Erosion risks

• OEMs capture more aftermarket via long-term service agreements
• Alternative parts/MRO competition where certification allows
• Air traffic downturn reduces flight hours and aftermarket demand

Leading indicators

• Commercial Aviation Aftermarket revenue growth
• Segment margin trend vs OEM pricing pressure
• Aircraft flight-hours trends

Counterarguments

• Airlines can multi-source MRO and parts for some components
• Competitors with similar installed bases can match service offerings

Erosion risks

• Standardized open architectures reduce differentiation
• Regulatory changes shift retrofit cycles

Leading indicators

• Rate of new platform certifications / linefit wins
• Retrofit mandate-driven demand cycles

Counterarguments

• Regulation applies to all major suppliers; not uniquely advantaged
• OEMs can sponsor certification of alternative suppliers

Erosion risks

• Airlines adopt independent analytics platforms
• Data access and interoperability limit stickiness

Leading indicators

• Connected aircraft / telemetry penetration
• Software renewals (if disclosed) and attach rates

Counterarguments

• Airlines may prefer vendor-neutral software platforms
• Switching software vendors can be easier than switching certified hardware

Erosion risks

• Commoditization of sensors and safety products
• Customers standardize on open protocols and multi-vendor architectures
• Industrial capex cycles reduce new system demand

Leading indicators

• Service mix and recurring software attach
• Orders/backlog trend in automation projects
• Gross/segment margin trend vs component inflation

Counterarguments

• Many sub-markets are fragmented with aggressive price competition
• Competitors can displace suppliers during plant upgrades or new builds

Erosion risks

• Customers prefer best-of-breed point solutions
• System integrators steer decisions toward other OEMs

Leading indicators

• Cross-sell rates across business units
• Win rates on multi-product automation bids

Counterarguments

• Bundling may be less effective when procurement is split by plant/region
• Specialists can outperform on specific modules (e.g., robotics, vision)

Erosion risks

• Quality incidents damage reputation
• Low-cost entrants narrow perceived differentiation

Leading indicators

• Warranty/return rates
• Customer satisfaction / NPS (if disclosed)

Counterarguments

• Procurement may prioritize total cost over brand in commoditized categories
• Large customers can run competitive tenders that compress margins

Erosion risks

• Building owners switch service providers post-install
• Open standards reduce vendor lock-in for controls

Leading indicators

• Service and retrofit mix vs new installs
• Software and connected building adoption rates

Counterarguments

• Projects can be rebid frequently; contractors influence vendor choice
• Competitors with similar installed bases can compete aggressively on service pricing

Erosion risks

• Point-solution vendors outperform on specific components (video, access control)
• Customer preference for open integrations and best-of-breed

Leading indicators

• Attach rate of software to hardware installs
• Win rate on multi-system building projects

Counterarguments

• System integrators can assemble multi-vendor solutions
• Building owners may prioritize upfront cost over single-vendor integration

Erosion risks

• Migration tools and open APIs lower switching barriers
• Cloud-based overlays displace legacy BMS vendors

Leading indicators

• Churn/renewal rates on software and service contracts (if disclosed)
• Competitive displacement rates in large retrofits

Counterarguments

• Controls layers can be overlaid without full rip-and-replace
• Large customers can standardize and negotiate aggressive terms

Erosion risks

• Competing licensors introduce superior process economics
• Energy transition policy and project financing volatility

Leading indicators

• Licensing awards / backlog in process technology
• Catalyst and services revenue trend (if disclosed)

Counterarguments

• Customers can run competitive process-licensor bids
• New technologies can leapfrog incumbents in fast-changing transition markets

Erosion risks

• Modular/standardized plants reduce redesign costs
• Customers prefer open technology packages

Leading indicators

• Share of revenue from repeat customers / revamps (if disclosed)
• Competitive win/loss commentary in earnings calls

Counterarguments

• Process selection is often re-competed on major turnarounds
• Independent engineering firms can standardize around multiple licensors

Erosion risks

• Project cancellations/deferrals
• Contract repricing and cost overruns

Leading indicators

• Total backlog trend and conversion timing
• Schedule/cost variance disclosures on long-term contracts

Counterarguments

• Backlog does not imply exclusivity; future awards are competitive
• Project businesses can be lumpy with uneven margins