NEW YORK, Nov. 3, 2023 /PRNewswire/ -- Global Management Consulting firm, Zinnov Management Consulting, released its industry-leading study on Digital Engineering spends today. Zinnov shared that Digital Engineering spends, continue to remain buoyant in a post-pandemic, possible-recessionary era, and has now stabilized at USD 810 Bn, at a consistent 22% CAGR. Despite macro-economic challenges of political tensions, inflation, recession, and supply chain disruptions, investments in Digital Engineering are on an upward trajectory, fueled by CXOs seeking to explore innovative use cases leveraging digital technologies. Zinnov's analysis reveals that Digital Engineering spends will reach USD 1,584 Bn by 2026, owing to the unabated pace of technological innovation. The study titled, 'The Inevitable Rise and Impact of Digital Engineering,' is a benchmark for business leaders across verticals that helps in identifying strong partners for rapid and efficient deployment of Digital Engineering-led services initiatives across geographies.
Poised to account for 55% of the global ER&D spending by 2026, North America continues to be the leader in Digital Engineering. Asia Pacific (APAC) pipped Western Europe in ER&D spending, driven primarily by a heightened focus on Digital Engineering by Hi-tech-led verticals in the region. In fact, by 2026, Hi-tech-led verticals will account for 58% of the overall Digital Engineering spend, followed by Services-led verticals and Manufacturing-led verticals.
Sustainability continues to remain a top priority for enterprises across verticals, especially the manufacturing-intensive ones. The Manufacturing industry being one of the largest energy consumers, faces strict government regulations to reduce carbon emissions and adopt sustainable practices making this digital expenditure category a non-negotiable one.
Even though the digital priorities of enterprises are evolving, there are key technology themes emerging. Zinnov analyzed the top 1000 enterprise spenders and identified Generative AI, Hyperscalers, Platformization, Electrification, and Software-Defined Vehicles as the key digital transformation levers.
Generative AI: Generative AI, driven by Natural Language Processing (NLP) and Large Language Models (LLMs), has rapidly emerged as the leading tech trend of 2023. It is transitioning from a consumer-focused technology to witness significant enterprise adoption. Organizations are set to quadruple their investments in Generative AI over the next three years, with Service Providers taking the lead. They are integrating Generative AI into their platforms, forming strategic partnerships with major Cloud providers, and investing in highly skilled talent in the space. Despite there being two camps, this technology continues to thrive and bring in investments.
Hyperscalers: The global Cloud market will reach ~ USD 1.4 Tn by 2030. Cloud platforms are now widespread across verticals like BFSI, Telecom, Media, and Retail due to the adoption of digital-led services. There is an increasing trend of partnerships, investments in data centers and Cloud infrastructure, and the adoption of digital services. Service Providers are extending their traditional offerings to include consulting, assessment, migration, deployment, and management, as well as developing and deploying digital Cloud-based solutions to aid organizations across verticals in effective platform adoption.
Platformization: Platformization is the integration of digital platforms into various economic sectors, infrastructures, economic processes, and government frameworks, restructuring cultural practices and perceptions related to these platforms. From digital factories, autonomous vehicles and driver assistance platforms to As-a-service platforms, these business models being driven are creating value focused on capabilities expansion for Service Providers.
Electrification: The global EV market has witnessed a clear shift from niche to mainstream adoption driven by substantial investments, manufacturing transformations, battery innovations, infrastructure expansion, and environmental benefits. Service Providers play a vital role in electromobility, from electric powertrain design to high-voltage battery development, and are offering OEMs comprehensive engineering solutions. As the market advances, investments in AI-driven capabilities, especially self-driving EVs and smart charging infrastructure, will rise to enhance the customer experience.
Software-Defined Vehicles (SDVs): Software-Defined Vehicles will revolutionize the Automotive industry by meeting the demand for autonomous, connected, and personalized mobility. These vehicles are equipped with automotive computing and versatile software platforms, enabling a wide range of applications, including autonomous driving, advanced safety features, personalized infotainment, and telematics. SDVs are Cloud-connected, facilitating real-time data access and updates, empowering automakers to enhance vehicles and offer new features and services throughout a vehicle's lifecycle, creating fresh revenue streams. While the SDV market is still in its early stages, it is rapidly growing, presenting investment opportunities. Automakers are making substantial investments, continually introducing new SDV models-enabled vehicles. As SDV technology advances, it is expected to profoundly impact the Automotive industry and redefine how we interact with vehicles.
Speaking about the study, Sidhant Rastogi, Managing Partner at Zinnov, shared, "Technology is no longer just relevant to businesses but has become applicable to every single person's life. It has redefined the baseline of what a good customer experience is. In the ever-evolving polycrisis, companies need to stay ahead of not just what their customers want but also predict what they might need – all underpinned by technology. The global ER&D spend is a reflection of this as businesses worldwide continue to tap into Cloud, Generative AI, Metaverse, 5G, and Digital Thread – both for their survival and growth.
Sidhant also added that, "Our analysis clearly shows that by 2026, Digital Engineering spends will reach USD 1.6 Tn, doubling in the next 3 years. Driving this will be collaborative ecosystems, creating an interlock of diverse expertise from across verticals like Automotive, Healthcare, Aerospace, and Energy – allowing for exponential engineering possibilities."
Zinnov's Assessment of ER&D Service Providers
As part of the Digital Engineering report, Zinnov evaluated ~60 Global ER&D Service Providers for its annual Zinnov Zones ER&D and Digital Engineering ratings. The assessment of global ER&D Service Providers this year is distinct - it now includes an evaluation of the Service Providers' proficiency in Generative AI offerings. The ratings encompasses an analysis of Service Providers' capabilities across six horizontals, seven verticals, and three micro-verticals. It also includes a geographic evaluation of high-spending regions like the US and Europe, focusing on parameters such as investments, client success, and delivery capabilities in Engineering services.
Global ER&D Service Providers were evaluated across the following areas:
Overall
- Overall ER&D Zones
- ER&D Zones – Small and Medium Service Providers
Horizontals
- Digital Engineering
- Digital Engineering – Small and Medium Service Providers - Data & AI Engineering
- Data & AI Engineering – Small and Medium Service Providers - Experience Engineering
- Experience Engineering – Small and Medium Service Providers - Industry 4.0
- Generative AI
- Overall Hyperscaler Services
- Hyperscaler Services (AWS) – Top 10 SPs
- Hyperscaler Services (Microsoft Azure) – Top 10 SPs
- Hyperscaler Services (Google Cloud) – Top 10 SPs
Verticals: Automotive, Aerospace, Consumer Software, Enterprise Software, Industrial, Semiconductors, Telecommunications
Micro-verticals: Software Platform Engineering, Telehealth, and Electrification
Service Providers evaluated: Accenture, ACL Digital, AFRY, Akkodis, Alten, Apexon, Ascendion, Aspire Systems, AVL, Bertrandt, Capgemini, Caresoft Global, Centum, Cigniti, Cognizant, Cyient, Daffodil Software, Deloitte, DXC Technology, EDAG, eInfochips, Encora, EPAM, Expleo Group, e-Zest, FEV, Global Logic, Globant, GS Lab|GAVS, Happiest Minds, HARMAN DTS, HCLTech, IAV, Ignitarium, Infovision, Intellias, Itransition, Kellton, KPIT, LatentView Analytics, L&T Technology Services, Marlabs, MulticoreWare, Ness Digital Engineering, Persistent Systems, Quest Global, Sacumen, Sasken, Softdel, Sonata Software, Talentica, Tata Elxsi, Tata Technologies, TCS, Tech Mahindra, TO THE NEW, Trigent, UST, VVDN Technologies, Wipro, Xoriant
*Z1000 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 ratings globally, for both enterprises and Service Providers to better understand the vendor ecosystem across multiple domains such as Digital Transformation, ER&D Services, IOT, Intelligent Automation, and Media & Entertainment.
This is the fourteenth 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/ratings/e-r-and-d-and-digital-engineering-services/overall/2023.
About Zinnov
Founded in 2002, Zinnov is a global management and strategy consulting firm in New York, Santa Clara, Houston, Seattle, Hyderabad, Bangalore, Gurgaon, Pune, Japan, and Paris. Over the past 21 years, Zinnov has successfully consulted with over 250+ Fortune 500 enterprises to develop actionable insights to help them accelerate their technology journeys to create value – across dimensions of revenue, transformation, and optimization. With core expertise in Digital Engineering Talent, Digital Transformation, Innovation, and Outsourcing Advisory, Zinnov assists clients by:
- Structuring and implementing Digital Transformation levers enabled by technologies like AI/ML, Intelligent Automation, Cloud, IOT, etc.;
- 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;
- Growing revenue for companies' products and services in newer markets through account intelligence, market entry, and market expansion advisory;
- Enabling global companies to develop and optimize a global engineering talent footprint through center setups and accelerators - in an as-a-service model, as well as optimizing their global portfolios, 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.
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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