2018 outlook: trends to watch
An estimated 40% of the market is currently outsourced, with the remainder of TIC services carried out in-house. These services are often non-core business for the company. The push towards outsourcing – and in specific instances, the privatisation of state-owned laboratories – will continue to be a strong driver of growth. It’s not all one-way traffic though, and the outsourced model cannot rely solely on its third-party accreditation capability as justification for continued growth. There are instances of TIC services attributable to some government agencies moving back in-house, reflecting the pressure on public spending.
Increasing levels of regulation have triggered a transition from a voluntary-based risk management approach to mandatory testing services – for example, after the recent high-profile vehicle emissions scandal. Additionally, the tragic Grenfell Tower fire highlighted the critical need for standards and certification in the construction and maintenance of public infrastructure.
An evolving regulatory landscape is an intrinsic part of the TIC industry and will continue to generate new opportunities for firms – matching their clients’ needs.
Emerging market growth
The next year will see multinational TIC players expand further into new markets and developing economies, chiefly through acquisition, and deal with new cultural, tax and legislative regimes. China will continue to be a prime growth territory for the sector.
TIC firms continue to be called on to scrutinise international supply chains as a result of trends towards lower sourcing and procurement costs. The sourcing of raw materials from jurisdictions with different quality control procedures, for instance, will require more TIC input. Additionally – given the proliferation of firms deploying products on a global scale, often simultaneously, and involving complex manufacturing and supplier arrangements – globalisation is a major growth element of the TIC industry.
The rise in conscious consumerism will continue on a major scale, piling pressure on brands to protect their reputations. This is moving the needle from TIC services being seen as obligatory, to being able to provide real competitive advantage. Consumers expect more choice, lower prices and better quality – hence, the trust provided by certification is increasingly important. The proliferation of social media networks and the speed of information sharing will drive further growth in the TIC sector. General increases in global wealth will have the same effect, through raised expectations of safety and quality.
The recent rise of protectionist policy and trade barriers has been one of the ‘handbrakes’ on the soaring growth trajectories previously seen in TIC. If followed through, this trend has the potential to limit global trade growth, with a natural dampening effect on the sector. However, we remain confident that the resilience and strength inherent in the industry will compensate for the challenges faced.
Boards will be looking to achieve further efficiencies in staffing, procurement and general operating models, to save on costs and grow margins. TIC has an increasingly important role in helping all industries achieve these cost targets.