Digital investments to account for a third of overall ERD spend by 2022: Zinnov

Investments in digital engineering are expected to increase to over one-third of total engineering and research and development (ERD) spend by 2022, as digital technologies disrupt the traditional ERD models, according to research firm Zinnov.

The emergence of new technologies such as machine learning, artificial intelligence, blockchain, 3D printing, AR/VR, IoT, and so on, is creating newer avenues to generate alternative revenue streams as well as modernize the product development life cycle, Zinnov said.

In a research report last year, Zinnov had pegged the the total corporate engineering and R&D spend at excess of USD 1 trillion. Enterprises headquartered in the United States contributed about 45 percent of the global R&D spend led by companies like Amazon, Alphabet, Microsoft, Intel, and MERCK & Co., while European headquartered enterprises accounted for about 29 percent of the global R&D spend in 2017.

In 2016, global in-house centres of foreign companies, set up primarily for ERD, made up a USD 23.1 billion industry in India.

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At present, about 20 percent of ERD spend is digital, the research firm said in its latest report.

“While traditional ER&D spenders try to stave off competition from Digital Natives, they can look to leverage Service Provider capabilities to ‘manage the old,’ ‘renew the old,’ and ‘build the new.’”said Pari Natarajan, CEO, Zinnov.

“Service Providers who focus on embedding digital technologies with digital outcomes and build deep capabilities to drive change across enterprise-level architecture will succeed,” he added.

The research firm recognised that enabling organization-wide digital transformation is a herculean task, and large organisations get impacted the most when they try to make these changes.

However, the fact that large companies face these challenges means that there are sizeable opportunities for service providers because of the scale and speed at which they can help large companies.

Service providers have the opportunity to carve out opportunities associated with end-to-end ownership of legacy products, end-of-life products, IP partnerships with revenue sharing, and R&D centers with legacy skill sets.

They can also help in modernizing their product development life cycle to reduce time to market and building new and connected products by leveraging new age technologies such as IoT, AI, ML, RPA, etc.moneycontrol