German China India

New Work in Engineering Business

Re-Thinking EPC Business Models

| Author / Editor: Dominik Stephan / Wolfgang Ernhofer

Five elements of digitalisation in EPC companies: The main pillars of a succesful digitalisation strategy.
Five elements of digitalisation in EPC companies: The main pillars of a succesful digitalisation strategy. (Source: ©Karolina Madej - stock.adobe.com)

Related Companies

Say goodbye to the Lump-Sum-Turnkey-Project: Engineering of the future has to be networked, cooperative and transparent — The necessity to re-think the way EPC companies do business in the digital age is one of the key findings of a recent benchmark study. This requires a completely new work from technology-loving plant engineers. The hunt for new ideas and competent minds is in full swing...

Rethinking plant engineering: Currently, technology-oriented business models are a mainstay for EPC companies — but digital and data-driven services are on the rise. By 2025, these new-model projects are expected to triple their market share, according to a benchmark study by the German industry association ­VDMA's plant engineerings workgroup (AGAB) in cooperation with the consulting firm PWC. According to the study's findings, technology enabled business models, which dominate the market today with a share of around 60 percent, will lose considerably in importance by 2025. By contrast, digital, data-driven services (“open digital”) will more than triple their market share by 2025. As a result, engineers need to rethink the way they handle large construction projects, Dr. Hannes Storch, member of ­Outotec's management and deputy spokesman for AGAB, states: “In this changing environment, skills such as agility and flexibility are becoming increasingly important.”

Large-scale plant construction companies have to adapt quickly to the changing market situation and the new customer requirements. Based on a digital reference model, the study has identified 18 specific capabilities for large-scale plant construction that are necessary to fully exploit the market potential in 2025. These include, for example, knowledge of change management and agile project management methods, the promotion of business incubators and the development of intelligent logistics concepts which help to optimize construction site processes.

It is the technological change and the associated needs of the customer industries that put the plant manufacturers under pressure: Operators who want to use the possibilities of Industry 4.0 place entirely new demands on the handling of EPC processes or the flexibility of production. Especially, as transparency over the entire product life cycle — one of the most important operator demands — is currently not something be taken for granted in EPC projects. Also, the desire to produce small and micro-sized batches safely, reproducibly and cost-effectively for more and more specialized products in pharma and fine chemicals, requires a rethinking of the way plant projects are carried out, the experts agree. One possible approach could be provided by digital integration platforms for critical business processes. But even the increasing demands for ever shorter project throughput times and digital tools for cost optimization would be difficult to meet with conventional procedures.

Competence Wanted!

But how prepared are plant engineers really when it comes to doing business in the digital age? As a matter of fact, the management of digitization processes is rarely regarded as a core competence of the rather conservative sector. “Against the background of radical technological changes and rapidly changing customer requirements, it is important for companies to continue their consistent digital transformation,” explains Christian Elsholz, expert for Plant engineering at PWC and project leader of the study. “Transparency of processes and close cooperation with partners within the value chain, particularly within the framework of integrated platforms, are becoming key success factors.”

As a result, engineering companies are struggling with their self-image as technology driven specialists. Internal competence is in high demand — and employees with the appropriate skills are sought after. In the hunt for the heads, it is no longer the long-feared lack of engineers but the question of how to bring digital-affine experts on board that troubles EPC managers — especially, as engineering firms no longer just compete with each other, but also with the digital economy. “In order to successfully master the digital change, the industry must open up more strongly and retain more experts with a high level of digital expertise,” says PWC expert Elsholz. But how to lure the “digital natives” away from hip start-up firms or large IT companies? Nearly half of the EPC players fear that they will not be sufficiently attractive to attract the professionals of tomorrow. Elsholz: “The company's own scope for decision-making, attractive development opportunities and modern working time models have proven to be helpful instruments.”

Digital Guidelines

Nevertheless, digitization offers companies the opportunity to position themselves in a changing market environment. This transparency and interconnectedness is increasingly demanded by the customer, the study makers state. However, considerable efforts are required to meet the expected changes by 2025. “There are no standard solutions for this. However, the study provides a guideline that every company can use individually to define the key steps to digital success,” AGAB spokesman Storch summarizes.

Comments are being loaded ....

Leave a comment

The comment is checked by an editor and will be released soon.

  1. Avatar
    Avatar
    Edited by at
    Edited by at
    1. Avatar
      Avatar
      Edited by at
      Edited by at

Comments are being loaded ....

Report comment

Kommentar Freigeben

Der untenstehende Text wird an den Kommentator gesendet, falls dieser eine Email-hinterlegt hat.

Freigabe entfernen

Der untenstehende Text wird an den Kommentator gesendet, falls dieser eine Email-hinterlegt hat.

copyright

This article is protected by copyright. You want to use it for your own purpose? Contact us via: support.vogel.de/ (ID: 45951777 / Engineering)