|IMS Research estimates revenue from service of EWC detection equipment will grow to $768.9 million in 2012|
In the $2.6 billion market for Explosives, Weapons, and Contraband (EWC) detection equipment, technological innovations and controversies surrounding airport body scanners continue to grab headlines. But according to a new report by IMS Research, now part of IHS Inc. (NYSE:IHS), developments in the service side of the EWC business should receive closer attention.
In its latest EWC study, IMS Research estimates revenues from the service, maintenance, and installation of EWC detection equipment will grow to $768.9 million in 2012. This represents a 7.7% growth in service revenue over the prior year, and trumps the increase seen from pure product sales.
“The uptick in service business is being driven by a number of factors,” notes Michael Arluck, the report author and analyst. “For one, service revenues are inherently more stable, and more predictable than product revenues. Recognising this, industry suppliers have begun to place greater emphasis on service business as a means of reducing earnings volatility.”
In addition, there is a growing desire on the part of end-users to reduce overhead by outsourcing the screening function itself. This is referred to as ‘turnkey screening’ or ‘screening-as-a-service.’ The latest example of this trend is a six year, $900 million agreement recently announced between Rapiscan Systems and the Mexican customs agency. Under the terms of the contract, Rapiscan will build, own, and operate an inbound EWC screening program at the US-Mexico border on behalf of Mexican authorities.
“Given the sheer size of the Rapiscan deal, we are likely to see a number of other suppliers making a play at turnkey deals,” notes Arluck. “It will be interesting to see how this unfolds.”
The World Market for Explosives, Weapons, and Contraband Detection Equipment, now an annual publication, is in its fourth edition. The study is the most detailed and comprehensive of its kind, and is read by the leading decision makers in the marketplace.