Boston, Massachusetts – Smarter, more advanced asset management strategies will save water utilities US$41.9 billion in capital expenditures by 2027, according to a new report from Bluefield Research. These savings stem from the proliferation of new technology solutions and companies adjusting their business models to serve the municipal water sector.
Utilities rely on asset management solutions to maximize asset service life and prioritize capital investment for critical infrastructure. For the water sector, concerns over older infrastructure, aging workforces, and increasing climate volatility are bringing this issue to the forefront.
“By integrating advanced asset management solutions across their business, water utilities can save upwards of 20% on annual capital requirements, while improving operational efficiencies,” says Will Maize, Research Director for Bluefield. “In its essence, asset management is the core-function of utilities in ensuring a sustainable, safe water supply.”
Utilities in the U.S., Canada, Australia, and Europe (representing 31 countries) currently manage US$2.9 trillion in water, wastewater and stormwater assets, which provide critical infrastructure services to over 822 million people, globally. Bluefield’s forecasts indicate that advanced asset management solutions will save these utilities US$1.2 billion in annual CAPEX savings in 2018 and scale to US$7.3 billion in annual savings by 2027.
Exhibit: CAPEX Savings by Country, 2018-2027 (Annual and Total)
Data and analytics drive advanced asset management strategies
Central to this shift toward more advanced asset management solutions is the increasing value in data collection, analytics, and visualization of network conditions and operations. Utilities are looking for ways to extend the service life of aging infrastructure assets and placing an increasing importance on data-based, predictive decisions, rather than being reactive.
“Municipal water utilities often include dozens of departments managing disconnected data silos to make complex operational and strategic decisions,” says Maize. “In today’s rapidly changing information landscape, truly transformational companies enable a bridge between these silos, bringing together engineering and finance departments and unlocking the hidden value in relational insights.”
Advances in machine learning and computation systems are disrupting age-old asset planning processes and improving how utilities more efficiently allocate capital. Firms like Copperleaf, SEAMS, and Servelec Technologies look to the U.K. market as a key battleground for advanced asset investment modeling solutions. Early-stage companies such as Fracta and Baseform are compiling utility pipe data from multiple sources (e.g. soil conditions, historical work-orders, hydraulic models, environmental conditions) and applying algorithms to generate predictive insights into the potential for asset failure.
Asset management segments are emerging as a key battle ground for innovative business models.
Bluefield sees a diverse group of players looking to capitalize on this opportunity. “It is a natural evolution that companies serving water utilities are migrating towards strategic asset management decision-making,” says Maize. From equipment providers like Xylem, modeling firms like Bentley, to the multitude of engineering firms, strategic asset management decision-making is making its way into their core offerings.
Adding to the sector’s competitive complexity, technology companies, including IBM and SAP, are looking to expand their positions, while diversified industrials ABB, GE, and Schneider Electric, have built-up digital business services through recent industry-agnostic acquisitions that are also applicable to water. At the same time, a number of venture capital backed companies are carving out positions, which could ultimately be rolled-up into larger portfolios via acquisition.
“While the concept of asset management has been around forever, new more advanced solutions are impacting how utilities plan, design, operate and maintain critical infrastructure.” Looking ahead, as assets age and data capabilities improve, we expect this critical function to grow in importance for the water sector,” says Maize.
About the Report
Advanced Asset Management in Municipal Water: Global Trends & Strategies, 2018 – 2027, released in May 2018, deconstructs the complex processes that municipal water utilities undertake to manage their assets. Bluefield analyzes key market drivers and inhibitors, successful strategies of early adopting utilities, and profiles over 40 innovative solution providers. Learn more.
About Bluefield Research
Bluefield Research provides data, analysis and insights on global water markets. Executives rely on our water experts to validate their assumptions, address critical questions, and strengthen strategic planning processes. Bluefield works with key decision-makers at municipal utilities, engineering, procurement, & construction firms, technology and equipment suppliers, and investment firms. Learn more.