Suppliers’ automation services to approach $15 billion by 2008

Dedham, MA—The worldwide market for supplier-provided automation services is expected to grow at a 9.1% compounded annual growth rate (CAGR) during the next five years, from $9.2 billion in 2003 to close to $15 billion in 2008, according to a new stidy by ARC Advisory Group.

10/19/2004


Dedham, MA— Services delivered by suppliers is the fastest growing segment in today’s automation market because the reservoirs of engineering expertise that used to exist at major end-user companies have shrunk to critically low levels, according to new research by ARC Advisory Group .

p their plants running.

Consequently, the worldwide market for supplier-provided automation services is expected to grow at a 9.1% compounded annual growth rate (CAGR) during the next five years, from $9.2 billion in 2003 to close to $15 billion in 2008, according to ARC's latest study.

'More suppliers today are taking on the task of supervising entire automation implementation projects, and acting as the main automation vendor or supplier that coordinates activities between the systems integrators, smaller suppliers, and the user. This simplifies things for the user because the main automation supplier provides one point of responsibility for the success of the project, which saves time and money,' says Larry O'Brien, ARC's research director, and principal author of ARC's ' Supplier-Provided Automation Services Worldwide Outlook .'

Enabling sustained improvements
While project services are increasingly outsourced to automation suppliers, the real benefits for users lie in increasingly varied after-market services being offered. Users are focusing more than ever on achieving superior return on assets and asset utilization. This also means driving optimum levels of performance from the control system and the automation and plant or factory equipment infrastructure. Again, automation suppliers are stepping in to fill this void with a range of products and services designed to help users achieve real-time performance management (RPM).

Fighting sagging hardware margins
Adoption of standard, commercial-off-the-shelf (COTS) products and components has drastically reduced the cost of hardware, and eliminated most of the proprietary, competitive advantage that automation suppliers could build into their hardware. With hardware no longer a competitive differentiator, suppliers have looked to their software and service offerings, as well as vertical industry expertise, to make up for the losses experienced in the hardware business. The scope of services offered has widened considerably over the past several years. Services have emerged as a lucrative business addition. When coupled with areas requiring high-domain expertise, services can generate high margin business for suppliers.

China's opportunities, challenges
In addition, suppliers are finding it a challenge to keep up with demand in China, and the sheer volume of new plant and factory construction is expected to continue at a healthy pace through the next five years, barring any unforeseen actions by the Chinese government to slow growth. At the same time, users in China are demanding many of the latest technologies, and are investing heavily in education and training of their workforce to be able to use advanced technologies effectively.

Conversely, users in China and the rest of Asia are known for being very price conscious, making it difficult for suppliers to actually make money off many of the large-scale projects they are bidding on in China. Many automation suppliers lament that while the majority of revenue growth for their services business comes from China, they still make most of their profit in developed markets such as North America and Europe.

Control Engineering Daily News Desk
Jim Montague, news editor
jmontague@reedbusiness.com





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