The facilities maintenance sector can be considered as the products, services and software needed to maintain and operate buildings. It is an enormous industry approximately $250 billion in size. This includes products used for maintenance, repair and overhaul (MRO), janitorial-sanitation products (Jan-San), building maintenance and janitorial services as well as the software used for tracking maintenance related activities known as Computerized Maintenance Management Systems (CMMS) and Enterprise Asset Management Systems (EAM). MRO, Jan-San and related services are huge industries:
- $125 billion - MRO and Jan-San Products (47.3%)
- $138.5 billion - Building Maintenance and Janitorial Services (52.4%)
- $617.6 million - CMMS / EAM Software (0.2%)
MRO
The MRO market is highly fragmented spread among more than 150,000 outlets. The top 10 industrial distributors only claim about 13 percent of the market, while the next 80 players collectively only control about another 10 percent. The roughly $125 billion facilities MRO and Jan-San products segment can be broken down into the end user markets as shown below.
End User Market Size ($ billions): Manufacturing $78; Living Spaces $10; Commercial Real Estate $9; Education $4.8; Hospitals $1.7; Federal Government $0.1; Others $21.4; TOTAL $125.
Major trends, issues and drivers include:
- Cleaning up inefficient MRO purchasing processes and reducing costs of purchasing through product standardization and supplier consolidation.
- The long-term trend of manufacturing moving offshore means that MRO suppliers must look to other markets for growth.
- Downsizing and empowerment are reducing company hierarchies. As a result, more and different people are involved in MRO buying.
- MRO customers and product manufacturers are both trying to reduce the number of MRO distributors with which they deal. In the large distributor channel, this will likely lead to a smaller group of distributors controlling a larger portion of the MRO product volume.
Building Maintenance and Janitorial Services
The main segments in building maintenance and janitorial services include:
- Mechanical and Electrical
- Janitorial and General Maintenance
- Structural and Incidental Maintenance (roofing, pumps, valves, fittings, filtration, etc.)
About 50,000 firms provide commercial janitorial and maintenance services in the U.S., with combined annual revenues of about $75 billion. The electrical and mechanical contractor repair and maintenance services market represents an additional $63.5 billion market. This puts the total facility maintenance services market at about $138.5 billion. The following table shows the breakdown by end use markets.
End User MarketSize ($ billions): Commercial Real Estate $70.6; Healthcare $20.8; Hospitality $13.9; Education $6.9; Other $26.3; TOTAL $138.5.
The main trends, issues and drivers for the building maintenance and janitorial services market include:
- There has been a definite trend toward more outsourcing in recent years.
- The most often outsourced function is custodial and housekeeping where as much as 70% of companies outsource this function.
- The two most important reasons for outsourcing are cost savings and the need for special skills, services or tools/equipment.
- The increased level of complexity, sophistication and automation of building systems are causing building owners and operators to put a stronger emphasis on preventive maintenance.
- Many of the smaller facility management, building maintenance and janitorial services do not buy products from distributors, but instead purchase their supplies from local retailers such as Home Depot, Sam's Club, etc.
Maintenance Software
The global market for EAM software reached $1.6 billion in 2003 and is estimated to grow at the Cumulative Annual Growth Rate (CAGR) of 3.1 percent reaching $1.9 billion in 2007. The U.S. market in 2001 was $617.6 million and is expected to reach $743.8 billion by 2006 with a CAGR of 3.8%. Growth in this market will not stem from purchases of additional software licenses, but from services that focus on making the software work.
Major trends, issues and drivers in the EAM/CMMS software market include:
- Consolidation is continuing in the EAM / CMMS software market. Vendors are all chasing the same customers and there is a limit to how many vendors it can support.
- Mobile computing for EAM / CMMS has become a mainstream offering.
- Virtually all vendors offer ASP solutions for EAM / CMMS systems as well as licensed software.
- Vendors are pursuing ancillary services because of the limited money available from licenses and connection fees.
- The purchase of an EAM / CMMS system is usually driven by the need to reduce costs, regulatory actions, fines and/or safety.
- The number one problem with CMMS programs is that users still do not understand how to fully utilize their CMMS or have the expertise to implement it properly.
Distribution Channels
The main distribution channels for MRO products are:
- Large distributors
- Integrated suppliers
- Regional, small and specialty distributors
- Distributor buying groups
The service providers themselves sell most maintenance services and software directly to the customer.
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