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© 2015 Information Services Group, Inc. All Rights Reserved.
© 2015 Information Services Group, Inc. All Rights Reserved.
The Rapid Convergence of IT and Engineering Sampath Kumar, Partner, ISG
© 2015 Information Services Group, Inc. All Rights Reserved 3
Agenda
o The opportunity in Engineering Services Outsourcing
o The new, integrated enterprise
o How enterprises are preparing for disruption
o How service providers are adapting to the change
© 2015 Information Services Group, Inc. All Rights Reserved 4
What is the opportunity in Engineering Services?
THE PROMISE OF ESO: $70 B in FY14 à $120 B in FY20 A key for enterprises to • adopt to disruptive
technologies • improve efficiency • address emerging markets Global Corporate R&D Spend by Geography
2009: $ 446 B 2014: $ 559 B 2020: $ 650-‐750 B US 35% Japan 26% US 34% Japan 26% US 29% Japan 20%
Europe 28% China 3% Europe 26% China 4% Europe 23% China 18%
US$ 446 billion US$ 559 billion US$ 650-750 billion
Automotive Consumer Electronics Telecom Machinery Semiconductor Computing Systems Aerospace Energy Medical Services Construction Industrial Automation
2009 2014 2020
Global Corporate ER&D spend
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The changing face of Engineering Services Outsourcing
New technologies like IoT, analytics, big data and mobility are transforming the way products are developed, manufactured, maintained and consumed.
Technology Changes
Wave I Late 1990s onwards
Software & electronics
embedded in products
Emergence of smart products
• Automotive • Smartphones
ecosystem • Telecom
Wave II 2010 onwards
IoT/M2M, ubiquitous connectivity, digital
technologies
Smart & connected product ecosystem
• Automotive • Smart homes and
buildings • Airline
Wave III 2015 onwards
Extension of IoT/M2M, digital to manufacturing;
3-D printing
Smart manufacturing,
Industrie 4.0
• Smart Factory • Digital Oilfields • Additive
Manufacturing
Industry Examples
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The new, integrated enterprise
CTO Org. Engineering Manufacturing CIO Org.
Design & Develop
Smart Manufacture
Demand & Distribute
Product in Use
Support & Maintain
Smart Product Development
Smart Maintenance Smart Inventory Mgmt. Smart Supply Chain
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How are enterprises preparing for disruption?
KEY CHALLENGES:
o “AS IS” à “TO BE” vision
o Change management
o Impact on business, customers, providers and employees
Enterprise
Manufacturing
Product R&D, Engineering
IT – OT Convergence
Digital Technologies (SMAC)
Smart & Connected Products
Industrie 4.0 / Smart Factories
Emerging Markets Focus
Engineering Analytics Insights
Additive Manufacturing
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How service providers are adapting to the change
BIG QUESTIONS: o What are the right
investments?
o Are you delivering innovation?
o Are your business models aligned ?
o What are the new delivery models?
o SLA-aligned pricing
o Fixed-price, outcome-based & risk-reward
o Shared, upfront investments
o Labs, infrastructure, IP stacks
o IoT, DevOps, Industrie 4.0
o Global workforce, more SMEs
o Hybrid GEC-ESP models
o Increased ownership, managed services
o Project-based, end-to-end
o Partnering in new product development/introduction
o Co-ownership in sunset products, sustenance eng.
o Creating IPs for clients
Service Provider
© 2015 Information Services Group, Inc. All Rights Reserved.
Changing Paradigms of Global Engineering Outsourcing
Sudhi Sinha, VP Engineering, Building Efficiency, Johnson Controls Incorporated
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Discussion points
o Macro influences
o Emerging opportunities
o Top engineering priorities
o Blind spots for services providers
o How service providers can best help their clients
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Macro influences
o Recovering but sluggish global economy
o Shift in focus from cost savings to growth
o Non-traditional competitors enabled by technology and hyper-innovation
o Pervasive connectivity; disappearing digital divide
o Intertwined fields: research, engineering, manufacturing, service
o Globally integrated development and rising captive influence
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Top research and engineering priorities
o Significantly reduce cycle time
o Increase productivity and return on engineering
o Improve quality and reliability of products and services
o Make everything communicate; leverage IoT, big data, analytics
o Differentiate value proposition for products and services
o Globalize engineering; rapidly establish partnerships
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Impediments to growing the engineering outsourcing wallet share
o Lack of matured outsourcing models in engineering
o IT-centric approach of service providers
o Risk aversion to new business models
o Inadequate contextual understanding around products/markets/business value chains
o Rapid pace of change in organizations and market place
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Turn your customers into clients.
Study the core of your customer.
Understand the context of your customers.
Design the connect to turn your customer into a client.
1 2 3
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Understand your customer.
Get to know their:
o Products and services
o Economic model
o Definition of value for its customers
o Definition of value for its enterprise
o Strategy and focus for its business
o Competitive landscape
o Context in terms of macro-economic and technology trends
1
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Study the core of your customer.
o What is its organizational model and structure?
o What is its process model?
o What are its skills, competencies, key strengths, gaps and geographic context?
o What are its current and future outsourcing and subcontracting initiatives?
o What are its key research and engineering initiatives?
2
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Turn your customers into clients.
o Identify the synergies between your capabilities and your customers’ needs.
o Co-develop the engagement model.
o Build a development plan to better understand how you can add value.
o Co-develop a business plan.
o Create a model on how to co-exist with captives.
3
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Tap the market for Engineering Services Outsourcing.
o Enjoy better customer relationships and more profits.
o Develop a deeper and differentiated understanding of your customers.
o Turn customers into clients.
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