as a built-in validation mechanism for the technology being developed. For example, a good starting point can be MEP drafting for US clients, building credibility while simultaneously developing an AI-powered solution to standardize and automate these processes. Mind you, you don't have to achieve full automation for the tech to be valuable. While arbitrage alone operates at good margins, the combination of arbitrage + automation (even when partial) means you could potentially operate an Outcome-as-a-Service business at Software-as-a-Service-like margins. And by the way, the revenue generated at the beginning (so, mostly from arbitrage) can help fund (part of) the tech development, so you would need less capital than a pure software play due to lower burn.

The second model takes a more traditional but equally ambitious path, typical of opportunity spaces with low NPS and fragmentation: buy and build, know also as "roll-up". This approach involves acquiring smaller outsourcing operations and dramatically improving their performance through existing technology solutions and standardized best practices. While this model cannot leverage the kind of proprietary automation technology proposed in the first approach, it can still achieve significant improvements through careful implementation of existing tools and rigorous quality control processes, better workflows and management.

Essential success factors

Now, there are some key factors that are "must-haves" for either model to work.

The first, and most important, is trust. This one takes time to build, and I argue that breaking the initial barrier of trust can only be done by an industry insider with years of experience and a portfolio to show for, which is needed for the customer to underwrite the company and its promise to deliver. Ideally, this OaaS firm is led by professionals who've worked extensively in both Western architecture firms and Indian operations. The former is particularly important as it gives access to unfair access to demand, which would be difficult to tap into with no prior proven track record in delivering outsourcing work, and therefore becomes crucial to create a portfolio at the beginning.

Geographic focus is also essential at the start. You don't want to target "the United States", but rather focus on specific regions/states within the country, mostly because there are nuances in local building codes and regional construction practices one needs to master in order to deliver quality work. As you expand, you build "specialized teams", each developing deep expertise in their niche.

Perhaps, an even more focused approach is to become a "dedicated offshore partner" for select clients. Think of it as creating a "virtual office" for established Western firms. When done right, this creates remarkably stable partnerships. The outsourcing team learns the client's exact standards, adopts their workflows, and essentially becomes an extension of their operation. Mind you, this concentrated approach does carry risks (e.g. having just a few major clients means that losing one could seriously impact the business, client financial troubles or management changes could threaten established relationships, etc.).

Implementation needs to be methodical. Starting with smaller projects lets teams develop expertise and build a portfolio without the pressure of major deadlines. Employee training becomes central – not just in technical skills, but in understanding client preferences and regional practices. Quality control systems can be refined gradually, and institutional knowledge builds naturally.

Remember, ultimately, you don't want to be the cheapest option if being the cheapest means delivering subpar work. You want to be the most reliable partner for clients in specific markets, that also offer price-competitive rates.

Conclusion

Architecture and engineering services stand at an inflection point similar to where IT services were in the late 1990s. While the challenges are real, they're not insurmountable: it's the classic case of opportunities in disguise that a startup can benefit from.

With the right approach combining trust (first and foremost) + technology + execution, there's room to build something truly transformative in this space.

In my mind, the question isn't whether there will be an Infosys of A&E services, but rather who will build it.

If you're building something in this space, do not hesitate to reach out to me!

By the way: I am working on posting Part 2 of this article, where I'll bring in perspectives from cross-border VCs who are backing transformative companies between India and the US, examining how they view the opportunity to build the next Infosys in the A&E space. Stay tuned!

Well, that's it! Feel free to reach out if you want to share thoughts, or leave a comment - I'll be happy to get your perspective.

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