The market for R&D services and STIE in Germany, comprising engineering services, technical consulting as well as the development and deployment of embedded software and solutions, is in a interesting phase of orientation and definition. While economic pressure increases and the outlook for 2013 could surely be better in many industry sectors, clients are more and more involving external partners and suppliers into the development process of consumer devices, medical equipment or vehicles, just to name a few. That keeps the development of this market, especially in terms of embedded software development, comparatively stable and offers promising growth opportunities for engineering and IT service providers.

So, which aspects are going to be important for successfully providing software development services in the future? The answer on that can be derived from thinking of a rather simply scenario: the communication and interaction between individual electronic units and devices will continuously increase in the future and is regarded as one of the major growth drivers in this market. This trend is normally addressed by the term “machine-to-machine” (M2M) communication and business cases in these markets are equally various and promising.

Take, for instance, the automotive industry: in the (near) future your car will be able to independently react on traffic reports or other risk notifications, not only by displaying this information for the driver but by passing on this information to following vehicles, security staff or rescue teams, to traffic control systems in order to trigger adaptions to traffic flows as well as to providers of public transportation in order to increase capabilities. At the same time you will get your dispenser reserved at the next petrol station as your remaining fuel (or energy) won’t last until the traffic jam is over. If you are on a business trip or on holidays, your reservations in hotels or restaurants will get postponed or canceled while your cars gets refueled (or recharged).

This simple example or everyday life’s experiences already highlights the variety of different parties being involved in order to enable these services: of course yourself as the owner or driver of the car, other vehicles, technical or medical service units, petrol stations, traffic control authorities, hotels, restaurants, etc. And this only represents the user site of this scenario. Regarding required technologies we have car manufacturers and suppliers, infrastructure providers, various software- and hardware manufacturers, network carriers, third-party content providers and many more involved here.

Well honestly, we are not yet there with such scenarios. However we are also no longer far away from them. From a technological point of view, various individual parts of such an example case are already feasible. What is missing so far is the sufficient interaction and collaboration among all parties involved. And this brings me to the central point of this article: the business model will become a strategic challenge for every single participant in these value chains. And there will only be an added-value through such kind of scenarios, when they work comprehensively across multiple technologies, platforms, contracts, countries, etc. That means that each of these parties involved will heavily depend on a strong and reliable partner ecosystem, because none of them is able to provide the entire service as a stand-alone supplier so far today, and probably also not in the future. The important questions for many service providers or product vendors in this market now are: where do I have a bottleneck in my value chain? Which partner brings the biggest risk to the success of the complete business model? And how can all partners contribute to the business case in order to jointly reduce risks and ensure success of the service offering?

This is what will become important in many future scenarios in this market: collaboration and risk sharing will be critical success factors for many different business models. Especially companies that are able to cover multiple elements of these value chains and, furthermore, will be able to share risk and reward in a jointly business case, are likely to succeed in a market of integrated solutions and services.

If you want to learn more about trends and growth drivers for the R&D services and STIE market in Germany, please have a look at the latest PAC Market InSight report “Software development for the future – what makes up the domestic R&D services and STIE market in Germany″.

Post by Philipp Schalla