Have Plant Design and Engineering Become Commodity Services?

During my nearly 25 years in the plant design and engineering industry, I’ve witnessed the inevitable transition of plant design and engineering from a high-expertise, boutique service to one primarily dependent on experience. As is typical, the change was driven by the spread of knowledge and economic forces enabling strategies such as offshoring.

In addition, this transition was supported by the shift from drawing boards and manual methods to computer-aided engineering and procurement systems, which took advantage of rapid advancements in computer power and availability. I believe the initial immaturity, complexity and cost of purchasing, as well as difficulties implementing and operating these systems, unnaturally prolonged the time in which this experience-based stage and approach prevailed.

External forces are driving change

Two key forces have been building and applying pressure to this dynamic, and I believe we are well on the way to the third stage in the professional service life cycle*, which is almost entirely dominated by service efficiency. The two forces behind this change are the huge number of engineers graduating each year from institutions in China and India and the virtual elimination of technological barriers.

With some estimates putting the total number of engineers graduating in India each year at 1.5 million (total, not specifically plant engineering disciplines), the first factor is a simple case of supply and demand, meaning that the historic resource constraints faced by industrial engineering projects are no longer a limitation. Rather, effective recruitment, training, retention and advancement policies become key factors for organisational success.

The commodification of computer hardware, coupled with the rise of the internet and associated communications technologies, has combined with steadily improving automation from companies such as Hexagon to dramatically lower or remove barriers to entry. More than ever, it’s possible for organisations to execute projects in the most cost- effective locations and leverage automation to support distributed coordination while maintaining quality.

The service has changed, so the business model needs to change

Given that the profile of the service itself is maturing and changing with the emphasis now largely upon efficiency, firms must adapt to meet these changed circumstances to remain competitive. As is typical for professional services, this means rebalancing the organisation to one with a wider base. In other words, rather than rely on a few highly experienced, expert individuals to perform the heavy lifting (at correspondingly high cost), competitive companies today must enable large numbers of staff with lesser experience to out-perform, often by leveraging technology and automation.

It’s my view that this final stage will also likely result in the plant design and engineering industry adopting some of the human resources techniques from the management consulting and legal sectors, with more rigidly defined career paths and a far more systematic approach to advancing and replacing employees.

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Specialisation is the key

Of course, there are topics within the plant design and engineering industry that continue to require high levels of expertise for one reason or another, and one may ask how these should be addressed considering the newly ’flattened’ organisation. The answer is provided by the economic tool of specialisation. Sub-contracting or outsourcing such challenges to companies that specialise in the subject matter delivers the best of both worlds. While the bulk of the effort expended for the project is efficiently dispatched by the EPC, whose organisational structure best suits the job, the same is true for specialist service providers, who have similarly refined their profile to align best with their subject matter expertise.

Historically, the use of such specialist partners to execute packages of work is not unusual, although it has most often been due to proprietary technical knowledge or linked to the provision of specialised equipment. Seen from this perspective, the approach should not be confronting from a risk or project management point of view.

In conclusion, it’s my view that plant design and engineering is moving into a new and highly challenging phase, and companies must evolve to remain competitive. A key strategic directive must be to focus on core business and work with specialist service providers and partners to tackle problems that don’t match the target organisational structure rather than trying to ’do it all.’

If you are facing complex IT challenges related to your engineering, procurement or construction systems, contact us to find out how our focus complements your own to deliver results.

Providing solutions that leverage an industry dynamic and are perfectly positioned to provide cost-effective, reliable and high-quality servicesnow that’s shaping change.

Regards,

Patrick Mackinlay
Principal Consultant
TecSurge

Patrick MacTecSurgekinlay, principal consultant at TecSurge, directs product management and technology for the company. He holds a bachelor’s degree in computer science from Curtin University, and has more than 20 years of experience in the plant design industry.

Prior to joining TecSurge, Patrick held senior technical and consulting roles with NRX and Intergraph, after 10 years with several EPCs as a systems analyst and administrator.

 

*See David H. Maister’s classic ’Managing the Professional Service Firm’ for a detailed explanation of the professional service life cycle and associated organisational structures.

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