By Sampath Kumar. The field of engineering is changing rapidly with the convergence of emerging technologies, connectivity via the Internet of Things, automation and data. Join our conversation about how engineering and manufacturing enterprises are engaging with engineering services providers and how can you prepare to exploit the opportunities.

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The Rapid Convergence of IT
and Engineering
Sampath
Kumar,
Partner,
ISG

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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

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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 MaintenanceSmart 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

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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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