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