Automation services market to boom


Jul 10, 2007

Automation suppliers continue to benefit from strong demand for automation services across the entire spectrum of the plant lifecycle and the scope of nearly all automation products and applications, say the results of a new ARC Advisory Group study. In an automation market that is already riding the crest of a growth cycle, automation services is at the top of that crest and benefiting from several converging factors that will provide ever increasing market growth through the next five years, according to the study titled, “Supplier Provided Automation Services: Market Size and Forecast Through 2011” (

“The total services market served by the automation suppliers approached $14 billion in 2006, and will grow at an average annual rate of over 12% through 2011,” says Larry O’Brien, ARC research director and the study’s principal author. “Mature markets such as North America and Europe, the Middle East and Africa (EMEA) constitute the bulk of the market for automation services, but revenue growth will be concentrated in the developing economies of China, the rest of Asia and Latin America. The Chinese market, for example, will be more than double the size of Japan by 2008 for automation services provided by suppliers.”

Labor drives outsourcing and services growth

The primary contributor to the growth in services over the next several years is the continuing shortfall of skilled labor among end users. Baby Boomers are starting to reach retirement. Many of them are now, or soon will be, 60 years old. This is starting a wave of retirements that will see the number of people over the age of 65 in the U.S. alone reach more than 70 million by the time the last boomer retires in 2030.

The average age of workers in manufacturing industries in developed countries is already over 50. 

Companies have downsized, right-sized and reengineered their workforces without apparent thought for the consequences of this upcoming retirement tidal wave. The paradox is that although workers are getting older on average, the average retirement age has dropped to 58 years, in many cases due to the re-engineering process of the past couple of decades.

U.S. Census Bureau data also shows that, as a percentage of the world population, the largest growth area in the next 50 years will be in the ranks of the elderly. Several governments have responded by increasing the statutory age of retirement. Germany, for example, has increased it to 67 years. In a recent interview, a major refining company stated it had lost 2,500 years of experience in 2006 when 100 operators retired at one site, each with an average of 25 years of experience. As further evidence, a major chemical company analyzed its plant demographics and found one of its largest plants would lose 75% of its operating staff to retirement by the end of this decade. The same is also true of many discrete manufacturers.