UPS service revenues predicted to grow to $3.1 billion in 2014 despite sluggish hardware sales
Revenues from uninterruptible power supply (UPS) services in 2014 are forecast to grow by an estimated 7.7% over 2013, increasing from $2,894 million to $3,117 million, according to IHS Inc.
IHS includes revenues for service contracts, warranties, installation, battery replacements and preventative maintenance on UPS hardware when assessing the service market. Service revenues often follow the trends seen in the UPS hardware market, although are not inextricably linked.
Despite UPS hardware sales continuing to post year-on-year falls, service vendors have become increasingly focused on shoring up their income by increasing the penetration of service and support. It is projected that service and support revenues will grow by 4.3% in 2013, to reach $2.9 billion. This is in contrast to the performance of the service market through 2012 when revenues were estimated to have contracted by 0.7%.
The Asia-Pacific region is incredibly important to the future income derived from UPS service revenues and was estimated to have grown by 5.9% in 2012. In contrast, the markets in the Americas and EMEA both declined over the same period. While it is estimated that growth will return to all regions in 2013 and beyond, Asia will continue to be the area of the strongest growth, with the market projected to expand by 11.1% in 2014, compared to a global average of 7.7%.
Despite many major economies slowly emerging from the global economic slowdown, conditions are still challenging for UPS hardware sales. As a result, service vendors are focusing as much of their effort as possible on capturing a greater percentage of the existing installed base of hardware, which has prevented deeper losses in the Americas and EMEA. In addition, the burgeoning market in Asia is helping to mitigate the weakness in the rest of the world, and we expect to see this strength continue through 2014.
With the UPS hardware market set to return to growth over the coming years, service revenues are, as a result, set for continued growth through the next five years as greater hardware numbers provide a further avenue for increased service penetration.
The insatiable requirement of individuals and businesses for ever greater amounts of storage will drive the number, and scale, of data centers over the coming decade. Barring the development of any new technology this will create an opportunity for growth in the UPS hardware and Service & Support, markets. The big challenge for service vendors is to capture this market and to increase their own revenues while doing so.