Zinnov, a global research & consulting firm has announced the findings of its latest “Engineering Analytics Report 2013”. Across the globe, the use of Engineering Analytics has aided verticals such as the automotive, aerospace, healthcare, energy and industrial verticals and has transformed the way their businesses operate, contributing to increased revenue and efficiency.
Engineering analytics refers to the derivation of meaningful insights by processing information from physical machines. It has almost limitless applications and provides a significant opportunity for OEMs, suppliers and service providers to differentiate themselves in the new connected-machine dominated technology era.
The report revealed that engineering analytics (EA) represents a large opportunity for Original Equipment Manufacturers, Tier suppliers and Service Providers. These opportunities include: New product and systems sales which is the revenue from sales of new EA products / systems to end customers to help streamline their operations, Brownfield upgrades, which are revenues from the upgrades of existing client systems to make them EA compliant and outsourcing which is revenue for service providers from the outsourcing by OEMs and Tier suppliers. As the adoption rate increases exponentially over the next 5 to 10 years the market is expected to grow at a similar fast pace.
Engineering analytics spending can be classified into three categories. Firstly Engineering spending-represents the investments made by OEMs and Tier suppliers on addressing the potential opportunity and comprises the biggest segment with nearly 60% ($7.1 billion) of overall EA spending.
Secondly, Analytics Spending, referring to investments by OEMs and end customers on analytics infrastructure such as data warehousing, software licensing, software maintenance and analytics services and consulting (USD 3.7 billion); and lastly System Integration Services which is the spending by end customers on system integration services of EA components (USD 1.8 billion).
This total spending, currently at USD 12.6 billion, is expected to increase to USD 27 billion by 2017 driven by an expanding EA market. In comparison, the study revealed that EA-related benefits are currently estimated to be close to USD 250 billion and expected to rise to nearly USD 500 billion by 2017, primarily in the area of improved efficiency.
The Industrial vertical forms the largest part of the engineering analytics spending due to large engineering and SI spending, with a total spend of USD 3.9 billion. This is followed by Energy, which spends $3.2 billion; and automotive, which spends $2.1 billion. The Healthcare and Aerospace sectors currently spend $1.8 billion and $1.7 billion, respectively. However, the largest segment of the addressable EA market is energy, which is growing at CAGR of 22.4%, followed by industrial which is growing at 18%.
Nearly 55% of the overall EA spending by OEMs, suppliers and end customers is addressable by service providers. The addressable market, currently at USD 5.4 billion, is set to increase at a CAGR of 22.4% to $14.8 billion by 2017. System development comprises over half this market, at 57%, followed by system integration at 22% and managed services at 21%.
Product engineering service related activities within system development forms the largest part of the addressable market. Growth will be driven predominantly due to increased spending by OEMs and Tier-I suppliers as well as increased adoption by end customers.
Speaking about the report, Sidhant Rastogi, Director. Zinnov Management Consulting, said, “The potential application of engineering analytics is almost boundless and will expand even further as technology evolves. The advent of the era of personalization – one-size-fits-all approach to customizing products for individual customers, and growing focus on energy efficiency are the key megatrends fueling growth in this space.
“Further, technology advancements such as in-memory computing, cloud, big-data, increased sensor adoption and improved bandwidth are important drivers. As organizations become aware of the benefits of engineering analytics –improved customer understanding, identifying new opportunities, reduced time-to-market and efficiency, service providers now have a great opportunity to move up the value chain of engagement with their customers.”
