All Posts By

Akshat Vaid

Getting Digital Product Verification and Validation Right Through “As-a-Service” Models | Blog

By | Blog

In today’s digital world, a car isn’t just a car, a home isn’t just a home, and a factory isn’t just a factory. They’re all connected and intelligent and rely on both hardware and embedded software to deliver value to end-customers.

But to make sure these connected and intelligent products operate safely and as intended, enterprises need to completely rethink the way they verify and validate them before they release them to market.

Here are the key things enterprises need to keep top of mind when reimagining Verification and Validation (V&V) for their digital products.

  • Product security: With increasing volumes of data and products operating in an “always connected” state, enterprises need to emphasize security compliance and testing for digital vulnerabilities. Examples such as Microsoft’s AI bot Tay going haywire and hackers being able to remotely control Tesla car functionalities make it clear that these vulnerabilities expose their users to multiple risks.
  • Ecosystem integration: Here, enterprises need to think beyond the component and system level to verify and validate how the product functions within its connected ecosystem. For example, how does your connected medical device interact with other hospital equipment, patient records, doctors’ offices, and patients’ smart phones?
  • Response predictability: Making products connected and intelligent also means that interactions with them will yield different responses based on context and the period they have been in service. This lower predictability in responses – as compared with legacy products – makes it complex to manage quality and mandates a degree of automation in the V&V process.
  • Compliance: As regulatory bodies are imposing increasingly stringent compliance and certification requirements on digital products, especially in industries such as medical devices, BFSI, and automotive, enterprises need to quickly and adeptly revise their quality assurance practices.
  • Speed: With an ever-increasing competitive requirement on time-to-market and the many frequent changes that characterize digital products, enterprises must appropriately tune their V&V programs to deliver with speed and scale. At the same time, they need to manage the complexity of embedded and hardware development lifecycles running at different cadences.
  • Learning curve: Given the new technologies and capabilities required for developing digital products, enterprises also need to determine how to manage hard-to-find skilled talent, collective organizational knowledge, and the typically steep learning curve around quality engineering.
  • Developments in processes and technologies: Finally, enterprises need to leverage new developments such as Design For Quality (DFQ) to rectify design flaws earlier in the product lifecycle, cognitive testing techniques enabled by AI/ML, analytics, and robotics to make the V&V process productive and repeatable, and “digital twins” to increase predictability of product performance in the real world. They also need to keep pace with the innovation in tools and procedures in areas such as EMC, environment, acoustic, and mechanical testing to ensure better coverage and conformance.

Third-party service providers can help

Because these capabilities require significant infrastructural and talent investments many enterprises find it challenging to leverage them. As a result, V&V for digital products is emerging as a highly relevant category for global sourcing with the presence of specialist partners that provide “as-a-service” capabilities. Their offerings, including Quality-as-a-Service (QaaS) Testing-as-a-Service (TaaS,) and Testing-as-a-Utility (TaaU,) are cost effective, and can provide multiple benefits to enterprises, including:

  • Access to consulting expertise: Ideation and planning for quality requirements, and associated strategies for leveraging technology and maximizing test coverage
  • Scalability: Easy accommodation of demand fluctuations
  • Access to the latest techniques: Because service providers are consistently investing in upgrading their labs
  • Compliance and certification support: Prescribing the necessary procedures for compliance and certification and readying all documents for submission to certification authorities.

Over the last few years, service providers have invested heavily in making this model a success. Examples include Wipro’s Tarang Labs, which provides product qualification and compliance services in diverse areas such as EMI/EMC, mechanical, environmental, reliability, safety, and acoustic testing, and domain-specific labs, such as LTTS’ Autonomous Validation Studio, which offers digital validation of autonomous practices, annotation correction, and image processing in ADAS scenarios.

With digitalization on a rise across industries and product segments, we expect demand for third party V&V services to grow. We also expect the technological complexity involved to drive specialization, in turn making these “as-a-service” models emerge as an industry norm over the next few years.

Capgemini-Altran Acquisition: Upping the Ante in Engineering Services | Blog

By | Blog, Mergers & Acquisitions, Uncategorized

Back in December 2017, Altran’s acquisition of Aricent for US$2 billion was one of the biggest inorganic growth initiatives in the engineering services space. The acquisition helped Altran draw synergies across key verticals and strengthen its leadership position in the global engineering services space.

Fast forward just a short year and a half later to a much larger deal: Capgemini on June 24, 2019, announced its plan to acquire Altran for a cash consideration of ~US$4.1 billion and also assume Altran’s financial debt of ~US$1.6 billion, which is primarily attributable to its Aricent acquisition. The transaction is expected to close by the end of 2019.

Based on our calendar year 2018 estimates, the combined entity will hold over 10 percent of the global engineering services outsourcing market and will have nearly US$1.4 billion higher revenue than its nearest competitor.

Engineering Services revenue for leading service providers1 CY 2018; US$ billion

1 Includes Everest Group estimates

The acquisition reinforces the fact that the global services industry views engineering services as an avenue to offset the low headroom for growth in the IT and business process services. While players such as HCL Technologies and Tata Consultancy Services have primarily followed the organic route to drive growth in this space (both the companies have a spot in the list of global top 10 engineering services companies,) Capgemini has become the largest engineering services company with this mammoth acquisition.

The acquisition also highlights how service providers are increasingly reckoning with the need to develop capabilities to cater to the Information Technology – Operational Technology (IT-OT) integration needs of today’s connected world. An IT-OT play helps service providers demonstrate capabilities across multiple value elements and capture a larger share of enterprise spend.

What this acquisition means for Capgemini

Altran reported year-on-year growth of 27.1 percent for calendar year 2018, and its organic growth stood at 8 percent. Capgemini will certainly benefit from Altran’s robust portfolio growth. But it stands to gain more benefits:

  • Top spot in the engineering services industry: The combined entity will be the undisputed leader in engineering services, with over US$4 billion in engineering services revenue, and ~54,000 professionals
  • Enhanced capabilities across key verticals: With Altran’s stronghold in the automotive, aerospace, electronics & semiconductors, medical devices, and software products spaces, and Capgemini’s strength in sectors including manufacturing and energy and utilities, the combined entity will have a leadership position across the majority of engineering verticals
  • Asset and infrastructure dividend: Altran has developed numerous labs, solutions, innovation centers, etc., that will add rich depth and breadth to Capgemini’s capabilities
  • Enhanced value proposition: Capgemini will not only be able to cross-sell its enhanced IT-OT value proposition to Altran’s existing, top R&D-spend clients – including six of the top 10 Independent Software Vendors (ISVs) and all of the top five automotive Original Equipment Manufacturers (OEMs) –– but also to its own engineering-heavy verticals
  • Enhanced nearshore delivery capabilities: Altran has a sizeable delivery presence in Eastern Europe, which is a hub for high-quality engineering talent, and a significant delivery presence is viewed as a differentiator in the engineering services space
  • Access to Altran’s hand-picked portfolio of companies: Capgemini will be able to enhance its capabilities in niche areas including design and cyber security through Altran’s previous acquisitions of companies like Frog Design and Information Risk Management (IRM.)

What it means for Altran

In its mid-2018 “The High Road, Altran 2022” plan, Altran presented the key objectives it aimed to achieve by 2022:

  • Compound Annual Growth Rate (CAGR) of 6.5-7 percent (organic) during 2017-2022
  • 25,000 engineers in near/offshore locations, including India, up from 16,000 in 2018
  • Momentum in high-growth segments such as ISVs, electronics, automotive, and medical devices
  • Leadership in North America, while pursuing selective growth in the APAC region
  • Complete integration of Aricent by 2020

With Capgemini coming into the picture, the growth plan for Altran will likely be redefined. Nonetheless, assessing how Capgemini impacts the objectives Altran’s leadership laid down is still worthwhile.

While Altran has been managing steady growth on its own (8 percent year-over-year organic growth in calendar year 2018,) integration with Capgemini will help generate greater exposure to clients and accelerated market growth in North America. It will also accelerate Altran’s delivery expansion in offshore locations.

As a downside, Altran will be integrating with Capgemini – which could come into play as soon as early 2020 – while it continues to attain full synergy with Aricent. This multi-faceted integration will require meticulous planning and execution to ensure success. It may result in increased attrition among the talent Altran acquired from Aricent.

Cues for the broader engineering services outsourcing industry

This acquisition further enhances the dominance of Europe-headquartered firms on the leaderboard of the global engineering services industry. Further, once the acquisition is complete, Capgemini – as the largest engineering services provider – will have developed a sizeable offshore delivery presence and will be capable of going to market with an optimum combination of four key factors: capabilities, scale, client proximity, and cost-effectiveness. Offshore-heritage service providers will need to step up their game to continuously invest in building and enhancing capabilities for new and emerging areas.

We expect the inorganic growth wave to continue in this space. While it is unlikely that we will soon see another acquisition of this scale, we expect both large and mid-sized players to explore smaller acquisitions that address their unique objectives. While large service providers will flex their financial muscle to gain market share and niche capabilities, mid-sized service providers will look to build adjacent capabilities. And when this happens, both the providers and their clients will win.