In 2024, software and internet companies faced a volatile landscape marked by persistent economic uncertainty, inflationary pressures, and an increasingly complex regulatory environment. Yet, amid these headwinds, firms remained committed to future-focused investments, particularly in generative AI, real-time data systems, cloud-native infrastructures, and secure platform engineering. The rise of multimodal AI, zero-trust architectures, and sustainable computing reflects the industry’s enduring emphasis on innovation and resilience. This report provides an in-depth analysis of Engineering Research and Development (ER&D) spending and outsourcing strategies among the top 100 global software and internet firms. It offers insights into how companies are allocating budgets, scaling innovation, and leveraging external partnerships to advance product and platform development. By examining trends across company size, geography, and key verticals, this research identifies strategic patterns in spend intensity, outsourcing behaviors, and modernization priorities. Additionally, it offers insights into future growth trajectories, emerging trends, and their strategic implications for providers, enabling them to navigate the shifting market landscape and seize new opportunities.

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

In the product engineering domain, software remains the largest expenditure, growing despite economic slowdowns, geopolitical tensions, and talent shortages. Key drivers include a shift toward platform-based business models, increased adoption of AI- / gen AI-augmented secure products, a focus on sustainability, and improved customer and developer experiences. Enterprises now seek strategic partners that can offer not just engineering talent, but also cost savings, speed, and innovation. In this report, we delve into the Software Product Engineering Services (SPES) market, analyzing its size, growth dynamics, and outsourcing trends across key verticals. The report sheds light on SPES spending patterns, growth rates, and the tailwinds and headwinds shaping its trajectory. Additionally, it provides insights into the future growth outlook, emerging themes, and their implications for providers, helping them navigate the evolving landscape and capitalize on new opportunities. Scope Industry: SPES Geography: global Contents In this report, we examine: SPES market size, growth, spending, and growth rate across verticals Tailwinds and headwinds to future growth SPES outsourcing market size, growth, and trends across verticals Growth outlook for SPES and prominent themes Implications for providers Membership(s) Software Product Engineering Services Sourcing and Vendor Management

The automotive industry is significantly transitioning due to shifting consumer expectations. Vehicles are evolving from being mere utilities to offering connected features, advanced safety, and personalized experiences. This shift has driven OEMs to rethink their approach to vehicle engineering and revenue channels and led to the emergence of Software-defined Vehicles (SDVs), where software acts as the vehicle's central control unit, controlling functionalities, analyzing data, and providing an enriched user experience. While OEMs are making strong inroads in capitalizing on the demand drivers and introducing SDV features, developing SDVs is a daunting task faced with challenges such as software development complexity, dynamic regulatory environment, and research and development ramp-up and monetization. All these challenges can lead OEMs to stray away from their course of action, incur cost overruns, and improperly prioritize applications from a monetization standpoint. In this viewpoint, we provide an overview of the North American SDV market and propose a framework that OEMs can utilize to assess their success in navigating these challenges, building SDV competencies, and monetizing their offerings. The framework will help them understand their current state of maturity and identify areas that they need to actively focus on. Scope Industry: automotive Geography: North America Contents In this viewpoint, we: Define SDVs and how they differ from traditional vehicles Give an overview of the North American SDV market dynamics Explain the challenges faced by OEMs in developing SDVs Provide a framework on how OEMs can assess their maturity in developing SDVs and driving market success Role of providers in supporting OEMs in their SDV journey Memberships 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

In the product engineering domain, software remains the largest expenditure, continuing its upward momentum in the face of recessionary pressures, geopolitical conflicts, talent shortages, and delayed enterprise decision-making. Despite these macroeconomic challenges, several key factors are driving software R&D’s evolution. These include a shift toward platform-based business models, AI- / gen AI-augmented secure products’ increased adoption, a strong focus on sustainability, and a heightened emphasis on customer and developer experiences. As enterprises navigate these transformative trends amid economic uncertainty, their expectations from providers are evolving. They now seek strategic partners that can offer not just engineering talent, but also cost savings, speed, and innovation. This report, the fifth edition of Everest Group’s Software Product Engineering Services PEAK Matrix® Assessment, evaluates 37 engineering service providers, positioning them on the PEAK Matrix&® framework and offering enterprise sourcing considerations. Scope Industry: Software Product Engineering Services (SPES) Geography: global The study is based on RFI responses from providers, interactions with their SPES leadership, client reference checks, and an ongoing analysis of the SPES market Contents In this report, we examine: Everest Group’s PEAK Matrix® evaluation of SPES providers The characteristics of Leaders, Major Contenders, and Aspirants Providers’ key strengths and limitations, market impact, and vision and capabilities Membership(s) Software Product Engineering Services 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

Enterprises are increasingly depending on providers with rapid innovation in software product engineering. Consequently, providers are developing offerings that can help them play a critical role across the software 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 software product engineering, it is important to understand how satisfied enterprises in the domain are with the providers they engage with. Everest Group’s Software Product Engineering Services Enterprise Pulse study analyzes enterprises’ expectations and satisfaction levels with their providers. The findings in this report are based on insights from 234 unique interviews with enterprises nominated as references by more than 40 global software product engineering providers assessed in this report. The study summarizes the enterprises’ views on their providers’ capabilities across the software product engineering services value chain. The report also outlines enterprises’ expectations from engineering providers and captures quantitative and qualitative insights across multiple assessment parameters. Scope Software product engineering services All industries and geographies Contents This report studies Enterprises’ satisfaction levels with their providers across geographies, key engineering domains, and key engagement parameters Enterprises’ expectations from and perspectives on individual providers Membership(s) Software Product Engineering Services Sourcing and Vendor Management

As the immersive experience landscape evolves from its initial stages, it transforms both consumer and enterprise digital experiences. Despite its early development stage, enterprises recognize immersive experience services’ value and plan to invest in this space. The surge in consumer demand for immersive and captivating experiences presents numerous opportunities for enterprises across various sectors, thereby driving the immersive experience market. Immersive marketing, customer experiences, employee training, live virtual events, and digital asset trading are some potential immersive technology application areas. Advances in Virtual Reality (VR), Augmented Reality (AR), and Mixed Reality (MR) technologies are propelling this market growth, offering users and enterprises immersive content experiences. By integrating immersive technologies across BFSI, manufacturing, retail, education, gaming, healthcare, hi-tech, and entertainment sectors, enterprises can reshape consumer behaviors and create new opportunities for engaging customer experiences. This market expansion is also due to rising investments in immersive technology and Web 3.0, highlighting immersive experience services’ promising future across industries. This compendium provides accurate, comprehensive, and fact-based snapshots of 16 immersive experience service providers’ capabilities. Each profile offers a detailed overview of the provider’s vision, solutions, partnerships, and investments. The report will enable buyers to select the best-fit provider for their needs and empower providers to benchmark themselves against their competition. Scope All industries and geographies This assessment is based on Everest Group’s annual RFI process for the calendar year 2024, interactions with leading technology providers, client reference checks, and an ongoing analysis of the immersive experience services market Contents In this report, we: Examine the immersive experience services landscape Categorize providers as Leaders, Major Contenders, and Aspirants Compare providers’ key strengths and limitations Membership(s) Digital Services Engineering Research and Development Marketing and Interactive Experience Software Product Engineering Services Sourcing and Vendor Management

In the product engineering space, software remains the largest expense, although its growth has slowed recently. This deceleration is largely due to economic headwinds, such as decreased consumer confidence and tighter budgets, which have made enterprises and providers more cautious about investing in new technologies. Additionally, geopolitical conflicts, talent shortages, and delayed decision-making within enterprises have further contributed to this trend. Despite these challenges, the software R&D landscape continues to evolve, driven by several key trends. The increasing adoption of AI and generative AI is transforming product development, while a growing emphasis on sustainability is shaping both product design and delivery. Additionally, providers are focusing on enhancing the customer and developer experience to drive adoption and loyalty. To navigate this evolving landscape, businesses are also exploring platform-based business models to create scalable and flexible solutions. This compendium provides comprehensive and fact-based snapshots of 43 software product engineering service providers. Each profile offers a detailed overview of the provider’s software product engineering services, solutions offered, strategic partnerships and investments, market performance, and customer case studies. Scope Industry: software product engineering Geography: global This study is based on RFI responses from providers, interactions with their software product engineering services leadership, client reference checks, and Everest Group’s ongoing analysis of the software product engineering services market Contents In this report, we examine: The software product engineering services business, including vision and strategy, revenue and YoY growth, and revenue composition across geographies, industry segments, value chain functions, and buyer sizes Providers’ case studies and proprietary solutions Provider’s partnerships and investments in the software product engineering domain Software Product Engineering Services Outsourcing Excellence