INNOVATION AS A SERVICE MARKET SIZE AND SHARE ANALYSIS - GROWTH TRENDS AND FORECASTS (2023 - 2030)

Market Challenges And Opportunities

• Cultural challenges of embracing open innovation
• Concerns over data security and IP protection
• Geographic constraints in scaling global innovation

Innovation as a Service Market Drivers:

• Increasing Focus on Core Competencies: Companies are increasingly focusing on their core competencies and outsourcing other functions to specialized service providers. Developing innovative products and solutions requires significant investment in R&D, resources, and capabilities. Many companies find it challenging to build all innovation capabilities in-house. Outsourcing innovation services allows them to tap into on-demand expertise, assets, and infrastructure to accelerate innovation. This is enabling companies to focus on their core offerings.
• Need to Accelerate Product Development Cycles: Shortening product development cycles is critical for companies to keep pace with the dynamism of markets today. Reliance solely on internal R&D limits the ability to accelerate innovation. Collaboration with agile startups and research networks via the innovation as a service model allows access to newer technologies and solutions at a faster pace. Companies can leverage collective expertise to ideate, prototype, develop, and launch products faster. 
• Growing Complexity of Technologies and Shorter Technology Cycles: The growing complexity of technologies like AI, ML, blockchain, quantum computing, etc., makes it difficult for companies to build all capabilities in-house and several changes are also increasing with the emergence of new technologies. This requires companies to continuously invest in new capabilities and assets. Innovation as a service provides access to specialized expertise in complex futuristic technologies without significant in-house investments. It also allows companies to keep pace with shorter technology cycles. For example, the emergence of hyper-scale cloud platforms has accelerated the product development lifecycle. Companies are leveraging cloud-based agile innovation models to quickly prototype and test solutions. The growing gap between the complexities of future technologies and internal capabilities will continue to fuel the adoption of external innovation services.
• Cost Optimization and Increased R&D Productivity: Maintaining large internal innovation teams and R&D infrastructure leads to escalating costs and lower productivity. Innovation as a service provides access to on-demand innovation capabilities in a pay-per-use model, thus reducing the costs of innovation. It also provides access to a wider range of expertise and ideas, thus improving R&D productivity. Companies are increasingly embracing these models to optimize their innovation investments and outcomes.

Innovation as a Service Market Opportunities:

• Leveraging Collective Expertise and Collaboration: Innovation requires out-of-the-box thinking and the exchange of diverse perspectives. Companies are increasingly realizing that innovation cannot happen in silos. Partnering with innovation networks, startups, universities, and expert freelancers through open-service models provides access to collective knowledge and creativity. This diversity of expertise and perspectives can open up unseen possibilities to fuel breakthrough innovations.
• In April 2020, HCL Technologies Limited, a multinational information technology company, partnered with IBM, a multinational technology corporation to bring an innovation-as-a-service model to help enterprises accelerate their digital transformation journeys. It combined IBM's enterprise cloud and cognitive solutions with HCL's implementation services.
• Unlocking the Potential of Emerging Technologies: Emerging technologies like AI, ML, AR/VR, 3D printing hold tremendous disruptive potential but also require new expertise and capabilities. While individual companies may struggle to build capabilities, collectively tapping into innovation networks can help accelerate unlocking the potential of these technologies.
• Faster Experimentation and Minimum Viable Products: Innovation requires testing multiple ideas quickly to discover the optimal solutions. However, prolonged internal product development hinders rapid experimentation. Collaboration with startups and expert networks through innovation services allows quick prototyping and testing of minimum viable products.
• Geographic Expansion and New Markets: Expanding into new geographic and product markets requires an understanding of diverse customer needs, regulations, and ecosystems. Building this expertise internally can be resource-intensive and facilitates the creation of global collaboration networks. Companies can form partnerships, joint ventures, or collaborations with local businesses, research institutions, and startups, enhancing their ability to innovate by leveraging a wide range of expertise. In June 2021, Tech Mahindra, an Information Technology Company partnered with Pega, an American software company, to offer innovation-as-a-service solutions to help clients accelerate their digital transformation and deliver enhanced customer experiences.