Digital twins are virtual replicas of physical objects, systems, or processes that simulate their real-world counterparts in real time. They allow users to monitor, analyze, and predict how the actual entity will behave under different conditions. For investors, digital twins can provide valuable insights into performance and potential risks, helping to make better-informed decisions.
model-based systems engineeringtechnical
Model-based systems engineering is a way of designing complex products by creating and using shared digital models rather than relying mainly on separate documents. Like building from a detailed 3D blueprint or simulation that everyone can test and update, it helps catch problems earlier, speed development, and reduce costly surprises. Investors care because it can lower development costs, shorten time-to-market, improve reliability, and make regulatory or integration risks easier to manage.
product lifecycle managementtechnical
Product lifecycle management is the organized process a company uses to guide a product from initial idea through development, launch, ongoing updates and eventual retirement. For investors, it matters because effective management speeds time to market, controls costs, ensures quality and regulatory compliance, and extends a product’s revenue potential — much like a film producer coordinating writing, filming, promotion and sequels to maximize box-office returns.
manufacturing execution systemstechnical
Manufacturing execution systems are software platforms that control, track and optimize what happens on a factory floor in real time — from machine activity and worker instructions to quality checks and material use. Think of it as the factory’s operating system or a conductor that keeps every part of production synchronized; for investors, MES impacts cost control, product quality, uptime and the ability to scale, all of which affect margins and risk.
enterprise resource planningtechnical
Enterprise resource planning (ERP) is a comprehensive software system that helps organizations manage and coordinate their core activities—such as finance, supply chain, human resources, and manufacturing—within a single platform. It streamlines operations by providing real-time information, enabling better decision-making. For investors, ERP systems indicate how efficiently a company runs and can signal its ability to adapt and grow in a competitive market.
application programming interfacetechnical
A set of rules and tools that lets different software systems talk to one another, like a menu and waiter connecting diners to a kitchen so requests are understood and fulfilled. For investors, APIs matter because they enable companies to share data, add features, partner quickly, scale software without rebuilding everything, and create new revenue streams or efficiencies—advantages that can affect growth, costs, and competitive position.
digital threadstechnical
A digital thread is a continuous, organized record of data that follows a product or system through its entire lifecycle — from design and manufacturing to operation and maintenance — so every decision and change is traceable. For investors, a strong digital thread signals that a company can spot problems faster, cut waste, roll out improvements more quickly, and predict maintenance needs, which can lower costs, reduce risk, and support faster revenue growth much like a GPS that keeps all steps of a trip connected and visible.
agent-based systemstechnical
Agent-based systems are computer models made up of many individual software “agents” that follow simple rules and interact with each other and their environment, like a simulated crowd where each person behaves on their own. Investors use these models to explore how complex outcomes—market moves, supply-chain reactions, or the spread of a disease—can emerge from many small interactions, helping to test strategies, estimate risks, and stress‑test scenarios that are hard to analyze with simple averages.
LONDON--(BUSINESS WIRE)--
Enterprises in Europe are rapidly adopting AI-native and software-defined approaches to digital engineering to increase innovation speed, ensure regulatory compliance and achieve sustainable product development, according to a new research report published today by Information Services Group (ISG) (Nasdaq: III), a global AI-centered technology research and advisory firm.
The 2026 ISG Provider Lens® Digital Engineering Services (Large) report for Europe finds that enterprises are repositioning engineering as a core business function to deliver connected products, real-time services and circular value chains. This report evaluates large service providers with annual revenue over $2 billion, and a future report will focus on midsize providers.
New engineering approaches reflect evolving product lifecycles and the need to modernize legacy environments without compromising traceability or sustainability. Organizations are embedding AI, digital twins and structured engineering practices into workflows to improve efficiency, quality and governance. This practice also helps companies address fragmented data landscapes and evolving skill requirements.
“European enterprises are becoming more innovative and competitive by changing their approach to engineering,” said Dorotea Baljevic, director at ISG. “Many partner with large service providers that offer deep domain expertise, large-scale delivery and AI governance capabilities.”
Enterprises in Europe are embedding AI across development lifecycles to move toward autonomous and adaptive operations. Deploying agent-based systems and closed-loop optimization across design, production and service environments is enabling faster decision-making without compromising strict standards for explainability, validation and certification readiness. Enterprises are also investing in large language model operations and machine learning operations frameworks to ensure model governance, data lineage and risk control in regulated sectors.
European organizations are adopting model-based systems engineering and digital twins to shorten development cycles and improve product quality. Simulation-led validation and early-stage testing reduce reliance on physical prototypes and maintain auditability, while digital twins of products, manufacturing systems and field operations provide real-time insights into performance and risks. These capabilities help enterprises respond to supply chain disruptions and energy volatility and improve time to market.
Enterprises across Europe are modernizing legacy environments into modular and interoperable architectures to improve scalability and integration. Organizations are replacing product lifecycle management, manufacturing execution systems and enterprise resource planning platforms with cloud-based data fabrics and application programming interface-driven frameworks. This transition reduces system complexity and improves interoperability while enabling faster release cycles. At the same time, enterprises are establishing digital threads that connect data across the product lifecycle to support compliance, warranty analysis and sustainability initiatives, ISG says.
“Enterprises are aligning engineering transformation with business outcomes and regulatory expectations,” said Srinivasan PN, senior lead analyst at ISG and lead author of the report. “They are working with providers that offer modular delivery frameworks, governed AI and lifecycle traceability to enable faster innovation and sustainable growth.”
The report also explores other European trends in digital engineering services, including the increasing focus on digital thread implementations for end-to-end lifecycle visibility and the growing use of cross-functional, product-centric workforce models.
For more insights into the digital engineering-related challenges faced by enterprises in Europe, plus ISG’s advice for overcoming them, see the ISG Provider Lens Focal Points briefing here.
The report evaluates the capabilities of 26 providers across three quadrants: Augmented Design and R&D Services, Intelligent Operations and Connected Experiences and Integrated Platform and Application Services.
The report names Accenture, Akkodis, Capgemini, Cognizant, HCLTech, Infosys, TCS and Wipro as Leaders in all three quadrants. GlobalLogic, NTT DATA and Tech Mahindra are named as Leaders in two quadrants each.
In addition, Alten is recognized as a Rising Star — a company with a “promising portfolio” and “high future potential” by ISG’s definition — in two quadrants. CGI and Tech Mahindra are named as Rising Stars in one quadrant each.
In the area of customer experience, HCLTech is named the global ISG CX Star Performer for 2026 among large digital engineering service providers. HCLTech earned the highest customer satisfaction scores in ISG's Voice of the Customer survey, part of the ISG Star of Excellence™ program, the premier quality recognition for the technology and business services industry.
A customized version of the report is available from Akkodis.
The 2026 ISG Provider Lens Digital Engineering Services (Large) report for Europe is available to subscribers or for one-time purchase on this webpage.
About ISG
ISG (Nasdaq: III) is a global AI-centered technology research and advisory firm. A trusted partner to more than 900 clients, including 75 of the world’s top 100 enterprises, ISG is a long-time leader in technology and business services that is now at the forefront of leveraging AI to help organizations achieve operational excellence and faster growth. The firm, founded in 2006, is known for its proprietary market data, in-depth knowledge of provider ecosystems, and the expertise of its 1,600 professionals worldwide working together to help clients maximize the value of their technology investments.
