While the professional services market experienced a slowdown last year, engineering services emerged as a standout performer among other segments.
In this webinar, our analysts examined the past performance and future prospects of the engineering services sector. Participants gained valuable insights into the pricing outlook, commercial dynamics, market attractiveness, and evolving buyer expectations for engineering services. Finally, we explored emerging trends and future projections.
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Impact Sourcing
Indian pure-play engineering R&D (ERD) players have outshone their IT peers, aided by strong demand tailwinds by growing their digital engineering and embedded capabilities.
According to Everest Group, the global ERD sector increased 11.5% to US$73 billion in 2022 from US$65 billion in 2021.
Impact Sourcing
The ongoing strike by the United Auto Workers (UAW), the biggest union in the US automotive industry, has ramifications on auto production, costs, and supply chains. In this blog, we explore the impact of the UAW strike against GM, Ford, and Stellantis and look at who stands to win and lose.
Union leaders representing the striking workers are negotiating for the following:
After unsuccessful negotiations on these issues, UAW President Shawn Fain declared a rolling strike on Sept. 15, simultaneously targeting all three automakers. Since then, the consequences of these events have hit the entire US automotive industry. Let’s explore this further.
Despite only three factories/plants being affected by the strike initially (GM’s assembly plant in Wentzville, Missouri; Ford’s site in Wayne, Michigan; and Stellantis’ site in Toledo, Ohio), the impact on production was stark when 13,000 workers walked off the job. Vehicle production by these automakers fell by 4,000 to 6,000 vehicles within a week of the UAW strike.
The three Original Equipment Manufacturers (OEMs) argue that the proposed UAW contract would hinder their competitiveness in transitioning to EVs. If the UAW strike continues for more than four weeks, it could delay EV development plans and extend production schedules to 2024. This would further set back Ford, GM, and Stellantis, who already trail Tesla, Rivian, and Lucid Motors in the EV market.
The UAW proposal is unlikely to be accepted in full by any of the three automakers, considering they already pay higher wages (US$65 per hour) compared to competitors such as Tesla (US$45 per hour) and Toyota (US$55 per hour), which do not use union workers. Any further wage increases would likely cause GM, Ford, and Stellantis to pass on some costs to their customers, providing an advantage to other automakers who can price their vehicles lower.
The three auto OEMs contend that they must shift towards manufacturing EVs to comply with government regulations and maintain competitiveness in the automotive industry. However, this transition will require significant reinvestment of their profits, which will not be possible if they comply with the UAW’s demands unless the firms choose to incur more debt.
The UAW expanded its strike last week to 38 GM and Stellantis parts distribution centers as negotiations with these two manufacturers failed to make significant progress. The strategic move by the union to hit parts centers rather than production facilities will impact supply chains, making it harder for the companies to source new parts to repair and service vehicles that have already been sold. Production delays and strikes on parts centers will also cascade the impact onto Tier-1 suppliers, further increasing pressure on the three OEMs to reach an agreement with the UAW.
While the UAW’s demands may well be in good faith and result in improved working conditions for their members, the road ahead for the three impacted automakers seems nothing but bumpy. The true winner in this entire saga may well turn out to be Tesla, as it is poised to expand and enhance its market share in the EV segment.
Everest Group’s Engineering Research & Development (ER&D) services analysts will continue to follow the developments and provide updates. Please reach out to Nishant Udupa or Gokul K to discuss the UAW strike or other automotive industry topics.
DALLAS, September 12, 2023 — Everest Group today released the fifth annual edition of “Everest Group Engineering Services Top 50™,” a ranking of the world’s largest third-party providers of engineering services (ES). The ranking is based on revenues and year-on-year growth.
Engineering services include all activities that support the design, development, testing and management of products, both hardware and software.
Topping the 2023 ES Top 50 list are these 10 providers:
*** Download a complimentary copy of the 2023 Everest Group ES Top 50 list and analysis ***
The Everest Group Engineering Services Top 50 represented 82% (more than US $60 billion) of the estimated US $73 billion in total outsourced spending in 2022. The global ES industry grew 11 to 11.5% between 2021 and 2022.
“ES providers have continued to boost their engineering capabilities and acquire companies to increase scale and gain access to new markets,” said Akshat Vaid, partner at Everest Group. “Outsourcing has increased from 2021, driven by a platformization wave, increased investments in connected and electric cars, and a rise in sustainability and green technology practices toward software and digital engineering.”
This year’s edition of the Everest Group Engineering Services Top 50 includes numerous additional research findings, including:
The Everest Group Engineering Services Top 50™ is a global list of the 50 largest third-party providers, based on their ES revenues and year-on-year growth. Revenues comprise 75% of the composite score used for ranking. Growth comprises 25% and has two sub-parameters: absolute growth (measured as change in ES revenue in US$ million and accounting for 12.5% of the composite score) and percentage growth (measured as percentage change in ES revenue and accounting for the final 12.5% of the composite score).
Everest Group is a leading research firm helping business leaders make confident decisions. We guide clients through today’s market challenges and strengthen their strategies by applying contextualized problem-solving to their unique situations. This drives maximized operational and financial performance and transformative experiences. Our deep expertise and tenacious research focused on technology, business processes, and engineering through the lenses of talent, sustainability, and sourcing delivers precise and action-oriented guidance. Find further details and in-depth content at www.everestgrp.com.
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