In 2024, enterprises faced economic headwinds from recessionary pressures, inflation, high interest rates, and geopolitical tensions impacting supply chains. Despite these challenges, organizations showed resilience by focusing on cost control, value realization, and technology adoption to enhance productivity. Key Engineering and R&D (ER&D) growth drivers included IoT, connected ecosystems, AI augmentation, and the demand for intelligent manufacturing and software-defined solutions. There were indications of a market recovery toward the end of 2024 due to the reduction in interest rates and the AI boom. The surge in Global Capability Centers (GCCs) and their shift from backend offices to R&D hubs also contributed to the ER&D growth momentum. In this report, we examine key ER&D verticals and horizontal themes, such as the rise of GCCs, AI, and manufacturing, that will influence enterprise investment priorities in 2025. Scope Industry: ER&D Geography: global Contents This research presents Everest Group’s view on key macroeconomic and technology trends shaping spending and outsourcing in the ER&D industry in 2025. Membership(s) Engineering Research and Development Sourcing and Vendor Management

Enterprises are increasingly relying on providers due to the rapid pace of innovation in engineering. Capitalizing on this reliance, providers are developing offerings that can help them play a vital role in the product engineering value chain by filling capability gaps, augmenting staff, reducing time-to-market, and bringing in new technologies. Given the vital role that providers are playing in product engineering, it is important to understand how satisfied engineering enterprises are with the providers they engage with. Everest Group’s Engineering Research and Development Services Enterprise Pulse study analyzes enterprises’ expectations and satisfaction levels vis-à-vis providers. The findings in this report are based on insights from 140 unique interviews with enterprises that were nominated as references by 38 global engineering service providers assessed in this report. The study summarizes enterprises’ views on their providers’ capabilities across the key engineering domains, including ACES automotive engineering, connected product and medical devices engineering, digital twin, Industry 4.0 engineering, and 5G engineering. The report also captures quantitative and qualitative insights across multiple assessment parameters. Scope Research area: engineering services All industries and geographies Contents This report studies: Engineering enterprises’ overall satisfaction with their providers Enterprises’ satisfaction levels across geographies and key engineering domains Enterprises’ expectations from providers Membership(s) Engineering Research and Development Sourcing and Vendor Management

Economic uncertainties influenced global Engineering Research and Development (ER&D) spending in 2023, with enterprises prioritizing caution and cost control over rapid innovation. Despite the headwinds, enterprises spent on themes such as AI integration, generative AI exploration, next-generation technologies, and green initiatives. Heightened customer demand for intelligent, sustainable, and interconnected products drove this shift, motivating enterprises to allocate resources toward R&D activities in new areas. In this research, we analyze the global ER&D market, focusing on the top 200 enterprises with the highest ER&D spend across 10 industries. Our study reveals that global business spending on ER&D activities increased by 7.14% in 2023, reaching US$1.5 trillion, with the enterprises featured in this report accounting for 51% of the spend. Scope Geography: global Industries: Internet Service Vendor (ISV) and internet, automotive, consumer electronics, semiconductors, industrial products, telecom equipment providers, aerospace and defense, medical devices, telecom service providers, and compute and storage Contents In this report, we examine: ER&D trends and priorities for the top 200 enterprises across 10 industries ER&D spend growth, enterprises’ ER&D spend intensity (ER&D spend as a percentage of revenue), and key investments and initiatives Membership(s) Engineering Research and Development Software Product Engineering Services Sourcing and Vendor Management

As we step into 2024, global macroeconomic stability is shrouded in great uncertainty. Ongoing macroeconomic events, trade wars, and an economic slowdown are impacting businesses worldwide, compelling them to approach business growth in the upcoming year with caution. Most organizations are striving to minimize cost/price pressures in response to growing inflationary trends. While the demand and supply gap for conventional engineering skills has eased, new advances in AI have once again resulted in a scarcity of skilled talent. More importantly, there is a shift caused by multiple industries looking to explore and implement generative AI across their value chain, signaling a substantial change in traditional talent requirements. Today, the challenge lies in navigating these uncertain times while addressing the talent gap. This report offers insights into how leading global enterprises have been impacted in 2023 and outlines their strategies for fostering innovation with resilience in these uncertain times. Scope All industries and geographies Services: engineering Contents In this report, we examine: Identify top business challenges and vital business model changes in 2024 Study the outlook and priorities for 2024 Explore key themes that define the enterprise software industry Examine changes to provider portfolios and key provider-related challenges and priorities Membership(s) Engineering Research and Development Software Product Engineering Services Outsourcing Excellence

Recessionary concerns exerted a significant influence on enterprise decision-making in 2023, driven by factors such as depleting pandemic savings, high-interest rates, global demand slowdown, rising oil prices, and ongoing geopolitical uncertainties. Despite these challenges, enterprises displayed adaptability and strategic responsiveness to emerging trends while actively pursuing profitability and optimizing costs. As a result, global Engineering Research and Development (ER&D) spending continued its upward trajectory. At the same time, as enterprises prioritized profitability and streamlined discretionary spending, ER&D services outsourcing grew at a slower-than-expected pace. In this research, we examine the key macroeconomic and technology trends that will shape ER&D spending and outsourcing in 2024. Scope Industry: ER&D Geography: global Contents This research presents Everest Group’s view on the key macroeconomic and technology trends that will shape ER&D spending and outsourcing in 2024. Membership(s) Engineering Research and Development Software Product Engineering Services Sourcing and Vendor Management  

Enterprises influenced the 2022 global Engineering and Research and Development (ER&D) spending by adopting a cautious strategy amid economic uncertainties. Despite this approach, new investment themes emerged. Heightened customer demand for intelligent, sustainable, and interconnected products drove this shift, motivating enterprises to allocate resources toward R&D activities in these innovative areas. In this research, we analyze the global ER&D market, focusing on the top 200 enterprises with the highest ER&D spend across 10 industry verticals. Our study reveals that global business spending on ER&D activities increased by 5.1% in 2020, reaching US$1.4 trillion, with the enterprises featured in this report accounting for 49% of this spend. Our research examines enterprises’ key investment areas, ER&D spend growth, and spend intensity (ER&D spend as a percentage of revenue). We also capture prominent themes driving growth in the ER&D space across industries. Furthermore, this report outlines the evolving enterprise ER&D priorities and projects the future growth outlook. Scope Geography: global Industries: software products, automotive, aerospace and defense, compute and storage, consumer electronics, industrial products, medical devices semiconductors, telecom equipment providers, and telecom service providers Contents In this report, we examine: ER&D trends and priorities for the top 200 enterprises across 10 industries ER&D spend growth, enterprises’ ER&D spend intensity, and key investments and initiatives Membership (s) Engineering Research and Development Software Product Engineering Services

Throughout 2022, headlines concerning the Ukraine-Russia conflict, wage inflation, talent shortages, and the possibility of an impending economic slowdown remained prevalent. Despite these challenges, enterprises demonstrated resilience and increased their expenditures on Engineering Research and Development (ER&D) in areas such as platformization, 5G, digital engineering, and Industry 4.0. As a result, there was a gradual but steady growth in global ER&D spend. Furthermore, ER&D outsourcing continued to grow, albeit at a slower rate than in 2021, as recessionary headwinds persisted in the latter half of 2022. The need for specialized talent capable of working on rapidly evolving technologies and the drive for shorter innovation cycles and faster time-to-market remained vital ER&D spending growth drivers. As enterprises and providers adjust to the anticipated economic slowdown in 2023, we examine the key developments expected in ER&D this year. Scope Industry: ER&D Geography: global Contents In this report, Everest Group analyzes the key macroeconomic factors that are expected to impact both spending and outsourcing in the ER&D industry throughout 2023. Membership(s) Engineering Services Sourcing and Vendor Management

Global Engineering and R&D (ER&D) spending rebounded strongly in 2021 after the COVID-19-induced decline in 2020, with enterprises investing heavily in softwarization and the embedding of digital technologies into their products to meet customer demand for smart and connected products. This shift in consumer demand toward digital has compelled enterprises to quickly repivot their ER&D investments and product offerings toward software, trying to retain a competitive edge through time-to-market. In this research, we present a fact-based view of the global ER&D market, with a focus on the top 200 enterprises with the highest ER&D spend across 10 industry verticals. Our study found that the global business spend on ER&D activities increased by 13.8% in 2020 to reach US$1.33 trillion, and the enterprises featured in this report accounted for 47% of this spend. Our research looks at the enterprises’ key investment areas, ER&D spend growth, and spend intensity (ER&D spend as a percentage of revenue). We also capture prominent themes driving growth in the ER&D space, including metaverse, cybersecurity, AI-ML-based applications, shared mobility, low-code-no-code, multi-cloud capabilities, 5G, and connected devices. Further, this report outlines the evolving enterprise ER&D priorities and projects the future growth outlook. Scope Research area: engineering services Geography: global Industries covered: software products, automotive, aerospace & defense, compute & storage, consumer electronics, industrial products, medical devices semiconductors, telecom equipment providers, and telecom service providers Contents This report features: ER&D trends and priorities for the top 200 enterprises across 10 industries Details of ER&D spend growth, ER&D spend intensity for all enterprises, key investments, and initiatives by industry Membership(s) Engineering Services Software Product Engineering Services Digital Engineering Services Sourcing and Vendor Management

Software has emerged as the most critical component in products today. The lines of code in products have increased to unprecedented levels, while technologies such as Artificial Intelligence (AI) / Machine Learning (ML), Internet of Things (IoT), 5G, and Augmented Reality (AR) / Virtual Reality (VR) are being embedded into products to make them connected, smart, and autonomous. The growing significance of these technologies has led enterprises to embark on a journey of softwarization, which refers to the increasing share of software and digital technologies in physical products that add smart, connected, and autonomous features and convert the products into digital products. This conversion of physical products into digital products via softwarization enables enterprises to monitor, control, optimize, and automate their products and processes. The twin levers of software and connectivity are also increasingly critical for enterprises developing new, as-a-service revenue models. This research dives deeper into the phenomenon of softwarization to explore use cases across industries and the common pitfalls that engineering enterprises should watch out for as they embark and continue on their softwarization journeys. Scope Industry: All Geography: global Contents This research presents Everest Group’s view on softwarization and examines the following: Drivers of softwarization Current state of digital product engineering maturity Key enterprises challenges in softwarization A framework for enterprises to harness the full potential of digital products The role and relevance of service providers Membership(s) Engineering Services Sourcing and Vendor Management

The rapid pace of innovation in engineering has made enterprises increasingly dependent on service providers. Consequently, vendors are developing offerings that can help them play a critical role in the product engineering value chain by filling capability gaps, augmenting staff, reducing time-to-market, and bringing in new technologies. Given the vital role that vendors are playing in product engineering, it is important to understand how satisfied engineering enterprises are with the service providers they engage with. Everest Group’s Engineering Services Enterprise Pulse study analyzes enterprise expectations and satisfaction levels with their service providers. The findings in this report are based on insights from 134 unique interviews with enterprises that were nominated as references by 33 global engineering service providers assessed in this report. The study summarizes the enterprises’ views on their service providers’ capabilities across key engineering domains, including 5G engineering, Autonomous, Connected, Electric, and Shared (ACES) automotive engineering, connected medical devices engineering, digital product engineering, and digital twin engineering. The report also lays out enterprises’ expectations from engineering vendors and captures quantitative and qualitative insights across multiple assessment parameters and enterprise perspectives on individual service providers. Scope Research area: engineering services All industries and geographies Contents This report studies: Engineering enterprises’ overall satisfaction with their service providers Enterprises’ satisfaction levels across geographies and key engineering domains Enterprise perspectives on individual service providers Enterprise expectations from service providers Membership(s) Engineering Services Sourcing and Vendor Management