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Booming services business `on the brink of transformation`

27 May, 2009

Automation services is one the few bright spots in the current economic climate, according to a new report from the ARC Advisory Group, which predicts that the global market for supplier-provided services, which was worth around $17.3bn in 2008, will grow with a CAGR of close to 7% over the coming five years. According to ARC, ABB is the market leader.

“Today, we stand on the verge of an era of transformation for the services business,” says ARC research director, Larry O’Brien. “In the prevailing economic chaos, many end-users find their problems are even worse than before. The pace of job loss in all manufacturing industries in the past few months alone has been staggering.

“Tight operating environments and reduced demand are forcing companies to cut costs wherever possible,” he adds. “Even with the recent collapse in oil prices, projects costs remain high and many end-users have postponed projects. The result is that users rely on suppliers to provide them with a continuously expanding scope and depth of automation-related services.”

End-users no longer have the internal services resources they once had. In the wave of downsizing during the 1980s and 1990s, many either eliminated or reduced the size of their internal automation and control engineering departments – often by 50% or more. With the imminent wave of retiring “baby-boomer” employees and layoffs of experienced workers, end-users are facing increasing challenges when executing projects and conducting day-to-day operations, says ARC.

They are also finding it increasingly difficult to hire qualified personnel, ARC adds, not only in developed markets but also in China, where too few trained and qualified personnel are available despite the large number of engineering graduates produced every year.

Automation suppliers have stepped in to fill the gap. Many experts who are retiring from end-users are finding new careers as consultants and engineers at supplier companies who have increased their application expertise and project execution capabilities to fill the voids left at the end-users.

One of the biggest trends in the past decade has been for automation suppliers to take on the role of main automation contractor, providing a single point of responsibility for all automation-related aspects of a project.

ARC points out that suppliers have the deepest knowledge of their own products and applications, and are also increasing their knowledge of competitor offerings as they focus on competitive migration projects. Many suppliers have also become experts at identifying cost-cutting opportunities in specific industries and applications.




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