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Software is playing a growing role in reshaping engineering at European companies, causing a major upheaval in the digital engineering services market as providers scramble to hire more developers, according to a new research report published today by Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm.
The 2022 ISG Provider Lens™ Digital Engineering Services report for Europe finds digital transformation has emerged later in Europe than in other regions but is now growing at a pace that is rapidly changing the market for engineering services. Providers from outside Europe are expanding their presence there, while European providers of traditional engineering services are trying to enter the digital market.
“For many European companies involved in engineering, software is becoming a much more important part of their product and customer development strategy,” said Gaurav Gupta, partner and global head, digital engineering, at ISG. “Engineering services firms in Europe are teaming up with international providers to secure enough developers to meet the rising demand.”
Several factors have slowed Europe’s adoption of digital engineering technologies and services, the report says. Midsize companies dominate most industries in the region and tend to favor in-house development. Some industries, including automotive and aerospace, turn to their close-knit supplier networks rather than to large service providers for engineering. And most European companies develop products so specialized that the internal mechanical, electronics and software teams need to work closely together, making extensive sourcing of engineering skills more difficult and complex.
However, many industrial companies in the region are now motivated to undertake digital transformation, ISG says. Discrete industries are adopting automation because of high labor costs and increasing regulation, while also using new technologies to meet growing demand for highly customized products.
In Europe’s process industries, massive enterprises with huge plants are implementing digital solutions to monitor, control and visualize all processes so their facilities can run for long periods of time without interruption. They are also adopting technologies to secure their assets from cyberattacks. Sustainability is part of most conversations, and enterprises are working quickly to align their digital engineering strategies with their sustainability commitments.
As more customers demand digital services and direct access to manufacturers, companies in Europe and other regions are focused on creating digital customer experiences, the report says. An ecosystem of partners is emerging to make up for the lack of in-house expertise at many enterprises, creating a major opportunity for service providers.
The 2022 ISG Provider Lens™ Digital Engineering Services report for Europe evaluates the capabilities of 41 providers across five quadrants: Design and Development, Connected & Intelligent Operations — Discrete Industries, Connected & Intelligent Operations — Process Industries, Integrated Customer/User Engagement and Experience, and Platforms and Application Services.
The report names Accenture, Cognizant, HCL and Wipro as Leaders in all five quadrants. It names Capgemini, Infosys and TCS as Leaders in four quadrants each. The report names LTTS as a Leader in three quadrants and HARMAN Digital Transformation Services (DTS) as a Leader in two quadrants. AVL, Ferchau, FEV, IAV, Tech Mahindra and Zensar are named as Leaders in one quadrant each.
In addition, Mphasis is named as a Rising Star — a company with a “promising portfolio” and “high future potential” by ISG’s definition — in three quadrants. Cyient, GlobalLogic and Tech Mahindra are named as Rising Stars in one quadrant each.