Digital Engineering Spend is Expected to Grow by 124% by 2022; Creating vast revenue opportunities for Engineering R&D Service Providers, predicts Zinnov

Global Corporate Engineering and R&D (ER&D) spend is pegged at US$ 1,099 billion and is expected to reach US$ 1,310 billion by 2022 ~

~ Global Digital Engineering spend stands at US$ 217 billion and accounts for 20% of Corporate ER&D spending, which is expected to touch US$ 485 billion by 2022 ~

Zinnov, a global management consulting firm, today released its Engineering R&D (ER&D) report that assessed theER&D landscape, the evolving priorities of R&D spenders, the key disruptions across verticals, and the magnitude of the untapped opportunities that are on the table for Service Providers.

A clear trend is that Traditional ER&D spenders are being disrupted by Digital Natives across verticals. Globally, new age technologies like Machine Learning, Artificial Intelligence, Blockchain, 3D printing, AR/VR, IoT, et al, and their myriad applications and use-cases are driving innovations. This is creating newer avenues to generate alternative revenue streams as well as modernize the product development lifecycle, enabling greater efficiencies.  This increasing disruption is pushing large ER&D spenders to focus their resources and effortson “Digital Engineering.” Over the next five years, investments in digital engineering will increase significantly from the current ~20% of the total ER&D spend and is expected to account for more than one-third of the total ER&D spend by 2022.

A key deterrent is the fact that the largest ER&D spenders are so entrenched in the status quo, that enabling organization-wide digital transformation is a herculean task. Those embarking on this journey, are faced with challenges relating to people management, legacy complexities, change management, etc. However, these challenges translate into sizeable opportunities for Service Providers because of the scale and speed at which they can help large companies by

a)       carving out opportunities associated with end-to-end ownership of legacy products, end-of-life products, IP partnerships with revenue sharing, and R&D centers with legacy skillsets;

b)     modernizing their product development lifecycle to reduce time to market;

c)      building new and connected products by leveraging new age technologies such as IoT, AI, ML, RPA, etc.

Speaking about what ER&D companies can do strategically, Pari Natarajan, CEO, Zinnov, said, “While traditional ER&D spenders try to stave off competition from Digital Natives, they can look to leverage Service Provider capabilities to ‘manage the old,’ ‘renew the old,’ and ‘build the new.’” He further added, “Service Providers who focus on embedding digital technologies with digital outcomes and build deep capabilities to drive change across enterprise-level architecture will succeed.”

With digitalization sweeping the ecosystem, only the most agile, innovative, and robust organizations will survive. While every vertical and even horizontal is fair game for being disrupted, organizations need to relook their product strategies and prioritize their investments in exercises that yield positive business outcomes. Although enabling an enterprise-wide transformation is no mean feat, organizations need to embark on this journey sooner rather than later, if they wish to anchor their position as leaders in the ecosystem.