Digital Engineering Spend to account for more than 50% of the overall Global Engineering R&D Spend and will grow rapidly at 19% to exceed USD 1 Tn by 2024, says Zinnov

- Relentless focus and investments in Digital Engineering have positioned Hi-Tech and Services-led verticals to overtake Manufacturing-led verticals in terms of ER&D spend in the next couple of years

NEW YORK, Nov. 17, 2021 /PRNewswire/ -- The appetite for digital will surge unabated over the next 4 years, across newer technologies, industry players, and changing customer, employee, and partner dynamics. Zinnov's analysis shows that Digital Engineering spends will constitute over 50% of the overall Global ER&D spending by 2024, the details of which are included in its study titled, 'Global ER&D Landscape and Evolving Enterprise Priorities – 2021.' This comprehensive study is leveraged extensively by business leaders across verticals to identify strong partners for faster and more efficient deployment of Engineering and R&D-led services initiatives across geographies. Apart from evaluating the Global Engineering R&D (ER&D) landscape, the study also estimated that the Global ER&D spend by organizations will grow at a 9% CAGR to reach USD 2.1 Tn by 2024, as they double down on their digital investments to fortify their market positions.

The pandemic has resulted in enterprises relooking at their ER&D priorities and renewing their focus on Digital Engineering investments. As a consequence, the relentless focus on Digital Engineering by the Hi-Tech and Services-led verticals (BFSI, Healthcare, Retail, etc.) will surpass the traditional Manufacturing-led bastions in their overall ER&D spend, in the next couple of years. For instance, Retail firms have increased their Digital Engineering spend manifold to build capabilities such as contactless commerce through "touchless order-to-delivery" experiences for customers. 

Zinnov believes that while there is a mixed bag of digital priorities for companies, there are a few frontrunners catalyzing digital transformation:

5G – Enterprise use cases with high speed and low latency requirements across verticals are expected to drive 5G investments. Companies across the value chain (Telco operators, Network Equipment Providers, Semiconductor companies, etc.) are leveraging 5G to enable use cases such as Asset Tracking, Logistics Intelligence, Vehicle-to-everything, etc.

Digital Thread – A key lever of digital enablement is digital thread – which is playing a strategic role in enabling touchless manufacturing systems and serviceability. By incorporating 'intelligence' at every step of the value chain and enabling outcomes by intertwining next-gen technology into the process, digital thread will become a critical component for antifragility in manufacturing-led enterprises. In fact, digital thread is already transforming the way products are designed, manufactured, and serviced across Z1000¹ enterprises. From a use case perspective, smart manufacturing, tracking, and smart insights already lead adoption, while smart design is still playing catch up.

Sustainable Engineering – Sustainability adoption is buoyed by growing consumer preferences and investor interests. Today, companies are enabling Sustainability Engineering outcomes by making investments across the Digital Engineering stack for product innovation and operations excellence. Z1000 enterprises across verticals are focusing on Digital Engineering-led Sustainability Engineering, investing in use cases such as smart infrastructure, Intelligent Automation, vehicle electrification, etc., and also focusing on reducing their carbon footprint by enabling a circular economy.

Helming these large-scale initiatives, both for themselves and for their Enterprise customers, are Service Providers (SPs). In fact, SPs with significant exposure to Manufacturing-led verticals (Automotive, Industrial, etc.) were initially impacted in terms of revenues, and are now in the recovery cycle. Those SPs with exposure to Hi-Tech and Services-led verticals maintained a healthy growth trajectory even during the pandemic and are poised for further growth.

Speaking about the study, Pari Natarajan, CEO, Zinnov, said, "Technology has become the true core of companies across verticals even in traditional enterprises such as Banks and Retail companies, which was further reinforced during the pandemic and beyond. In fact, the last year not just moved companies from a physical construct to a digital space, but also transformed how they seamlessly manage their customer, employee, and partner experiences digitally. It is a testament to this heightened focus on digital that companies have increased their Digital Engineering spend not only to build new digital products and  experiences but also to digitally enable their existing products and services. Enterprises are investing in themes such as connected, electrified, and autonomous, and have renewed their focus on building sustainable products and services."

"As enterprises look at ushering in the next wave of growth, they are increasingly collaborating with the Service Provider community to accelerate their product roadmaps while keeping sustainability at its core by bringing in product innovation. With the changing macro-economic variables, the exacerbating war for talent on the back of The Great Resignation, and the increased focus on digital skills in technologies such as Cloud, IOT, Automation, AI/ ML etc., across verticals, Service Providers are poised to play a more comprehensive, elaborate, and crucial role in product development in the coming years."

Zinnov's Assessment of ER&D Service Providers

Zinnov's assessment of global ER&D Service Providers is unique this year, because of the geographic evaluation done across high spending countries such as the US, Germany, and Japan, where the primary parameters analyzed include investments, client success, and delivery capabilities for Engineering services. For this study, Zinnov evaluated ~50 Global ER&D Service Providers across the following areas:

Overall

• Overall ER&D Zones 2021
• ER&D Zones – Small and Medium Service Providers 2021

Horizontals 

• Digital Engineering
• AI Engineering
• ER&D Services – US
• ER&D Services – Germany
• ER&D Services – Japan

Verticals: Automotive, Aerospace, Consumer Software, Enterprise Software, Industrial, Medical Devices, Semiconductor, Telecommunication

Micro-verticals: ADAS, AI and ML for BFSI, Contactless Retail, Software Cybersecurity, Digital Thread, SDN and NFV, Software Platform Engineering, Telematics, Telehealth, and OTT

Service Providers evaluated: Accenture, Accolite Digital, Aspire Systems, Brillio, Bristlecone, Capgemini, Caresoft Global, Centum, Cognizant, Cyient, Daffodil Software, eInfochips, Encora, Expleo Group, e-Zest, GS Lab, Happiest Minds, HCL, HARMAN DTS, Ignitarium, Infostretch, Infosys, Innominds, KPIT, L&T TS, Marlabs, Mindtree, Mphasis, Musala Soft, Ness Digital Engineering, Persistent Systems, QuEST Global, R Systems, Rishabh Software, Robert Bosch Engineering and Business Solutions Private Limited (RBEI), Sacumen, Sasken, Segula, Sonata Software, SS&C Chorus, Tata Elxsi, Tata Technologies, TCS, Tech Mahindra, To The New, Trigent, UST, Virtusa, Virtusa, Volansys, VVDN Technologies, Wipro

¹Z1000 represents Top 1000 global ER&D spenders across 20+ verticals

About Zinnov Zones

Zinnov Zones is an annual rating published by Zinnov which assesses Global Service Providers based on their competencies, capabilities, and market success. Since 2009, Zinnov Zones (previously known as GSPR – Global Service Provider Ratings) has become one of the most trusted reports globally, for both enterprises and Service Providers to better understand the vendor ecosystem across multiple domains such as Digital Transformation, ER&D Services, IOT, HIA, and Media and Entertainment.

This is the thirteenth consecutive year that Zinnov has assessed Service Providers for their ER&D capabilities. The detailed ratings and contact information of Service Providers are available at: https://zinnovzones.com/

About Zinnov

Founded in 2002, Zinnov is a leading global management and strategy consulting firm, with presence in Santa Clara, Houston, Bangalore, Gurgaon, and Paris. Over the past 19 years, Zinnov has successfully consulted with over 250+ Fortune 500 enterprises and technology companies to develop actionable insights that help them create value – across dimensions of both revenue and optimization. With core expertise in Product Engineering, Digital Transformation, Innovation, and Outsourcing Advisory, Zinnov assists clients by:

• Enabling global companies to develop and optimize a global engineering footprint through center setups, and technology and functional accelerators to achieve higher R&D efficiencies, innovation, and productivity;
• Advising global PE firms in asset shortlisting and target evaluation, commercial due diligence, and value creation;
• Growing revenue for companies' products and services in newer markets through account intelligence, market entry, and market expansion advisory;
• Structuring and implementing Digital Transformation levers enabled by technologies like AI/ML, Cloud, IOT, and RPA;
• Helping global companies outline and drive their open innovation programs, design and operate accelerator programs, and enable collaboration with start-ups across specific use cases and predefined outcomes.

With their team of experienced consultants, subject matter experts, and research professionals, Zinnov serves clients from across multiple industry verticals including Enterprise Software, BFSI, Healthcare, Automotive, Retail, and Telecom in the US, Europe, Japan, and India. 

For more information, visit http://zinnov.com.

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