Industrial services – a new frontier for business model innovation and profitability
The poor scope for technological innovation coupled with growing market maturity, has motivated major industrial product suppliers to concentrate efforts on achieving growth through alternative channels. In this context, the potential for industrial services attains center stage, both from the standpoint of industrial vendors interested in market expansion and end-users aiming to maximise profitability.
The market has grown significantly in the last decade. In order to better understand the emerging services market, Frost & Sullivan has mapped the emerging segment into the larger framework of Industry 4.0. “The idea of Industry 4.0 assisted us in identifying a few key criteria like Big Data, the Internet of Things and the Internet of Services, as functional pillars catalysing the transformation of the current organisational architecture”, notes Frost & Sullivan Practice Director Industrial Automation & Process Control and Measurement & Instrumentation Muthukumar Viswanathan.
According to recent analysis by Frost & Sullivan, the overall estimates for service revenues accrued from automation products like DCS, PLC and SCADA. reached nearly $15 billion in 2012. The conspicuous part of this large service base is the increasing demand for new value-added services that goes beyond traditional repair and maintenance.
For example analysis on global pump market finds that the market earned revenues of $12.65 billion in 2011 and estimates this to reach $17.55 billion by 2016 with a CAGR of 6.8 percent. Within this segment, value-added services, such as condition monitoring, predictive maintenance, and advanced diagnostics, are rapidly gaining acceptance, and are anticipated to account for a significant portion of the growing demand for advanced pump monitoring solutions. Additionally, stringent regulations pertaining to pump efficiency and emission control, particularly in Europe and North America, is also likely to result in increased demand for superior value-added services.
From a demand perspective, end-users are increasingly looking at maintenance and plant service as a means for maximising profitability. From a market standpoint, we can safely surmise that the demand for services has improved quite significantly over the last decade. There is also a growing acknowledgement from industrial product suppliers and the end-user community about the dawn of services as the next big frontier for business model innovation and profitability.
“In order to understand and evaluate the nature of this new service frontier, Frost & Sullivan will be initiating a strategic in-depth analysis, focussing on end-user expectations and requirements of services across various product markets”, notes Mr. Viswanathan. “The study will aim to assist industrial product suppliers with designing their service mix and aligning their product strategies to better serve the needs of the end-user in a rapidly-changing industrial landscape”.
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