Written by | Yang Zeyuan, Ding Qi, Zhang Shuai
Optimization control software is one of the most challenging segments in process industry software. Currently, the optimization control software for process industries in China is experiencing rapid growth. As the domestic process industry gradually moves towards large-scale and refined operations, the penetration rate of domestic optimization control software is expected to accelerate, presenting a vast market opportunity. It is recommended to focus on leading domestic process industry software vendors.
▍What kind of company is Aspen?
1) AspenTech is a global leader in providing production process optimization control software. Its clients primarily come from industries such as energy, chemicals, engineering and construction, consumer packaged goods, and biofuels, covering over 2,400 clients, including most of the leading companies in the process industry.
2) The company’s business model consists of licensing + maintenance + services. The core aspenONE solution includes three suites: Engineering software, Manufacturing and Supply Chain (MSC) software, and Asset Performance Management (APM) software, which are responsible for optimizing asset design (including research and development, conceptual engineering, basic engineering, and equipment design), optimizing asset utilization to improve asset performance (including long-term planning, forecasting, scheduling, manufacturing operations management, and advanced control optimization), and optimizing asset operation (to maximize uptime);
3) High gross and net profit margins reflect the high value of core products. In fiscal year 2020, Aspen’s revenue was $598.7M, gross profit was $537.1M, and net profit was $229.7M. The gross margin was 89.71%, and the net margin was 38.36%.
▍Why focus on Aspen?
1) Optimization control software bridges the gap between DCS and ERP. DCS and ERP cannot address the optimization of the product itself or the production process. They also do not help process manufacturers understand how to improve their processes or reduce operational costs; however, optimization control connects DCS and ERP systems with intelligent applications, integrating knowledge from the process manufacturing field, supporting real-time decision-making, predicting equipment failures, and providing the ability to respond and adapt to operational changes. This leads to safer, more environmentally friendly, and more reliable operations.
2) Driven by information technology needs, the market capacity is expected to reach hundreds of billions. Currently, the optimization control software for process industries in China is experiencing rapid growth, with global penetration rates significantly higher than those in China, and the market capacity ceiling is above hundreds of billions. As the marginal benefits of extensive operations reach a bottleneck, coupled with the gradual exit of outdated small capacities, the domestic process industry is moving towards large-scale and refined operations, and the penetration rate of domestic optimization control software is expected to accelerate. As a leader in this field, Aspen’s development experience is particularly worth learning from.
▍What insights does Aspen provide us?
Insight 1: High R&D investment in products. Domestic optimization control software vendors need to further increase their R&D efforts, actively learn from successful overseas experiences, and build their brands;
Insight 2: High customer availability. AspenTech’s concept of “best practices” is worth learning from for domestic optimization and control software providers. Whether from its unique aspenONE licensing model or extensive training and services, everything is aimed at maximizing customer value. AspenTech places great emphasis on the timeliness, usability, and practicality of its products;
Insight 3: Standardized suites. Integration and platformization are major trends in the future development of industrial software. Domestic optimization and control software providers need to strengthen integration and platformization. aspenONE is currently the only integrated software suite focused on covering the entire asset lifecycle (design, operation, and maintenance), enabling enterprises to adapt to complex manufacturing environments;
Insight 4: Software-based charging drives business model upgrades. Aspen charges purely for software, with product gross and net profit margins significantly higher than those of local industrial software companies. The future challenge for local vendors is how to standardize customized software, achieve separation of software from hardware, and software from services, and even further transition from licensing to subscription models.
▍Investment Recommendations:
Optimization control software is one of the most challenging segments in process industry software. Currently, the optimization control software for process industries in China is experiencing rapid growth. As the domestic process industry gradually moves towards large-scale and refined operations, the penetration rate of domestic optimization control software is expected to accelerate, presenting a vast market opportunity. It is recommended to focus on leading domestic process industry software vendors.
▍Risk Factors:
Downstream industry volatility risks; industry penetration rate increases not meeting expectations; fluctuations in macroeconomic growth; intensified industry competition.
