40% of Three-Phase UPS Under Service Contract

IMS Research’s recent study, “The World Market for UPS Service and Support,” estimates that 40% of all three-phase uninterruptible power supplies in the field have a service contract attached. The analyst firm forecasts that the number under contract will grow from roughly 280 thousand at the end of 2011, to just over 350 thousand at the end of 2015.

Much of this growth will come from Asia, where contract attach rates are growing faster than elsewhere. This forecasted growth of contracts is because UPS shipments are projected to increase by an average of 10% per year over the next four years; and attach rates are growing considerably. The market in Asia has traditionally opted to pay for time and materials rather than adopt service contracts; but with maturing economies and a movement to higher kVA ratings, contracts attach rates are increasing.

Globally, higher power UPS are more likely to have a service contract attached than low-power units. A service contract is an annual agreement which can include the provision of on-site labor, guaranteed response time, and preventive maintenance on a UPS; all important considerations when looking to ensure an application’s uptime. Elizabeth Cruz, a market analyst with IMS Research, who studies UPS services, says that “companies are more likely to make the additional investment in an annual contract on a high-kVA unit given that they tend to protect more critical equipment. So as emerging regions, like China and India, move to higher power UPS, the attach rates will increase.”

Penetration of service contracts is an important benchmark for UPS service providers, as contracts account for more than half of their total service revenues. Cruz concludes that “there is huge opportunity for increased service revenues, given that typically over half of a company’s own installed base is not under a service contract. Beyond this, there are also other opportunities for growth in services coming in the future. Professional services like energy assessments are forecast to grow rapidly over the next few years and will offer a new source of revenues for major service providers.”