Industrial asset management revenues projected to jump 63% over seven years
London, U.K.—Revenues for industrial asset management (IAM) software licenses are projected to increase by 63.8% from $355.7 million in 2002 to $582.8 million in 2009, according to a recent study, “Analysis of the Industrial Asset Management Market,” by Frost & Sullivan.
London, U.K.— Fueled by an ongoing need for reduced costs and increased flexibility, an upbeat mood in Europe’s industrial asset management (IAM) market was confirmed in a recent study by Frost & Sullivan , an international consultant and research firm. The study, “Analysis of the Industrial Asset Management Market,” found that revenues for IAM software licenses are projected to increase by 63.8% from $355.7 million in 2002 to $582.8 million in 2009.
However, Frost & Sullivan warns that sentiments in the IAM market may sour if enterprise resource planning (ERP) suppliers flock to this buoyant industry. ERP suppliers may seek to reap returns with their own IAM variations by synchronizing their business systems to create an industrial bias in alignment with plant-floor control. The study points to a potential danger of the established IAM sector being increasingly sidelined as more business-oriented solutions encroach on its turf.
Another concern is that corporate decision-makers are often reluctant to invest in production facilities due to the high cost of implementing solutions on a plant-wide basis. As a result, many industries make their annual investment gradually, with little prospect of a major investment being made in any one year.
From its roots in computer maintenance management software (CMMS), modern industrial asset management (IAM) solutions have evolved to form the next step in the development of efficient industrial and manufacturing production, says Frost & Sullivan. IAM enables companies to enhance operations by combining manufacturing or process agility with the ability to synchronize maintenance and operational requirements. Also, modern asset management solutions can help eliminate unscheduled and costly downtime, and aid predictive, planned maintenance that prevents unnecessary disruptions.
“However, this situation is expected to change as prospective customers' senior management realize the benefits and value that can be gained by embracing and installing an IAM solution into their business procedures,” says Brian Flannery, Frost & Sullivan’s industry analyst.
The research firm projects that companies seeking to invest in the health and efficiency of their operational procedures will sustain momentum behind growth in the European IAM market. The industry is still in the early stages of its development lifecycle, and has constant introductions of new software that is increasingly “web-architected.”
Frost & Sullivan adds that many companies are looking to outsource non-core areas of activity to third party contractors, who specialize in particular areas of expertise, namely plant production and maintenance. Outsourcing service agreements to third party contractors enables the company to limit or cap expenditures to a known, fixed amount each year, and share the risks associated with day-to-day operations. Outsourcing also allows them to relinquish training of staff regarding new technology and equipment, as well as other potentially costly human resources responsibilities. The study emphasizes that investing in an IAM solution plays a key part in enabling a company to benefit from the supplementary value-added services that outsourcing to a service provider can offer.
“At present, suppliers of IAM solutions are having to absorb any price increases they may wish to implement due to competitive price pressure. Only vastly superior products will be able to see any increment in prices. However, this is expected to change in future years, when greater system comparisons can be made amid more widespread standardization of solutions,” adds Flannery. In particular, large suppliers may look towards increasing standardization of their software and hardware products, and improving the ability to plug and play 'out-of-box' solutions in an effort to keep system prices low. Smaller companies would be expected to concentrate efforts on core competencies, and surviving by focusing on improving their expertise and services in specialized or niche market areas.
In addition, the study found that strong investment from many application industries will make Tier One customers increasingly scarce as the market matures. However, Tier Two customers and below should maintain overall demand in light of sustained and strong growth rates forecast for this market as developments continue in all application areas and fuel a period of expansion.
Also, the oil and gas industry takes first place as the largest user of IAM solutions in Europe, accounting for 17.6% of total European revenues in 2002. As the oil and gas industry is truly global in its operations, high-level management demands information and knowledge of processes from around the globe.
Despite a tendency toward commissioning smaller projects in manufacturing, this sector is expected to increase to 17.0% of the IAM market towards the end of the forecast period in 2009. The saturation of larger projects assigned to Tier One companies from several other application sectors is mainly responsible for the growing importance of the manufacturing sector in the overall IAM market.
“The primary driver behind growth in every one of the 11 application sectors analyzed in Frost & Sullivan’s study is the ability to reduce costs. All companies are seeking to reduce and/or fix operating costs while increasing business flexibility. Modern asset management solutions enable the optimization of a processing or manufacturing facility, improving asset/plant performance to maximize revenue yet minimize cost,” adds Flannery.
Control Engineering Daily News Desk
Jim Montague, news editor