Operational Risk Usage Scenarios Will Power Ahead Even As ORM Software Vendors Disappear
We recently forecasted that the operational risk management software market will grow by 50% over the next 5 years to reach nearly $2 billion in 2023. An interesting aspect of this study was how revenue splits out between different categories of vendor. We found that Asset Performance Management software vendors like AVEVA garner 41% of spend on operational risk software, EHS software vendors like Gensuite capture 19% and specialist ORM vendors like Riskpoynt benefit from just 28% of the total spend. These ORM software vendors offer specialist capabilities for process safety management, control of work and barrier risk management. Typically, the petro-chemicals sector accounts for 80% of their revenues. Few of them have more than 100 employees.
Reflecting interest in the potential of operational risk management software, the past six months has witnessed a flurry of activity in the ORM software market with both EHS and APM vendors acquiring specialist ORM software providers. Wolters Kluwer (owner of Enablon) acquired eVision in October 2018, Sphera bought Petrotechnics in January 2019 and 18,000 employee Hexagon, acquired j5 International in January 2019. The recent Verdantix Green Quadrant benchmark of ORM software found that eVision and Petrotechnics were the two ORM specialist market leaders. These deals obviously have big ramifications for the smaller ORM vendors and also for competitors of Enablon, Sphera and Hexagon. Why are EHS and APM vendors buying ORM software specialists?
Customers are slowly moving away from analysing data and controlling risks in operational silos such as safety, mechanical integrity, environmental risks and maintenance. With paper-based processes a manager could only hope to control risks within their narrow area of operations. For instance, ensuring a JHA had been undertaken prior to maintenance activities being signed off; isolations applied to ensure the work could be conducted safely and permit to work documentation completed to demonstrate compliance. The secret sauce that the ORM vendors have developed is the ability to build complex models that allow operations managers to analyse risks based on real-time data about simultaneous operations across an entire facility. These interdependent risk models provide a digital control panel to schedule and monitor the safe performance of maintenance work as well as monitoring the overall status of risk controls – often referred to as barrier risk management.
What does this mean for operational risk management software? The core usage scenario based on interdependent risk models infused with real-time data will continue to grow because it ushers in a new paradigm of stronger risk controls and higher production. But the complexity of the technology will require owners with deep pockets, a multi-industry strategy and the credibility to sell into senior operations leaders. Specialist ORM vendors should look for acquisition partners before the logic of EHS plus ORM and APM plus ORM makes their best of breed strategy defunct.
To learn more about our operational risk research check out our recently published reports.