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Engineering Services Meet IoT

Enterprises these days are seeking specialized services to transform their operating processes and business models. As the current requirement demands optimizing the productivity, most of the enterprises are asking for reduced operational expenditure giving a rise to the need for real-time actionable insights for advanced decisions. This gap is being filled by the adoption of Internet of Things (IoT), as a result of which, the enterprises are upgrading their legacy infrastructure to IoT infrastructure providing new opportunities for infrastructure engineering service providers.

Engineering services for IoT include product conceptualization, designing, prototyping, and development along with testing, integration and support services. It also includes engineering services for connected devices, software, associated cloud and platforms, User Interface (UI) design, and security. My recent MarketsandMarkets study on IoT engineering services forecasts the market to grow from $8.37 billion in 2016 to $29.53 billion by 2022, at a Compound Annual Growth Rate (CAGR) of 24.5% during the forecast period (2017-2022).

To utilize the most of IoT engineering services, major vendors are adopting different organic and inorganic strategies such as partnerships, acquisitions, and product developments.

These strategies are helping service vendors to expand their reach and explore new business avenues. Some of the traditional engineering service providers such as eInfochips, Harman International, and Altran are transforming into IoT engineering service providers. Majority of engineering service providers, we had discussion with, are estimating a revenue contribution of 20 to 30% from IoT engineering services which is likely to cross 60% by 2022. Therefore, we anticipate a huge growth for IoT engineering services in the next five years—good news for electronics OEMs looking to forge new partnerships.

As per my findings, North America is the leading region in IoT engineering services market currently where US is the major contributor due to strict regulatory standards, advanced IT infrastructure, presence of many enterprises, and availability of proficient technical expertise. According to the Industrial Research Institute (IRI) study, the US accounted for about 26.4% of global R&D spending in 2016. The institute also estimated the growth of R&D spend in the region at a significant rate of 3.4% over the spending in 2015.

In addition to that, Asia-Pacific will be considered as the most lucrative region for investment due to presence of large number of service providers in the region. Also, smart city initiatives are being adopted in India, China, South Korea, and south-east Asian region and therefore, there is a huge requirement for advanced infrastructure. China is becoming the global leader in building out the fully functional IoT prototype. IoT adoption in China has started to ease the processes and increase the efficiency in various sectors, such as energy management, manufacturing, healthcare, smart buildings, connected cars, and connected wearable devices. In addition, companies in Singapore are working toward promoting Industry 4.0 initiative, thereby integrating autonomous robots, big data and analytics, IoT, augmented reality, additive manufacturing, and horizontal and vertical system integration.

The IoT engineering services market is expected to flourish in the next five years owing to huge opportunities in the untapped developing regions. However, we anticipate that high capital expenditure involved for new IoT infrastructure and varying IoT protocols and standards may affect the adoption. Nevertheless, availability of micro-services will increase the adoption of IoT engineering services in small and medium enterprises and will neutralize the effect of barriers.

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