Current economic conditions are causing weeks-old forecasts to change quickly, but as far as EHS software sales are concerned the long-term prediction of growth will hold.
Verdantix’s March report predicts that the EHS software market will reach $1.35 billion in 2020.
The annual growth rate will be 10.1% which will result in $2.2 billion sales in 2025.
However, the fallout from COVID-19 will alter that prediction. “There will be a reduction in the overall growth rate for EHS software market in the next year or two,“ explains Bill Pennington, senior analyst, EHS for Verdantix.
However, looking at specific EHS markets there will be some growth such as industrial hygiene and occupational health, as companies use software to battle COVID-19.
“Software companies are offering resources to help employees, customers and the public, during this time,“ says Pennington.
From an industry perspective, as COVID-19 fallout is especially hard on as oil and gas, aerospace, entertainment, software sales growth will slow. However, other sectors, such as logistics, will see an increase in sales.
Looking toward 2021 and 2022, Pennington said the market will rebound. “Part of this rebound will be due to the huge growth potential in emerging markets that are now increasing regulations,” says Pennington. “The market is still untapped in countries such as India, China and Latin American and this will provide growth over the next five years.”
The study gives insight into where and why growth will occur. From a geographical perspective, North America will contribute over half of the overall global spend, followed by Europe.
As far as market factors, there are several forces at work.
Private Equity
One force is the investment in the industry by private equity firms due to a renewed focus on innovation within the EHS function. Over the past few years, more than a billion dollars have been invested in the EHS industry through mergers and acquisitions. The increasing competition in this industry has attracted equity investors for the research and development opportunities.
Investments in this area are pretty safe as well, says Pennington. “This space is fairly stable due to its business model based on subscriptions which offer recurring revenue. It’s appealing with that consistent revenue stream and a lot of vendors have a strong customer base that they have worked with for the past five to ten years. We benchmarked 25 of the largest vendors and 80% have had double-digit growth over the past five years.”
Innovation
The field is also maturing in terms of how software is being used. While traditionally it has been a tool for compliance, now it’s become more a business driver. And that’s due to the new role that innovation in EHS has been taking.
One standout has been wearable technology. In 2019 Verdantix’s global survey of 403 senior EHS decision-makers revealed that 74% said they would use digital sensors for environmental data collection during 2020. Similarly, 53% and 52% of respondents said they will use vital sign monitoring and location tracking wearables during 2020, respectively.
Software Structural Evolution
As innovation has increased, costs have decreased. Data coming from sensors located on wearable technology can be integrated into one platform. And using Software as a Service (Sass), the start-up costs are less enabling small and medium-sized companies to use these technologies without having to invest in expensive on-premise infrastructures.
The concept of using cloud-based service is making inroads. While 81% of the respondents from the 2109 survey saw on-premise deployment of technology as acceptable, 53% said private cloud usage was acceptable with 27% seeing multitenant cloud acceptable.
The adaption of this technology, at its root, brings important advantages to the workplace. If the company decreases its incident rates due to the assistance of wearables or other uses of EHS technology, this can become a market differentiator, explains Pennington. “As safety is making headlines, a company that offers a safer workplace is able to protect both its employees and its brand.”