News from Plant-Design.Com
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STATE OF THE PLANT DESIGN INDUSTRY
A brief overview-
This article gives a quick industry overview based on my personal experience and some recent plant design statistics. During the past few months I have had the occasion to speak with over 200 process and petrochemical plant designers and engineers regarding their current level of activity, and their design software needs. If there was one constant throughout my conversations it was that the industry was in a slow down. I kept hearing that companies were consolidating, plants were being downsized, and projects were being delayed or cancelled. For a while I thought the industry was in significant down turn until I found out (to borrow a phrase) the rest of the story. The rest of the story is that although the plant design industry is in a slow period, the future looks bright. Experts agree that such slow periods are to be expected in industries such as petrochemical, chemical and pulp & paper. Their size and market focus makes them sensitive to normal business cycles, as well as being impacted by global economic conditions. These cyclical conditions, combined with the fact that almost all plant design work is reactive (scheduled in response to project needs), makes it is easy to understand why, when there is an industry slowdown there is also a slowdown in plant design. But, if we are to predict the future, what measuring stick should we use? One measure of the vitality of an industry is its willingness to modernize. Stagnant industries seldom invest resources on updating or building new facilities, and a good measure of plant modernization is the level of design activity that precedes that modernization. Fortunately, we have some statistics that give us a good prediction of design activity by measuring the industry's willingness to dedicate revenues to design software (See Table One). After all, plant design software is the front-end to plant design. Having said that, let me give you some news that bodes well for the plant design industry .
It is estimated that in 1999 there will be $1.2 Billion spent on AEC software. Even more impressive
is that plant design represents over 29% of the AEC segment, and is growing. In 1996 plant design
software represented about 20% of the total AEC software segment. In that year about $210 Million
was spent on plant design software. In the following years plant design software revenues grew at
rates of 26% in 1997, 14% in 1998, and are projected to grow at a rate of 12.5% in 1999 (See Table Two).
The decreased growth rate can possibly be attributed to industry's current slowdown, but what is
important is that significant growth is still taking place. Increased expenditures on plant
design software is a clear indication of industry's optimistic outlook for the future. Clearly,
the industry as a whole is preparing for the next wave of modernization.
Another interesting aspect of the plant design segment is the breakdown of 2-D and 3-D software. In 1996 2-D drafting and design software represented about 31% of the total plant design software segment. It was anticipated that 3D design would rapidly take over the segment, allowing designers to create everything in 3D making ISO's and other visualizations much quicker and easier. To some degree, this has happened. But strikingly, in 1999 it is still estimated that 2-D will represent 25% of the total revenue for the plant design segment. Only a 6% shift in almost 4 years. During this same time period, 3-D design has increased from 47% to 58% of the total plant design segment. An 11% increase. Interestingly, this increase has mainly come at the expense of add-on and collateral applications, whose percentage of the total has decreased from 20% in 1996, to 14% in 1999 (See Table Three).
It should also be noted that these statistics measure the dollar value of software purchases, not
the total units purchased. This is important because 3-D software is 2-3 times more costly than
most 2-D software applications. This means that although the revenue from 3-D software purchases
is 2.3 times more than 2-D purchases, the actual number of 2-D seats purchased may be equal or
greater to 3-D seats purchased.
What this tells us is that although 3-D design is expanding in use, it has not become the primary method of design for many operations in plant design. One might speculate that 3-D design applications have simply not solved the bi-directional transfer of data, ease of learning and use, and portability to other platform issues that prevent them from being a single source solution. We know that the industry is looking for single source solutions in many areas. It is ideal if one can purchase a single software application, perform all design activities with that software, and receive all support and other service from that supplier or developer. But as yet, that appears not to have happened. From the statistics we can also see that rather than enveloping 2-D as was anticipated, 3-D applications are incorporating more of the add-on and collateral applications that once had to be purchased separately. This seems natural if we agree that the objective of most software applications is to provide a single solution. The industry is looking for, and software developers are trying to develop, applications that incorporate as many add-on features as formerly found in separate solutions. From this brief overview we can see that although many companies in the petrochemical, chemical, and pulp & paper industries are in a slowing period, there is good reason to be optimistic. Table Two clearly shows that plant design software purchases are continuing to increase, and at a higher growth rate than the overall AEC software segment. Many companies are continuing to gear up for future growth by updating their design capability in the form of 2-D and 3-D design software applications. We can also get a small glimpse at future design trends by looking at Table Three. Although 3-D design applications continue to grow, 2-D design applications are still a significant percentage of the plant design segment. In reality, more than 50% of plant design may still be done on 2-D applications. In future articles we will take a closer look at how these applications are used, what the future trends are, speak with a few of the professionals who are using these applications, and speak with others who are developing the next-generation plant design products.
NNV.
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