Service providers are helping automakers transform vehicles and semiconductor companies adapt to geopolitical and pandemic disruptions, ISG Provider Lens™ report says
U.S. manufacturers are increasingly engaging with service providers to address significant challenges around supply chains and new product requirements, according to a new research report published today by Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm.
The 2022 ISG Provider Lens™ Manufacturing Industry Services report for the U.S. finds that manufacturers in two major sectors — automotive and semiconductors/hi-tech — have begun outsourcing a growing number of capabilities as each industry has gone through major changes over the past few years.
“U.S. manufacturers are operating under vastly different conditions than they faced before the pandemic,” said Bob Krohn, partner, manufacturing, at ISG. “In the case of the automotive industry, the fundamental focus of the product is simultaneously shifting from hardware to software.”
Automotive manufacturers in all markets, including the U.S., are in the midst of a long, complex transition from hardware-defined to software-defined vehicles, the report says. This revolution is driven partly by demand for a new generation of vehicles that will be autonomous, connected, electric and shared (ACES), and partly by the need to take advantage of modern, flexible development practices that originated in the hi-tech sector.
Traditional automotive firms in the U.S. have established sub-organizations focused on transforming the vehicle cockpit experience and re-engineering vehicle platforms around electric drivetrains, expanded computing power, automated driving functions and software upgradability, ISG says. They are reaching out to third parties for consulting, professional services and outsourced IT functions. Service providers are contributing expertise in fields including silicon customization, connectivity software and human-machine interfaces.
The U.S. technology sector, especially the semiconductor industry, is starting to respond to geopolitical disruptions over the past few years by significantly reshaping its supply chains, the report says. The effects of the COVID-19 pandemic, along with growing tension over China’s relationship to Taiwan, have forced chip manufacturers to recognize the dangers of relying on a single regional supply chain.
U.S. semiconductor firms such as Intel are working to build up their domestic fabrication capacity, while chip shortages continue to affect many industries, including automotive and health care, ISG says. In the U.S., the leading market for semiconductor design and R&D, a push to increase innovation capabilities had led to more engagements with providers of tools such as electronic design automation.
“Chipmakers in the U.S. are now strongly focused on business continuity,” said Jan Erik Aase, partner and global leader, ISG Provider Lens Research. “Service providers are essential partners in building up the capacity they need on the home front.”
The report also explores other issues affecting U.S. manufacturing, including the growing importance of product lifecycle management (PLM) and the ways in which some industries are working around chip shortages.
For more insights into the challenges faced by U.S. manufacturers, and advice on how they can best adapt to new industry conditions, see the ISG Provider Lens™ Focal Points briefing here.
The 2022 ISG Provider Lens™ Manufacturing Industry Services report for the U.S. evaluates the capabilities of 37 providers across two quadrants: Product Engineering — Automotive Autonomous, Connected, Electric and Shared (ACES), and Product Engineering — Semiconductor and Hi-Tech.
The report names Capgemini, HCLTech, LTTS, TCS, Tech Mahindra and Wipro as Leaders in both quadrants. It names Cyient, eInfochips, HARMAN Digital Transformation Solutions (DTS), Infosys, LTIMindtree and UST as Leaders in one quadrant each.
In addition, Embitel, Ignitarium and Mobica are named as Rising Stars — companies with a “promising portfolio” and “high future potential” by ISG’s definition — in one quadrant each.
A customized version of the report is available from LTTS.
The 2022 ISG Provider Lens™ Manufacturing Industry Services report for the U.S. is available to subscribers or for one-time purchase on this webpage.
About ISG Provider Lens™ Research
The ISG Provider Lens™ Quadrant research series is the only service provider evaluation of its kind to combine empirical, data-driven research and market analysis with the real-world experience and observations of ISG's global advisory team. Enterprises will find a wealth of detailed data and market analysis to help guide their selection of appropriate sourcing partners, while ISG advisors use the reports to validate their own market knowledge and make recommendations to ISG's enterprise clients. The research currently covers providers offering their services globally, across Europe, as well as in the U.S., Canada, Brazil, the U.K., France, Benelux, Germany, Switzerland, the Nordics, Australia and Singapore/Malaysia, with additional markets to be added in the future. For more information about ISG Provider Lens research, please visit this webpage.
A companion research series, the ISG Provider Lens Archetype reports, offer a first-of-its-kind evaluation of providers from the perspective of specific buyer types.
ISG (Information Services Group) (Nasdaq: III) is a leading global technology research and advisory firm. A trusted business partner to more than 800 clients, including more than 75 of the world’s top 100 enterprises, ISG is committed to helping corporations, public sector organizations, and service and technology providers achieve operational excellence and faster growth. The firm specializes in digital transformation services, including automation, cloud and data analytics; sourcing advisory; managed governance and risk services; network carrier services; strategy and operations design; change management; market intelligence and technology research and analysis. Founded in 2006, and based in Stamford, Conn., ISG employs more than 1,300 digital-ready professionals operating in more than 20 countries—a global team known for its innovative thinking, market influence, deep industry and technology expertise, and world-class research and analytical capabilities based on the industry’s most comprehensive marketplace data. For more information, visit www.isg-one.com.
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Will Thoretz, ISG
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Julianna Sheridan, Matter Communications for ISG