Industrial Services in Europe

Opportunities in European Industrial Services:

A Frost & Sullivan Insight

Muthukumar Viswanathan

Practice Director, Industrial Automation and Process Control

27th Nov, 2013

SPS IPC DrivesSTRICTLY CONFIDENTIAL

“We Accelerate Growth”

Contents

About Frost & Sullivan 3

Introduction 9

Industrial Services - Market Snapshots 13

Project Highlights 22

3

About Frost & Sullivan


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9

Introduction


Industry 4.0

A Deep Dive

10

Industry 4.0

Technology

Processes

Collaboration

Wireless Intelligence

Ethernet-based IP Devices

Cloud Platforms

Digital Manufacturing

Intra-discipline Integration

Social Innovation

IP Centralisation

Mass Customisation

Sustainable Manufacturing

Lifecycle Assessment

Industrial Revolution 4.0 - Pursuits

• Product Innovation

• Increased Collaboration

• Operational Process Enhancement

• Cyber-Physical Production

Industrial Revolution 1.0 – 3.0

• Mechanical Production

• Mass Production

• Production Automation

� Convergence of applications will form

crux of new advancements

� Energy efficiency and sustainability to

gain greater business focus

� Greater presence of mobility and web-

based information systems

Strategic Trends

The term “Industrial” in this context, refers to

all segments within the industrial world

associated with discrete/process industries. It’s

scope is inclusive of enterprise applications in

the board rooms to manufacturing production

units in the shop floor.


Automation Trends: Shaping the Future of Factories

11

Cyber SecurityCyber Security

Cloud ComputingCloud

ComputingWireless

IntelligenceWireless

Intelligence

Big Data & Mobility

Big Data & Mobility

Enterprise Integration

.

Enterprise Integration

.

Integrated Industry Integrated Industry

Product Lifecycle

Management

Product Lifecycle

Management

Supply Chain

Innovations

Supply Chain

Innovations

Service InnovationsService

Innovations

Key TakeawayKey Takeaway

End user quest forinnovation, excellence andreduced time-to-marketneeds is poised to alterbusiness landscape andimpact vendor fortunes.High competitive pressuresis resulting in end-user'squest to reduce total costof plant ownership, shapingfuture factories besidesproviding the servicesmarket with impressivegrowth opportunities in thenext-generation enterprise.

Industry 4.0 is likely to usher in a new manufacturing paradigm resulting in increased in industrial productivity

Industrial Automation Trends: Factors Shaping the Changing Industry Landscape

Frost & Sullivan Analysis


Industrial Services

The New Growth Frontier for Innovation and Profitability

12

Source: Frost & Sullivan analysis.

Industrial Services provides a new arena for end-users for improving productivity and maximising profitability in a

highly competitive global industrial landscape

Drivers Challenges

Push for operational excellence Dearth of skilled workforce

Maintenance as a Strategy Concerns on cyber security

Regulatory compliance Demand for holistic services

Mapping Potential for Industrial Services

The huge demand for services in the automation

space is a bellwether for the potential of the

industrial services market on a large scale

Areas of Service Growth

Predictive Maintenance

Energy efficiency

On-demand Services

Cyber Security

End-user Perspective: Factors Favouring Services

13

Industrial Services – Market Snapshots


Automation Services

Precursor to the Untapped Service Market in Industrial Markets

Drivers Challenges

Push for operational excellence

Dearth of skilled workforce

Maintenance as a Strategy Concerns on cyber security

Regulatory complianceDemand for holistic

services

Major service end-user segments

Market Share

Oil & gas More than 66% of the global automaton services market in 2012

Chemicals

Power generation

78%

11% 7% 4%

Global Automation Service Market, 2012, Competitive Structure

Top IA Vendors

Niche service providers

System integrators

Regional vendors

Key Technology Trends

Demand for retrofits and upgrades in mature markets of Europe and North America will boost demand for services

Simulation modelling and advanced process controlsolutions are poised to likely to become an indispensable part of value-added services expected from end users

Remote monitoring, diagnostics, and remote maintenance in critical infrastructure industries, are likely to be next major avenues for growth in the global automation services market.

Major automation vendors are increasinglyadopting a pro-service approach that aims to deriveprofits out of value-added services in the long term.


Automation Services

An Analysis

38%

15%17%

30%

Global Automation Service Market, 2012, Revenue by Service Type

Project & InstallationConsultingOperational Improvement

Global Automation Service Market, 2012, Revenue by Product Type

Consulting services is estimated to be the fastest-growing segment in the global automation services market.

Continuous service capabilities facilitating energy efficiency and cyber security are poised to be in demand over the forecast period.

Value-added Services

Reliability-centred maintenance

Energy efficiency

On-demand Services

Cyber Security

DCS42%

SCADA17%

PLC13%

MES11%

Others*17%

Automation Services, 2012

Revenue Estimates

$15.2 bn

Note: Others* includes EAM, APC, SIS, etc.Key Takeaway: Mapping Overall Plant Maintenance Requirements

The huge demand for services in the automation space is a bellwether for the potential of the industrial servicesmarket on a large scale

Types of Services


New Service Framework Set to Redefine DCS Business Model

38%

15%17%

30%

Global Automation Service Market, 2012, Revenues by Service Types

Project & Installation

Consulting

Operational Improvement

Maintenance & Support

Consulting services is

estimated to be the

fastest-growing segment

in the global automation

services market.

Automation Services, 2012

Revenue Estimates DCS Segment

$15.2 bn $5.84 bn

Key Takeaways (For DCS Vendors)

New Service Framework

Continuous service capabilities facilitating energy efficiency and cyber

security are expected to form the new service framework influencing DCS

business models in industries.

Realigning Current Service Offering

Project & installation cost are expected to witness a decline in value as the

service framework offered by vendors are being reframed with higher

weightage towards after-sales service offering.


Motors & Drives Services Market

Market Indicators

15.1%

21.0%

23.9%

35.0%

5.0%

European Motor Services Market, 2012,

Technical Consulting

Motor Management

Installation & Commissioning

Maintenance & Repairs

Others

38.9%

29.2%17.9%

14.0%

European Repairs & RefabricationMarket for Electric Drives, 2012

Repair & Maintenance

Refabrication

Technical Consulting

Total Drives Management

Drivers Challenges

Macroeconomic challenges drive service investments

Limited availability of integrated service portfolio

Maximising asset utilisation

Shortage of skilled workforce

Maintenance as a profit strategy

Emergence of low-cost service providers

IndustryEnd-Users

Direct Consultants

Service Partners

Private ServiceProviders

Motor/Drive Manufacturers

Global Motors & Drives Market: Services Channel Analysis, 2012

Percentage Sales Breakdown by Service Type


Services in Motors & Drives Market

Trends, Opportunities & Unmet Needs

Analysis

Relevant Trends

Energy efficiency

High market fragmentation

Complex operational needs

Comprehensive integrated

service portfolio

Vendor-specific service

offerings

Effective after-sales service

strategies

Predictive and preventive

maintenance strategies

Remote monitoring

diagnostics

Unmet Needs

Energy optimisation

Increased complexity

Skilled labour requirement

Demand for one-stop solution

providers

Multi-vendor servicing

capability

Lifecycle management

Reliability engineering

Enhanced communication

capabilities

The emergence of complex manufacturing processes, combined with the increasing emphasis on improving plant

profitability and reducing downtime will steer the growth of services in the global motor and drives market.


Industrial Gearbox Services

Key End User Requirements – Selected Quotes

Types of Service Provided

Reaction Time

Time to Deliver

Reputation/ Brand Recognition

Geographic Location

Measurement

Low High

Low High

Low High

Low High

Low High

1 52 3 4

1 52 3 4

1 52 3 4

1 52 3 4

1 52 3 4

Maintenance

Parts Replacements

Repair/ Machining

Condition Monitoring

Measurement

Low High

Low High

Low High

Low High

Low High

1 52 3 4

1 52 3 4

1 52 3 4

1 52 3 4

1 52 3 4

“What are the top criteria you use when selecting a gearbox service

provider? How would you rank these criteria in terms of importance

when selecting a gearbox service provider?”

“What types of services do you typically require on the

industrial engineered gearbox?”

Re-Builds

“Growing interest for predictive and preventive

maintenance techniques of servicing is witnessed

especially in the energy and mining sectors.”


“Spare parts replacement accounts for about 60.0% of

the sales. The rest is split between repair, maintenance,

re-builds and condition monitoring.”


Pump Services Market

Types of Maintenance

Total Pump Services Market: Types of Maintenance, Europe, 2012


Predictive Maintenance

• Maintenance carried out only if

necessary and warranted by

operational conditions

• Reduces the need for high

spares inventory, as some lead

time is available to purchase

spare parts

Pro-active Maintenance

• Utilizes all of the other

maintenance techniques

along with root cause analysis

• Requires knowledgeable

technicians

Breakdown Maintenance

• Repair and maintenance carried

out subsequent to pump failure

• The most inefficient way of

maintenance and works only if

large inventory of spares is

available

Preventive Maintenance

• Maintenance carried out at

pre-defined time intervals

before the pump actually

fails

• Involves possibility of

reduced performance

through unskilled personnel

or futile maintenance


Conclusions

21

IndustrialServices

Ecosystem Services

Integration of Internet of Services with the Internet of Things will give create a new cloud based maintenance and service model

Plant Services

The dynamics of the emerging services framework will create new opportunities in the value chain of industries

Asset Services

Comprehensive asset services that are product neutral will be a key segment of opportunity for expansion in the future.

Product Services

Services becomes an exclusive entity with little or no dependence on product sales – a new business model that will promote “Service as a Product"


22

Project Highlights


� The project’s opportunity assessments will focus on

equipment that are utilised within the following end

user markets:

� Oil & Gas

� Chemicals & Petrochemicals

� Food & Beverage

� Water & Wastewater

� Pharmaceuticals

� Metals & Mining

� Power Generation

� Others (Pulp & Paper, Marine, Building Services , Material

Handling etc)

Industry Scope

� The project will cover Europe (EU 27, Norway,

Switzerland) and Russia and will provide country / region

profiles for the Top 5 industrial services markets. The

markets currently targeted are:

� Germany, France, UK, Italy, Northern Europe

� Other countries may be included which may be identified

during the research.

Project Scope

Country Scope


Product Scope

� The product scope for this analysis will be limited to:

� Pumps

� Industrial Valves and Actuators, Control Valves

� Compressors

� Electric Motors

� Electric Drives

� Industrial Gearboxes

� Industrial Automation

� Filed instrumentation devices

� The service types scope for this analysis will be

limited to the services relevant to each of the

product types and will be including as applicable:

� Repairs & maintenance

� Spare parts

� Retrofit

� Condition-based monitoring,

� Preventive maintenance

� Predictive maintenance

� Reliability-centred maintenance

� Energy efficiency

� Lubrication maintenance

� Calibration

� Diagnostic & inspection

� Optimisation

� On-demand Services

� Field Services

� Cyber Security

� Other service types will be included which may be

identified during the research.

Project Scope

Services Scope


Frost & Sullivan aims to quantify

the size and growth potential of

the industrial services market in

Europe. The assessment’s focused

objective will be to identify and

quantify key supply opportunities

for existing and potential market

participants within this high

growth market.

Frost & Sullivan will achieve this

aim by focusing on the following

objectives...

Objective 2:To quantify and provide key insights on the European industrial services market (2009

– 2012), including an overview of the market structure; key competitor profiles;

purchase trends; supply, pricing and demand trends

Objective 3:

To identify and discuss key challenges, drivers and restraints of the European

industrial services market, (2013 – 2018), including impact analyses for each of the

discussed market dynamics

Objective 4:

To provide forecasts (2013 – 2018) for the industrial services market including a

breakdown of the forecasts by product segment and end-user industry

Objective 1:To provide a detailed assessment of the European industrial services market (2012) –

Top 5 countries / regions

Objective 5:

To identify key supply opportunities and make recommendations for potential and

existing market participants intending to grow within these markets

Project Objectives

26

Thank You


Muthukumar Viswanathan

Practice Director - Europe - IPC and M&I

Direct: +44 20 7915 7804

Email: [email protected]

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