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Retiring baby boomers fuel automation services market

08 June, 2007

In an automation market that is riding the crest of a growth cycle, automation services is at the top of the crest and benefiting from several factors that will deliver increasing growth over the coming five years, a new report from the ARC Advisory Group suggests.

"The total services market served by the automation suppliers approached $14bn in 2006, and will grow at an average annual rate of over 12% through to 2011," says the report’s principal author, ARC research director, Larry O’Brien. "Mature markets such as North America and Europe, the Middle East, and Africa (EMEA) constitute the bulk of the market for automation services, but revenue growth will be concentrated in the developing economies of China, the rest of Asia, and Latin America."

O’Brien predicts that, by 2008, the Chinese automation services market will be more than twice as large as Japan’s.

The growth in services is being driven chiefly by the continuing shortfall of skilled labour among end-users.

"Baby boomers" – people born after the Second World War and into the 1960s – are now approaching retirement age. The average age of workers in manufacturing industries in developed countries is already over 50 and many manufacturers have downsized and re-engineered their workforces without apparent thought for the consequences of the upcoming retirement tidal wave, says ARC. At the same time, the average retirement age has dropped to 58 years due, in part, to the re-engineering exercises.

As a result of these changes, users need an increasing level of vertical sector expertise from their suppliers. Most suppliers are finding that hiring well-qualified experts from a wide range of different industries is fairly easy, with key customers often ending up as key employees.

The growing breadth of services being offered by automation suppliers requires an advanced selling approach, ARC suggests. Most large automation suppliers already have dedicated sales teams who are familiar with the concerns of their customers, but the increasingly complex array of services they offer demands a multi-tiered selling approach.

This applies particularly to performance-based services or services related to the adoption of new technologies, such as fieldbus, where there are often different teams for high-level selling, engineering and operations, and maintenance.




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