As the world becomes increasingly aware of environmental issues, sustainability in software development has emerged as a critical area of focus. While traditionally associated with physical products and processes, sustainability now extends to the digital realm, with the software sector playing a pivotal role in reducing carbon emissions. 

The technology industry holds a unique position to drive this change. It is imperative for developers, businesses, and consumers to understand the environmental impact of software development and adopt greener practices. 

Reach out to discuss this topic in depth. 

How software affects sustainability

Sustainability in software was often overlooked, as many assumed it didn’t pose environmental challenges like hardware, however, this view has shifted. Inefficient development practices and the hardware demands driven by software significantly increase energy consumption and carbon emissions.

With the rise of cloud computing, edge technologies, and the Internet of Things (IoT), software’s environmental impact has grown. While innovations like serverless computing and containerization improves efficiency, they also contribute to higher energy usage and e-waste.

While most senior Information Technology (IT) decision-makers acknowledge Environmental, Social, and Governance (ESG)and sustainability as top priorities, many enterprises are still in the midst of their digital transformation journeys or have yet to begin. These organizations are heavily investing in digital initiatives but continue to struggle with technical debt.

Sustainability, however, offers a promising opportunity. It not only accelerates digitalization but also aligns seamlessly with enterprise-wide optimization efforts. As we move toward an information-driven economy that leverages data for smarter decisions, businesses have a unique chance to embed sustainability into their digital strategies, enhancing operational efficiency, while staying competitive.

A central focus of sustainability efforts is reducing the storage and computing footprint of software. By optimizing resource consumption, companies strive to lower energy usage and minimize the environmental impact of their digital operations.

Green software engineering – a step toward sustainability

Green software engineering is centered on building software with sustainability as its core principle. It aims to minimize the environmental impact of software by reducing energy usage, resource consumption, and carbon emissions across the software lifecycle.

Key features include:

• Optimized energy usage: Focuses on writing energy-efficient code, minimizing the energy consumed by software during execution. This includes using algorithms and approaches that reduce computational power and processing requirements
  
• Reduced resource consumption: Designs software to use fewer hardware resources (Central Processing Unit (CPU), memory, storage) while maintaining optimal performance, promoting efficient resource utilization without over-provisioning
  
• Lowered environmental impact: Prioritizes reducing carbon emissions through the use of renewable energy-powered infrastructure, optimized data centers, and energy-efficient hardware. Leading companies like Google and Microsoft demonstrate these eco-friendly practices, showing the feasibility of greener software solutions.
  

Languages and frameworks like Go, Rust, and Node.js have gained significant popularity among developers in recent years, thanks to their focus on energy efficiency and sustainability. These technologies are designed to minimize resource consumption, making them more eco-friendly choices for modern software development.

To help developers make informed decisions, comparative benchmarks also allows them to evaluate the energy consumption of various technologies. This guides the selection of the most sustainable options based on specific project needs.

However, adopting these greener technologies comes with its challenges:

• System compatibility: Integrating new frameworks with existing systems can be complex
  
• Learning curve: Developers may need time to master these newer technologies, which may differ from traditional languages
  
• Performance trade-offs: Optimizing for sustainability can sometimes impact performance, requiring careful balance

Overcoming these challenges will require collaboration between developers, researchers, and industry stakeholders to find effective solutions that both reduce environmental impact and maintain high performance.

Challenges to adoption

Despite advancements in sustainable software engineering, several challenges hinder its widespread adoption, particularly among small and medium-sized enterprises (SMEs). The key barriers include:

• Limited awareness and resources: Many organizations, especially SMEs, lack the necessary awareness, expertise, and financial resources to prioritize sustainability in software development
  
• Complexity in measuring environmental impact: Evaluating energy consumption and emissions requires advanced lifecycle assessment tools and a deep understanding of hardware, cloud infrastructure, and software architecture
  
• Absence of standardized frameworks: The lack of universal standards creates inconsistencies, making it harder to ensure compliance with environmental regulations, measure impact, and achieve system interoperability
  
• Trade-offs between performance and sustainability: Optimizing for sustainability often involves balancing energy efficiency with performance and user experience, which can be challenging for developers
  
• Integration with existing systems: Embedding sustainability into current workflows and systems demands a significant mindset shift, along with technical adjustments and training to adopt newer, eco-friendly technologies

Opportunity for service providers

As enterprises increasingly prioritize sustainability, service providers have a unique opportunity to lead and support this transformation by delivering solutions that align with environmental goals while enhancing operational efficiency. Here are key areas where service providers can make a meaningful impact:

• Develop green software solutions: Create energy-efficient software applications that reduce carbon emissions and resource usage, meeting the growing demand for sustainable technology from environmentally conscious enterprises
  
• Provide consulting and integration services: Take proactive initiative with clients to embed sustainable software architectures, optimizing cloud resource usage, and embedding energy-efficient practices throughout the software development lifecycle
  
• Develop sophisticated lifecycle assessment tools: Offer artificial intelligence (AI)-enabled tools that enable comprehensive auditing and measurement of a software product’s environmental impact, assessing energy consumption, resource utilization, and carbon emissions throughout its entire lifecycle, from design to disposal
  
• Build training and certification programs: Develop specialized training modules and certifications to equip developers with expertise in green coding, carbon efficiency, and sustainable development practices
  

By focusing on these opportunities, service providers can differentiate themselves in a competitive market, drive innovation in sustainability, and position themselves as essential partners in achieving their clients’ ESG objectives.

If you found this blog interesting, check out our blog focusing on Getting Digital Product Verification And Validation Right Through “As-a-Service” Models | Blog – Everest Group, which delves deeper into another subject focused on by the Engineering & Information Tech service line.

We are actively tracking the evolution of sustainability and its impact on the future of all sectors. To discuss the latest trends and their implications for brands, technology vendors, and service providers alike, feel free to reach out to Manjul K (manjul.k@everestgrp.com), Mayank Maria (mayank.maria@everestgrp.com) and Kishore BS (kishore.bs@everestgrp.com).

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.

• Key Verticals, Value Chain Elements, and Nearshore Delivery Software Product Engineering Services PEAK Matrix® Assessment 2024

  

  What is in this PEAK Matrix® Report

  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

  READ ON

What is the PEAK Matrix®?

The PEAK Matrix® provides an objective, data-driven assessment of service and technology providers based on their overall capability and market impact across different global services markets, classifying them into three categories: Leaders, Major Contenders, and Aspirants.

LEARN MORE ABOUT Top Service Providers

Despite a  global economic slowdown, the APAC geography has proven its resilience in the face of market difficulty. As a result, it has become a strong area of interest across both enterprises and service providers, particularly for the opportunities it affords in the ER&D sector.

Join our experts Mayank Maria, Vice President, and Nishant Udupa, Practice Director, to understand the future role of APAC in global ER&D services, as well as the key segments that will drive growth in this space.

Participants will gain vital knowledge of engineering opportunities in the APAC geography, as well as understand the outlook for spending and outsourcing in this thriving market.

During this in-depth LinkedIn Live, we’ll answer the following questions:

• Should the APAC market be viewed as a strategic growth market for an engineering business?
• Which specific segments of the market are expected to offer high growth potential?
• Which factors will contribute to the success of an engineering business in this market?

Mayank Maria, Vice President, Everest Group will be joining an insightful webinar where the panel will explore how leading enterprises can successfully leverage technology for process and cost optimization in the pursuit of reduced costs, increased revenue, and optimized operations.

• Delve into the top enterprise priorities in 2024 and anticipated roadblocks, such as cost/margin pressures and evolving customer needs.
• Understand the enterprise technology ecosystem, including AI/ML, Automation, and Process Intelligence tech, and how they drive optimization.
• Explore the dynamics of technology adoption on process optimization across various industries and functions, highlighting benefits and challenges.
• Outline the role of service providers in assisting enterprises by offering guidance on tech selection, implementation, and workforce training.

Register

Mayank Maria
Vice President, Everest Group
Yuri Gubin
Chief Innovation Officer, DataArt

Cognizant’s acquisition of Belcan for US$1.3 billion marks a significant expansion in its engineering services portfolio. This strategic move enhances Cognizant’s capabilities, positioning the company closer to the top-tier engineering service providers. Reach out to us directly to discuss this topic further.

Cognizant recently announced the acquisition of Belcan, a portfolio company of AE Industrial Partners, for a total enterprise value of US$1.3 billion. This is among the largest acquisitions in the history of Cognizant, which, interestingly, has acquired seven companies with an engineering services focus since CY2021.

This is also the biggest acquisition of recent times in engineering services – a space that has been known for rampant M&A activity and sees a marquee acquisition every few years amid tens of tuck-in acquisitions. The last large acquisition in this space was back in 2022 when Modis acquired Akka Technologies (EV of US$2.36 billion).

Based on revenue estimates for Belcan, this acquisition sits at a modest revenue multiple of ~1.55x, which is slightly lower than the other recent acquisitions in this space, such as:

• Infosys’ acquisition of In-tech (EV: EUR450 million; 2.6x revenue)
• Infosys’ acquisition of InSemi (EV: INR280 crores, 1.8x revenue)
• HCLTech’s acquisition of ASAP (EV: EUR250 million; 1.6x revenue)

This seems like a bargain deal for Cognizant (especially considering that we saw valuations as high as 9.6X revenue, as recently as 2021).

So, what does Cognizant stand to gain on the back of this acquisition? Let’s discuss.

A significant elevation of its engineering services portfolio

Everest Group publishes an annual list of Top 50 Engineering Service Providers based on their engineering services revenue and growth. Cognizant was positioned at #7 in the last edition of the list, preceded by Accenture, Akkodis, Alten, Capgemini, HCLTech, and TCS.

Considering the combined engineering services portfolio of Cognizant and Belcan – the combined entity would inch closer to the top 5 providers.

A sizable play in a growing and uncrowded space

Asset-heavy verticals, particularly the automotive vertical, have been the hot favorites among service providers from a capability-building and acquisition standpoint. This has been on account of the resilience these verticals have showcased over several quarters despite the economic slowdown. While Cognizant broadly adhered with this industry trend as it picked Belcan, it took a slightly unconventional approach by focusing to tap into the aerospace and defense (A&D) vertical.

There are two key reasons for this shift in focus to A&D. Firstly, in CY 23, outsourcing in this vertical grew the fastest (9-11%) on account of enhanced defense spending and a post-pandemic recovery in aviation and aerospace. Secondly, compared to automotive, this vertical is less catered to by providers. While automotive is catered to by 90% of the providers featured in the ES Top 50 list, only 60% of the providers cater to A&D, thus making the space less crowded.

To bolster Cognizant’s asset-heavy portfolio, Belcan brings a vast pool of 6,500+ specialized engineers across not just A&D, but also automotive, industrial, and even cybersecurity. A&D remains their key focus area, where, along with expertise, Belcan also brings a well-established client base with “blue-chip” enterprises and state defense departments such as the US Department of Defense (DoD). This acquisition, along with capabilities, also fills whitespaces in the geographic footprint. For example, a strong network of offices in the United Kingdom will bolster Cognizant’s European presence, while the innovation centers in offshore locations will serve as hubs for high-quality technical solutions dedicated to A&D.

Were there other approaches that Cognizant could have considered for the desired outcome?

In recent quarters, IT service providers such as Cognizant have struggled with sluggish or stagnant top-line growth due to budget cuts, project downsizing in key verticals, and reduced focus on discretionary spending.

Juxtaposing this need with the continued growth momentum (albeit slowed down than in the past) being observed in the ER&D spending across enterprises has led to a faster growth rate in the engineering outsourcing services market viz-a-viz the traditional IT services outsourcing. In that spirit, the engineering services market seems to be the right choice to catapult growth and beat the slowdown.

While it is easy to zero down on the engineering services arena, it is difficult to follow the traditional approach and build capability organically, as has been the case in the past. This is because of the unique nature of engineering services, which is characterized by new-age design thinking (across software product engineering) and deep-domain expertise (across manufacturing and connected products engineering). In such an arena, it becomes poignant for providers to adopt the inorganic route, which enables quick muscle building and maybe relationships as well (as in the case of Cognizant – Belcan).

At the same time, this acquisition also brings in diversification from a vertical standpoint as currently, Cognizant’s top-line leans heavily towards BFSI and healthcare. While these industries are recovering, their growth isn’t as rapid as some of the asset-heavy industries.

To learn more about the engineering services landscape, reach out to Ankur Jain, ankur.jain@everestgrp.com, Mayank Maria, mayank.maria@everestgrp.com, and Nishant Udupa, nishant.udupa@everestgrp.com.

In the product engineering space, software remains the largest area of expenditure, maintaining its upward trajectory despite a slower pace. This deceleration is primarily due to recessionary headwinds, geopolitical conflicts, talent shortages, and delayed decision-making within enterprises. Amid this macroeconomic turbulence, several themes continue to drive software R&D forward. These include transitioning to platform-based business models, increasing the adoption of AI- and gen AI-augmented secure products, prioritizing sustainability, and enhancing customer and developer experiences.

The shift toward these transformative themes, coupled with the current economic climate, is significantly altering enterprises’ expectations from their providers. Rather than solely seeking providers focused on offering engineering talent, enterprises now aspire to engage with strategic partners capable of delivering savings, speed, and innovation simultaneously.

• Software Product Engineering Services PEAK Matrix® Assessment 2024

  

  What is in this PEAK Matrix® Report

  This report, the fifth edition of Everest Group’s Software Product Engineering Services PEAK Matrix® Assessment, evaluates 43 engineering service providers, positioning them on the PEAK Matrix® framework and offering insights into enterprise sourcing considerations.

  Contents: 

  In this report, we examine:

  • Everest Group’s services PEAK Matrix® evaluation of engineering service providers associated with software product engineering services
  • The characteristics of Leaders, Major Contenders, and Aspirants
  • Providers’ market impact and vision and capabilities
  • Providers’ key strengths and limitations

  Scope:

  • Industry: software product engineering
  • Geography: global
  • The study is based on RFI responses from providers, interactions with their software product engineering services leadership, client reference checks, and an ongoing analysis of the software product engineering services market

  READ ON

What is the PEAK Matrix®?

The PEAK Matrix® provides an objective, data-driven assessment of service and technology providers based on their overall capability and market impact across different global services markets, classifying them into three categories: Leaders, Major Contenders, and Aspirants.

LEARN MORE ABOUT Top Service Providers

Engineering service providers who demonstrated critical capabilities to enterprises over the past year are now being recognized for their leadership with the 2023 PEAK Matrix Service Provider of the Year awards in engineering services (ES). Read on to find out who’s providing the top engineering services based on Everest Group research.   

Activity in the Engineering R&D (ER&D) sector remained largely resilient during 2022, with service providers witnessing significant growth across themes such as platformization, digital engineering, and Industry 4.0. Amid this landscape, a few engineering service providers distinguished themselves by showcasing significant capabilities and market impact across all these leading investment themes.

We have identified the top 15 ES service providers and five leading ES challengers for the 2023 PEAK Matrix Service Provider of the Year awards in engineering services.

See the Top Engineering Service Providers

State of the ER&D industry

ER&D spending and outsourcing remained resilient in 2022, though there was some growth deacceleration as compared with 2021 on account of uncertainty around the Ukraine-Russia conflict, talent shortages and rising wage inflation, and bleak global economic forecast.

Enterprises remained committed to enhancing their products, services, and processes on the back of digital technologies. Service providers, by means of their scaled talent availability, domain know-how, and IP investments, supported these enterprises in realizing faster time-to-market and cost efficiencies for their engineering initiatives.

Methodology

The PEAK Matrix Provider of the Year awards helps enterprises identify leading service providers who have demonstrated strong capabilities and market success across multiple engineering domains.

This year’s results are based on assessments from five PEAK Matrix® reports published by Everest Group in the calendar year of 2022 that looked at the following key themes influencing ER&D over that period:

• Industry 4.0 services
• Software products engineering
• Digital products engineering
• Digital twins
• Connected medical devices

The Engineering Services PEAK Matrix Provider of the Year awards were determined by consolidating tiered scores for Leader, Major Contender, Aspirant, and Star Performer positions across each of the individual evaluations mentioned above. The two award categories are:

• ES Top 15: Engineering service providers with the highest consolidated scores based on the evaluation
• ES Top 5 Challengers: The next five top engineering services providers who are credible partners for enterprises and are positioning themselves as rivals to leading players

To learn more about the 2023 engineering service providers of the year, reach out to analysts Ankur Jain, ankur.jain@everestgrp.com, Mayank Maria, mayank.maria@everestgrp.com, or Akshat Vaid, akshat.vaid@everestgrp.com.

See the Top Engineering Service Providers

WATCH THE WEBINAR ON-DEMAND

Automotive original equipment manufacturers (OEMs), classified as Tier 1, 2, and 3, are experiencing a substantial and permanent change in customer preferences due to the widespread adoption of Software Defined Vehicles (SDVs) and Autonomous, Connected, Electric, and Shared (ACES) technologies – dramatically impacting engineering priorities in these markets.

Watch this on-demand webinar as our experts explore the latest key engineering priorities and why the automotive engineering landscape has evolved. They will also provide practical recommendations for engineering spend and examine the challenges that enterprises currently face.

Our experts will also share the latest impacts on automotive outsourcing and provide insights on how enterprises can effectively realign talent, technology, and ecosystem engagement strategies to scale SDVs and ACES initiatives.

What questions does the on-demand webinar answer for the participants?

• What are the key themes of engineering spending in the SDV and ACES market?
• What challenges do enterprises face while transforming to SDV and ACES vehicle production?
• How do you strategize for talent, technology, and ecosystem leverage to mitigate challenges?

Who should attend?

• CTO, CPO, COO, CEO
• Chief supply chain officer
• Vice president of innovation, automotive
• Managing director – engineering
• Head of information systems R&D
• Vice president – purchasing, engineering
• Vice president – operations
• Global sourcing managers
• Vendor managers
• Head of outsourcing
• Head of engineering

WATCH THE WEBINAR ON-DEMAND

As you are aware, recent advances in technology have led to a massive digital wave in the engineering world, with smart, connected, autonomous, and intelligent physical and hardware products taking center stage.

To meet the needs of the current generation of consumers and provide a rich user experience, tech and engineering leaders, such as yourself, are finding that investments in next-generation technologies and talent have become crucial in successfully building digital product engineering businesses.

Join us as our experts deliver a deep understanding of the digital product engineering market, the trends impacting this space, and potential avenues and opportunities that leaders should examine.

Our experts will explore:

• The size and expected growth of digital product engineering and how it compares to traditional engineering
• Digital product engineering spend across industries
• Relevant use-cases from an enterprise adoption standpoint and what will gain the most traction
• Approaches to gauging digital product engineering vendor performance
• The most relevant skillsets for digital product engineering initiatives
• Challenges enterprises may face when considering a play in this market

Who should attend?

• CTOs
• Chief digital officer
• VP engineering
• Engineering executives
• Product managers
• Product engineering leaders
• Leads of engineering for product-centric verticals
• Product engineering strategy leaders
• Product engineering vendor managers