trends and needs in engineering 2013

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Trends and needs in engineering 2013

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Contents1. Executive Summary 4

2. Introduction 6

3. Results and findings 8

4. Conclusions 20

5. Appendix 22

6. About Deltek 23


After years of economic turbulence and limited

expectations of growth, the outlook amongst

European engineering firms is beginning to

become more optimistic. In fact, overall, the

European engineering sectors predict that their

market growth will increase by 4% in 2013—a

significant forecast considering the continued

uncertainty of today’s global economic climate.

But why now? Amidst today’s challenges and

market pressures, how are European engineering

firms able to finally visualise a little hope for

success in 2013?

This report, based on a survey carried

out by Ipsos Synovate and commissioned by

Deltek, aims to get to the heart of this question.

Each finding has been developed from survey

responses, in which decision makers and senior

employees of engineering firms were asked about

the trends, challenges and opportunities facing

their own companies and the industries they

operate in. Through this summarisation of the top

industry drivers and overarching market outlook,

engineering firms gain the valuable insight needed

to align their business priorities for 2013.

Expect increase in growthOverwhelmingly, responses to the survey

indicated that individual firms are in a position

for growth. Specifically, 66% of the individuals

interviewed predict that their companies will grow

and expand in 2013 (4% points higher than last

year’s survey respondents). What we can take

away from this is that optimism and intentions

of growth are slowly, yet steadily, increasing year

after year.

In particular, Scandinavian firms are the most

optimistic - Norway for instance tops the tables

with 8% expected growth in 2013. Belgium and

Germany give more cautious predictions, voicing

a more conservative expected growth of 4%

and 3%, respectively. However, firms within the

Netherlands expect their businesses to contract

as much as 2%.

The role of technologyWithout a doubt, technology will continue to play

a heavy role in the investments of engineering

firms for 2013. Firms will continue to look to

technology to increase efficiency, optimise

internal processes and deliver more profitable

projects to their customers.

When asked “In which areas of technology

do you expect to invest in over the next 18

months?” respondents submitted a variety of

answers that all boiled down to one category:

business management systems. Everything from

collaborative tools, to CRM platforms, to business

applications for projects, finance and planning

made the list of top technological priorities

in 2013. These responses were unsurprising,

as they coincided closely with the companies

that identified winning new business, improving

customer relationships and having a better view

of projects as their main business issues at stake.

30% of respondents plan to invest in

Computer Aided Design (CAD) systems, 28% in

document management systems, and mobile

tools were the expected investment in 2013 for

26% of the surveyed firms. This demonstrates

that European engineering firms are renewing

their concentration on delivering quality

projects to clients, while keeping up with today’s

increasingly mobile workforce.

Business issuesWhether the “financial crisis” is over or not,

European engineering firms still have challenges

that they must overcome in order to succeed

in both 2013 and the long-term. Identifying and

understanding these issues are paramount to

future growth. Besides allowing engineering firms

to compare their challenges to their competitive

counterparts, acknowledging today’s top issues

can help firms proactively strategise solutions

that ensure profitability within their organisation.

1. Executive Summary

Trends and needs in engineering 2013 5

With this in mind, we asked what the respondents

saw as the top four business issues:

1. Project profitabilityProject profitability is the number one challenge

experienced by engineering companies. Firms

want to ensure that the projects they work on are

worth it. To do that, today’s firms recognise that

they need better visibility of project and resource

planning in addition to visibility of profitability per

project.

2. Customer satisfactionAs the second largest challenge identified,

customer satisfaction comes as no surprise.

Rather than just a ‘pat on the back’ for good work,

engineering firms are looking to improve their

strategies when it comes to building long-term

relationships with clients. After all, long-term

relationships breed long-term work opportunities.

3. Winning new projects:While customer satisfaction is required to retain

current clients for the long-term, firms still need

to successfully position themselves for untapped,

profitable business opportunities. This means

finding answers to questions such as: • What is the most profitable type of work?

• What are the most profitable customers to engage?

• What market segments should we look into?”

4. Billable utilisation rates:Just like project profitability, this comes down

to having a better view and stronger alignment

of project and resource planning. What’s more,

engineering firms identified that anticipated

billable utilisation rate was a top priority; firms

need this to ensure that even projects in their

pipeline can and will be completed with the

necessary resources on task.

Regional overviewTo get a full scope of the European engineering

sector, Ipsos Synovate conducted the survey

across six different European countries: Belgium,

Germany, Norway, Sweden, Denmark and the

Netherlands. The results demonstrated more

similarities than differences when it came to the

potential opportunities and business issues faced

by each country.

For instance, the top four most important

business issues (project profitability, customer

satisfaction, winning new projects and billable

utilisation rates) was the same across all

countries. Moreover, 45% of respondents across

the board replied that the biggest threat to

company cash flow in 2013 is clients not paying

their invoices on time.

In summary, challenges and opportunities

faced in each region are consistent for the

engineering industry as a whole. Knowing this,

firms can prepare for the potential threats of

2013, while deploying the best practices needed

to stay successful and take advantage of today’s

slowly improving economy.

The outlookIs the level of optimism for 2013 justified?

Overall, the ‘Trends and Needs in Engineering

2013’ study shows a trend of increasing

confidence and firm growth. When comparing this

study to last year’s industry outlook, the results

are clear: with an average projected growth of

4% across the majority of European countries,

engineering businesses are finally seeing the light

at the end of the tunnel. This means that firms

are looking for long-term solutions that put heavy

focus on optimising internal resources.


Deltek commissioned Ipsos Synovate to conduct interviews with key decision makers and senior

managers of engineering firms in Belgium, Germany, Denmark, Norway, Sweden and the Netherlands.

The research delineated from this survey reveals the trends and challenges facing the engineering

sector in 2013 and beyond.

2. Introduction

In order to get an in-depth picture of today’s European markets, we interviewed some of the most acknowledged experts in the engineering industry regarding the results of the survey. Primarily focusing on key representatives of the Dutch and German industries, below we’ve included a few of their most critical takeaways on 2013’s economic trends.

Question:

According to the survey results, German engineering companies consider increasing a business’ efficiency, customer satisfaction and innovation as the greatest opportunities for a positive market development. Where does your company, VBI, see the greatest opportunities for the industry?

Answer:

“I would share that assessment. Innovation has always been the key to the success of German engineering. Our customers expect us to develop great ideas to overcome technical and economic challenges. When that is coupled with high quality service, we can achieve customer satisfaction. However, in addition to finding technical and economic solutions, the industry’s slower growth has made it necessary for companies to review their actual internal business issues. Even now, there are certainly more opportunities and solutions that can make our business even more efficient and optimize our processes.”

Jörg Thiele, VP of VBI (Germany)

Question:

In the Netherlands, the engineering firms expect a market decline of 2 percent for 2013, while the surrounding, other surveyed countries (Germany, Belgium, Denmark, Sweden, Norway) expect an average growth of 4 percent. Based on the contracts your company has seen with the engineering firms in The Netherlands, does NLingenieurs think this representation of the market is accurate?

Answer:

“Among the companies that we are in contact with, we do see that the 2013 market has still not generally improved. More than half of the companies expect their revenue to be lower this year than it was in 2012. This is because the order book is still shrinking and the value of and margins on contracts are declining.”

Paul Oortwijn, Director of NLingenieurs

(The Netherlands)


Question:

How does NLingenieurs react to the findings that the neighboring countries of The Netherlands have higher growth expectations? Are there lessons to learn from this?

Answer:

“For years, up until about 2009, the Dutch engineering sector was doing very well. In those years, the Dutch industry often performed better than many other European countries. That the Dutch market now appears to be recovering more slowly than their neighboring countries has partly to do with the impact of the Dutch government policy. Currently, many projects in The Netherlands are delayed (or adjusted) due to uncertainty about spending budgets, e.g. in the municipalities.”

Paul Oortwijn, Director of NLingenieurs (The Netherlands)

Question:

In 2013, winning new projects is expected to be the biggest challenge in The Netherlands. What are examples of successful strategies that engineering firms can use to deal with this crisis?

Answer:

“It’s always been important to win new projects. At this time, however, firms in certain sectors are experiencing that ‘business’, i.e. the contracts and projects, are not coming automatically like they did in the past. We see very different ways of dealing with this situation in the engineering firms. Due to the shrinking order size in the public sector, some firms are moving their attention to the private sector. For example, there is more work available in the industrial sector, where engineering firms can clearly provide added value. We also see that engineering firms are starting to focus on product differentiation. In these cases, companies are looking at the needs of their clients and considering carefully which of the services from their service portfolio they could offer to their clients in the future. We also see companies creating their own work. Not by waiting for a request from a client, but often by working with others to develop a product and get it financed. By working together with other firms, the current, tight financial situation that often prevents an individual contractor from getting projects financed can be circumvented. Many strategies are possible, but for all of them it is important to analyze your own business, know the potential of your own staff and fully understand your market needs.”

Paul Oortwijn, Director of NLingenieurs (

The Netherlands)


3.1 Expectations for 2013

3.1.1 Market Development in 2013Across all of the countries included in the study,

the expected average market development figure

is 4%. Scandinavian countries voice the most

optimism, with Denmark returning 8% average

market development and Norway returning 6%.

A small fall in the Netherlands is revealed at -2%,

but it is worthy to note that this expectancy in the

market has decreased further since last year (the

market prediction for 2012 was -1%).

Fundamental to the research is finding out

the general level of market outlook within the

engineering sector. So how do those interviewed

see the market development for their company

in 2013?

The level of optimism shown by the

respondents generally coincided with the average

market development rates of the country of

residence. For the countries expected to grow

by larger margins (Denmark and Norway), more

respondents returned optimistic responses.

Likewise, for the country markets predicted at

marginally lower growth rates, a slightly lower

number of responses reflected optimism for their

corresponding country.

For instance, a tremendous 94% of Danish

respondents expect to see growth within

their businesses along with 90% of Norwegian

engineering firms. Similarly, more than half of

the respondents saw growth in the Swedish and

German markets. On the other hand, pessimism

over the market also holds true to the expected

development rate for the Netherlands; close

to half of the Dutch respondents believe their

development will fall in 2013, making the average

market development figure a realistic portrayal of

the sector.

3. Results and findings

Average market developmentTotal 4 %

Denmark 8 %

Norway 6 %

Sweden 4 %

Belgium 4 %

Germany 3 %

Netherlands -2 %

Total (n=177)

Denmark (n=16)*

Norway (n=20)*

Sweden (n=20)*

Germany (n=46)

Belgium (n=25)

Netherlands (n=50)

4%

8%

6%

4%

3%

4%

-2%

16% 18% 66%

94%

90%

69%

63%

44%

34%

20%

28%

40%

20%

6%

10%

9%

9%

16%

46%

Expected AverageMarket Development

fall stagnation growth

Table 2: How do you see the market development for your company in 2013?

Table 1: Average market development by country.

Base: all decision makers within (mid-size and large) engineering companies. *Results indicative due to small base.


3.1.2 Opportunities for the coming years

Expected opportunities for 2013 and beyond

haven’t changed much from the previous year’s

findings. However, contrary to the “been there,

analysed that” perspective, the repetition in

upcoming opportunities shows that a focus on

these trends has already worked when it comes to

driving steady growth across the industry. Firms

are now re-energising their concentration on

these factors to continue success in 2013 and for

the long-term.

Like in 2012’s findings, the European

engineering firms see the greatest opportunities

stemming from improving efficiency (51%),

innovation (41%) and customer satisfaction

(41%). This makes sense: mirroring the themes of

improving internal processes for better project

profitability and long-term client relationships,

these three factors continue to top the charts as

key success drivers across the European markets.

But, beyond, “continuing what works”, why

exactly is improving efficiency today’s top

priority? To get to the core of these opportunities,

firms realise they need to beat out their

competitors by constantly improving on the

services they provide and their ability to deliver

projects to key clients. For instance, if firms

have found themselves not making enough on

projects, they now understand that there is only

one way out: by getting better at what they do

and subsequently raising their operational profit

margins. In a nutshell, this translates back to

improving organisational efficiency for greater

profit.

Improving efficiency

Innovation

Improving customer satisfaction

Specialization in market sectors and customer types

(International) growth

Improving quality

Specialisation in types of work

Creating joint ventures*

Improving delivery times

Mergers

Other

51%

41%

41%

40%

38%

38%

34%

23%

16%

10%

10%

Table 3: Where do you see the greatest opportunities for the next few years? (%)

3.1.3 What the respondents say on opportunities

“ Because the government has announced further development in road and railway infrastructure and the water supply sector.”

(South Africa)

I am basing this growth in the oil and gas sector. I am looking at expected growth, world-wide, in the subsea sector.”

(Norway)

“We rent out specialists on an hourly basis, which I see as the future.” (Denmark)

“Specialised clusters can be used to bring in projects for export. Collaborating means you can realize more complete projects with the help of these complementary projects.” (Belgium)

“The poor state of the public finances will mean we receive fewer orders from the public sector. However, orders from the commercial sector are increasing.”

(Germany)

Total all countries 2013 (n=177)

Base: all decision makers within (mid-size and large) engineering companies

* In the Scandinavian and German companies, they are talking about joint ventures whereas The Netherlands and Belgium are talking about cooperation between firms.


3.1.4 Predominant business threatsWhen asked about perceived business threats for

the coming years, the responses were illuminating:

staffing, competition and cost-cutting continued

to be the biggest causes for concern amidst an

uncertain global economy.

Above all, finding and retaining talented staff

was identified as the biggest challenge, with 55%

of decision makers seeing this as the greatest

threat to business over the next few years.

Undoubtedly, this stems from heightened clients

expectations, wherein customers are looking

for firms that can deliver specialised knowledge

in their projects. For firms, this then translates

back to building key resources up to that level of

experience and becoming an attractive employer

to potential market ‘veterans’.

Reiterating the impact of market expectations,

price competition came in as the second most

prevalent threat to future business. With 52% of

respondents categorising this as a top threat,

it’s clear that customers are putting increased

pressure on prices and stirring the competition

across all European engineering industries.

Cost cutting also concerns the engineering

sector – from public authorities as well as industry

in general, returning 46% of the votes and 26%

respectively. However, the risk of not retaining

enough contract orders and the price of labour

came in as a close fourth and fifth business issue,

demonstrating that general idea of ‘cost’ across

the board will continue to cause some anxiety

over the coming years.

Competition-wise, the survey saw a large shift

in the responses from the previous year. In 2012,

interviewees considered international firms to

be the biggest threat (36%) with competition

from low-wage countries second (26%) and

from contractors last (21%). However, this year’s

findings demonstrated that now competition

from contractors had moved to the top threat at

25%, with competition from large, international

firms and competition from low-wage countries at

23% and 20%, respectively.

Finding and retaining good staff

Price competition

Cost-cutting by public authorities

Not enough orders

Labour costs

Loss-making projects

Cost-cutting by industry

Competition from contractors

Customer payment behaviour

Competition from large international firms

Competition from low-wage countries

Unlimited or too high accountability

Other

55%

52%

38%

36%

34%

27%

26%

25%

23%

23%

20%

14%

11%

Table 4: Where do you see the greatest threats for the next few years? (%)

3.1.5 What the respondents say on threats

“The way the trade outlook looks as it did in January and February; the expected debit will be difficult to reach.” (Sweden)

“I believe in our sector, people are unaware how much potential vacant space there is—vacant space that will not be released onto the market if leases are not extended.” (Netherlands)

“In our market of international companies, there is a shortage of engineers and issues with outsourcing.” (Netherlands)

“I expect to see some declines due to the receding number of public sector orders.”

(Germany)


Base: all decision makers within (mid-size and large) engineering companies


3.1.6 Threats to companies’ cash flowIn today’s age of unpredictable project pipeline

and revenues, ensuring steady cash flow within

an organisation is critical to an engineering

firm’s success. Likewise, understanding where

engineering companies expect to find cash flow

challenges gives a clear sign to protective actions

firms should begin to employ.

By a large margin, firm decision makers

responded that the biggest threat to company

cash flow was clients not paying their invoices

on time (45%). This fear is not understated;

if customers do not pay, then firms cannot

pay their subcontractors, resulting in delayed

projects. When analysed, this threat to cash flow

represents a vicious cycle that can directly impact

firm-wide growth and project profitability.

After that, the risks became more internally-

focused: project managers being too slow

to invoice clients (16%) and employees not

appropriately registering billable time (13%)

were the next highest response to cash flow

vulnerabilities.

Table 5 What is the biggest threat to your company’s cash flow?

Clients not paying their invoices on time

Project managers too slow in invoicing clients

Employees not registering their billable time

Inefficient internal invoicing process

Other

45%

16%

13%

3%

8%


Base: all decision makers within engineering companies


3.1.7 Top business issues for 2013The most important business issues faced by

engineering firms indicate the driving forces

behind the day-to-day decisions made by

senior professionals in industry. These decisions

inevitably answer questions such as: What do we

invest in for the future? How should we respond to

certain business trends? And, what are the areas

of our business that require the most attention?

Across the board, the top four most important

business issues were the same in all countries.

According to the survey, engineering professionals

across Europe were most concerned with project

profitability. This is to be expected given the

enormous economic pressures and increased

competition that characterise today’s engineering

industry.

The second most important issue specified

by all European respondents was customer

satisfaction, followed by winning new business in

third place and then improving billable utilisation

rates in fourth.

In every country, project profitability,

customer satisfaction, winning new projects

and billable utilisation rates were at the top of

the list as the most important business issues.

However, comparatively few are concerned with

more specific, process-related issues such as the

quality of reporting (3%) or back-office efficiency

(1%). When it comes down to it, this means that

firms are currently more focused on securing

revenues through ‘big picture’ project successes

than they are on optimisation of back-office

operations.

Total all countries 2013# 1 Ranking

Project profitability 19% 2.4

Customer satisfaction 24% 2.5

Acquisition (winning new projects) 30% 2.6

Billable utilization rates 20% 2.8

Back-office efficiency 1% 4.5

Quality of reporting 3% 4.8

Social project management tools n/a n/a

Table 6 Key business issue for engineering firms is project profitability


3.2 Insight into business issues

3.2.1 Project profitability For engineering companies globally, turning

a profit over the past few years had been

increasingly more difficult. Competition from

emerging markets is driving down costs and

squeezing margins to uncomfortable proportions.

At the same time, firms are unable to lower prices

beyond current levels.

In the survey, better visibility of project

and resource planning was identified as the

most important requirement in enhancing

project profitability, as 46% of respondents

acknowledged that this was an area they would

like to have a better view of. As a close second,

knowing the profitability per project was voted on

by 43% of respondents.

Farther down the line, decision makers

surveyed also said they desired better visibility

into their poorly performing projects (37%) and

better visibility of budgeted versus actuals per

project (36%).

Table 7 Which of the following aspects of project profitability would you like to have a better view of within your organization? (%)

When it comes to boosting profitability try:

• Creating a factual budget baseline – and sticking to it!

• Keep a watchful eye on sold, spent and planned hours per project

• Automating systems and processes for a streamlined, super efficient outfit

Visibility of project and resource planning

Visibility of profitability per project

Visibility of poorly performing projects

Visibility of budgeted versus actual costs per project

Visibility of the trend towards ‘fixed-price’ projects

None of these

46%

43%

37%

36%

31%

10%


Base: all decision makers who see ‘project profitability’ as one of the three most important business issues


3.2.2 Customer satisfactionAccording to the survey, the two biggest aspects of

customer satisfaction that firms planned to focus

on were building long-term relationships (61%)

and improving communication with customers

(54%). Improving the quality of services and

increasing the understanding of client needs

came right behind those answers at 49% and

47%, respectively. The least important objective,

by far, was in offering a wider range of services.

This tells us that firms are instead emphasising on

improving the services they already deliver to keep

customers happy for the long run.

With these statistics in mind, firms can glean

that a focused, long-term and customer-centric

approach to business is the sector’s chosen

method of retaining customer loyalty and

maintaining profits.

Table 8 Which aspects of customer satisfaction do you want to improve in your organisation? (%)

Building long-term relationships

Communication with customers

Quality of services

Increase understanding of clients

On-time delivery

Try to think how clients are thinking

Offering a wider range of services

Other

61%

54%

49%

47%

46%

43%

26%

3%

To boost customer satisfaction, aim to:

• Meet or go beyond customers’ expectations through careful time, budget and resource planning

• Match the right talent in your business for the right client or project, based on that talent’s personal skills, talents and experience.

• Collaborate and share customer information across department, growing knowledge throughout the entire organization and building trust between client and supplie


Base: all decision makers who see ‘customer satisfaction’ as one of the three most important business issues


3.2.3 Winning new projectsWhen it comes to winning new projects in

the European engineering sector, companies

identified a number of areas that they felt needed

improvement. More than half of the respondents

(57%) distinguished that knowing the most

profitable market segments would help grow

their customer base. This elevated focus can be

attributed to the growing competition throughout

Europe and emerging markets.

The second and third most important aspects

of winning new business came in far behind

the top answer. Of these two, 38% of those

interviewed claimed that a view of the most

profitable customers would help them find more

business, while 33% noted that a view of the most

profitable types of work/specialisation was the

most critical.

Table 9: Which of the following aspects of winning new projects would you like to have a better view of within your organization? (%)

Guaranteed strategies for winning new business include:

• Leveraging detailed, historical data from your business to identify new opportunities

• Identifying and personifying your ‘ideal customer’, making them easy to spot

• Accessing your employee’s hidden talents and using them to strategically diversify into new areas

Most profitable market segments

Most profitable customers

Most profitable types of work/specialism

Up-to-date overview of the sales pipeline

Sales costs per project

Most successful marketing campaigns

None of these

57%

38%

33%

27%

25%

15%

10%


Base: all decision makers who see ‘acquisition’ as one of the three most important business issues


3.2.4 Staff utilization ratesFor a productive workforce, the average utilisation

rate experienced across the entire engineering

sector was 76%. To increase margins, a key

approach is to improve staff productivity with

billable hours.

According to the survey, there was no one

obvious tactic when it came to improving staff

utilisation rates: 46% of those surveyed desired an

alignment of project and resource planning, while

41% wanted an improved view of future utilisation

rates. As shown in the chart below, several

areas of focus are viewed as imperative for both

improving organisation-wide utilisation rates, and

subsequently securing a better return

Table 10 : Which of the following aspects of billable utilization rates would you like to have a better view of within your organization? (%)

Some practical steps to improving staff utilisation include:

• Increasing productivity by thoroughly tracking employee output

• Eliminating the ‘guesstimation’ when it comes to availability—instead, plan resources on the basis of real-time, accurate data.

• Integrating resource management with your sales pipeline for end-to-end data flow and a guarantee of met customer expectations

Alignment of project and resource planning

Anticipated future billable utilization rate

Visibility of planning needs for new projects in the coming period

Possibility of transferring employees between departments and/or offices

Current billable utilization rate per employee of staff over time

Visibility during project planning of the project hours still available

None of these

46%

41%

38%

35%

31%

30%

7%

Average billable utilization rate* (All 2013= 76%)

Base: all decision makers who see ‘billable utilization rates’ as one of the three most important business issues

* % billable hours out of all hours for the organization for the staff


3.2.5 Back office efficiencyIntegration of project and financial administration,

as well as the invoicing of time and materials and

fixed-price projects was selected by respondents

as important back-office process improvements.

As engineering firms experience more turnovers

on their time and materials, they see the benefits

of fixed price contracts—where companies can

demonstrate their value to customers and retain

higher profit margins.

Automated workflows are seen as necessary

for 26% of respondents. Likewise, recording

processes such as time, expenses, and purchases

by project was selected by 25% of respondents.

3.2.6 Reporting

Reporting not only supports the day-to-day

decision-making and functioning of an engineering

firm, it also provides a level of transparency that

helps with customer retention and loyalty. The

more insight managers have about their project

– as well as the day-to-day functioning of the

business – the better.

According to the survey, at the top of the

reporting wish-list for 42% of the respondents, was

to have ‘a better view of the financial status of all

live projects’. Once again, this is indicative of the

industry’s number one desire to increase project

profitability; by having stronger visibility into their

financials, firms are able to better understand

which projects are bringing in profit and which

Table 11: Which aspects of back-office efficiency do you want to improve in your organisation? (%)

Integration of project and financial administration

Invoicing of time & materials and fixed-price projects

Automated workflows

Time recording, expenses and purchases by project

Time recording and approvals

Other

32%

28%

26%

25%

7%

8%


Base: all decision makers who see ‘back-office efficiency’ as one of the three most important business issues


ones are stopping short. This also alludes to the

need to make real-time decisions for a project as it

develops, so the project manager can react quickly

and avoid any pitfalls.

The second selection was a better view of

forecast turnover and costs per business unit,

which supported the survey respondent’s long-

established theme of ‘improving efficiency’.

3.2.7 The effects of emerging countries The emergence of developing countries in the

European engineering market brought increased

competition. In response, firms are taking the

‘increased value’ approach instead of cutting

service costs and pricing.

When asked, ‘What do you consider the most

important effect on your business regarding

competition from developing countries?’ 36% of

respondents claimed that they delivered higher

quality services to clients. A significantly smaller

number selected reducing costs to handle lower

prices (12%) and lowering prices on services (6%).

What does this mean for today’s engineering

firms? Optimism in the market, 4% overall growth,

business challenges, etc. All of these findings are

great insight into the path of 2013’s European

engineering market, but can leave a lot for firms to

digest. European engineering firms need to be able

to apply all this information for an advantage in their

businesses. Below, Deltek has analysed the findings

of the ‘Trends and Needs in Engineering 2013’

report to provide a more comprehensive picture of

today’s engineering business landscape.

4.1 So, is the financial crisis truly over?While 66% of respondents predict sustained

growth in 2013, this optimism reflects a

stabilisation in the market from 2012 to

2013—not that the financial crisis is officially

finished. However, it does mean that the

European engineering industries are beginning

Table 12: Which of the following aspects of reporting would you like to have a better view of within your organization? (%)

Financial status of all live projects

Forecast turnover and costs per business unit

Profitability per segment, customers and/or type of work

Financial status per business unit and type of work

Status of all live projects, in terms of time spent and progress

Status of all live projects, in terms of time spent and progress

Utilization rate achieved

None of these

42%

39%

30%

27%

20%

19%

11%

16%


Base: all decision makers who see ‘reporting’ as one of the three most important business issues


to see a pattern of growth, which is a good sign.

Unfortunately, due to the fact that the turbulence

of the global economy is still widely unpredictable,

firms are remaining cautious with their growth

strategies and focusing on improving efficiencies

for long-term business success. An example of

today’s unbalanced growth across Europe can

be seen in the Netherlands, which has predicted

decreases in the market for the past two years

(and is expected to be -2% in 2013).

Similarly, the European engineering

industry’s worries for hiring and retaining staff

are not unfounded. In general, firms are not only

experiencing more position openings due to

higher turnover rates, but they are also balancing

the need for highly specialised staff that can meet

client/project requirements.

Overall, there is a sense amongst engineering

firms that ‘things are starting to look up’. Yet,

pressures on staff and even competitive pricing

mean that firms are still going to have to focus on

efficiency, resource utilisation and knowledge of

profitable markets in order to continue that growth.

4.2 Why improve efficiency?One simple answer: to raise the operational

profit. Despite slow growth, engineering firms

are struggling to make top-line profit on the

work and services that keep them in business.

This is a direct result of the competitive pricing

strategies seen throughout the European sectors.

Customers are also looking for services that offer

the highest value and lowest cost, which is why

engineering firms should focus on efficiency and

resource utilisation.

Another justification for an increased

focus on efficiency and resource utilisation is

that operational profit is directly impacted by

company turnover. Though turnover is getting

better as the market starts to slowly stabilise,

profits are not following that same pattern. The

fact is that companies are still earning less profit—

meaning it is critical that firms be able to closely

follow projects and proactively respond when

budget or resource issues arise. Similarly, when

survey respondents claimed they wanted better

views of reporting (i.e. the financial position of

their live projects), it reaffirmed that companies

now require the exact status of each project,

including the project P&L (profit &loss), in order to

be profitable.

Instead of a firm lowering its prices to the point

where there is little change for profitable turnover,

European engineering firms are instead trying to

heighten the value of their business by improving

internal operations and service delivery to clients.

By improving efficiency across an organisation,

engineering companies become better at what

they do—increasing value instead of cutting

prices.

4. Conclusions


4.3 Understanding the threats: What makes finding and retaining staff and price competition issues for 2013?The engineering sector is a highly specialised

industry and customers are always looking

specifically for firms that can offer specialised

experience. To meet these expectations ,

European engineering firms need to leverage

people with 10 years or more experience in their

area. However, these highly-skilled people have

been in the past—and remain today—a scarcity.

This proves a challenge: without the right staff and

specialisation, clients will move on to competing

firms that can provide them with the high value

they desire.

The second biggest threat facing the

European engineering industry is price

competition. Today, it’s all about prices and

margin. And with today’s customers looking

for services that offer the highest value for the

lowest cost, price competition is fierce. Yet, it’s

worth noting that this price competition does not

originate from emerging markets (such as Brazil,

China and India). This is mainly because European

firms believe that their biggest competition

comes from other firms throughout Europe.

Although the battle for clients throughout

Europe is high, the true cause of this European

competition rests primarily in the fact that

customers are putting intense pressure on prices.

Because customers have also experienced the

revenue drops from the financial crisis, clients

are keeping low prices and margin as a top priority

when purchasing services.

5.1 Survey backgroundIn February and March 2013, telephone research

was conducted across a base of 177 decision

makers in the engineering sector across the

Netherlands, Belgium, Germany, Denmark,

Norway and Sweden to discover what the trends

and needs are in engineering.

The research was carried out by Ipsos Synovate

and was commissioned by Deltek.

• Telephone interviews of 15 minutes among senior level employees in top engineering firms with more than 50 employees.

• The target group for this study is decision makers at engineering companies.

• The engineering firms interviewed provide a representative sample of large and medium European engineering firms.


5.2 QuestionnaireThe questionnaire covers the following subjects:

• Expectations for 2013

• Critical business issues

• Technology

• Background questions

The companies that were interviewed are active in the following countries and sectors, with the below company sizes:

5. Appendix

Country Share

Netherlands 28 %

Germany 26 %

Belgium 14 %

Norway 11 %

Sweden 11 %

Denmark 9 %

# of Employees Share

< 50 28 %

51-100 19 %

101-250 27 %

251-1000 17 %

>1000 8 %

Sector Share

Construction 43 %

Infrastructure & Mobility

29 %

Industry 26 %

Town Planning & Environment

23 %

Water Supply 13 %

Sewage &Waste Treatment

17 %

Oil & Offshore 13 %

Other 27 %


6. About Deltek

Deltek is the leading global provider of

enterprise software and information solutions

for professional services firms and government

contractors. For decades, we have delivered

actionable insight that empowers our customers

to unlock their business potential. 16,000

organizations and more than 2 million users

in over 80 countries around the world rely on

Deltek to research and identify opportunities, win

new business, optimize resources, streamline

operations, and deliver more profitable projects.

Deltek - Know more. Do more.® deltek.com

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Herndon, VA 20171-2823

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Sweden T +46 (0)8 587 077 00

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www.deltek.com

[email protected]

deltek.com [email protected] (+1) 800.456.2009

Deltek is the leading global provider of enterprise software and information solutions for professional services firms and government contractors. For decades, we have delivered actionable insight that empowers our customers to unlock their business potential. 16,000 organizations and 2 million users in over 80 countries around the world rely on Deltek to research and identify opportunities, win new business, optimize resources, streamline operations, and deliver more profitable projects. Deltek – Know more. Do more.® deltek.com

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