Insights

Challenges in Digital Engineering, and How to Address Them

Gilroy Mathew, VP, Global Head of Semicon Engineering, UST

Our first blog discussed how digital engineering changed during the pandemic. Though industries across manufacturing, hi-tech and services-led segments have ramped up their focus on next-gen engineering areas in recent years, they are encountering various challenges, which we anticipate will remain for years.

However, since the pandemic has accelerated the digitization of products across enterprises from various industries, digital engineering will only grow in importance as more companies provide multiple online and hybrid solutions to meet customers where they prefer to make purchases and communicate with their suppliers.

Key takeaways

• The Great Resignation did not spare digital engineering teams, making it harder for companies to match their goals with execution
• Companies that have yet to embrace the chip-to-cloud movement are falling behind the competition
• Inflation and other business challenges are straining Engineering and Research & Development budgets
• All of the above reinforces the need for partnerships with digital engineering experts

Challenges in Digital Engineering

Companies are directly encountering four key challenges as they look to scale their digital engineering capabilities.

Talent shortage

Enterprises looking to keep apace in next-gen engineering need to hire good talent. Experts expect nearly 149 million new digital roles will be created between 2021 and 2025.

Unfortunately, the engineering industry, like others, is confronting a talent crunch. Enterprises faced the “Great Resignation” in 2021, where 69 million Americans quit their jobs for better pay and benefits. This, coupled with “Great Inflation” where the compensation costs increased by 4.4%, has created a challenging market scenario and increased demand for talent.

Companies will need to rethink how they recruit engineers, especially when they’re competing against major tech companies like Google, Facebook, Tesla, and Apple, all of whom offer competitive pay packages and demonstrate how much they value engineers within their organizations. Companies that have technologists in senior leadership positions demonstrate to candidates how important engineering is to the overall success of the organization.

Lack of Chip-to-Cloud Capabilities

As we discussed in our first blog, experts predict an explosion in Chip-to-Cloud capabilities. Incumbent enterprises face challenges from upstarts in their vertical who have already embraced Chip-to-Cloud capabilities disrupting their business.

Chip-to-Cloud is one of the most promising new opportunities in digital engineering. IoT has been on the periphery of a massive adoption curve for some time, but concerns about security and the power to connect multiple devices have dampened adoption. Chip-to-Cloud makes it much more difficult to hack IoT devices while boosting energy efficiency and staying connected to the cloud.

For example, newer automotive players with chipsets, autonomous driving algorithms and cloud capabilities – beyond what traditional organizations can offer – will continue to provide compelling offerings for their customers.

Of course, moving to Chip-to-Cloud will require some reskilling of employees used to traditional digital engineering. Enterprises operating across multiple verticals offerings have, over the years, invested in developing capabilities and hiring talent dedicated to a specific suite of capabilities. They will need to either upskill or hire new employees specializing in Chip-to-Cloud.

As the next-gen engineering technological trends pick pace, the boundaries between verticals and horizontals are fading. Enterprises need to focus on becoming agile and cross-integration of horizontal capabilities. This is where they lack the necessary skillsets, e.g., chip design and cloud engineering; therefore, they risk getting left behind.

Pressure on Engineering and Research & Development (ER&D) Budgets

Despite the pressure to produce next-generation digital engineering, enterprises will nonetheless attempt to keep their ER&D budgets under control. The budget crunch is hitting all verticals, though distributed unevenly.

They will try to optimize their legacy engineering budgets, which are directed towards maintaining and sustaining their existing product portfolio, versus investing in budgets to develop new products and technologies.

Fortunately, many CFOs intend to increase their technology budgets, demonstrating the importance of digital engineering during a potential recession. Many executives surveyed by Gartner believe technology and automation specifically helps the fight against inflation.

It’s a delicate balance to keep legacy engineering working while funding their next-gen engineering investments. This, along with the limited bandwidth and staffing issues, increases the burden of managing short- and long-term investments.

The good news is that by 2025, spending on digital is expected to be 1.2X of legacy engineering spending based on optimistic growth projections by Zinnov. Digital is expected to drive the growth at 18% CAGR, whereas legacy spending will remain stagnant. Next-gen engineering technologies and trends are expected to drive this spending growth in the ER&D market, which will benefit from increased technology budgets.

Need for Reliable Partners

Before the pandemic, enterprises tapped into latent expertise and proven engagement models by partnering with multiple specialist vendors. During the pandemic, however, enterprises had to quickly scale up offerings and expand portfolios with new solutions while minimizing face-to-face interactions with partners. As a matter of convenience and safety, one-stop-shops became the top priority to help reduce touchpoints and overall costs - a practice that has since remained prevalent across industries.

Through this experience, enterprises now realize the benefits of an end-to-end partner to help them with efficient project management possibilities. They can get better cost structures and seamless assistance in portfolio expansion and digital transformation.

The Solution: End-to-End Engineering by UST

UST, a leading digital transformation player, has built end-to-end digital engineering offerings that address enterprise-grade, next-gen engineering challenges.

UST helps enterprises bridge the gap between supply and customer demands across next-gen engineering segments such as Cloud, Artificial Intelligence, Machine Learning, the Internet of Things, and others, by offering one-stop-shop solutions and a robust and attractive partner ecosystem.

We deliver customized solutions across semiconductors, medical devices, smart devices, retail, and other verticals. Customers engage UST because we provide faster development cycles and go-to-market strategies with fewer touchpoints, thus positively impacting their P&L and creating differentiation among peers.

Read our whitepaper Next-Gen Engineering: Transformation Across Chip-to-Cloud to explore UST’s unique approach to digital engineering. Visit UST Product Engineering to learn more.