LONDON--(BUSINESS WIRE)--Technavio’s latest report on the global engineering services outsourcing (ESO) market provides an analysis on the most important trends expected to impact the market outlook from 2016-2020. Technavio defines an emerging trend as a factor that has the potential to significantly impact the market and contribute to its growth or decline.
Organizations outsource several business processes to service providers to provide more focus on core business offerings. Outsourcing brings down costs and innovation in product development. The services can be availed for various phases of product development process. Outsourcing can be key to organizations operating in industry verticals like automotive. It helps industries keep up with the rapidly changing technological landscape.
The outsourcing decisions in organizations are very strategic in nature. Project managers mainly opt to outsource engineering services such as 3D modeling and computer-aided design (CAD). Digitization has triggered organizations to demand for advanced IT solutions such as engineering analytics, internet of things (IoT), and artificial intelligence (AI) to gain an edge over their competitors and maintain the momentum of the company.
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The top four emerging trends driving the global engineering services outsourcing according to Technavio information and communications technology research analysts are:
- Emergence of artificial intelligence and machine learning
- Evolution of industrial IoT
- Growing trend of engaging clients with consulting services
- Nearshoring and growing captive operations in emerging countries
Emergence of artificial intelligence (AI) and machine learning
“Automation in engineering services has triggered the usage of artificial intelligence technology. AI-powered engineering solutions help to resolve various stages of design and development of engineering products. Automation in engineering services helps an organization to reduce cost by 35%-45%. Leading vendors in the market have invested in the development of engineering services powered by artificial intelligence technologies,” says Amit Sharma, one of the lead analysts at Technavio for IT professional services research.
Machine learning, which is a part of AI systems, is recognized in the engineering services industry. Machine learning solutions integrated with analytical tools are transforming the industrial manufacturers' decision-making pathways. These solutions are also being developed by leading cloud computing firms such as Amazon Web Services and Microsoft.
Evolution of industrial IoT
Penetration of industrial IoT in several industry verticals has increased significantly. Smart connected devices are aiding manufacturers to enable M2M communications. Industrial IoT services provide real-time information exchange to help industrial manufacturers to design and develop products. The industrial IoT services for ER&D opt to bring innovation in engineered products.
Leading automotive companies such as GM, Nissan, and BMW are investing in building next generation autonomous cars. GM has invested USD 500 million in Lyft, a ride-sharing firm, to provide on-demand autonomous vehicles. Autonomous cars are designed and tested with the help of IoT technologies.
Growing trend of engaging clients with consulting services
“Leading IT vendors are entering the consulting space to engage with customers as a part of building strategic relationships. Engineering Service Outsourcing vendors require smart talent management and a comprehensive understanding of the client’s business. This will aid them to move to higher value consulting and establish long-term engagements,” says Amit.
In line with the growing adoption of technology and associated engineering services, engineering outsourcing services (ESO) vendors need to offer high-end consulting services. This also helps clients gain expertise in technology and engineering to an extent. Consulting services are advisory services that help companies analyze and improve business operational performance and technology strategies. With increased adoption of social networking, mobile computing, online collaboration, cloud computing, and data storage, there is also an increased need for consulting services to manage the large complex networks.
Nearshoring and growing captive operations in emerging countries
Currently, India is the most preferred location for ESO because of the highly skilled labor force and cost advantages. The Indian service providers win contracts from western countries including the US, the UK, and Germany because these reasons. This is leading to a significant growth in number of multi-national companies (MNCs) in India. The trend of MNCs setting up their own operational centers despite their high costs is on the rise. This makes them across as centers of excellence and the creators of high-end employment opportunities as opposed to the cost-arbitrage model of the past. The idea behind setting up captive centers is to put the diverse talent pool of India to good use, retain key data and information within the company, and propagate R&D activities through partners.
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