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The research and development (R&D) outsourcing services market size is estimated to grow at a CAGR of 8.11% between 2023 and 2028. The market size is forecast to increase by USD 3.89 billion. The growth of the market depends on several factors, including the cost-effective nature of outsourcing research and development services, the increasing need for end-users to focus on core competencies, and the increased access to the global talent pool. Research and Development outsourcing is defined as the outsourcing of non-physical engineering R&D tasks, such as simulation, design, and consultation, to third-party service providers or specialized market players. These players help enterprises enhance efficiency, improve different processes, and reduce the time to market for products.
This research and development outsourcing services market report extensively covers market segmentation by end-user (automotive, consumer electronics, telecommunications, semiconductor, and others), type (large enterprises, small, and medium enterprises), and geography (North America, Europe, APAC, South America, and Middle East and Africa). It also includes an in-depth analysis of drivers, trends, and challenges. Furthermore, the report includes historic market data from 2018-2022.
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Increased access to a global talent pool is the key factor driving market growth. Most SMEs have limited operational reach, due to which they have access to only the regional talent pool. However, specialized market players such as Wipro and HCL have operations across the world. Hence, outsourcing R&D services to such research and development outsourcing services market players will provide enterprises, especially SMEs, access to the global talent pool. Enterprises can leverage diverse skill sets distributed across geographies by outsourcing R&D services to these market players.
Therefore, market players from countries such as the US focus on expanding their operations to countries such as India for real-time support and low-cost labor. Accessing the talent pool from such countries can lead to a reduction in R&D costs, which will help enterprises increase their profit margins. This will lead to the growth of the global research and development outsourcing services market during the forecast period.
An increase in merger and acquisition activities is the primary trend shaping market growth. The intense competition has increased the number of strategic mergers and acquisitions (MA) over the last few years. Market players are opting for MA to enhance their market reach and customer base with the increasing demand for R&D outsourcing services from various end-users, such as the healthcare and construction industries. Also, intense competition in the market is expected to compel established research and development outsourcing services market players to increase their market presence through MA.
Moreover, market players in R&D outsourcing services are investing extensively in joint ventures and acquisitions to capture a major share of the research and development outsourcing services market and expand their presence to new regions. Thus, the increase in MA activities will help major market players expand their product portfolios and geographical reach in the global market, which is expected to record more such acquisitions during the forecast period.
The risk of poor quality research and development is a challenge that affects market growth. Quality is one of the most important aspects of R&D engineering tasks, such as designing and simulation for enterprises. However, after outsourcing the tasks, enterprises lose control and visibility over the R&D process. Market players offering R&D services may not have the same standards of quality or technical adequacy. Hence, the quality of R&D could decrease. The quality can also be compromised if research and development outsourcing services market players are inexperienced or lack in-depth knowledge about engineering tasks.
In addition, a substandard output from R&D can harm the brand value of enterprises as the product or service developed may not be up to regulatory compliance standards. Such issues can discourage enterprises from outsourcing R&D services, which, in turn, can impede the growth of the global research and development outsourcing services market during the forecast period.
The market share growth by the automotive segment will be significant during the forecast period. The demand for vehicles is increasing continuously across the globe, mostly due to changing consumer needs, which are encouraging original equipment manufacturers (OEMs) to produce new vehicles. Modern automobiles are essentially becoming computers on wheels, with digital technology taking up to 50% of the development cost of new car models. Furthermore, engineering R&D will help these OEMs embrace efficient and cleaner technologies as well as integrate solutions based on cloud, mobility, and analytics with existing products.
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The automotive segment showed a gradual increase in the market share of USD 1.77 billion in 2018. Moreover, market players in R&D services can help OEMs identify key areas of improvement and support them in implementing innovative solutions. This, in turn, will help OEMs gain a competitive advantage over their rivals. Thus, the growth of the automotive industry will lead to the growth of the global R&D outsourcing services market. Therefore, such factors will drive the growth of the automotive segment in the R&D outsourcing services market during the forecast period.
Large enterprises can redirect their resources and efforts toward their core competencies, such as product development, innovation, and strategic planning while leaving research and development outsourcing service management to experts. Research and development outsourcing services providers can easily scale their services up or down to meet the fluctuating demands of large enterprises. Outsourcing of research and development services allows large enterprises to adapt to changing R&D outsourcing services market conditions, customer needs, and industry trends quickly. This flexibility is crucial for remaining competitive in a highly dynamic market. Hence, such factors will drive the growth of the segment of the market during the forecast period.
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North America is estimated to contribute 45% to the growth of the global market during the forecast period. Technavio’s analysts have elaborately explained the regional trends and drivers that shape the market during the forecast period. The market for research and development outsourcing services is expected to grow in North America due to the increasing demand from industries such as aerospace, semiconductor, and consumer electronics. Moreover, research and development outsourcing service providers are also known to have expertise in a variety of designs, advanced designing techniques, collaborative R&D activities, and others, which help organizations achieve desired results. Such factors are anticipated to drive the growth of the regional R&D outsourcing services market.
Furthermore, market players of R&D outsourcing services help OEMs in enhancing application management services, testing, infrastructure support, and new product development. The market players will also help enterprises in the aerospace industry in this region in identifying key areas of improvement and support them in implementing innovative solutions. Thus, with the growth of data centers in this region, the demand for semiconductors will increase. Thus, such factors will drive the growth of the regional research and development (R&D) outsourcing services market during the forecast period.
The outbreak of COVID-19 in 2020 had a negative impact on the regional research and development outsourcing services market. However, in 2021, the initiation of large-scale vaccination drives?lifted the lockdown and travel restrictions, which led to the resumption of supply chain activities. Furthermore, factors like the growth of the aerospace, semiconductor, and consumer electronics industries and the construction of new data centers in the region will foster the growth of the research and development outsourcing services market in the region during the forecast period.
The Research and Development Outsourcing Services Market report includes the adoption lifecycle of the market, covering from the innovator’s stage to the laggard’s stage. It focuses on adoption rates in different regions based on penetration. Furthermore, the report also includes key purchase criteria and drivers of price sensitivity to help companies evaluate and develop their growth strategies.
Global Research and Development Outsourcing Services Market Customer Landscape
Companies are implementing various strategies, such as strategic alliances, partnerships, mergers and acquisitions, geographical expansion, and product/service launches, to enhance their presence in the market.
The research report also includes detailed analyses of the competitive landscape of the market and information about 15 market companies, including:
Qualitative and quantitative analysis of companies has been conducted to help clients understand the wider business environment as well as the strengths and weaknesses of key market players. Data is qualitatively analyzed to categorize companies as pure play, category-focused, industry-focused, and diversified; it is quantitatively analyzed to categorize companies as dominant, leading, strong, tentative, and weak.
The research and development outsourcing services market report forecasts market growth by revenue at global, regional & country levels and provides an analysis of the latest trends and growth opportunities from 2018-2022.
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Research And Development Outsourcing Services Market Scope |
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Report Coverage |
Details |
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Page number |
185 |
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Base year |
2023 |
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Historic period |
2018-2022 |
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Forecast period |
2024-2028 |
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Growth momentum & CAGR |
Accelerate at a CAGR of 8.11% |
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Market Growth 2024-2028 |
USD 3.89 billion |
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Market structure |
Fragmented |
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YoY growth 2023-2024(%) |
7.59 |
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Regional analysis |
North America, Europe, APAC, South America, and Middle East and Africa |
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Performing market contribution |
North America at 45% |
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Key countries |
US, China, India, Germany, and UK |
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Competitive landscape |
Leading Companies, Market Positioning of Companies, Competitive Strategies, and Industry Risks |
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Key companies profiled |
Accenture Plc, Altair Engineering Inc., Capgemini Service SAS, Carl Zeiss AG, Cisco Systems Inc., Cyient Ltd., DXC Technology Co., HCL Technologies Ltd., Hitachi Ltd., IAV GmbH, Infosys Ltd., Kistler Holding AG, KPIT Technologies Ltd., Mindfire Solutions, Quest Global Services Pte. Ltd., Sonata Software Ltd., Tata Sons Pvt. Ltd., Tech Mahindra Ltd., Wipro Ltd., and Mindtree Ltd. |
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Market dynamics |
Parent market analysis, Market growth inducers and obstacles, Fast-growing and slow-growing segment analysis, COVID-19 impact and recovery analysis and future consumer dynamics, and market condition analysis for the forecast period. |
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Customization purview |
If our report has not included the data that you are looking for, you can reach out to our analysts and get segments customized. |
We can help! Our analysts can customize this market research report to meet your requirements.
1 Executive Summary
2 Market Landscape
3 Market Sizing
4 Historic Market Size
5 Five Forces Analysis
6 Market Segmentation by End-user
7 Market Segmentation by Type
8 Customer Landscape
9 Geographic Landscape
10 Drivers, Challenges, and Trends
11 Vendor Landscape
12 Vendor Analysis
13 Appendix
Research Framework
Technavio presents a detailed picture of the market by way of study, synthesis, and summation of data from multiple sources. The analysts have presented the various facets of the market with a particular focus on identifying the key industry influencers. The data thus presented is comprehensive, reliable, and the result of extensive research, both primary and secondary.
INFORMATION SOURCES
Primary sources
Secondary sources
DATA ANALYSIS
Data Synthesis
Data Validation
REPORT WRITING
Qualitative
Quantitative
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