Everest Group reports that although a talent shortage exists across the overall engineering, research and development (ER&D) landscape, the supply crunch is much more pronounced for emerging skills, such as cloud engineering, artificial intelligence and machine learning (AI/ML), internet of things (IoT), analytics, cybersecurity, and augmented reality and virtual reality (AR/VR).
According to Everest Group, the exponential growth in the adoption of these next-generation technologies over the next couple of years will cause a huge supply shortage in the software product engineering world.
In the report, The Everest Group report, “Reaching New Frontiers in Experience-centricity and Resilience –Software Product Engineering Services State of the Market Report,” the analyst estimates that enterprises globally spent US$1.27 trillion on engineering in 2020, and more than one-third of that spend was on software product engineering.
Software product engineering has been the fastest-growing segment of engineering spending over the last four years and was the only segment to witness positive growth in 2020, even as overall global engineering spending declined by 2%.
Contributing to sustained software engineering spending are commercial software sellers and internet companies as well as enterprises seeking to augment existing products with software-driven features and functionalities.
Other report highlights
Overall enterprise spend for software product engineering has been growing at a robust pace, reaching approximately US$410 billion in 2020.
The supply crunch in the software engineering talent market is leading to a price war, where enterprises are having to pay a premium rate to access talent skilled in emerging software engineering themes.
The talent shortage in emerging skillsets is also compelling enterprises to explore non-traditional locations to access talent. As a result, nearshore locations have steadily been gaining prominence for talent sourcing.
Cloud engineering has emerged as the biggest spend area for enterprises, with more activity around cloud-native engineering, platformization, carve-outs of legacy products and verticalized solutions.
The software product engineering services market (i.e., outsourcing) has grown at a rate of 16% over the past year to reach approximately US$23.5 billion, which is 5.7% of the overall enterprise spend.
The hi-tech verticals continue to hold a large share of the services market, while the geography split reveals North America to be the largest location.
