Engineering and Design Services
Market, Supplier, Risk and
Competitive Intelligence

Industry Outlook & Drivers

Engineering Services Industry Outlook & Drivers - Global Market Outlook

• The global engineering and design (ED) market is projected to grow at the CAGR of 1–3% to reach $1.50 Tn by 2023, primarily being driven by growing investment in transport, industrial, non-residential, and commercial infrastructure sectors in the emerging economies.

• The majority of the firms in this industry operate in their national/regional markets due to:
  ̶ Expertise in specialized engineering services
  ̶ Myriad regional regulations

• A trend of mergers and alliances of various global engineering firms has been seen to increase foothold in a single market segment over the past decade. Larger suppliers in the market are more acquisitive and look to acquire smaller suppliers.

The engineering services market is highly fragmented across all regions, with the top 30 firms accounting for around 12–14% of the market share in 2017. Several firms are indulging in a horizontal merger in the US, given the increasing demand for a ‘one-stop-shop' for engineering design services.

Buyers from the process industry, especially biotechnology, chemical, and pharmaceutical sectors, prefer engaging with service providers who provide turnkey solutions in designing advanced technology facilities.

High engineering services market maturity regions include North America, Western Europe, and Australia. Medium engineering services market maturity regions are India, China, Brazil, Chile, and Mexico. The engineering services industry outlook shows that there are new investments for industry expansion and large infrastructure investments in countries such as India, Indonesia, and China fueling ED services’ growth. Furthermore, increased outsourcing to emerging economies benefits developed economies due to the availability of a low-cost talent pool.

Engineering Services Market Outlook 

• The global ED industry is projected to grow at a CAGR of 4–5% by 2020. The demand for ED services is driven by infrastructure, residential and industrial sectors, seeking process efficiency in the construction phase.
• Asia Pacific (APAC) has become an increasingly favorable destination for outsourcing ED services among players in the European Union (EU) and the US, citing a low-cost talent pool.
• Large construction firms, especially with revenue of more than $1 Bn, increase their acquisition activities as a part of their strategy in order to integrate design and construction together.
• Global players are expanding their regional presence, especially in APAC with mergers and acquisitions (M&A). For instance, Tetra Tech's acquisition of Coffey and Aurecon's merger with AUP.

Buyers prefer engaging with integrated service providers, primarily for megaprojects, in order to reduce time in negotiations and minimal documentation. Industrial buyers with large-scale projects and multiple spending in a region can obtain cost advantages through bundling of ED services.

Engineering Design Services Market Trends

The rising collaboration between original equipment manufacturers (OEMs) and engineering service providers (ESP) will emerge as one of the key driving factors in the engineering services market. 

The globalization of research and development (R&D) activities, the increasing demand for equipping product offerings with the latest technologies, and the rising need to reduce the product life cycles and curb costs will also contribute to the market growth. 

Furthermore, the engineering services outsourcing (ESO) industry has been changing consistently along the lines of the strong focus of the customers on outsourcing different services as part of the rigorous efforts to reduce costs.

Engineering Design Services Market: Drivers and Constraints

Drivers

• Modular design: Buyers in mature markets demand quicker and less expensive construction, which stresses the need for modular designs.
• Industry consolidation/M&A: The demand for intelligent design and to solve complex construction has resulted in the expansion of service portfolios by strategic M&As.
• Sustainable design: Sustainable design is in high demand in the engineering services industry, currently leading to the rise of niche segments, such as lighting and energy design.
• Urbanization: With levels of urbanization to reach 50% in APAC and Africa, by 2020 and 2035, respectively, there will be increased consumption of products and services, encouraging various industries to develop their facilities and offices in these economies.
• Project Design Time: Increased design complexity and fast-paced projects lead to delays and cost escalations, thus encouraging the use of design tools and techniques.
• Tech intervention: The onset of Industry 4.0 has triggered the adoption of digital solutions, automation, and smart manufacturing in industries to step up production efficiency and decision-making.
• The utilization of emerging technologies by end-use sectors will push the need for companies that offer development and manufacturing, process development, and designing services, which will improve the growth opportunities of the engineering services industry.

Constraints

• Project funding: Investment in infrastructure projects remains slow due to political deadlocks, biased politics, and corruption, thereby delaying the projects as a whole.
• Recruiting and retaining staff: Skilled workers have left the industry due to the economic downturn. There is an insufficient number of skilled younger workers.
• Technology adoption: Poor adoption of BIM/VDC by suppliers and buyers has led to delays in advantageous time and cost estimation methods.
• Project execution: In the case of ED firm + GC, the GC may face difficulties in taking cost and time advantages in the construction phase.

Market Overview

• The engineering industry analysis shows that the KPIs are predictability of design, schedule variance, predictability of design cost, committed cost and unapproved.
• The major technology-related engineering industry trends include 3D laser scanning, BIM 4D/5D, augmented reality (AR), reprographics, 3D printing and construction robotics. Supplier availability and supplier market maturity are the key factors that influence decision-making. In markets where the supplier maturity is high, project owners can transfer the risk to the contractor based on experience and capabilities with confidence.
• The engineering and design services market has been seeing a radical shift in requirements from non-core and mechanical to basic competencies in specific domains. The evolving methods toward product service life are strengthening the role of ESPs in the supply chains of OEMs. 
• As the ESO services keep on evolving, ESPs are developing service delivery strategies, which incorporate significantly wider engagement portfolios and an authorization framework, spurring innovation and both top-line and bottom-line growth.

Why You Should Buy This Report

• The report on the engineering and design services market offers a detailed analysis of the regional market outlook as well as the drivers and constraints for the Americas, Europe, and APAC markets.
• Porter’s Five Forces analysis of emerging and developed markets.
• Supplier profiles and SWOT analysis of major players in the global and regional engineering services market such as Fluor Corporation, Hatch Group, and Bechtel Corporation.
• Furthermore, the report provides insights on ways to market engineering services, top engineering industry trends, best procurement practices, KPIs, and end-use industry outlook.