Companies are gearing up to design, develop, and produce smarter products and services, according to a report from ISG

June 14, 2022

STAMFORD, Conn.—Enterprises in the United States are modernizing their engineering practices at an unprecedented pace in response to rising demand for digital products and services, according to a research report published by Information Services Group (ISG), a global technology research and advisory firm.

The 2022 ISG Provider Lens™ Digital Engineering Services report found that many enterprises in the U.S. have embraced digital engineering as their industries undergo a digital transformation. What were once objects built to perform a task, such as automobiles, semiconductors, and athletic shoes, are becoming connected systems defined by software and data, ISG said in a release.

“Growing demand for smarter products and processes is making engineering far more complex than in the past,” said ISG Partner and Global Head of Digital Engineering Gaurav Gupta, in the release. “Companies are adopting new technologies, often with the help of ecosystems of technology and service providers, and digital engineering services are making these massive transitions possible.”

Automotive is a prime example of an industry where engineering is changing quickly, the report said. Much of the value of a new, high-end vehicle is in software for safety and automation, and in data the car collects about driving behavior and its surroundings. Mobility is just one function of an intelligent platform on wheels, the company said in the release.

According to ISG, perfecting a vehicle’s digital features involves so many variables that engineers may need assistance from artificial intelligence. Similar challenges are emerging with other types of products, such as connected shoes that sense how the wearer is running and send real-time data to a smart watch.

“Shoe manufacturers that used to focus solely on size, materials, and colors now have to consider services, too,” said Jan Erik Aase, partner and global leader, ISG Provider Lens Research, in the release. “Many products are being engineered for a whole new set of parameters.”

The report explores how digital engineering introduces new approaches to designing, developing, testing, and producing products and customer experiences. These approaches require new skills in addition to investments, ISG said.

By partnering with service providers, enterprises can tap into a scalable supply of digital engineering talent, which is often scarce and not available in-house. The report also explores how digital engineering affects discrete and process industries differently, the company said.

Digital Engineering Business Aims to Meet Booming Demand for Data- and Software-Driven Business Models

Information Services Group recently launched its digital engineering advisory business to meet booming enterprise demand in this critical area. Through the new business, ISG will help global enterprises digitize their products and create connected customer experiences. According to ISG, digital engineering supports everything from initial product design to digital systems for continuous product and service evolution and enhanced customer experiences.

The company said data from the ISG Index™ , which tracks global spending on technology and business services, show that annual contract value (ACV) for engineering services grew more than 35 percent, year over year ,in the first quarter of 2022. The total engineering services market is estimated to be worth $200 billion, although the market is still highly fragmented and mostly unadvised, the company said in a June 6 release.

“Digital engineering is one of the hottest areas in the technology services and solutions market, as enterprises across industries turn to data- and software-driven approaches to support each stage of the product lifecycle,” Gupta said in the release. “This sea change in traditional engineering enables companies to update products online long after they’re sold, and to deliver actionable data and insights back to the manufacturer.”

As information technology merges with industrial machinery, enterprises are leveraging digital engineering to connect data, analytics, and services with product design. This connection allows manufacturers to continually update and extend product functionality and create an ongoing customer relationship throughout the product lifecycle.

Digital engineering also enables manufacturers to test the performance of physical assets before they are built. The data and analytics gathered from devices fuels and improves ongoing product development, ISG said in the release.

“The pandemic acted as a catalyst for digital engineering, pushing companies to bridge the gap between information technology and operational technology,” Gupta said. “In addition to accelerating changes in customer behavior and expectations for smart devices, the pandemic demonstrated that shop floors were not sufficiently resilient to withstand supply chain challenges. Manufacturers struggled to provide remote operations and data management.”

Gupta said enterprises are turning to remote teams, virtualization, and cloud technology to extend the traditional engineering bench. This is leading to growing demand for augmented and virtual reality (AR/VR), IoT sensors, artificial intelligence, and machine learning. These solutions connect traditionally siloed organizations and data in the areas of information technology (IT), operational technology (OT), and engineering technology (ET).

The new ISG Digital Engineering business will work with clients to assess the current state of their transformation initiatives; perform a strategic re-design of their target operating model; define a sourcing strategy, including the design of flexible and modular contracts; and govern their ecosystem to track success, the company said.

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