Third Party Automation Services Market Getting Back to Business with Migration Projects

Keywords: Service Providers, Automation, Main Automation Contractors, Control Systems, Migration Projects, System Integrators.

The third party automation services business is poised for moderate growth over the next five years.  It represents one of the best ways for end users to take advantage of the growing expertise of service providers to help reduce plant maintenance costs, operating costs, and project costs. 

“As the automation suppliers’ engineering, integration, and service divisions grew in both size and experience, they began to act as main automation contractors (MACs) on many of their projects.  Today, as these projects increase in size, the automation suppliers often award engineering packages to service providers.  The recent recession caused many migration and upgrade projects to be postponed over the past couple of years.  Once the recession’s impact receded and companies were on the recovery track, many of those projects came back on-line.  However, since some of these projects were postponed, end users are now finding that their problems have worsened, as their control systems rapidly approach the end of their useful lives.  This has created an excellent opportunity for many service providers to build up a backlog of projects, either through direct sales or in partnership with one of the major automation suppliers,” according to ARC Senior Analyst Kevin Crisafulli, the principal author of ARC’s “Third Party Automation Services Outlook for North America”.

In the early 1970s, when automation began to gain acceptance, the integration of control systems, instrumentation, and enterprise systems emerged as a necessity.  The trend and need for control system integration grew through the 80s and exploded in the 90s.  Today, as the automation services market in North America expands, it is not only the major automation suppliers who stand to gain; the regional third party service providers are poised to participate in engineering projects that have come back on-line or provide maintenance and support services as end users continue to shrink their internal engineering and maintenance and support organizations.  In North America alone, there are over 1,100 third party service providers doing business and approximately 500 – 800 other organizations, such as value added resellers, representatives, and distributors that provide some form of services that are related to the automation market.  Some service providers are full-fledged service firms, while others offer niche services, often only for specific industries, which makes the market very fragmented.

The State of Third Party Automation Services
The third party services market growth has been tempered by the world economic downturn, especially in North America.  As markets recover, it appears that the services market has fared better than others.  This is due to the large backlog of projects that sustained automation suppliers and service providers through the recession and many of those projects are ongoing.  Service providers, with their relatively small sizes and limited resources, weathered the storm but were impacted by the recession a bit more than the automation suppliers, but most are now crawling back to revenues of pre-recession levels.

Migration and upgrade projects that were postponed at the beginning of the recession have come back on-line and this is creating a boom in business for service providers.  Other factors, such as continued reduction in end users’ internal engineering staff, increased complexity of automation and enterprise systems, and aging of automation systems and infrastructures will lead to growth in this market.
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