New products drive European SCADA and DCS markets

Paul Boughton

In response to rising raw material costs and increased competition from low-cost manufacturing regions such as ChinaEuropean manufacturers are paying greater attention to their operational efficiency.

As a resultsays a new report from Frost & Sullivan*investment in automation and control solutions is on the rise and providers of supervisory control and data acquisition (SCADA) as well as distributed control system (DCS) solutions are likely to see greater opportunities since these systems are crucial in achieving production synergies and eliminating costs in the manufacturing process.

An added factor aiding the uptake of SCADA and DCS systems is the enhanced value proposition derived from new product developments.

Advances on the DCS front have seen the development focus widen from traditional process control to an extended range of applications such as production managementsafety instrumented systemsinformation management and documentationall handled in one single system.

Likewiseadvances in SCADA technologies have ensured improved IT compatibility along with the capability to support higher-level business systems such as manufacturing execution systems (MES) and enterprise resource planning (ERP).

“New SCADA systems increasingly offer features traditionally associated with DCS productssuch as in-built redundancy” notes Frost & Sullivan industry analyst Jonas Westlund. “This enables a primary host computer to automatically switch to a secondary computer in the event of a system failurethereby ensuring that the data remains available to clients in the event of server disruptions.”

As a result of these product advancementsdifferentiation between SCADA and DCS systems has blurred and this has also changed the degree to which these systems compete against each other. Furtherwith a growing share of the revenues being generated from system upgrades and retrofitsthe general reluctance of end users to switch suppliers is restraining competition.

With the retrofit market offering healthy revenue opportunitieslarge suppliers will benefit from their greater installment base and are thus in a better position to pursue retrofit opportunities. Neverthelessthese suppliers will also be under pressure to extend their offerings through new retrofit product developmenta heightened focus on which could negatively impact profit margins and force suppliers to review their costs.

This pressurecoupled with the relative lack of organic growth among many large firmsmay in turn trigger a degree of divestment among those firms whose control system business is not a core element. Converselythis could also force larger market participants to acquire other manufacturers with particular strengths in new product development or with a brand presence in vital end-user sectors.

In response to this challengesmaller suppliers stand to gain from aligning with competitors in order to reach a wider customer base. This is likely to become increasingly important as multinationals look to source products from a selected short list of large firms with global supply capabilities. Although this may seem improbable in some cases because domestic participants would require a significant incentive to enter into such an agreementthis proposition could be relevant in specific end-user sectors.

The European SCADA and DCS markets across major end-user sectors such as oil and gaspharmaceuticalsfood and beveragechemicalspower generation and pulp and paper is expected to generate a revenue growth of US$691.0million between 2005 and 2011.

With a projected increase of 36.9percentthe food and beverage sector is likely to show the highest growth rate and the power generation sector is poised to lead the growth in monetary termsexceeding US$300.0million for a growth of 28.4percent.
IndividuallySCADA system growth is likely to be US$188.0million compared to DCS growth of US$503.0million.

Strategic Analysis of Selected European SCADA and DCS Marketscode B543-10


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