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System Integrators Provide Industry Outlook

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FILED IN:  Industry Trends
     
  • From the CSIA/JP Morgan 2012 survey of CSIA members.

  • From the CSIA/JP Morgan 2012 survey of CSIA members.

  • From the CSIA/JP Morgan 2012 survey of CSIA members.

  • From the CSIA/JP Morgan 2012 survey of CSIA members.

A joint survey conducted by Control System Integrators Association (CSIA) and JP Morgan offers insight into the near-term outlook for the discrete manufacturing and process industries.

If you’re looking to get a feel for where industry is likely headed, there are few better people to question than system integrators. After all, these are the people directly impacted by any pickup or slowdown in industrial projects.

A survey conducted by CSIA and JP Morgan in December 2012 sought system integrator input on topics ranging from expanding industries and order activity to growth expectations and project delays.

Survey results showed that CSIA member respondents indicated that the top five industries they plan to expand services into are power & energy, oil & gas, metals and mining, life sciences, and food & beverage. The results here confirm much of the news widely touted over the past couple of years about the surge in activity in energy, oil & gas, and mining. As a consumer staples industry with heavy regulation, constant activity in the food & beverage industry is always consistent, and it’s reasonable to suspect that the growing emphasis on reducing medical care costs—coupled with the move to convert all medical records to electronic form—is behind the surge in the life sciences.

When asked which industries have been the most active in the past year, system integrators cited the following sectors: automotive, food & beverage, oil & gas, power & energy, chemicals & petrochemicals. I find it interesting that two of these top five industries (automotive and chemicals) are not industries that high numbers of system integrators plan to expand their services into in the near term. Perhaps they’re waiting to see if the activity trends in these industries are as sustainable as those in power, oil & gas, and food & beverage have been.

Reflecting on order activity at the end of 2012 versus mid-2012, the news from system integrators was very positive. Though 27 percent of respondents said order activity was weaker, 39% said it was stronger. Plus, 65 percent of respondents say their business grew over the past year versus 22 percent who said their businesses shrank. In fact, twenty-five percent said their businesses grew in excess of 15 percent in the past year.

Looking ahead, system integrators are very bullish on 2013. Seventy percent expect their businesses to grow in 2013, while only 14 percent expect it to decrease. Backing up this expectation is the fact that nearly 30 percent of respondents say their project backlog/leadtime is stronger than normal. In addition, 54 percent say that project delays are either non-existent or typical. However, 46% are seeing higher-than-usual slowdowns, which sheds light on some of the cautious verbatim statements given as part of the survey.

Of the verbatim comments from respondents, three in particular grabbed my attention:

“I have not seen delays or canceled projects yet, but feel a slowdown is coming some time next year. Customers are barely keeping old legacy equipment running but are holding back on upgrading due to the uncertainty. Our business outlook is still guarded optimism despite the current headwinds.”

“Due to the European crisis, some system integrators based in those countries have sought projects in our region and are offering projects at prices we can hardly compete with.  As a result, we are seriously taking a look at our costs and reusing resources to lower them.”

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“… due to the cyber security and control incidents that occurred in the last few years, it looks like manufacturing and critical infrastructure companies are paying more attention to their investment in consulting services to mitigate related IT risks that could impact them.”

What do you think? Do you agree or disagree with the outlook provided the system integrators in this survey? Please share your thoughts in the comments section below.

FILED IN: Industry Trends
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