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New Paradigm in ER&D Services: Convergence of Engineering and Technology – Part 2 | Sherpas in Blue Shirts

By | Blog, Customer Experience

In New Paradigm in ER&D Services: Convergence of Engineering and Technology – Part 1, we talked about the emerging trend of convergence of engineering services and new technologies, and why it is important for enterprises to deliver an enhanced customer experience. Now, let’s turn our attention to the steps and measures enterprises and service providers are taking to tap into the trend and enhance their value proposition.

Engineering Services and Technology ER&D

  1. Access talent with hybrid (technology + domain + design) skills: Service providers and enterprises are increasingly looking at hiring people not just with the right domain knowledge, but also with cross-functional expertise. There is heightened demand for engineers with niche technology skills, such as IoT and artificial intelligence. For instance, Altran, one of the world’s largest engineering service providers by revenue, has an innovative way of recruiting talent. It filters talent through case studies based on its own real-time projects, such as “connected car” and Solar Impulse . This enables it to select candidates who have both the right skill sets and an innovative mindset, which has become critical for people in the industry.
  2. Capitalize on data to drive business value: New technologies and social media have led to a gush in the amount of consumer data that can be tracked and mined to deliver a better customer experience. Players in the engineering services space are realizing the value of customer data, and taking steps to build infrastructure for analyzing it. For example, ALTEN Calsoft Labs, a global engineering service provider, recently announced that it will acquire ASM Technologies Ltd’s software business division to augment its cloud, analytics and mobility capabilities.
  3. Reimagine product development: With shrinking product lifecycles and ever-changing customer demands, the focus is on providing end-to-end solutions rather than just point solutions. Service providers are partnering with clients to deliver solutions in an as-a-service model. Customer expectations are putting pressures on product lifecycles, and enterprises are trying to innovate and create newer and smarter products at warp speed.
  4. Move towards co-innovation model: The shift in technology complexity and consumer demand for a “connected” ecosystem is increasing collaboration between enterprises and providers for innovation and new product development. For example, Jaguar Land Rover is partnering with Altran to develop and market a unique software platform for vehicle internet connectivity, driver assistance systems, autonomous driving, and analytics. The partnership is aimed at delivering increased customer value by combining Jaguar’s automotive experience and Altran’s expertise in providing solutions for the automotive sector.
  5. Drive efficiencies in design to deliver cost savings: New technologies and methodologies in software development and testing are transforming the product development landscape for enterprises and they are increasingly adopting automation tools to accelerate time-to-market for products. For example, Wipro has a defined test automation framework (Wipro Endur Test Automation Framework) that can help clients reduce overall TCO of test automation by as much as 45 percent.

Implications for the industry
So what does this all mean for the ER&D services industry outlook, and for players in the domain? As it becomes increasingly crucial for enterprises and service providers to gain new capabilities in engineering and technology, there will be increased merger, acquisition, and partnership activity. Enterprises will look at partnering with niche technology firms or innovative startups for new product development. Service providers will pursue targeted acquisitions, and try to strengthen their value proposition for clients by increasing investment and focus on the segment. It will be exciting to see what happens in this space in the next 5-ten years.

For more insights and information on the ER&D services industry, please refer to our latest report, “The Evolving Demand Paradigm in the Engineering and Research and Development (ER&D) Services Industry.”

New Paradigm in ER&D Services: Convergence of Engineering and Technology – Part 1 | Sherpas in Blue Shirts

By | Blog

It is interesting times for the engineering services and R&D (ER&D) market. Industry demand for engineering services coupled with technology innovations is transforming the market landscape, and leading to the emergence of new business models – in particular, the convergence of engineering services with new technologies, such as digital, IoT, and analytics for product development.

The proliferation of digital technologies is compelling enterprises to relook at their product development strategy, and integrate new technologies with products to deliver an enhanced customer-centric experience. Service providers in the ER&D industry are looking to expand their engineering service offerings by tapping into new technologies that can help them differentiate their position in the market and deliver increased value to their clients.

The convergence trend is manifesting itself in many ways in the industry, and fundamentally transforming the normal course of business for both enterprises and service providers:

  • Evolving consumer needs, coupled with the explosion of digital devices and technologies (e.g., connected vehicles, chatbots, and machine learning based platforms) are dramatically changing the demand landscape in the ER&D services industry. Given that the number of connected or smart devices is expected to grow from 22 billion today to 50 billion by 2020, it’s clear that enterprises must now provide a “connected ecosystem” experience for their customers across devices and platforms.
  • The US$75-80 billion ER&D global services industry is expected to grow at a rapid pace (14-16 percent YOY) and reach US$145-155 billion by 2020. This growth is being driven by evolving customer demands, the need to integrate new technologies with products, shortening product lifecycles, and the resulting cost and margin pressures for enterprises.
  • Facing margin pressures for IT services, service providers such as HCL, Infosys, and TCS are betting big on the fast growing ER&D services segment. For example, Infosys recently opened delivery centers in Croatia and Russia to provide engineering services to its automotive, heavy manufacturing, and aerospace clients. The ER&D services industry is expected to drive the next wave of growth for these players:
    • In the last couple of years, the engineering services segment has grown faster than IT services. Estimates from NASSCOM are that engineering services exports grew by 12.6 percent in India during FY 2016, whereas IT services exports grew by 10.3 percent
    • Infosys’ YOY FY 2016 revenue growth for its engineering services practice (16 percent) was more than the company’s total revenue growth (9 percent)
  • With enterprises’ shift in demand, service providers are looking at capturing a larger share of ER&D outsourcing market pie by investing in the segment and acquiring new capabilities. For example:
    • HCL Technologies recently acquired Geometric to strengthen its engineering services and IoT capabilities
    • Luxoft recently acquired Pelagicore AB, a leader in open source software services for human machine interface (HMI) development. The acquisition is expected to help the service provider bolster their automotive services offerings with next-level technology capabilities.

Time-to-market pressure for product development is making enterprises and service providers look at avenues to deliver enhanced value to their customers. Make sure to visit our blog page later this week to read our follow-up post on the different ways they’re keeping up with this trend.