Product Engineering Services Market Intelligence

Industry Outlook & Drivers

Global Market Outlook on Product Engineering Services

• Software product engineering includes various phases, starting from planning, developing, testing, deployment, to support and maintenance of the software based on the requirements of the customer/client
• It is also referred to as ‘Software Product Development Services' , 'Application Development and Maintenance Services' or ‘Product Engineering' by the clients
• The product engineering services market size is expected to grow between 9.8–10 percent (CAGR) by 2022, from $810 billion in 2018 to $1,185 billion in 2022

• The major trends which drive the growth of software product engineering is:  – Reducing the time taken for development helps the vendor to achieve  quicker delivery cycles of the product. This accelerates the ‘time -to- market' criteria of the product among the vendors – Industries have started adopting IoT to reduce costs, and this is achieved  by manufacturing various devices, thereby providing better customer  experience
• Major end-users for software product engineering services are:  Automobiles, Independent Software Vendors, Healthcare, Telecom,  Educational  Institutions, BFSI, Aerospace and Others Industries
• Software product engineering service is more concentrated in the US as  they spend more in R&D, followed by India, China and few countries like  Russia, Ukraine, Romania (Central and Eastern Europe)

Supplier Evaluation Criteria

• Software product engineering or software product development services is a highly competitive and fragmented market
• Though there are many small and medium players, big players TCS, Cognizant play a dominant role due to their technical capabilities
• The service providers are evaluated based on their technological capability, employee availability with desired skills

Cost Break-up

• The below chart represents the approximated cost break-up for developing a software product as a whole
• When going for complete cloud, one would need to get a person who communicates between the cloud and the team
• The cloud/hybrid reduces the storage cost of the hardware from an infrastructure-cost related standpoint
• The current trend is more towards moving applications and data to the cloud based deployment model as it can scale up/down according to the system's needs. This will reduce the overall cost of the system as no upfront costs for server acquisitions are needed
• Cloud-based deployments are becoming feasible, secure and reliable because of established providers like Amazon, Google and Microsoft 
• Banks and financial institutions still prefer to keep their systems deployed on-premise because of certain security considerations of the business as well as regulatory requirements. Moreover, on-premise solutions don’t have the disadvantage of a vendor lock-in

Drivers and Constraints

The analyst report product engineering services show that the key drivers and constraints are: 

Drivers

ISV

• ISVs are those who are specialized in developing and selling the software designed for masses. Earlier, the market for ISVs were not found attractive by larger service providers as their competencies were constrained within the application development methodology. In recent times, ISVs prefer ‘as-a-service’, so they require the service provider to invest in the following:

           –Reuse, and automation of the code

           –Development of knowledge and resolutions to migrate the current product to SaaS

           –Reduce the time-to-market by automating the development, testing and delivery processes

Demand for IoT

• With more and more devices, services, and platforms getting connected, data gets transferred through the Internet. Hence, the growth of IoT is expected hit the $1 trillion mark by 2019
• Major service providers have expanded their services and have also created a separate IoT engineering portfolio

Test Automation

• Agile development methodologies have necessitated the shift toward leveraging automation for testing activities
• This has given rise to low code or even no-code functional and system testing, greatly reducing time to production

Constraints

• As majority of the clients opt for outsourcing, there is a possibility that the confidentiality of product development may be lost, which affects the uniqueness of the product 
• Apart from this, there are common constraints found within the service providers, which are as below:
• Lack of understanding and a gap in communication about the requirements of the product between the designer and the developer
• Failure to determine the availability of technical features and functionalities before the product development phase may lead to product failure 
• While outsourcing the service to a vendor from a different location, partnership and communication between the client and the service provider becomes challenging

Summary

 The software product engineering services are often also known as software product development services, product engineering, or application development and maintenance services. The global product engineering services market size is $800 billion and experts predict the CAGR of the market to be about 10 percent by 2022. The product engineering service market is expected to be valued at $ 1078 in 2021 and $1185 billion by 2022. The software product engineering services consist of major phases. The phases are developing, support, planning, testing, maintenance, and deployment. According to cost break up, the product development phase is at the top as it accounts for 30 percent of the cost.

 Product strategy and planning & maintenance and support phases account for 20 percent of the cost each. The product design phase accounts for 17 percent while the product quality assurance or testing accounts for 12 percent. The least cost is accounted for by the product deployment phase. The top global suppliers of the product engineering services market include Luxoft, Accenture, Wipro, Alten Calsoft Labs, HCL, TCS, Altran, Pactera, EPAM, and Cognizant. The market is highly fragmented and competitive. The big players account for the majority of the market share because of the technical capabilities of each of the software product engineering services company.

 The contract period can be anywhere between 1 year to 10 years. This is primarily based on the particular requirements of the client. One of the major trends in the software product engineering market is the high adoption rate of IoT. This has helped considerably reduce costs among other benefits. The growth of software product engineering market has been due to the focus on faster product development. The major end-user industries include BFSI, automobiles, telecom, independent software vendors, aerospace, healthcare, and educational institutions. Due to higher investment in R&D, the US is leading in the market. After the US, India, China, Ukraine, Russia, and Romania have a high market share.

The latest trends indicate an increasing interest in the adoption of a cloud-based system in the market as it enables easy scaling up or down depending on the requirements. When a cloud system or a hybrid system is used, storage costs are reduced by a significant amount. Google, Amazon, and Microsoft are the providers who have given rise to cloud-based deployments. Financial institutions such as banks prefer on-premise deployment because of security concerns and regulations. One of the benefits of on-premise systems for banking institutions is there no vendor lock-in.

 There are certain drivers and constraints that can boost or hinder the growth of the market respectively. Production time has reduced due to development methods and this has boosted the growth of the market. The demand for IoT has accelerated the market too. ISVs are also drivers of the product engineering services market. Due to an increase in outsourcing, product uniqueness might vanish and this can act as a constraint. Product failure is inevitable in cases where the availability of the product’s key features and functions are not determined before the development phase. Lack of communication between developer and designer can pose a problem too.