e&c industry review by scott boutwell jan09

Engineering & Construction (E&C) Industry Review

© 2006 C – Level Search LLC All rights reserved.

For Discussion Purposes Only

January 2009

Scott Boutwell

C – Level Strategies

Overview

• E&C Industry Background• Global E&C Profile• Market Drivers• Strategies• Solution Mapping• Key Business Issues• Key IT Challenges

11© 1999 - 2009 C – Level Search LLC - All rights reserved.

• E&C Market Segments

• Contact Info

Global E&C Profile

• E&C Community• Trusted advisors to Fortune 500 and national governments for capital programs• Tight community: Know other firms very well, at all levels

• Global: large, distributed workforces following the sun• 24/7 work teams; multiple engineering centers worldwide

• Diversified: all segments/disciplines/stages of lifecycle

• Risk-averse • Operate on relatively low margins


• Operate on relatively low margins• Executive management by engineers / geologists; limited operational experience outside

industry• Operating efficiency focuses on direct labor utilization; consulting model

• Technology • They are not interested in earning a profit on reselling product; important to remain impartial

on technology decisions with clients• Attempt to drive technology costs into projects or to clients• Multiple & disparate systems and toolsets• Emerging trend to partner with strategic vendors• Emerging trend to partner with leading R&D and academia for advanced technologies

E&C Market Drivers

External Driver

Scarcity

Abundance

Global (new construction, envt) and US (security, upgrades, hazwaste). (Example: 7.5% compound annual growth rate on infrastructure spending from 2005 to

2013)

Lack of qualified technical personnel: Aging workforce and fewer engineering graduates

Fortune 100 and national


Consolidation

Outsourcing

Fortune 100 and national governments are increasingly

relying on relationship-based E&C firms

Successful mergers require compatible corporate cultures,

repeatable processes, and integrated multi-discipline toolsets

Risk Management

Potential impacts on profits, brand, and resources:• Health & Safety

• Regulatory Compliance• Bonding & Insurance

Market Drivers are forcing Significant Changes Abundance of work; scarcity of people; thin margins Industry consolidation resulted in various standards / processes: inefficient Need to adopt new processes and technology Want strategic relationships with key tech providers Unique, enterprise solutions not available to mass market Ability to customize, provide ‘white space’ processes Tech vendors need to be more responsive Streamline licensing and deployment schemes Provide integrated solutions around key workflows Work in context of strategic sourcing and risk management

E&C Strategies

External Driver

Scarcity

Abundance

E&C Strategies

Business Impact

Business Issue

Create a Knowledge Organization

Innovative Resource Mgt.

Corporate Impact

Revenue Impact

Ability to provide services

Shareholder value

Competitive position


Risk Management

Outsourcing

Organic / M&A Growth Strategy

Technology Standardization

Customer Loyalty & Retention

Operational Impact

Customer satisfaction

Shareholder Impact

Employee Impact

position

Service quality

Employee satisfaction

Consolidation

Technology Solution Mapping

Technology Solutions

E&C Strategies

Business Issue

Scarcity

AbundanceMulti Discipline & Targeted

Tools

Global Work Sharing &

Collaboration

Enterprise Licensing

Create a Knowledge Organization

Innovative Resource Mgt.

Ability to provide services

Shareholder value

Competitive


Consolidation

Information Lifecycle Mgt.

Outsourcing

Licensing

Advanced Technology (3D

Prototyping)

Organic / M&A Growth StrategyCustomer

satisfaction

Technology Standardization

Customer Loyalty & Retention

Competitive position

Service quality

Employee satisfaction

Account Mgt / CRM

Risk Management

Key Business Issues for E&Cs

• How do we increase & maintain operating efficiencies in an industry where margins are typically low? How can we manage SGA costs?

• How do we identify, share, and leverage best delivery practices when the company has grown via acquisitions?

• What customer segments should we focus on, relative to: risk management, profitability, and core skill sets / resources?

• What growth strategies should be followed: incremental (‘organic’) or acquisitions (‘inorganic’)?

• How can we execute globally with distributed engineering teams?


• What business processes must we excel at?

• Given the limited resources available, how do we align our organization to learn, innovate, and leverage technology?

• Better understand IT Investment (inventory, utilization, future use)

§ Align technologies with BMPs, and share across numerous business practices, cultures, IT systems

§ Reduce number of toolsets / vendors, but retain flexibility for range of clients and expertise of internal teams

§ Obtain economies of scale and leverage purchasing power

§ Rationalize annual expenditures on core technologies

Key IT Challenges


§ Establish predictable annual expenditures with strategic vendors

§ Enhance, leverage & communicate strategic partnership with strategic vendors

§ Invest sufficient time & research into emerging technologies (i.e.. 3D prototyping, SaaS)

§ Streamline licensing and deployment schemes

§ Provide integrated solutions around key workflows

ENR Top 20 Design – Build Firms(US based firms only)


The Top 20 firms control much of the global engineering & construction market

ENR Top 20 Design-Build FirmsRevenue Segmentation

Water / Wastewater5%

Hazardous Waste12%

Other (i.e. Iraq)4%

Manufacturing3%

Industial / Petrochem33%

Communications2%

Key Takeaways:• Industrial / Petrochem /

Energy = 45%• Wide range of toolsets required

• Integration / use of renewable


Energy12%

Building14%

Infrastructure15%

• Integration / use of renewable energy technologies

• Infrastructure, Water / Wastewater, Hazardous Waste = 34%• More outsourcing of operations

• Design – Build – Operate Workflow solutions

• Manufacturing segment is small (3%), but growing rapidly• PLM / RoHS

Top Ten E&Cs by Market Segment


Key Takeaways:

• E&Cs have multiple business units that work somewhat independently; varying level of control by corporate IT

• International – based firms (SNC, Fugro, WorleyParsons) are dominant players in EMEA and APAC for local projects

Opportunities for E&C Vendors / Partners

• Business Solutions• Business Process Development & Management• Account / Services Management Strategy• IT Strategy Development & Validation• Organizational Assessment & Design• HR Strategy, Assessment, Change Mgt• Innovation & Learning Strategy• Business Continuity Planning / Risk Management Strategy

• Technology Solutions• Toolsets for project use: CAD, GIS, PLM, PDM, Data Mgt, Risk Mgt • Enterprise Architecture Design• CRM process solutions


• CRM process solutions• Project Management process solutions• Collaboration / work sharing process solutions• Training & E-learning process solutions• IT, app development, & BP outsourcing• Shared Services Strategy & Design• IT - based and cleantech for specific sustainability processes: buildings, water, reporting, GHG control, SCM

• Partnering with E&Cs• Influence both E&Cs and their clients on toolset selection, customization, and integrated workflows• Identify pilot projects and get buy-in from both client and selected E&C• Develop solution maps and co-marketing with E&Cs for select market segments• Foster E&C interest to customize technology with their business process expertise for their clients• Foster E&Cs interest to develop integrated workflows for their clients

Highest Value

Partnering with E&C Clients“Sell With” as well as “Sell To”

Illustrative Example


Direct Revenue Opportunity

Partnership Revenue

Opportunity

Scott Boutwell

Contact Information

16 Point Gallinas RdSan Rafael CA [email protected]

AEC & Cleantech Trends Blog: www.scottboutwell.blogspot.com

LinkedIn profile: www.linkedin.com/in/scottboutwell(has list of publications, work history, recent projects, and 11 recommendations)
