industrial services market - a new business frontier for profitability
TRANSCRIPT
Industrial Services - A New Business Frontier for Profitability
Niranjan Paul, Research Analyst
Industrial Automation & Process Control
01 July 2014
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Today’s Presenter
Experience in the field of consulting and market research across the
Industrial Automation and Process Control Division. Particular expertise in
the European Pumps, Valves and Compressors (PVC) segment and
specialize in conducting growth consulting research studies and
generating market focused intellectual property. During my time away
form work, I love to read and also find that cycling during the weekends
keeps me refreshed.
Niranjan Paul, Research Analyst
Frost & Sullivan
India
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Contents
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Market Overview—Executive Insights, Drivers and Restraints1
Market Analysis2
End User Snapshot3
Key End User Requirements4
Key Selection Criteria by Country5
Roadmap for the Future6
How Does it Fit into the Industrie 4.0 Perspective? 7
Q&A8
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Scope of the Briefing
Product Segmentation End-user Segmentation
• Oil & Gas
• Chemicals & Petrochemicals
• Food & Beverage
• Water & Wastewater
• Pharmaceuticals
• Metals & Mining
• Power Generation
• Others (Pulp & Paper, Marine, etc.)
• Pumps
• Industrial Valves and Actuators
• Compressors
• Electric Motors
• Electric Drives
• Industrial Gearboxes
• Industrial Automation
Services Segmentation
Installation & Commissioning
Training
Spare Parts & Consumables
Maintenance
Repairs
Engineering & Consulting
Advanced Services
Extensions, Upgrades & Retrofits
End of Life Services
Replacement
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Market Overview—Executive Insights
Maintenance as a strategy
Emphasis on advanced services
Adoption of integrated solutions
Emphasis on on-site training
Growth Opportunities
CEO 360 Vision
CEO 360 Vision
Industrial services is expected to shape new business models of major industrial vendors
Industrial vendors are striving to widen their service portfolio to be recognized as a service solution provider
Industrial vendors are expected to be establish service centres as close to their customers as possible
Competitive Landscape
End-users Perception of Services & Opportunities for Vendors
Snapshot of the Industrial Services Market
Major service providers Market Share
Industrial Vendors OEM More than 3/4th of the global industrial services market in 2013
Service Companies
EPC
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Market Overview—Drivers and Restraints (Current and Future)
Denotes long-term impact Denotes current impact
Driv
ers
Re
stra
ints
Driv
ers
Re
stra
ints
Increasing emphasis on improved asset utilisation
Greater technical complexity of installed equipment
Standardization of price and quality across
manufacturers
Conservative mind-set leads to slow
technology adoptionReduction in greenfield investments
Increased competition from low-cost service companies
Industrial Services Market: Key Drivers and Restraints, Europe, 2013–2018
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Market Overview—Key Trends
Market Trends
Increased end-user focus on establishing
longer service contracts
Increased end-user
outsourcing
Proliferation of non-genuine spare parts
Maintenance
Manager of a
Global Pulp and
Paper Company
“Everything to do with product
maintenance is outsourced either to
equipment manufacturers or local service
providers.” Factory
Manager of a
Global Food &
Beverage
Company
“Quality of service is the most
important factor in the food and
beverage industry. If a baby dies
anywhere in the world due to our
product, that would be the end of
our company. So, we prefer to
establish long service contracts.”
Industrial vendors should capitalize on the increased end-user outsourcing of maintenance and service requirements and the requirement for extended service contracts to build long-lasting relationships with their clients.
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Market Analysis
25.3%
8.3%
28.9%
7.3%
5.6%
5.8%
18.8%
Pumps Valves Compressors
Electric Motors Electric Drives Industrial Gearboxes
Industrial Automation
0
5
10
15
20
25
30
2013 2018
Reven
ue (
€B
illi
on
)Year
Industrial Services Market: Percent Revenue Forecast by Product Type,Europe, 2013
Industrial Services Market: Revenue Forecast, Europe,
2010–2018CAGR = 5.7%
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Market Analysis (Continued)
Industrial Services Market: Percent Revenue Forecast by Service Type,
Europe, 2013
17.3%
1.9%
23.4%
14.9%
12.8%
4.2%
9.3%
7.0%3.0%
6.2%
Installation & Comissioning Training
Spare parts & Consumables Maintenance
Repair Engineering & Consulting
Advanced Services Extensions, Upgrades & Retrofits
End of Life Services Replacement
High
Medium
Low
• Spare parts &
Consumables
• Advanced
Services
• Replacement
• Repair
• Engineering &
Consulting
• Extensions,
Upgrades & Retrofits
• Training
• End-of-life
Services
Service Type – Growth Potential Chart, Europe, 2013
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Examples:Water and Wastewater, Pulp and Paper, Marine, Metals and Mining, etc.
Examples:Oil and gas,
Power Generation, Chemical and Petrochemical, Food and Beverage, Pharmaceutical
Industrial Services Market—End User Snapshot
Industrial Services Market: End User Profile, Europe, 2014–2018
Critical Infrastructure Industries
End-user CharacteristicsRoadmap for Service
Providers
Focused mainly on the quality of services provided, and not on its price
Willing to adopt new technology, but only after stringent tests have been completed
Prefer outsourcing of non-core maintenance and service requirements
Wide service portfolio with capability to provide advanced
services
Skilled service personnel with high degree of technical expertise
Non-critical Infrastructure Industries
The sovereign debt crisis in Europe has increased price sensitivity among customers
Focused mainly on the price of services offered
Conservative nature pertaining to adoption of new technology
Educate the customer on the benefits of advanced services
Provide services at competitive prices
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Industrial Services Market—Key End User Requirements
Analysis
Key End User Requirements
Quality is an indispensable factor that remains critical in curtailing
plant downtime
Key Unmet Needs
Owing to stringent market conditions, end users prefer service
providers with a holistic solution
Increasing complexity of applications is expected to drive the need of skilled service providers
End users need low-cost service providers to cater to majority of non-critical and general servicing
Close proximity to end-users facilities is crucial to ensure promptness of services
Dearth of competent in-house manpower demands the need for end users to look out for regional service providers
Multi-vendor capability is an important factor as it minimizes time and resources spent in handling vendors/service providers
Possessing wide variety of skills amongst the service providers is slowly turning into a prerequisite
Focus on energy efficiency raises the demand for efficient services. Lack of in-house expertise makes service providers an indispensable option
Data analytic services coupled with systems performance monitoring solutions are areas that pose to have immense potential but remain untapped
The evolving manufacturing processes brings about high levels of complexities, combined with the increasing emphasis on improving plant profitability and reducing downtime. All these factors are more likely to steer the growth of services.
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Industrial Services Market—Key Selection Criteria by Country
Industrial Services Market: Key Selection Criteria by Country, Europe, 2013
As cash reserves lessen and markets move eastwards, end users in Russia are looking at Services to contribute towards stabilizing their productivity rate
Advent of digital technologies and relentless focus on maximizing return on investment promotes the growth potential of external service providers
End-user’s focus on asset optimization services is pivotal to steer the growth of services market in Denmark, Finland, Norway and Sweden
End-user requirement for advanced monitoring solutions and the establishment of service centers within France is
expected to result in growth opportunities
Economic sluggishness coupled with realization of merits in reducing carbon footprint have led services to play a key role in plant upgrading activities
Quality is an indispensable factor. End-users in Germany are willing to pay a premium for quality service in order to curtail downtime
0
1
2
3
4
5Germany
France
UK
Italy
Scandinavia
Russia
Quality of Service Response time
Service Portfolio Reputation/Brand Recognition
Geographic location Price of Service
Multi-vendor capability
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Service Provider
Localized Service Presence
Training - Cost or Profit Center?
Industry Convergence
Spare parts – Genuine vs Pirated
Capitalization of End-user Outsourcing
Effective leveraging of diminishing talent pool
Industrial Services Market—Roadmap for the Future
The aftermarket segment is going to provide significant growth opportunities for marketparticipants during the next 5 years; industrial vendors should ensure that they enhance theirservice portfolio and widen their service presence, thereby enabling them to be viewed as asolution provider.
Industrial Services Market: Roadmap for the Future, Europe, 2014–2018
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Industrial Services – How Does it Fit into the Industrie 4.0 Perspective?
Product Services
Asset Services
Plant Services
Ecosystem ServicesThe amalgamation of Internet of Services with the Internet of Things will give birth to a new cloud-based maintenance and service model , that is poised to transcend plant operation and help improve efficiency across the enterprise.
The dynamics of the emerging service framework will create new seats of ownership in the value-chain of industries
Comprehensive asset services that are product neutral will be a key segment of opportunity for expansion in the future.
Services to become an exclusive entity with little or nodependence on product sales. This will give rise to a newbusiness model that will promote “product as a service”
The focus on service as the new business model has gained considerable traction in the developed world. The trends of plant outsourcing and value-added services have disrupted traditional business strategies of industrial vendors, resulting in major transformations across the value-chain. In the current context, the business model of services is at a crossroads. With the advent of I4.0, the service proposition is expected to grow in complexity, necessitating a need for discerning end-user needs in line with the vision of I4.0.
How are end-users planning to approach
service partnerships in future?
Will increasing service needs decline end-user stakes in production?
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For Additional Information
Julia Nikishkina
Communications Executive
Industrial Automation & Process Control
+7 (499) 213 0156 [email protected]
Niranjan Paul
Research Analyst
Industrial Automation & Process Control
(+91) – 44-6681 4030
Sivakumar Narayanaswamy
Research Manager
Industrial Automation & Process Control
(+91) – 44-6681 4038
Muthukumar Viswanathan
Practice Director
Industrial Automation & Process Control
(+44) – 20-7915 7804