Is the Future of Automation Outsourcing the Performance-Based Model?

As the automation services market continues to evolve, ARC Advisory Group is paying close attention to a concept that has been bubbling at the surface for years: performance-based outsourcing. We first saw this slowly emerging trend gain serious traction in the logistics arena. More recently, there has been some talk of applying this method to automation services as end users look for ways to combat the shrinking workforce and dearth of qualified resources at their disposal, while also improving their operations.

Performance-based outsourcing involves the client compensating the service provider based on achieving predetermined results, such as percent uptime or alarm reduction, instead of focusing on specific tasks like asset maintenance. This is hardly a new concept. For many years, the US Air Force has awarded performance-based contracts to both Boeing and Lockheed Martin. Examples exist in other industries as well. Some companies in the IT and facilities management industries have been using performance-based outsourcing contracts in for quite some time.

However, in the automation services market, there are very few examples of total performance-based outsourcing relationships. Unfortunately, where examples do exist, the companies involved, especially the end users, are unwilling to share their experiences because they view it as a distinct competitive and strategic advantage.

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