Despite interruptions in global markets due to the Covid-19 pandemic, the demand for simulation and test data management systems has continued to grow due to consistent demand from key consumer industries. Some of the key end-user industries for the market include the automotive industry, the aerospace industry, the defence sector, the healthcare sector, the electronics and information technology industry, building and construction, the energy sector and certain other public utilities. Though the pandemic has had varying effects on most of the above-mentioned industries, the simulation and test data management systems market is estimated to be valued at USD 525.5 million in 2021 and will grow by almost four times to USD 2.06 billion by 2031.
The key driver behind the rising demand for simulation and test data management tools is increasing automation and digitisation in most industries. This is since along with the need for automation and digitisation comes the need for simulation and test data management systems, failing which companies may face cost and time overruns due to poor data management. Simply put, the increase in data being accessed and processed by companies increases the risks associated with data loss and data theft, thus making data management systems an imperative for profitability. As a result, the simulation and test data simulation software segment dominates the market in terms of solution type with 45.5 percent of the market share in 2021.
Correspondingly, technological developments in the information technology sector help enhance the capabilities of simulation and test data management systems. In the recent past, simulation and test data management systems have been leveraging the growth in cloud computing technology to expand its product range and provide more nuanced solutions. Going forward, the market is keenly awaiting and researching developments in fields such as artificial intelligence (AI), machine learning (ML) and internet of things (IoT) technology. Furthermore, along with expanding capabilities, key manufacturers of simulation and test data management systems are also banking on increasing technology dissemination to make products more efficient and affordable.
Going beyond generalisations to maximise growth
Despite the overall positive outlook for the market, market players need to be aware of several other dynamics that have the potential to affect profitability and market shares in the coming decade. Key among these dynamics is shifts in macroeconomic factors that will affect consumer industries. The single largest macroeconomic factor in present times is the Covid-19 pandemic. The pandemic is notable not only in terms of industries and sectors it has affected, the effects of which will continue to be felt for the most part of the coming decade but also in terms of accelerating shifts in regional consumption patterns.
The Covid-19 pandemic has severely hit the automotive industry. The effect of Covid-19 on the automotive industry is significant since the industry consumes almost 30 percent of all simulation and test data management products and services; the industry has also been the leading driver of the market’s growth in the recent past. To put this in perspective, consider that the healthcare sector, which is likely to witness tremendous growth in the near future, so far accounts for less than 10 percent of the simulation and test data management market. Another key industry adversely affected by the effects of Covid-19 is building and construction. Thus, manufacturers will need to account for these shifts in the near future.
In regional terms, the North American regional segment accounts for almost one-third of the total market share with the US alone holding approximately 25 percent to 30 percent of the total market share in 2021 with a value of USD 142 million. While the automotive sector has been the bedrock of the North American simulation and test data management market, the aerospace and defence sector too has been an important end-user industry. Thus, despite the struggles of the automotive sector, the high technology dependency of the sector, coupled with intake by other key industries, will result in the market growing at a CAGR of around 10.6 percent over the next ten years.
The Middle East and Africa segment is the only regional segment where the automotive industry does not lead all other industries by a large margin. This is since the aerospace and defence segment stands fairly close to the automobile segment in terms of value of product and services. This can be attributed to the vibrant aerospace and defence industry in the Middle East, especially in Israel, which has translated into the region being a trend-setter in modern drone-based warfare and other affiliated weapons systems technologies. However, this dynamic fails to get reflected in a broad overview of the simulation and test data management market since the Middle East and Africa segment is the smallest segment for the market, accounting for just over 5 percent of the market’s total value.
Along similar lines, the gap between the automotive segment and aerospace and defence segment is a lot narrower in Europe and South and South East Asia when compared to North America. However, a key difference between the aerospace and defence industries of Europe and South and South East Asia is that the European industry is more commercialised and export oriented, while the industry in South and South East Asia mainly caters to national security requirements in given countries. Thus, going forward, just as the Israeli aerospace and defence industry fuels a security dilemma in the Middle East that increases the demand for simulation and test data management systems, growing Asian powers like China and India will fuel demand for simulation and test data management systems in their own respective aerospace and defence industries, as well as in their respective neighbourhoods.
In terms of opportunities for manufacturers, the East Asian and South Asian segments are likely to be the most lucrative. In East Asia, where there is a high uptake of simulation and test data management tools in the electronics and information technology industry besides the automotive sectors, China remains a bright spot. The country is one of the few major economies to have registered growth in 2020 despite the pandemic and this trend is slated to accelerate industrial consumption of advanced technologies, including simulation and test data management systems. Going forward, it is projected that China will create incremental opportunities amounting to USD 151.7 million for the simulation and test data management market over the next ten years.
Besides East Asia, another region that has been improving its digital infrastructure at a rapid pace is South Asia, South East Asia and the Pacific Islands. Though the value of this segment is currently only around 10 percent of the global market share, i.e. less than a third of the North American segment, the region holds huge potential, mainly on account of growing consumption from the aerospace and defence industry, the hydrocarbon industry, energy utilities and healthcare sectors. To put this in perspective, consider that India, which is sometimes viewed as a yardstick for industrialisation in the region, is expected to create incremental opportunities worth over USD 219 million in the coming decade on account of growing adoption of technology and digitisation in various manufacturing sectors.
Besides these regional opportunities, a huge opportunity for manufacturers of simulation and test data management systems lies in the form of a largely untapped market among small, medium and micro enterprises (MSMEs). As technology dissemination and digitisation among smaller companies increases, more and more MSMEs are going to adopt data management systems. Due to this, it is estimated that the MSMEs segment of the simulation and test data management market will grow at a CAGR of 16.7 percent from 2021 to 2031 and create incremental opportunities for manufacturers to the tune of around USD 781million.
Conclusion: Informed decisions hold key to maximising growth
While it is now commonly acknowledged that most markets that depend on consumer industries will grow depending on the pace of recovery of industries from the effects of the Covid-19 pandemic in their respective countries, the estimated time periods of recovery of particular industries and individual countries varies widely. As a result, there are several shifts that will be witnessed by the simulation and test data management market despite the overall growth. Manufacturers and other players in the market need to account for these shifts in their decision making processes to maximise their potential. Furthermore, the growing adoption of simulation and test data management software also means that the market’s services segment will grow rapidly. It is estimated to outpace the growth of the overall market and grow at a CAGR of 17.3 percent over the coming decade.