ARC says DCS market is recovering

  • September 26, 2010
  • ARC Advisory Group
  • News
September 26, 2010 - The Distributed Control Systems (DCS) market suffered much more than ARC had anticipated in 2009. ARC initially predicted that the market would be relatively flat, with a strong services business compensating for a sharp decrease in hardware business. Instead, the overall market declined by just over 7 percent between 2008 and 2009. “Even with this decline, the DCS market still fared better than discrete automation-driven markets such as PLCs and motion control. The DCS business, however, may lag discrete automation in speed of recovery,” according to ARC Research Director Larry O’Brien, the principal author of ARC’s “Distributed Control Systems Worldwide Outlook.” So far, 2010, has not shown significant growth over 2009, but it looks like conditions are gradually improving. Most companies are pretty close to or a bit above what they did in 2009, at least in the process automation systems business. Some businesses seem to be recovering faster, others slower. The DCS market is at a point where suppliers serving the installed base are probably more stable than those that must rely more heavily on project business. Suppliers ate through a huge chunk of their project backlog while new projects were postponed or canceled. After 2011, growth will accelerate, but ARC does not believe it will approach the same levels of growth witnessed pre-recession. Historically, the process automation market has been characterized by slow yet steady growth, and we expect the market will return to this pattern with an overall CAGR of 4 percent over the five-year period of 2009-2014. Services Market Remains the CoreThe DCS business has primarily been a services business for the past few years, with combined project and after-sales or operational services accounting for over half of total revenues. ARC had expected the services market to remain quite buoyant throughout 2009, but in fact, both project services and operational services declined. Many large projects were put on hold in 2009 and many continue to be on hold. Many end user companies also cut back on travel budgets, so training suffered in some cases. Both these sectors, however, seem to be bouncing back in 2010 at a good pace. Project activity continues to ramp up as well, particularly in sectors such as power generation, upstream oil and gas, water and wastewater, bioprocessing, renewable energy, and others. About ARC: Founded in 1986, ARC Advisory Group is the leading research and advisory firm for industry. Our coverage of technology from business systems to product and asset lifecycle management, supply chain management, operations management, and automation systems makes us the go-to firm for business and IT executives around the world. For the complex business issues facing organizations today, our analysts have the industry knowledge and first-hand experience to help our clients find the best answers. Learn More

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