Aerospace Engineering Go-to-Market Strategy: Digital & New Services

Aerospace engineering is going through a massive transformation with more development programs in niche and emerging areas. All the major civil aerospace programs are coming to an end in FY17, so the next phase of aerospace engineering will cater to aeroengines (more fuel efficient, clean fuel), avionics, interiors (in-flight entertainment), manufacturing, and MRO segments, among others. This is a shift from mechanical engineering to more software engineering, safety, and passenger experience areas. The big aerospace players have already started to embrace this digital disruption in their manufacturing landscape, extended supply chain, and other stakeholders.

With the applications of digital technologies (IoT, AR/VR) in different areas of aerospace, clients are increasingly looking for aerospace engineering service providers with a strong digital background. The scope includes digitization in the areas of supply chain management, product design, training, and maintenance, enabling more digital technology integration with traditional aerospace engineering. Therefore, service providers are expanding their capability toward digital innovation and transformation.

We released our HfS Aerospace Engineering Services Blueprint Report recently, wherein we evaluated 20[1] leading service providers. In this PoV, we discuss the top go-to-market strategies adopted by the aerospace engineering service providers, key differentiators, and  investments to boost their services capabilities.

Strategies Adopted by Service Providers to Grow the Aerospace Engineering Business

Exhibit 1: Strategies Adopted by Service Providers to Grow the Aerospace Engineering Business

Source: HfS Research, Aerospace Engineering Blueprint 2017, n=11 Service Providers

New service offerings and business models are the highest focus areas for service providers for growth across aerospace segments in the areas of manufacturing and aftermarket services (See Exhibit 1). In aerospace engineering, digital tools such as AR/VR, analytics, AI, IoT, 3D printing, and industry 4.0 are influencing aerospace manufacturing, maintenance, and customer experience activities. Service providers are developing the right business enablement tools that can enable clients to improve productivity, reduce time to go-to-market, and optimize costs. Fixed price and time and material (T&M) are already the most popular, and outcome-based models have started showing up more frequently in the service providers’ pricing mix as well. With the advent of digital technologies, buyers are more interested in nonlinear pricing models, such as transaction-based or risk reward pricing, to get the best out of their service providers.

Key Differentiators as a Provider of Aerospace Engineering Services

Exhibit 2: Key Differentiators as a Provider of Aerospace Engineering Services

Source: HfS Research, Aerospace Engineering Blueprint 2017, n=11 Service Providers

Service providers want to differentiate by demonstrating their domain knowledge, including digital solutions and advanced engineering capabilities across aerospace segments (See Exhibit 2). Another differentiator is end-to-end aerospace engineering capabilities, including proprietary tools and platforms, IP, and accelerators, providing value across the chain of new product development, product sustenance, manufacturing support, testing and certifications, MRO/after market services, and software implementation.

The innovation capabilities of aerospace engineering services are the next priority for service providers. Some of the key focus areas in aerospace engineering innovation are partnership ecosystem, technical infrastructure and domain certifications, workforce capability, and outcome-based engagement models, among others.

We have seen robust investments in IP development (testing frameworks and methodologies for certifications, analytics/AI applications for insights) and emerging areas such as drones, electric aircraft technology, and composites. Partner ecosystem development, talent management, and resource capability augmentation are the emerging focus areas.

Other investments include technical infrastructure development (testing, innovation, 3D printing), partnerships with academic institutions (research programs, recruitment), industry-specific certifications (both global and country-specific regulatory compliance, including defence requirements), and thought leadership initiatives.

Bottom-line: Digital and Emerging Aerospace Areas will Drive Technology-led Differentiation in Aerospace Engineering Services

The aerospace engineering sector is an interesting space due to digital technologies, strict environment regulations, urban mobility development programs, and autonomous flight technology, among others. At present, the aerospace engineering services outsourcing client mix is dominated by the United States and Europe. In the civil aerospace, Chinese player COMAC is a new entrant for both short-medium and long ranges. As most of the aircraft development programs are entering into production, the next focus will be the maintenance of the fleet. We believe that in the next few years, Asia-Pacific will be the major growth driver. Defense expansion programs in India, Saudi Arabia, and other APAC countries will create volume orders for defense manufacturers.

Aerospace engineering service providers need a long-term strategy and planning for capability development. Some aerospace projects are stretched due to stringent regulations, development guidelines, and testing procedures. Service providers need long-term planning commitment followed by delivery alignment, research labs, investment funds, APAC focus, and other entities. As Digital and IoT are becoming mainstream, service providers need to leverage all their digital learnings in aerospace engineering.

This PoV is a reality check for both aerospace engineering service providers and enterprises to assess whether they are investing in the right areas for developing their aerospace engineering capabilities and identify action points for future-proofing their aerospace engineering operations.

[1] AKKA Technologies, Alten, Altran, Assystem Technologies, AXISCADES, Belcan, Capgemini, Cyient, eInfochips, Genpact, HCL, Infosys, L&T Technology Services, P3, QuEST Global, Tata Elxsi, TCS, Tech Mahindra, Tata Technologies, Wipro