Product category:
Engineering Industry Reports and Surveys
News Release from: Frost and Sullivan
Edited by the Engineeringtalk Editorial
Team on 13 April 2001
Internet strategies in the Power
Generation market
A revolution is sweeping through the European power generation equipment industry as OEMs and turnkey contractors are forging their e-business strategies in an effort to boost 'lucrativity'.
A revolution is sweeping through the European power generation equipment industry as OEMs and turnkey contractors are forging their e-business strategies in an effort to boost lucrativity The trend amongst contenders in the power generation market to transform themselves from traditional equipment and service suppliers into leaner, web-enabled enterprises is crystallised in a new study by Frost and Sullivan, the international marketing consulting company
This article was originally published on Engineeringtalk on 9 Aug 2000 at 8.00am (UK)
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E-business in the European power generation equipment industry is undergoing a period of profound development and dynamism as companies seek to leverage the power of the internet to make their relationships with their supply chain and customers more efficient whilst improving internal working processes.
'Those companies that fail to benefit from the cost-saving features of e-business tools will start to fade from the picture in the wake of accelerated consolidation,' notes Harald Thaler, Senior Industry Analyst at Frost and Sullivan.
Frost and Sullivan's findings reveal that International Multiple Segment (IMS) OEMs and international turnkey contractors are in the vanguard of e-procurement adoption.
This segment, amassing $600 million in combined online procurement and sales transactions in 2000, comprises OEMs operating on a global scale, providing a wide range of power generation equipment and services.
The value of online procurement and sales transactions will rocket to a massive $18.41 billion in 2007.
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Soaring on the back of its market might to force the pace in e-business expansion, the IMS OEMs segment is poised to make the most rapid progress in the early years of e-business adoption and eclipse the other two segments under analysis in Frost and Sullivan's study, namely Focused Product Group (FPG) OEMs and Packagers and Turnkey Contractors (P and C).
Whilst mostly starting with the procurement of indirect goods and services, companies are rapidly moving towards online purchasing of direct materials and services.
Growth is expected to be particularly high in 2001 as some of the leaders' procurement portals gain support through the ongoing connection of suppliers and progress in cataloguing standard parts.
'A small number of FPG OEMs ' active only in one or a relatively targeted group of segments within the global power generation industry - commenced online purchasing activities in 2000, with many more preferring to wait until e-procurement solutions are adopted more widely and more first-hand evidence emerges about their business benefits,' Mr Thaler explains.
Global turnkey contractors, meanwhile, will support the development of global electronic procurement hubs geared to the requirements of the international engineering and construction industry.
Despite the flurry of activity surrounding marketplaces, players have so far shown considerable reluctance towards the use of third-party electronic marketplaces, with the possible exception of FreeMarkets.
Many IMS OEMs are actively investing in building their own marketplaces, either alone or in strategic alliances with industry partners.
'Marketplaces not tied to an industry partner, on the other hand, are widely regarded as a risky proposition as they are seen to often lack the initial volume backing required to gain sufficient momentum to sustain their business,' Mr Thaler explains.
IMS OEMs are also spearheading the adoption of customer-facing e-business initiatives, with most activity so far concentrated in the aftermarket arena where GE Power has taken the lead with GEPartsEdge.
Moreover, a few leading IMS OEMs already offer, or are planning to shortly launch, online configuration tools enabling customers to configure power plants and, as a next step, also individual components, such as gas turbines.
Frost and Sullivan's study observes that most FPG OEMs' development of e-sales is still in its nascency although some of the more proactive companies in this segment plan to establish their own marketplaces that will link them with their main customers, with the ultimate aim being a marketplace incorporating suppliers, dealer and customers in an integrated supply chain solution.
Meanwhile in the Packagers and Turnkey Contractors (P and C) segment ' comprising players that mainly assemble power generation units and/or build turnkey plants on an engineering-procurement-construction (EPC) basis - large turnkey contractors are looking to sell associated services online, while locally-based packagers and genset companies have no clear perspective on selling equipment online, although some firms in this group plan to launch online parts sales in the near term.
Rampant investment in the implementation of security products, encouraged by high-profile security threats, will benefit growth prospects in the overall market.
The high level of interest in precautionary measures is closely tied to the ubiquity of the internet.
The phenonemal surge in internet usage is one of the key factors stimulating sales in this industry.
The study concludes that the advent of the mobile internet is a boon for collaborative engineering solutions where engineers and suppliers are in a remote location.
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