Today’s world is heavily disrupted by the adoption of digital solutions and modern technologies. Every industry is paving its way towards digitization, making use of cutting-edge technologies like Artificial Intelligence (AI), Internet of Things (IoT), Machine Learning (ML), Robotic Process Automation (RPA), and blockchain. ER&D (Engineering R&D) is no different as it is significantly increasing the investment on digital engineering.
As per the recent stats by Zinnov, the spending on digital engineering will account for 37% of the total ER&D market by 2023. The leading firms and traditional R&D spenders are increasing their investments in digital engineering all the more to adopt the change, fight the competition with newer firms, and fuel the next wave of ER&D growth. Moreover, digital engineering will also have an impact on the traditional engineering services as more enterprises will start finding the traditional solutions less relevant.
What is digital engineering, anyway?
Digital Engineering is the method or way to make use of modern technologies and digital methodologies to transform the old into new or develop the new products or services. In ER&D, digital engineering also covers the transformation of infrastructure and creating new revenue streams for stronger growth.
Over the last few years, there has been a massive growth in digital engineering, which is majorly driven by three main factors. First, there is demand to leverage technology for innovative business models. Second, the massive growth of new businesses, startups, and leading tech firms which are developing a high-spirited digital ecosystem. And third, the ongoing digital transformation in the technology ecosystem.
Key benefits of digital engineering:
There are numerous benefits of adopting digital engineering in ER&D, such as:
- Faster product development
- Improved product ownership experience
- Improvised product portfolio
- New streams of revenue
How is digital engineering paving the way for ER&D growth?
- Rebalance of IT investment
In order to make the development of products affordable and more efficient, R&D investment on IT is getting rebalanced. More than half of the manufacturers in the ER&D market are responding well to the change and adopting product lifecycle management (PLM) platforms like virtual reality (VR), augmented reality (AR), and digital twins. The IT budget is now being shifted from legacy solutions to digital engineering components.
In 2020, the digital engineering holds around 25% of the total ER&D investment, which is expected to increase to nearly 37% by 2023.
- Product innovation with rich data analysis
The legacy market surveys of the products are being replaced by the digital data analysis using AI and ML solutions. It is easier to analyse data from connected products in real-time, as well as finding customer reviews through social media channels. The rich data analysis in real time helps in analysing the performance of the products and creating new strategies on how to build next generation products. Along with enabling rich data analysis, product engineering enabled by digitization also delivers actionable insights for product innovation.
- Faster time to market
The cutting-edge technologies like AI and IoT are also the enabler of faster time to market. For instance, Google is using digital engineering to foster faster time to market for its self-driving cars. The concentration is on building the products that exhibit intelligent and autonomous capabilities. On the other hand, the already established firms in the automotive market, such as Ford and Toyota are also increasing their spend on AI-enabled driving. Ford is spending over $4 billion by 2023 in acquiring newer organizations and developing autonomous capabilities powered by digital engineering elements. The aim is to explore the new use cases of products faster and reach the market in minimum time.
- Rise in non-physical skills
In 2014, the non-physical skills like data analytics, app development, and cybersecurity used to hold only 20% of the workforce skills. But the rise in adoption of digital engineering has also increased the implementation of non-physical skills. By the end of this year, the ER&D market will have more than 40% of the workforce with non-physical skills. This shows exactly how digital engineering is fuelling the next wave of engineering R&D.
- Disruption of existing business models
In order to bridge the digital skills gap and drive success with innovation, the ER&D spenders are switching to a service-based business model from the existing product-based business model. It is because the ecosystem of the organization plays a key role in adopting new technologies, digital engineering, product engineering services, etc.
The firms are realizing the importance of AI-based chatbots, advanced data analytics, cloud solutions, enterprise mobility solutions, and IoT. The recent partnership between HCL and IBM is one fine example of this. HCL believes that the partnership with IBM will help them in developing ‘as-a-service’ offerings by bringing the smart solutions of IBM to their traditional IT services.
- New acquisitions
To broaden the skills and geographical presence in ER&D, the investments are also being made on the acquisitions. For example, in the last few years, Altran has acquired Aricent, GlobalEdge Software, Pricol, Benteler, and Lohika. The acquisitions not only help in developing a skilled workforce for the product, but also to widen the global reach of that product. More of such acquisitions will be witnessed in the coming months.
Looking ahead, 2021 will witness massive transformations in product engineering, digital engineering, and a lot more new digital initiatives across several verticals, including the ER&D. More organizations will be shifting from traditional engineering models to the one powered by digitization. Regardless of the segment, whether it is industrial manufacturing, automotive & transportation, hightech, medical services, or aerospace and defense, digital engineering will disrupt the existing business models and fuel the next wave of ER&D growth.