Welcome. We're very excited today to be here with our CEO, Ulrich Spiesshofer, and our CFO, Eric Elzvik, for an exciting day about the stage 3 of our Next Level strategy, committed to unlocking value. The day will actually entail a couple of presentations at the very beginning with Uli and Eric, a Q&A session, a lunch where our EC will actually join us for a networking session, Power Grids presentation, execution, digital, and finally a wrap-up at the end of the day. One thing that I would like to remind you is that there are no fire drills scheduled for today. If you actually hear the fire alarms going off, I'd ask you to please get up in an orderly manner and exit through the doors on the right and left-hand side.
With that, I would like to also make you aware of anything for our safe harbor statement and forward-looking statements. With that, let's start the day. Enjoy.
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Good morning, ladies and gentlemen, and a very, very warm welcome to all of you that have come here to Zurich, close to the headquarters of ABB. You might not believe it, I'm really happy that all of you are here today and join us here in Zurich. Today, we are really excited to share with you where we're taking our company in the future. There's tremendous opportunities for ABB. It has a lot of change happening, and we will share with you how we will create and unlock additional value for our shareholders in the years to come. A lot is changing in the world of ABB. A lot is changing with our customers. What will not change is ABB's underlying identity.
We are the pioneering technology leader serving utilities, industry, and transport and infrastructure all around the world in an unmatched balance between Europe, the Americas, and Asia, Middle East, Africa, which today is our largest region. What is changing is a lot in the key areas where we are active. The energy revolution and Fourth Industrial Revolution are impacting everything that we do for all of our customers. The energy revolution, if you look at what's happening with the electricity grid. 40 years ago, you switched on the power plant in the morning, you switched on the user, the paper factory out there in industry, and that was it. Today, we have renewables kicking in in the past. We don't know when the sun shines. We don't know when the wind blows. We have more feeding points than ever before.
They need to be transported, the power needs to be transported over longer distances than ever before. We have new consumers of electricity. Electric vehicles are coming at a very high speed. Data centers are one of the largest consumers of electricity. There is an unprecedented complexity increase in the electricity value chain, which offers tremendous opportunity for us as a technology leader. At the same time, the Fourth Industrial Revolution is in full swing. Through digitalization, any business in the world will be impacted, and the winners will create opportunities out of this massive change. If we take the 3 customer segments that ABB is active, let me just share you some facts why I'm really excited about all three of them. In the utility sector, more than $7 trillion will go into the renewable sector until 2025.
300 HVDC projects, high-voltage direct current projects, which are projects $a couple of hundred million each, are in the pipeline going forward, connecting this renewable power to the points of consumption. Microgrids, while still small today, is coming up at pace. Energy storage out there on different levels will change the pattern of the electricity grid as well. In industry, in only a couple of years' time, there will be 4 times the amount of devices connected in industry than we have people on this Earth. ABB is already strong on the way in this build. It's a fantastic opportunity for us to do more. If you look at robotics as one of the key growth opportunities for us, it's a mind-boggling dynamic in that market that we have in front of us.
In transport and infrastructure, very soon, two-thirds of the people in the Earth will live in cities. They want to have convenience. They want to have smart buildings. They want to have individual and public sustainable transport. Here is another opportunity for ABB. All together, we are uniquely positioned to benefit from these dynamics. Our pioneering technology puts us really at the heart of the energy and Fourth Industrial Revolution. The opportunity is now, and we are ready. Over the past years, we have done significant homework, and we delivered on the ambition that we had. In 2013, the year before we started Next Level, we faced significant challenges. Before I took office as CEO and since then, I want to be an active listener. Before taking office, I met many customers, I met many investors.
I got also through discussions with our own people, where I spent more than 170 hours preparing for the CEO role after the announcement. I got a clear understanding that we had significant challenges to be addressed. One of them was organic growth. Today, whilst you don't see it on the overall top line yet because we have dampening effects from contraction in certain industry sectors, we have the growth pattern back. We are delivering organic growth in many areas of the ABB portfolio. Couple of years together when we were in this room or a comparable room together, you all were very, and rightly so, concerned about the performance of certain elements of our business portfolio. Power Systems was off-track, and we had put ourselves, it was not the market, we had put ourselves in a very unpleasing situation.
All four divisions are today back in the target corridor. I'm proud of what the team has achieved all around the world. We are delivering on our efficiency programs, whether it's supply chain management and operational excellence, where we take every year since the financial crisis in 2008, about $1 billion out of our cost base. Or whether it is our White Collar Productivity program that addressed the historically grown, pretty fat and inefficient white-collar organization. We are really draining the muscle at the moment by losing fat to become a more efficient ABB. It was also clear out of the listening exercise that I did, and I'm still doing, that we were perceived as far too complex, so we simplified it. I started in my own shop.
When I started, I had five divisions, eight regions, and a head of global markets, meaning I needed 14 people reporting to the CEO or one level below to run the world. We cut that by half. Today it's seven. We have three regions and four divisions. We have fundamentally made ABB simpler and faster and more agile over the years to come. This change finds its way into our numbers. Without coming over arrogant, we need to stay humble. We have delivered seven consecutive quarters of improved margins. It's firmly our ambition to do this also in the future. We have improved our cash culture, and if you look at the cash generation capacity that ABB has today and the cash that we have freed up, it's a very strong result, and Eric Elzvik, our CFO, will talk more about that in a minute.
We have also let you participate in this journey. We returned $8.7 billion, despite some very difficult markets and a full transformation program, to our shareholders since 2013 in the form of dividend and buyback. All together, we delivered on many dimensions, but we cannot be satisfied because we still have a significant challenge ahead of us. We need to deliver on growth. Growth is the element which we have not done what we wanted to do all together for ABB, and that finds its result in our earnings momentum. We have an ambition to grow earnings per share by 10%-15%. We need to get growth going to really deliver on this earnings momentum sustainably going forward. A lot of homework is done or in good hands today.
We have delivered in many dimensions, we are humble enough to say there is still a significant challenge that we need to address, that is getting ABB back to growth, despite a difficult market and a market outlook which is not too positive for the near term and medium term future. Let me share with you how we get the stage 3 of our Next Level, the growth momentum going, which will help us deliver on our commitment to unlock the value that we have in ABB for our shareholders going forward. Next Level Stage 3 builds on our focus areas of growth, execution, and collaboration. We are sharpened what we will do in 4 key action points. Number 1. We will drive growth in 4 market-leading, shaped-for-market-leadership positioned entrepreneurial divisions. Number 2, we are announcing today a quantum leap in digital.
You have probably seen the press release. I'll come back to that. I'm really excited about the opportunities that we have out there and the strength of ABB that we can play much better as a team going forward. We will not forget what got us to where we are today. We need to accelerate further operational execution. You see a strategy in front of you that has the power of the and, the growth momentum on the one side, and on the other hand, the focus, the continued focus and commitment on operational improvement of ABB. We will play better team sport externally by bringing ABB together. To articulate that stronger in the future, we are strengthening the ABB brand, and I'll talk later on about the exciting decisions that we have taken to really strengthen our external positioning.
Let me start how we will drive growth and how we will shape 4 market-leading businesses going forward. The ambition is very simple. When I took office as CEO, I made a commitment to all of you to have all businesses in a number 1 or 2 position in the foreseeable future. We have delivered, I will show you now how the future setup is reaching exactly that ambition. In Electrification Products, we are bringing together everything in ABB, Electrification Products will be, in the future, the division whose purpose is very simple. It's the partner of choice for electrification of any consumption point of electricity. It's a significant market opportunity. We are number 2 in this field with that alignment, we are clearly lined up against the top three competitors in this field.
We are shaping a division called Robotics and Motion based on the previous Discrete Automation and Motion portfolio, where we will really focus much stronger than in the past on a sharp setup in robotics, which is one of the most exciting and promising growth opportunities for ABB, playing our strong position in motion that we have built over many years as being the number 1 in industrial motors and drives. Industrial Automation will be the new frame how we articulate our strength on having control solutions for industry. It will build on the previous Process Automation division, it's already number 1 today in process control, as external studies all the time confirm. Last not least, we will shape Power Grids to be the partner of choice for a smarter, greener, and stronger grid going forward.
With this setup, you see here very clearly all these businesses are number 1 or 2 in their respective fields. All of them are in growth markets, and all of them are much better lined up and easier to be communicated and managed with the alignment that we're doing now against the top competitors in their respective fields. Having done so and looking at the competitive dynamics, it is very important that we empower our divisions to act as fully empowered entrepreneurs. You know that we have started the transformation on the performance culture on ABB right when I took office by the introduction of relentless execution dashboard and many other activities. We changed the compensation system towards stronger individual accountability. And what we're doing now with the next step is we are living the entrepreneurial culture in ABB even stronger.
Our 4 division heads will be empowered as entrepreneurs running their businesses with a strong degree of freedom and with a much reduced corporate intrusion in daily operations, review cycles, and similar. Tarak came recently to me and said, "Wow, Uli, that means I have about 5%-6% more time with customers in the future if we do this. This is great." And that's exactly what we want going forward. We are also changing really the key activities that we have in that field and empower them. How do we really shape the activities and what will be under the portfolio of each of these businesses? Electrification Products will get the share of Discrete Automation and Motion, which is basically electrification. Solar, EV charging, power quality moves over to Electrification, and Tarak will be the one-stop shop for electrification.
Robotics and Motion will be simplified and focused, as I said before, and we have the firm ambition to become number 1 in robotics in the world, having achieved already a number 2 position after a really tough turnaround and transformation of this business in the last couple of years. In Industrial Automation, we will further shape our digitalization efforts to really work with our customers, creating unique value. And in Power Grids, we will focus on high-growth segments. We will drive digitalization as a part of the Power Up program that we will come back to later on stronger. We are pruning the portfolio, making it lighter. Taking out niche businesses that don't make sense in the context of ABB. And we are changing the business model fundamentally, and I'll come back later on to that more in detail.
As I said, the guiding spirit will be the one of entrepreneurs. The performance management will be changing, the compensation will be changing in line with the ambition that if you run a business within one of the divisions, your compensation, your short-term incentive, is tied to the performance of the team that you're part in within the division. That's a massive change that will allow people to run hopefully faster and feel more and stronger ownership than in the past. Now, one of the questions that you have come here to get an answer on is the Power Grids question. Let me take that and share with you what we have done, what the results are, and what the decision is. On the market attractiveness, we looked very carefully. Is this an underlying market that has an opportunity for us to grow?
The answer is yes. There's tremendous growth opportunity in the field and the markets that we are serving with Power Grids. First question, it is a highly attractive market. Second question, what is the right offering? How can we shape our offering to be not in the threat of commoditization? How can we make sure that we drive differentiation? There is an opportunity to take our already leading business and differentiate stronger, one of the key levers being digitalization. A transformer that speaks about its health and communicates the well-being to an Asset Health Center of ABB is something else than copper and iron that gets installed with a customer and never touched anymore. The business model question was a really important one to look at carefully.
Quite frankly, the problems that we had in Power Systems in the past had nothing to do with the market. It was self-inflicted. We took on too much. We had an omnipotent aspiration of engineers, and we took on too much risk too quickly without having the appropriate resources and competence. In this field, we will drive, and we already have taken some very decisive actions, massive transformation to tap growth better and de-risk the Power Grids portfolio. The ownership question. Look, we got a lot of questions, why does it take a year? If you want to go through an ownership discussion fully fledged in the right detail, it takes a while. We had to go through taxation, for example. What's the tax effect if you pull out of a 75% shareholding in India?
What happens when you really divest all the joint ventures that we have around the place? What really happens when you try different ownership options? We looked at all the options with very non-emotional lenses, and we said we choose the option that has the most significant value upside for our shareholders. Having done so, we had last night with a board meeting. In a board meeting, we took the decision jointly between board and management, with full support of our anchor shareholder, to move forward and run this business in the future with a continued transformation under ABB's ownership. There's tremendous value creation possible in this field, and that tremendous value creation will be tapped with the program and with the strategy that we are learning out today, and that Claudio Facchin, the business leader on this business, will share with you later on in much more detail.
Let me go through these four questions in a bit more detail. We looked at all the options in terms of ownership for this business. We looked at spin, we looked at sale, we looked at joint ventures, we looked at IPO, we looked at transformation. There was one option that we did not look at, and here I expressly agree with Xavier. Running the status quo is not a good option. We ruled that out and said, "Clearly, this is not an option." We looked at all the other options and said, "What can we do with this business, and what is the best ownership structure?" As you can see here, the value creation potential that we have for our shareholders, for you, under continued ownership of ABB with a massive transformation program, came out the highest regarded option. We took this program very serious.
We worked with McKinsey, we had Credit Suisse and Goldman Sachs advising us, and the board. We had some very detailed discussions. We went back and forth when new questions came up. We considered all arguments of all shareholders. We listened very carefully to the arguments made, whether they were made loud or not so loud, we listened to them very carefully and made sure that we addressed them with our answer. It's very clear we have a responsibility towards all of you to deliver the best possible option, and the best possible option for our shareholders is the transformation under ABB's ownership. I already talked about the market dynamics, but what I did not talk about is the growth that is in this market. There are many growth segments, high growth segments within the Power Grids space.
If you just take the opportunities around HVDC, where ABB is the number one in the world, high voltage direct current technology, where we transport electricity over long distances. It's a market that grows at about three times GDP. If you look at grid automation and software, again, significant opportunities. In the microgrid, which is basically happening on different levels, sometimes on the lower electrification level, that is with Tarak, sometimes on the large scale utility base, is a small market that will not move the needle overall for ABB, but it is fast-growing as well. To attract these opportunities, we are massively transforming the portfolio of Power Grids. We will emphasize stronger consultancy, I mean technical consultancy, services, and software. We will be a partner with our customers in the planning, operations, and maintenance phase of their grid.
We will digitalize and drive digitalization in a massive way out there in our offering with our customers. Just to take one thing right at the beginning, if you look at the competitive environment, Siemens, GE, ABB, we are all large-scale industrial with large-scale digitalization activity. Taking the business out and running it separately would be very dangerous for this business because the scale and digitalization scales horizontally would be lost totally if we have it standalone only. We are not only transforming the offering. As you have seen this morning in our press release, we have taken decisive actions to de-risk the business model and to go for growth in a different setup than in the past. We have announced this morning two partnerships, one with Fluor on substations. You all know Fluor, a fantastic company in the EPC space. We are working together with them.
We are changing the business model. Fluor will do the EPC part, we are doing the systems, and we do the classic technology packages and the system integration, and they do their concrete in the earth. They pour it in where we got very often in trouble in the past. We are changing that fundamentally, and that's a paradigm shift within ABB, running this business in a different way. Exactly the same pattern will be adopted in offshore wind. In offshore wind, Aibel, the leading Scandinavian platform builder for many industries, is our partner in the future. They will build the platform, and we fill it with our offering. The order for ABB might be smaller, but the volatility risk profile is more attractive because we don't have the same scale of competencies as Aibel has in that field.
The second element that we're doing on changing the business model, we are pruning niche businesses. The divestiture of cables is a clear articulation of this constant pruning. You might remember when I took office as the CEO, I announced a portfolio pruning exercise. We sold about 13 businesses that were niche or smaller businesses. We got them out. Now the cables business is another one. We could have sold in an act of nervousness three years ago, the cables business. At that time, this business was not performing. People came to us and said, "Dump it." We said, "No, we see an opportunity to create value." The first phase of the transformation of cables was that we transformed it.
Now, as you have seen, we sold it for more than $900 million because it came to a quality where we said, now the next level of quality and the next level of development is better in other hands with a player at scale. We kept the touch and the reach into the technology, but at the same time, when we sold it, we formed a strategic partnership with NKT, the new owner. We will have access to the technology. The business will be in a better home. We got fair proceeds for the divestiture. We have a new business model operating in that field. You will see these kind of actions not only in Power Grids, in ABB altogether, as one key pattern of our active portfolio management that we're living.
The transformation of Power Grids will be articulated in a program that we are starting today, which is called Power Up. The commitment in this program is to get the business well within the group growth target corridor and to deliver significant further margin enhancement. Don't forget, two, three years ago, the business was hovering about 4%, 5%. Today, it's at 9%. Now we are making a commitment that by 2018, we will enter the corridor of 10%-14% EBITDA margin range for this business by changing the business model, by transforming the portfolio, by really focusing on high growth segments with lower risk and better returns like digital offering, like software, like services that we drive more in the future. Ladies and gentlemen, the journey of the portfolio review is over. Decision is taken unanimously between the board and management.
This business will be transformed under ABB's ownership going forward. This is the best way to create value for our shareholders. Now, I already talked a lot in the Power Grids part here about digitalization. Digitalization together with the energy revolution is really impacting all of our customers. It's a fantastic opportunity out there. Therefore, as a key pillar of our third phase of our strategy, we are launching a massive quantum leap in digital. What does it really take to be successful in this field? You need to be in the control loop. You need to be somehow the partner of your customer that works directly in operations with your customer, building on asset health information, building on control information, encompassing the overall planning of the operations, the daily operations, and the maintenance as well.
ABB has done not a very good job in the last years articulating how strong we are in this field. Let me lift the curtain and share with you some numbers, because we are, in fact, a truly hidden digital champion. We have more than 70 million devices. Let me repeat that. 70 million devices connected in industry, which are digitally enabled through our control systems. More than 70 million. By the way, we do this in an open way. A significant part of that 70 million is not ABB devices, it is third-party devices. We integrate them in our control systems already today. We have more than 70,000 control systems installed out there that control mission-critical processes right on an oil platform, in a pharmaceutical plant, in a chemical plant.
We have more than 6,000 plant-wide solutions installed, we have targeted 50 solutions on an overall platform base for specific industry verticals, like you have seen in marine, and later on, we're going to talk more about that, like we have in robotics and many other places. If you look at this Swiss Toblerone of ABB's offering in digital today, it is strong, but it is very clear it is not articulated sufficiently as an overall offering of ABB to our customers. We have done our homework, and here is how we're going to run this in the future. Today, we are launching ABB Ability. ABB Ability will be the digital offering of ABB, bringing together everything, the overall platforms, the control systems, the connectivity of devices in one common managed set of offerings that we will drive out there in the industry.
We are leading in this field today already, we haven't articulated it well enough. We're bringing it together under ABB Ability. What does Ability really do? It helps our customers to drive uptime, speed, and yield. It gives our divisions, our 4 focus entrepreneurs, a really significant unmatched scale in terms of tapping the installed base of more than $400 billion, tapping the opportunities in a horizontally leveraged capability that spans across the $36 billion company that ABB is today. Let me become a little bit more concrete, and let me give you a concrete example what this means in real life. Let's assume you are the manager of an offshore oil platform. For an offshore oil platform, uptime is everything. Reliability and uptime is really important.
In the past, we came to you and said, "We have a wonderful new bearing for a motor, and we can physically differentiate with our motor, and we make it more reliable." This offering has diminishing returns when you invest in it. This is already very good. For every dollar, yes, you get a return, but the returns are diminishing. Now, as you have seen in the Hannover Messe this year, we make our assets big, the motor has a sensor on it. Instead of waiting that a very well-designed motor with the greatest bearing of the life needs some maintenance because it is breaking down, we make the motor speak.
It tells our control system, "Hello, I'm starting to shake." We take that pattern into the cloud-based platform, we compare it to the repository of all motor data that we have stored and say, "Typically, within a couple of hours, this motor, or a couple of days, this motor might break down, send a maintenance crew in." We put that information into the automatic maintenance scheduling system, which is part of our control architecture that we have for our customers today, we help the customer to get uptime. Just to give you some numbers, just for the single asset, uptime or downtime might be reduced by up to 70%. That's real money if you are operating on an oil platform. Lifetime expectancy increases by 30%, and energy consumption goes down by 10%.
Altogether, ABB Ability will bring together the speaking devices, the control system, the cloud-based platform that ABB offers to really give the customer a differentiation opportunity in a very competitive environment that he is in. Now, we learn from the past. Sometimes we had an omnipotence aspiration, as I mentioned before, we try to do everything to everybody. We will drive ABB Ability in a very strong partnership approach. I'm very, very pleased to announce today that we will form a global, unique partnership between Microsoft and ABB. The leading software player in the world and ABB are teaming up. Microsoft brings intelligent cloud, but they bring also B2B specific engineering teams that will work with our teams on vertical specific solutions. We are mastering the control room. We know the domains. We have the process knowhow.
Microsoft has great cloud experience and great analytics, but also certain engineering capabilities for verticals such as the robotics environment. I'm very excited about it. We have been working on this for quite a couple of months. Today is the D-Day. We are coming out with the announcement, I would like to have a good friend speaking about that one as well.
Hi, I'm Satya Nadella, CEO of Microsoft. Thank you very much, Ulrich, for the opportunity to address everyone at your capital markets day. At Microsoft, our mission is to empower every person and every organization on the planet to achieve more. Key to empowering every organization in every industry is forging strong partnerships with companies including ABB. Microsoft and ABB have a long history of collaborating to provide comprehensive solutions to customers in industries spanning energy and smart grids, marine and port logistics, electric vehicle charging infrastructure. Today, I'm thrilled that we're expanding our relationship to bring the power of Microsoft Azure and the intelligent cloud to ABB's IoT and industrial collaboration platform. Think about it. There is an exponential amount of data and information that's being generated from computing and computers around us.
This data is merely an exhaust without the ability to reason over it and convert it into a fuel for every team, employee, and business system within an organization to gain new insights and drive faster decision-making, it's of no use. Together, ABB and Microsoft will empower utilities, industrial transportation, and infrastructure companies to accelerate their digital transformation with the power of a hyperscale trusted and intelligent cloud with ABB's industrial IoT platform. We're excited to build upon our long-standing partnership with ABB and moreover, the opportunity it represents to help our mutual customers transform their organizations and seize the opportunities ahead. Thank you all very, very much.
Thank you, Satya. We're working together on this one. This is a CEO-to-CEO-sponsored exercise. We started last year by collaborating in the EV charging field and in robotics. We learned to walk together, and now we are getting up and running, and we'll combine the two companies. Why am I so excited about the opportunities in digital? Let me share with you the situation in our customer field. This curve shows the maturity S curve of digitalization in different industries. You see that the ICT, the media field, is already very, very far advanced in terms of maturity of digitalization. When you look at the red dots, you see many of our customer segments which are starting to walk in the digital environment.
There is a tremendous opportunity to team up with our customers and to team up between ABB and Microsoft to provide unique value based on the learnings that were achieved in other industries and bring that to our customer base in an accelerated way. I'm very pleased to share with you that Guido Jouret, who sits here in the front row, IoT pioneer that spent 20 years with Cisco and set up many, many new businesses in the IoT space, has accepted our offer to join us as our Chief Digital Officer, reporting to me. Guido started a couple of days ago. He was already in discussions with us before, and he is a guy that has lived this S-curve. He has lived this S-curve, and he knows what it takes. He has worked with our customers already.
He knows what it takes, he also knows what best practice is, and he will be fully empowered to really drive the digitalization effort in ABB. If you take this opportunity and ask yourself how relevant is it? Over the years to come, not tomorrow, not next year, but over the years to come, there is a $20 billion revenue opportunity for ABB in this space. Later on, Guido and the team will give you more granularity that shows you that this is a number which is for real. This is not out of the air, just some thinking.
We have this afternoon, representatives from our businesses, ranging from Robotics, mining, the building electrification, we have marine here, and they will share with you what we already do and how we are driving it, how we create value for our customers, and how we drive that in the future going forward using ABB Ability as the key differentiator in our offering. I'm very excited about the growth opportunities that we get through the divisional sharpening and the digitalization effort. I'm also conscious and humble enough that I know we did not get here through growth. We got here through very good execution. Therefore, accelerating execution is the third element of the third phase of Next Level. We have delivered year-over-year more than $1 billion cost out through supply chain management and operational excellence.
As you can see here on the left side of the graph, we have played the group very smartly. Take copper, take steel, and look at the spend pattern of ABB. Overall, we have about a $16 billion third-party spend, and you see that large spend categories are spend categories where Power Grids and the other parts of ABB are working together with our suppliers to develop leading-edge cost situations to really take cost out jointly. What would we lose if we get part of the business out, and what would we gain? Here is one of the areas that we would definitely lose if we would not be able to drive this in this way going forward anymore.
In addition to the supply chain management and operational excellence, I said in beginning we took effort to make ABB simpler, faster, train the muscle, and reduce the fat, and that's basically our White Collar Productivity program. The White Collar Productivity program has the ambition to take $1 billion cost out by the end of 2017. We are really well on track. We are so well on track that we are raising the target today from the historic $1 billion target by 30% to $1.3 billion with the same timeline, the same cost to execute the program. Altogether, you see an ABB that is conscious that operational execution and growth will get us into the future target corridor that we want, and it's very clear we need to deliver on both.
Our commitment is we will continue to take $1 billion cost out plus every year through OpEx and supply chain management, which is about 3%-5% cost of sales equivalent. We will deliver on the $1.3 billion in working capital. Eric will show you later on the great momentum that we have created in taking down net working capital and freeing up cash in ABB, and we will continue to change the pattern from an initiative-driven program to an overall operating model. You know that we regularly benchmark ourselves, and we regularly benchmark ourselves against the best operators in industry. Two of them are Honeywell and Danaher. When we did benchmark, we realized, wow, there are companies that are doing better than us.
We hired Pasquale Abruzzese, who was one of the guys that in one of the two companies was in the core team for more than a decade, driving the transformation there. He started in summer in ABB. His 100 days are over soon, then we will put him in front of you that you also get a feeling what the opportunity is from his perspective going forward. We talk about growth, we talk about execution. What we also should talk about is how do we play the strength of ABB in an even better way going forward. Therefore, I'm very happy to share with you, and you can already see it in the visuals, you can see it in our overall identity, we are strengthening the ABB global brand. There are two dimensions to that. The one is we are initiating a brand migration program.
We have today more than 1,000 product brands. We have more than 20 company brands, a lot of that came through acquisitions. Just imagine you run a world-class soccer club, you acquire a new player, when he gets on the field, he wears the tricot of the old club. What would that do to your team? We need to make sure that in a responsible way, without giving up the brand equity value that we got through the acquisitions, we are transforming that in a sensible way into an overall master brand architecture of ABB. The second dimension of our strengthening of our brand is very simple. We will reflect our strategy of growth, execution, and collaboration in our future brand promise. The brand promise of ABB is changing, here it is. Let's write the future together.
It articulates the fact that as a pioneering technology leader, we have already written the future for more than 125 years again and again and again with many technology firsts. It also articulates our strategy. Future stands for growth, writing stands for execution, and together embrace in a collaborative way what we want to do in terms of playing team sport in ABB. Ladies and gentlemen, Next Level stage 3, four key actions, clearly defined, bring a lot of simplicity in ABB, a lot of momentum. With these actions, we are in a position that we can confirm today to you all of our targets on group level. We will deliver with this strategy going forward. With delivering these targets, we are already creating a lot of cash, we will continue to create a lot of cash.
Some people might be nervous about the capital allocation priorities of ABB. They remain unchanged. There are exciting opportunities to drive organic growth going forward through investments in technology, in digitalization. We will continue to drive that. We commit to our dividend policy that we have delivered on for many years before. We will continue to do value-creating acquisitions. Far, we have done a couple of smaller, strategically relevant bolt-on acquisitions. We are ready to do larger ones, we will stay very disciplined. We will not get nervous because all of our targets are tied to organic growth. If the right target comes along, we will hit and we will go, we are not desperate to drive them. Last but not least, returning additional cash to our shareholders has become a pattern of ABB.
The last share buy program has been successfully completed last week. Now we are planning the next one, starting in 2017, running until 2019, returning $3 billion to our shareholders in the future. If I sum up, ABB is right at the heart of the energy and the fourth industrial revolution. Our four market-leading businesses, led by empowered entrepreneurs, drive sustainable value creation. When I started as the CEO, I made a commitment that our businesses would be number one or two in their markets. We would shape and deliver on ABB this way. Today, we are in this position. These businesses will be supported by the activities in the regions on customer collaboration and what we call group oxygen.
We need to make sure our sports guys that run the four divisions get additional oxygen through on the growth side, through a digitalization platform that we use across ABB, on the cost side, through our supply chain management, and our leading SG&A structure. If you compare today Rockwell against ABB, we have about 500 basis points lower SG&A than Rockwell. There is an opportunity to give value to our businesses going forward. With that, I would like to thank you for your attention and hand over now to Eric, who will give you the CFO mirror to what I said before where we are going. Thank you very much.
Thank you, Uli. Good morning to all of you. Let me now take you through how we will build on the momentum we have created to deliver and to unlock further value in ABB. I will take you through where we are against the targets and the plans we discussed in the last two capital markets day. Short glimpse on the market conditions and where we are today. Then how we will deliver in stage 3 and unlock value for our shareholders. If you look at stage 1 and stage 2 of the Next Level strategy, we have clearly shown that we are delivering on the cost outs and productivity improvements. We have turned the thinking internally, also the focus externally from operational earnings and margins to earnings per share and operational earnings per share, which is the key item for delivering shareholder value.
We clearly have improved our capital allocation and capital efficiency. We have a very strong cash flow. I will come back to that in much more detail later. All in all, this has helped us to deliver $8.7 billion of cash back to the shareholders since 2014. Now we move into the stage 3 of the Next Level strategy, we are firmly committed to unlocking more value in ABB. Looking at some of the key performance indicators, on the margin side, you already heard we have seven consecutive quarters of margin improvement. This is coming from the cost-saving programs, lately, quite a bit from the White Collar Productivity Program. Should also be clear that we have achieved this in the last quarters, basically on flat revenues. There is a lot of hard work and a lot of change behind the numbers as you see here.
When you look at the return on capital measured as capital return on investment, we used to be below 13%. We have been able to bring that up to 15, and even slightly above 15, which is exactly our long-term target. I'm very pleased to see this development, which a lot is helped by the capital efficiency from the net working capital program. On cash flow generation, we have been performing well, and if you compare us to our peers, we are in the upper end of the league table in terms of free cash flow generation to revenues. Also in a little bit longer perspective here, 2013 to 2016, if you look at the amount of cash we have returned to the shareholders measured as dividend and buybacks compared to market value, we are at the top of the list.
We have really lived our principle to make sure we run ABB in an efficient way, also from a balanced sheet point of view. Looking at our targets that we issued two years ago and where we stand against those targets 18 months into the six-year period. We have a good momentum on the operational items. We have seen the margin improvement. On operational earnings per share, we are on a compounded annual growth rate basis after 18 months at 7%. We are 10% in the first half year 2016, we are clearly moving this in the right direction. Cash is very strong. Return we have heard about already. We are on a good move on the operational side, but we are obviously not happy that the revenue is not yet where it should be.
I will come back in quite some detail how we will achieve that in the future. Before we go there, let's take a look at the markets around us today. We are operating in quite challenging and difficult markets. It's hard weather sailing, as we have said at quite some occasions beforehand. It's still a lot in the process industries around oil and gas, around mining, which is difficult. Specifically also in the large markets in U.S., in China, in Middle East, specifically also now this year in Saudi Arabia. At the same time, we have some good and positive areas which are going quite well in construction, in T&D, in food and beverage, we put a lot of efforts in.
Europe has been growing quite well so far, but I must say now in the third quarter with all uncertainty around Brexit, that it is putting more uncertainty in the market, like also in the United States with the uncertainty in front of the election. All in all, there is not a strong momentum. We are still in hard weather sailing, and we are operating in that condition. Looking further out into midterm and long term, we see a much more positive picture. The growth drivers that we have spoken about in this room or with this audience many times are firmly in place. You can see how we see the different industries moving in the four-year perspective on the arrows in the upper part of the chart.
In the lower part, it's quite important that we have three quarters of our markets that we are operating in, which are in a growth mode. Some in fast growth, some in a bit slower mode. We are putting a lot of effort to grow more with our penetration efforts, with our growth programs, and also in specific actions, for instance, in food and beverage. We are reallocating resources into these areas in order to catch and take the growth that we have there. Last but not least, the opportunity in digital is very big. The number Ulrich showed before, we will go much more in detail in that later today, but that is a clear growth driver for the future.
In the piece which is not growing so fast, we obviously are taking all the appropriate action in terms of adjusting capacity, in terms of changing the footprint and making sure we are competitive and successful even in the current market condition, and being ready for the day when those markets are coming back again. Turning to relentless execution, we clearly are on the track and have a firm target to be in the double-digit operational earnings per share growth per year. It is based on the proven cost-out programs, which are securing that we match price pressure and other operational conditions in the market with the cost takeout from operational excellence and from supply chain that we heard about before. The White Collar Program is clearly helping us to drive the margin up.
Net working capital is helping with the capital efficiency. We are driving a very active portfolio management. We have done it for quite some time, and I will now tell you in a while exactly how we do that. First, let's take a look at the two big execution programs, the White Collar Productivity Program, where we last year when we announced it, said we will have gross savings in the calendar year 2016 to the tune of approximately $400 million. We are making very good progress on this program, both in terms of speed and in terms of effect. We will today say that we are going to get above $550 million for the full year. As you can see on the left side, it contributes from all the part of the program.
On the right side, you see quite some examples of good achievements we have done on the sales side in the Global Business Services, which includes finance, HR, IS, and supply chain. We are already operating with significant resources out of the two Global Business Service centers. We are serving today about 24 countries out of those centers. More and more is now coming over the quarters as we move into 2017. We will be finished with the whole transition there by the end of next year. We have simplified the organization, as Ulrich already alluded to. On the White Collar side, between productivity improvements and the program, we have reduced the resources on the White Collar side by about 8% since 2014. It's clearly one of the key reasons why the operational performance has improved in the group.
I said last year, I say it again, I will be disappointed if not at least half of those growth savings get to the bottom line of ABB. If you look at year-to-date numbers for first half this year, we are clearly above that 50% level. We are also, as Ulrich already said, lifting the longer-term target, which is the run rate of savings from this program by the end of 2017, by 30%, from $1 billion to $1.3 billion. We are doing that with the same time frame and with the same cost envelope between restructuring costs and implementation costs. We have been quite successful to execute some of those actions with less restructuring costs. At the end of the day, we'll have a bit less restructuring, but more implementation where we do it in a broader sense.
All in all, it's a better payback because we have more savings for the same cost. Turning to the working capital program. We have been successful to bring down sustainably the level of net working capital as a % of revenues by about 200 basis points. You can see in the chart on the left that compared to 2014, it is quite consistent between the quarters. It means we are successful with doing this down in the value chain in a sustainable way that sticks, and not just by the end of the year when somebody's pushing hard for a lot of cash. It really sits in a big change in the organization that's been on it.
This has resulted in about $800 million of cash freed up from net working capital, with the majority coming from inventories, which we are then able to use for other investments in growth or other capital allocation priorities. The improvements are coming from all divisions, so this is not only result from one or the other corner of ABB. Also here, we set a longer-term target last year, $2 billion by the end of 2017, and with the trends and the actions we have, we are firmly on track to achieve that target. You can see on the left side also how we compare against our peers and against benchmarks. We were worse than the average on the benchmark.
I said already two years ago that we want to be among the best in this, and we are a good way in that direction to achieve a top quartile performance by the end of 2017. The additional savings that will come from where we are today until the end of 2017 comes from quite a few corners. There is more potential in the front end. There is more potential in sales and operations planning, receivables and payables, we have worked on quite a bit, but there is much, much more potential there. We are using also more advanced analytics in order to see how do we operate the value chain and how do we achieve those benefits. On active portfolio management. That is part of what we have been doing in ABB for a long period of time.
One very good example is the robotics business, where we made a clear analysis a couple of years ago, and we turned it from a not very strong performer to one of the stars in ABB. The way we are doing it, we are looking clearly on the strategic side from a portfolio point of view. Is it an attractive market? Is it an offering that we have in place to be successful? Does it help us to move the center of gravity of ABB as we have discussed in the capital market days before? Then matched, of course, with the financial criteria. On that side, it's very important that we are not looking only at top line and margins. We are also looking at the return on capital. For me, that is the most important parameter.
The capital we have from the shareholders, we need to provide great return from those. With that analysis, we have looked at businesses on larger scale, on medium scale, on smaller scale in the group, that's what has resulted in quite some of the portfolio changes we have done. One example is the cable announcement we did two weeks ago, which is a quite capital-intensive activity in a niche business which ABB does not have to have in our portfolio. We found a better home for it, where we have then set up a partnership where we can still deliver the complete scope to the customers, including the cables. The outcome of this analysis can have different results, either strengthening it, fixing the business like we did with robotics, divesting, or even partnerships.
Overall, including the pending sale of cables, we will have pruned the portfolio to the tune of about $2 billion of value since 2014. Overall, we are set to continue delivering. We are accelerating the growth. We see the markets being more positive. We are activating even more growth programs to drive firmly into the target range of 3%-6%. The cost programs are helping us to deliver, and we see that we will move inside the target range by 40 to 60 basis points per year upwards. Finally, of course, the working capital program that helps us to streamline the balance sheet and minimize the capital we are needing to run the business. All in all, this leads us to the double-digit earnings and earnings per share growth.
Group targets are confirmed on the group level, especially the growth target of 3%-6%, as I said before. On the divisional level, we are confirming the targets in the three divisions, we are raising the targets in Power Grids, as Ulrich already explained, and Claudio will go much more in detail to that later today. It's important, we are taking it up by 200 basis points to show what the transformation plan will deliver that we are executing in Power Grids. On the other divisions, as you heard, we are moving a package of growth businesses from the Robotics and Motion division into Electrification Products. These are businesses we are investing in and which are early on the growth curve, they are also then dampening the margin effect.
We have seen it in the current Discrete Automation and Motion division, and that will now have some dampening effect also in Electrification Products in the short term. The target for Power Grids is valid as of 2018, as we move into that direction. Our capital allocation priorities remain unchanged. We have a strong cash generation. We have been generating about $3 billion of free cash flow every year in the past. We see now a much stronger cash generation coming with an increased margin, the higher volumes, and even better execution. Let's look at the capital allocation of where we put that cash. The organic growth is the first priority. That's where we typically find the highest capital return on investment projects. We invest about $1 billion in CapEx every year and about a billion and a half in R&D.
All of those projects are evaluated with the same technique and the same requirements on capital return on investment. The dividend yield today is at 3.5%, quite an attractive yield, and we are firmly committed to our policy of a sustainable increasing dividend over time. On acquisitions, I come back on the next chart. You have seen today that we are committed also in the future to return additional cash to the shareholders that we don't need for the operations in ABB. Let's first look at the acquisition side and value-creating acquisitions. We have a pipeline of acquisitions in all the four divisions. What is really, really important here is that we have enough of them so that we can be picky and choose the right ones with the right returns before we execute them. We will always do it in a disciplined way.
You have seen quite a few situations, even public, where we have stepped away from transactions when we have not met the criteria that you see on the right side of this chart. The areas we are looking into on the left side are quite complete for the portfolio, but they are, for instance, in additional products for our Process Automation business, better geographical coverage in Electrification Products, and also within the Discrete portfolio in motion control and things like that. We have quite some active projects. We have not done much in the last 12 months, mainly because of the discipline. We will see what now happens in the next 12 months, if there are some projects that we will be able to pull off, meeting the criteria that we have.
To the last part, the last chapter of the capital allocation priorities, which actually is something that needs to be balanced with the acquisitions. We have a certain amount of cash available, and actually, if you look forward for the next four years, it's about $13 billion-$15 billion of free cash flow that we will have available for dividends, M&A, or returns to shareholders. On the buyback side, we are announcing today that we have a plan to put a $3 billion buyback in place for the year 2017, 2018, and 2019. The reason for doing that is we need to have all the levels of the capital allocation priorities in place so that we can manage an efficient balance sheet for ABB.
We will do it in a very responsible way, in line with the cash flow development, in line with the needs that we have on the inorganic growth side, obviously also to maintain our credit rating on which we base ABB's business. We are firmly committed to unlocking value, to drive the operational earnings per share up based on growth, based on the execution program, the active portfolio management, and also the performance model that Ulrich went into detail today. With the four divisions and a much stronger focus on ownership and performance and accountability by the divisions will also help us to drive the performance higher. We will continue to drive the return on capital, measured as capital return on investment, in the mid-teens. It is a good level, it is an attractive level, and we do not have the ambition to drive that extremely much up.
We should rather develop the business and provide a good level of return as we are doing this. There is massive potential for attractive shareholder return from ABB, going into the latter part of the strategic period. Let me close by repeating why ABB. We are clearly positioned with very strong positions in attractive markets. There is growth there, and there is good growth drivers where we are active. We have the technology, both in the core business and also even on the digital side in a quite massive way as we heard earlier today. We have a crystal clear transformation agenda, how to transform the business, including Power Grids, and we are committed to an efficient balance sheet. With that, we are committed to unlocking further value of ABB. Thank you for your attention. Now I will hand over to Alanna for questions.
Yeah. You have to move it up. While they are moving the desk up here, I had a couple people asking me earlier that you got this nice box. What is really in this box? Well, it is not empty. In line with our digital direction, it actually has all of the presentations, all of the press releases, the fact sheets, which I am sure many of you have been waiting for and would love to look at. Please, it is not just only a gift or a giveaway. It actually has a significant amount of data on it where you can actually grasp all the information for the day. No more handouts. We are going digital, electronic. Please take a look at it. It has a lot of information for you guys.
There is another important aspect of the iPads. It is cheaper and more cost efficient than all the paper and all the printings. This is great also for the P&L.
So I ask that everyone that wants to ask a question put their hand up, and then Mark, you got it first there, and the lady with a microphone will come to you.
Thanks very much, Alanna. Mark Troman, Bank of America Merrill Lynch. Three questions I've got here. Firstly, Uli, the Power Grids review, obviously you've done a comprehensive review of that business. Should we assume now that the portfolio there is going to remain as it is, ex the cables business that's been disposed, i.e., there's no further pruning? I've noticed, I think on slide 20 in your presentation, you talk a lot about offering a different mix within that business with a lot more digital product systems and automation. I guess what I'm asking, something like medium-voltage transformers, maybe the lower margin parts of that portfolio Is that going to remain? If it is, how are you going to do this transformation of mix that you highlight on your slide 20? That's on Power Grids.
Second one, I think you said, you have an ambition to be number one in robots. Can you just go a little bit more detail on that? Is that inorganic, organic? What are you doing there? Finally, Eric, I think you said you had a pipeline of M&A in all four divisions. That's quite interesting. Maybe a bit more color in some of the gaps, particularly Power Grids, because I'm not sure we've heard that before. I could be wrong, but where you see the gaps in Power Grids. Thank you very much.
Okay. Mark, first of all, thank you very much for being here. Thank you for your question. Now look, the transformation of the Power Grids portfolio is one of the key value creation drivers that you have experienced so far, and it will continue in the future. We will live, as we have done since I took over, and previously in ABB, very active portfolio management. No, the portfolio is not set for the next 20 years and say that's exactly it, and that's it. We will continuously shape our portfolio for more value creation. We will continuously shape our portfolio in direction that I laid out. If you take the engineering piece, the working with our customers in the planning phase, there are tremendous opportunities to do more for ABB. We will do that, and Eric will talk more about it.
We will do that, pulling all means of growth that we have available. We will also, when the time is right, prune certain activities of our portfolio. You have seen we have constantly added and pruned pieces, we have a clear plan laid out. When the time is right, we will also share more on the details on that one. What will happen of the portfolio overall? We have committed to a 10%-15% earnings growth to you as our community, as our owners of this company. What we will do is we will do this active portfolio management in a sensible way that we deliver on these activities. If we see it makes sense to do larger moves in terms of adding or divesting, we will absolutely do them.
In the portfolio review, I can tell you, all of the options for ownership, they're really on the table. We went through what would it mean spinning, selling, IPO in this business in a lot of detail. That's one of the reasons why it took quite a while. Because if you talk with the tax guys, when Eric Elzvik talks with the tax teams, what does it really mean if you get our 75% shareholding in India out of many joint ventures that we have? In China and many other places, what would that mean in terms of taxation? You want to have a sensible answer before you do that. Mark Troman, the answer on the portfolio management in Power Grids is very clear.
That will be an ongoing pattern in a very active way, both receiving, pruning, and transforming, and I'm not ruling out any of the means of activity in there. The second one is the number 1 in Robotics. Look, it's really interesting. 2009, many of you gave a strong advice to divest Robotics. We did a strategic portfolio review there. We said this ailing business at that time, a little bit more than a $1 billion turnover, $200 million operational loss, has tremendous value creation potential. We went through, against mainstream, with that decision, and today we have a rock star in the portfolio, which is already number 2 now globally. There is no other Robotics player in the world that has a digitalization platform like ABB. There's no other Robotics player in the world that has 30,000 service people all around the world.
There's no other player in the world in Robotics that has access to distribution like we have. There is no other player that has the scale that we have on artificial intelligence collaboration with Microsoft that we are creating now with our new partnership, where, for example, we bring Microsoft HoloLens. That's a 3D visualization product together with Robotics to visualize future Robotics situations out there in the market. I'm tremendously excited about Robotics opportunities. I'm really proud of what the team has achieved. Per Vegard Nerseth, our head of the Robotics business, sits here in the audience. He will present to you later on a case on digitalization Robotics that you get a little bit of a feel for it. This will be the path going forward. With that, I hand over to Eric Elzvik because on the easy M&A question.
Thanks for the question, Mark, and I think it's a really good one because we have been nurturing a pipeline across the four divisions for a long period of time. It's also clear that with the transition we are doing or transformation we are doing in Power Grids, we have not been so focused on that. We are nurturing also a pipeline in the Power Grids area.
With that, I would just like to make sure that everyone leaves it to two questions so that we can get as many people answering as possible. Andrew? Right here.
Morning. It's Andrew Carter from the Royal Bank of Canada. Thank you for the opportunity. I was actually going to really just ask one question, which was on targets. Thought that might make you happy. Just in terms of the sales growth and the margin targets for the period. I guess one of the things that I noticed was that you do seem to be talking about Power Grids growing a bit more quickly than perhaps you previously did
I think you talked about 3% to 6% now, whereas a year ago, I think it was 2.5% to 3% or something like that. It does look as though there's a sort of an argument that maybe the group sales growth targets might want to move up a little bit and perhaps sort of similarly with what you've said about where margins go on Power Grids and also on Power Grids, on the White Collar Productivity, there's also a little bit of an argument there that you might have raised the margin targets over the period. I wonder if you could talk a little bit about those and perhaps explain sort of perhaps why you haven't.
Let me take the growth. Eric takes the margin. On the growth side, I've shown you there are some very exciting fields in the market space of Power Grids. Claudio, this afternoon, will spend quite a bit of time running you through the dynamics of that market and what we will do to drive growth in this field. There are certain parts which are pretty slow, and there are certain parts which are excitingly growing, and we will position this business in a smart way to take the opportunities there in terms of growth. Look, at the moment, coming from where we come from, I think we need to stay humble with our growth targets. Before increasing 3% to 6%, let's first deliver on that one.
With the band that we have put together, we are really firmly believe that we get into the target corridor in terms of growth for ABB overall. With that, I hand over to Eric on margin.
Thanks, Ulrich. On the margin side, we have the group target 11% to 16%. We have raised the Power Grids from 8% to 12% to 10% to 14%. That will help us with the confidence to drive the group margin up in the upper end of the corridor. There's no reason because of that to change the group target. It's clear, as you correctly said, we are helped in that margin accretion very much by the White Collar Productivity program, and that's why we have said today that we see a 40 to 60 basis points improvement per year on average inside the corridor.
Andreas?
Andreas Willi from JP Morgan. Two questions, please. The first one on M&A. You maintained the criteria for a return above cost of capital in year three. We've seen a lot of deals in the industry recently, when even some of the companies you admired earlier have called five the new three, in terms of getting to cost of capital or companies reducing cost of capital hurdle rates, given the lower interest rates. What's your view on ability to do deals while sticking to these relatively strict criterias compared to what peers are now doing? The second question on the approach to EPC and risk-sharing, how does it actually work if you get a big project with Fluor, for example? If you use an offshore wind substation in the North Sea, for example.
You win it together, what exactly happens to risk-sharing if it's delayed, if there's a problem? A year ago, there was a comment, I forgot from whom it was within ABB, who said customers don't really want to break up these projects. They look for an integrated solution, and obviously Siemens offers that. What gives you the confidence that you can come with a different approach there, which is not in line what customers historically looked for?
Thank you very much for your question, Andreas. Look, I said, I think very clearly that I admire certain competitors for their operational excellence performance. You mentioned now the same in terms of the M&A activity. That's a different bucket of consideration. We will stick to our criteria, and we will act accordingly to them. You have seen us absent on some of the larger deals because they were not right for us. It wouldn't have been right at the time. It wouldn't have been right for ABB. Lowering the hurdles in a way that it becomes long-term a difficult value proposition for our shareholders, we will stay disciplined going forward. On the EPC activity, let me give you an example on activity that we already have today, where we have recently got first orders on a partnership.
That's the one with Hitachi, similarly, Fluor and Aibel will be set up. Basically, what happens in that case, we jointly go for a project, we articulate our capabilities. ABB takes the part of delivering a package of power electronic solutions to our joint venture. That case, we have formed a joint venture. To our joint venture. The joint venture does the engineering configuration where we need the Japanese insight combined with the ABB engineering capability, and then we hand it over for execution to Hitachi on the EPC side. Later on, when the customer needs service, it's very clear that we are still there for our customer working with him. Similarly, will Fluor be set up. Similarly, will Aibel be set up. Basically what we do is we take the strength of our partner that is very strong on electrification, procurement, and construction.
We leave him the turf on that space, we bring prepackaged solutions that we sell then into this project to our customers. In the offshore wind area, we went, Claudio and I went personally to the CEOs of our customers, we sat down and say, "We are fundamentally changing the business model of ABB. If you would not choose to work with us on that one, we accept it, this is the way we will run the company in the future." It's interesting because every industry goes through different maturity curves, we see now more and more unbundling of the different packages in an offshore wind activity, that's an opportunity for us to drive this business model. There are other competitors that choose different business models. That's okay. This is the way we run ABB.
Go ahead, James.
Yes. Thank you. It's James Moore from Redburn. I've got two questions. One on the fast bits of growth in BG. You said there's some slow and fast bits, and you mentioned FACTS, grid automation, HVDC software, microgrids. I wonder if you could help us with two things on that. One, which is the size of the business within BG, because it would help to think about the fast and slow. Also, currently, are they broadly similar profitability or higher or lower? The second question relates to the EPC revenues. I know since your decisions a couple of years ago in the North Sea, et cetera, you've come out of some EPC revenue. I just wonder with some of these arrangements you've announced today, whether we should think of some revenue decline to think about scaling that and the margin effect of that in the coming period.
Look, James, we're not disclosing details in too much granularity on the different activities. If you look at our new fact sheets that are part of the iPad that you got in front of you will see much more granularity because we have listened not only to our shareholders, we also listen to the analyst community very carefully, and we understood that we need to give you more granularity. Alanna has been really nagging us very strongly. We got now a much more granularity on that one altogether. If you look at the HVDC, for example, it's a very large part. It's a very significant business for us today. If you look at the largest project that we have under execution, that we have just completed successfully the first phase, is North-East-Agra. That will bring six gigawatt of power from the Himalaya.
It's hydropower from the Himalaya. We bring it over 1,200 kilometers to the center of India, and that has been completed successfully in the first stage. The second stage comes. These are the type of projects. They are very significant. They are very material. In certain areas in that, we are making good money. In the areas where we feel we need to partner up, like the substations piece, like the offshore piece, we do a partnership model. You should see an underlying positive effect both on the top line and on the bottom line by this massive change of the portfolio action and the business model going forward. Eric, you want to complement?
Yeah. If you look at some of the charts we will show this afternoon, on Power Grids, there are details on the size of the market. I believe it's about one-third that is represented by those high-growth areas, it's quite a substantial part of the overall market.
Ben?
Thank you. Ben Uglow, Morgan Stanley. I appreciate that the whole Power Grids review has probably been a fairly tricky process between management, the board, and shareholders. You've gone into a kind of risk-sharing structure along the offshore and the substations business. Were there any conversations, were there any scenarios where you thought about the core product areas, i.e. risk sharing in areas like transformers and high voltage switchgear, which I guess are the parts of the portfolio where the biggest concerns are vis-à-vis commoditization? That was question number one. Question number two, I'm sure we're going to hear lots more about this, probably not just today, but for a while. The Ability initiative, Ulrich, how are you thinking about that in terms of management? Are we going to be having a separate center?
Are we going to be having specific numbers of engineers? How are we going to do that? I guess ultimately, I realize not today, how do we think about that financially? At what point could we talk about a quote-unquote digital P&L for ABB?
Okay. Thank you very much for your questions. The answer on the question number one is yes. We have looked at all elements of the portfolio in quite some detail. I can tell you, Claudio can probably talk more about this afternoon. We went down to the single product line. We didn't stop at the product group. We went down to single product lines. When we commit to a transformation that will move the target range by 200 basis points and has the upper end of the target range at 14% at an attractive growth that we are putting forward, we have done our homework. We know how we will get there, we know the transformation path going forward, absolutely will it also include a continued active portfolio management. When we did this review, there were no sacred cows on the table.
We would have sold the business if we would have convinced this is the better option for our shareholders. We went really thorough and deep, and we come up with the clear conclusion that running it the way and transforming it the way we have articulated is a significant upside for our shareholders. Similar like we have already delivered over the last couple of years. Now, on the second question on Ability. Look, you could probably sense I'm really excited about it, and I'm really excited to have Guido running it. He will later on talk a little bit more about it. We will not hire hundreds of thousands of people that are outside of our business lines. What we will do is Guido will have a significant budget, a significant amount of money to spend together with the divisions to really unlock the opportunities in this field.
He will have some central resources that work with him, but we will have a lot of the resources in the respective businesses where really the activity happens. Look at one element of Ability is to drive vertical specific applications building on our common platform. That should happen within the business, enabled by Guido's team that we have then built centrally. It will be a collaboration between division and Guido's team driving that forward. If you look at a comb with which you brush your hair, ABB historically had very strong teeth. On the horizontal side, the digital is now really changing the way we work because there is strong horizontal leverage capability that offers tremendous oxygen and tailwind to our businesses if you play that right.
Guido's task is to provide oxygen to the businesses to make sure they're growing faster by tapping the ABB digital platform that we develop jointly. That will be in-house between the business that a major will be and the central team that from a resource perspective, the minor will be. I see Guido here nodding fiercely. You can later on probably try to catch up with him. On the finances, look, we are moving to a more granular disclosed ABB. Again, if you look at the fact sheets, if you look at the amount of disclosure that we give you, there's a right time for everything. Now is not the right time to disclose more in terms of the financials, but I wouldn't rule it out that in the not too distant future this is coming.
Go ahead, Will Mackie.
Thank you. Will Mackie, Kepler Cheuvreux. A couple of other questions to follow up. With regard to your software partnership, we face a world which is seeing huge software companies dedicating resource to industrial applications. I could name many. Why did you choose Microsoft as your dedicated partner, and to what extent was Guido involved in that decision? As you build that business, how do you envisage that the value created, whether it's in software or services or in the specific applications, is shared with ABB shareholders rather than Microsoft? Thank you.
Will, I think those are excellent questions. Look, when you look at the space of digitalization and horizontal providers, at the moment, there are some that have tremendous success and some others which are a little bit slower. We looked at the whole universe, we narrowed down very quickly to a couple that would be the right partner given our global reach, given where we play, given the size of ABB, given the investment requirements that we have also on our partner side. Microsoft has a very clearly articulated business model, very clear. The delineation line between ABB and Microsoft is crystal clear. When Satya and I sat down and said, "How do we work together?" We said, "Okay, here's a business model." We tried it first in two areas. We saw it works. Our teams fit from a cultural perspective, we got going.
We had the same going on with other providers. At the very end, it was a mix of the clarity of how we would work together, the commercial agreement, and I come back to that in a moment, the strength of the partner, and the capabilities that the partner brings, for example, for vertical engineering. When you later on have Per Vegard Nerseth here on stage, he's working today with Microsoft already on the Robotics side. We are working on the EV charging side. That's an active program. We chose the little variant because we felt it's the right fit with us. Naturally, the term sheet that we have signed in a partnership contains also a fair value sharing.
Our domain expertise, our deep process knowhow, our installed base, our close relationship with many B2B customers that we have will be properly honored in the commercial model that we have set up between Microsoft and ABB. We will not be taking the lead . This is a true partnership approach that we have also in terms of value sharing.
I think I saw Jeff Sprague.
Thank you very much. It's Jeff Sprague from Vertical Research. Two questions. First, just back on digital. One of the things that I just struggle with analytically is if you look at the competitive landscape, your competitors are all big global players. These are oligopolistic industries. Really understanding how one gains an advantage over the other and drives a new profitable business model or some new element of growth is challenging. Some of this seems like kind of the new table stakes, if you will, to play the poker game going forward. I know we're going to have a presentation on this this afternoon, but maybe some high-level thoughts on that. The second question, perhaps I'm reading a subtlety which is not there, but changing the name of Process Automation to Industrial Automation would imply a broader definition of that space.
I was wondering if you could just comment on your strategic imperatives for that segment in particular. Thank you.
Hello, Jeff. Thank you very much for your question. Look on the digital side, you caught it right. The way I describe the situation is you have a participation requirement, and you have a differentiation opportunity. If our products don't speak and are not connected, we will not be a tier 1 supplier in five years' time anymore. There is a need to make digital natural as a tier 1 player in our product offering. This is something that we have to do. There's no question about it. If we would not do this, we would allow disintermediation of our relationship with our key customers, because somebody else would go in between us and them and put intelligence on our products.
We have to make sure that the installed base, the customer relationship that we have, is combined with leading-edge offering on products that are able to participate in the new rules of the game of the market. You first catch absolutely right on the money. The second piece is differentiation. How do we differentiate? If you look at where the true value is created for our customers, it happens in the control room or in the control loop of a machinery. In the control room, ABB is very strongly represented. We have more than 70,000 installations all around the world.
If you go down to Sadara, which is the largest downstream investment in oil and gas that has been recently commissioned, it's a $27 billion plant, three by six kilometers, and ABB does the entire automation for power and the processes out of one control room setup. In this control room, there come the asset health data, there come the control information, there come the requirements and output that we all put together in the control system. We don't have that many competitors there are in this field. There's one very vocal American competitor who is outside of the control room. They will have a hard time matching ABB with its strong installed base inside the control room, its deep domain expertise, and the customer trust.
It's much easier for us to go to a customer and say, "Look, in addition to telling your products what to do in this process, we put sensing capability on it. We listen to these products, and we optimize maintenance in the way I've described it before." If you are not in the control room, you will have a hard time matching up with us in the future, because we have that domain know-how, and we have the trust of our customers. We should never be arrogant about it. We need to take decisive actions to maintain that, but that's the pattern. You will see the participation element is one, where certain companies will fall out because they don't have the muscle, the strength, to really provide us across that. Here, the horizontal play really plays a role. Sensing scales with mass, communication scales with mass.
Our $400 billion installed base will make a big difference in the size of ABB as well.
Industrial Automation division.
Yeah. PA to IA. Yeah, look, we moved last year our PLC activities within Peter's business. You have probably seen it. We have absolutely the ambition to do more in the discrete side as well. Good catch.
Daniella?
Thank you. Just very quickly on the Power Grids on why is the target only effective from 2018, given you are already very close to it, and then Cables is going out of the portfolio soon. Is there something on the backlog? Just some clarity. Thank you.
Look, now, Natalie, you want to take it?
I can take it. You are right. We are moving in the right direction. We are also saying that we are making investments to bring the next step of the continued transformation. We are not far away, but it is a clearer and better target to say we are entering that in 2018.
Natalie? She's right there.
Oh, sorry. Thank you so much for taking my question. Natalie Falkman from Carnegie. Two questions. The first one on your focus or refocus, maybe on digitalization. Do you feel that you already have internal infrastructure in place to drive that? Or might it be so that R&D costs would need to be increased in order for you to become a leader in that area? The second question is on electrical vehicle [inaudible] infrastructure. How fast do you see this market growing? It is very fragmented market right now, but could you just mention which market share you think you'll have in five, 10 years and how you drive that?
Thank you very much for your question. Look, on digitalization, we are since more than 40 years active in that space. Half of our product offering, half of what we sell to our customers is software-based. This is not something where we start from scratch and do a little startup. This is something which is absolutely core to ABB today already. We have fantastic resources in place. If you look at the embedded software piece on our product, if you look at application software, if you look at control software, this is where ABB is already strong. I admit that we have been lousy in communicating how strong we are. We do a better job on that one. I admit we need to bring that better together across the team. We have very solid strengths in this field already.
You will see as the business portfolio shifts, the content of R&D will also be prioritized in line with that. I don't expect that we spend much more on R&D than we do today in terms of a % of revenue. I expect as the portfolio shifts, and the intention is to shift the portfolio, we will drive that stronger in the future going forward also as a matter of priority. On EV charging, you catch the right guy because I'm excited about electric cars. I drive one myself. When you look at the Paris Motor Show that just happened last week if you look at the amount of electric vehicles that were launched, and if you read the press releases that large OEMs come out with, it's an absolutely substantial market opportunity. Look at the announcement of Volkswagen. Look at Renault Nissan. Look at Ford.
Look at Daimler. All of them are coming with a mass avalanche of new models. The EU emission targets will not be met if you don't bring electric vehicles on the streets en masse. There is a regulatory element that will drive the growth. There is also the realization on the OEM side that you can do some quite interesting cars, some very fantastic cars on the EV side. I recently saw a prototype of the new Porsche Panamera fully electric vehicle that comes. I tell you, when you drive one like this, you will never drive anything anymore because it's an exciting experience. The consumer at the very end in this industry will call the shots. All of the community said a while ago, Tesla will be a failure.
If you look at the growth of that momentum and the way Elon has really created that market, very strong. I personally believe we will be all sitting here in five years' time surprised how fast this market takes off and how fast it will go. ABB did a startup a couple of years ago in EV charging. Today, we are the only company in the world that has an installed base in more than 50 countries all around the world with DC fast charging. Under the leadership of Tarak, who will, in the future, bring this consumption point of electricity to scale, we have the firm intention to stay also in the future, the number one in this field. If you look at the success so far, if you look at the technology, we are well-positioned.
We have a cloud-based platform to manage fleet data for EVs already today with Microsoft. That was one of the two pilots that Satya and I sat down and said, "Let's try it in that space." That's up and running. It's an exciting growth opportunity. We are number one today, and we have the firm commitment to be that also in the future.
James Stettler.
Can I have more water? Thank you very much. Sticking with software, can you talk a bit about your feeling of the need to have PLM software and how you could actually get access to that, whether through partnerships or potential acquisitions? Then power electronics obviously moved to EP, looks to be loss-making. Can you talk a bit about, again, what is driving that? Is that all due to solar, and how long you think it's going to take to fix that? Thank you.
Okay. I take the software piece, Eric takes the profitability piece. On the software side, we are looking at all means of continuously growing our software activities. If you look what we have today, in embedded software, there's not much need for us to go shopping. We are very strong in embedded software, whether it's in our drives, whether it's on the robot side. We work together with players, for example, on the sensing side. Look at the smart sensor that we brought out. We are working here with Nick Hayek and his team with Swatch here in Switzerland, and we have established a joint offering that combines electronics with software on that activity. We will absolutely, on the control software, play the strength that we already have.
If you look at the muscle of ABB in control software for process, we are very well-positioned, and I would not expect us to do anything massively inorganic. This is an organic play. Maybe some bolt-ons on certain vertical capabilities that we're going to add on and drive going forward. On the discrete side, having software for discrete OEM machinery would be interesting. At the moment, ABB is not that active in that field. If you look at application software, on the planning side, there's tremendous opportunities to work closer with our customers on the planning software side. If you look at that space and how it's populated today, it's either one of the very few large players, which are, in my eyes, prohibitively valued at the moment for us to make a move, or it's smaller companies.
We have bought some of them, we will continue buying teams or smaller companies to work on the planning side. On the operation side, I already talked about the control piece. On the maintenance side, the asset health capability that we have is amazing. Later on, Juha will present what we're doing in marine, for example, in terms of the software capabilities that we have, where again, we work with Microsoft together. All together, James, we will take all means of growth organic. We will do more partnerships, and we will do selected discipline acquisitions, but without going in a space where valuations would not be acceptable in this room anymore. With that, I hand over to Eric on the margins.
Okay. Look, on solar, we are moving a set of businesses across from the current DM division, in the future, the Robotics and Motion division, into Electrification Products. We are also moving some other businesses the other way. What you see in the pro forma and in the fact sheets is the net of all those effects. It is clear that the solar business is quite challenging. When we bought it a couple of years ago, we said it would be a rocky road in this market. There's a lot changing in the market dimension, the dynamics, and there is quite some price pressure in this market that is exactly happening now, what we had seen from the beginning.
The point is that this is a very attractive market long-term with good growth, where ABB is positioned in the right place from a technical point of view to be successful. We are continuing to invest, we are turning this into the right direction. We have also strengthened the management around this business, that is part of the plan.
We're going to have to close out the Q&A. I just saw a couple of hands here. I was just going to give you guys the floor earlier so I can see. Okay. For later on. You guys get to ask the first question in the afternoon session. I'd like to end the Q&A as of today or right now for the morning. We now have lunch being served outside. You have one hour. I'd ask that everyone please be back at their desk at 1:45 and look forward to a great afternoon session. Thank you. Welcome back. For a great afternoon right now, we're going to start off with Claudio. We will go into the execution section. We have about a 20-minute break again. We go straight into the digital and close out the day.
With that, I ask Claudio, please come on stage.
Thank you, Alanna. Good afternoon, everyone. I'm pretty sure that the session will be interesting, so I'm not concerned about you guys having just lunched. You heard from Uli and also Eric, the decision, I will run through how we see that with the Next Level stage 3 of Power Grids, we will unlock significant value for our shareholders and for our customers. Let me start by setting the scene of where we are today. We're playing in a $100 billion-$110 billion market, we're undisputed number one. That's not just by size, market share globally, but also in terms of footprint, also in terms of technology. I'm going to come back to that. We are very well-balanced from a regional perspective, obviously, the large share of our customers is in the utility. That's one of our strengths.
We really have a deep understanding across the geography on what utilities, what power grid customer need in terms of technology, in terms of services and systems and solutions. From a technology point of view, Uli mentioned it, we are pioneering technology leader. Definitely on the power grid side, just a few examples here. The way we see it is we enable our customers for a stronger, smarter, and greener grid. From a stronger point of view, the most obvious case obviously is HVDC technology, which allows to transport bulk energy, more and more renewable energy from long distances and world record that we're just breaking now. That's basically transmitting 12 GW worth of power, which is the equivalent of 12 large conventional power plants in one link, in one line, over 3,000 km. We are developing that together with our customers in China as we speak.
On the smarter, obviously, the digital substation is right at the center. We will hear more about that in the session that Guido will address on what does the digital technology, how do we help our customers in that space. It's about less outages. It's about lowering the CapEx in terms of also doing installation and so on in a smarter way and optimizing the asset management piece. Last but not least, we also invest a lot in terms of R&D in an organic way to develop products that also make the whole growth more sustainable. We know the electricity demand is growing. There is underlying growth. I'm going to come back to that. We need to make sure that the technology that is required will also sustain and sort of decouple the growth from the environmental impact.
Few examples are, for instance, the eco-efficient GIS or lower losses on transformers, which actually help in addressing also the efficiency of the grids. Once again, we're really at the center of all the key building blocks of what is required today, but more even so in the future from a Power Grids standpoint. We also have delivered so far. I'm really proud to say that the team has done a fantastic job. It was not an easy journey. You all know that we had quite some legacies. Uli mentioned some of those. We took the chance, and I think the key important point here, the key takeaway, is that it was not just about looking at addressing the legacy projects, but also looking at the structure, the processes, and changing the way we approach the business.
Some of the things that you already heard, that we communicated today, already generated in terms of changing business model back then when we were addressing the turnaround of the system business. Q1 2014, 3.8% EBITA margin. Last quarter, after 2 years, 9%. I think it's a strong delivery that the team committed to, and we're on the right way. Now, I will show it to you later. We're not yet done. We want to do more. We're confident that the foundation is there, is solid. By the way, the whole Step Change program that you remember we introduced to address that part of the turnaround, we will continue with those initiatives. We will continue to drive the changes to solidify our engineering centers.
We're building up backend engineering in places like India, where we're doubling our capacity to support in a much more structured, standardized, and modularized way, the engineering that we need on the front end in the different places. We'll continue to do this to make sure that we do continuous improvements in our processes. Solid foundation. Now we need to do the next step. Uli presented the strategic portfolio review, what we have done. I won't spend time to go through that again. The key point is that it was really comprehensive. This was an extremely detailed exercise. Eric showed in one of his slides the bubbles in that chart, where we look at the relevance of the portfolio of each and every product line. We did this on product line level. We analyzed all the products across the portfolio.
How are we performing today in terms of margins, in terms of growth, in terms of CROCI, in terms of working capital, and also what is the relevance of those single product lines within the Power Grids portfolio today and also in the future. We had leading external partners supporting us on that, challenging us, making sure that we took all the different aspects into account in that process. What I'm going to now spend time is to show you how we then define, based on the analysis that we have done, the transformational program. Where is it that we're going to focus on and how are we going to implement this, and what is this going to deliver at the end of the day? The program pillars, very simple, is two. One, it's the offering, the portfolio offering, and then the business models.
Those are very much connected. I'll come to that later on to explain why the rationale of some of the announcement that you saw today. Basically, is looking at, first of all, where is it that we have the buckets of growth? Uli already alluded to some of those. Obviously, the whole digital area, it's a key element for us. I'm going to come back to that. Strengthening the core. It's important for us to make sure that we continue to serve our customers while we are transitioning on the new business mix. Definitely a lot of areas to continue strengthening on that way.
Last but not least, leveraging the partnership so that we basically concentrate on what we're really good at, concentrate on our technology, on our R&D, on our innovation capacity, and allow our partners to do what they do best in areas where we obviously are not strong. The second pillar, which is as important, is driving the world-class execution. We know that we have room for improvement across all the businesses, across the geography, and across the value chain. The way we see this is obviously we want to be industry leader in cost and quality. We have identified a number of areas with very detailed initiatives on what needs to be done in order to really become a leading industry player in those two areas, cost and quality. It's not only about that.
We also want to make sure that we address operationally how do we execute our services in a way that we can leverage our scale and we can tap into our installed base much stronger and much better than what we do today. Last but not least, because of all the changes we see in the market, we will also have to address in a different way and want to be world-class on the front end performance as well. Those are the two pillars. Let me walk you through starting obviously from the market point of view. Where is it that we see the buckets of growth? The energy revolution, I think it's clear to everyone what is going on out there in the market. It's a huge transformation.
As we said it at the beginning, once we put together the new division, Power Grids, we also said that's not going to be enough because the market is changing dramatically out there. I took the time during also this last 12 months to spend a lot of time with the customers, certainly a lot of utilities, a lot of TSOs, and understand from them how do they see that we serve them today, but even more important, how do they see them that we can help them support them in this transformation that they are facing themselves. The supply is changing. The renewable penetration is driving dramatically changes in how we operate the grid. The demand EV charging. Someone asked a very important question there. That is also driving changes in the grid and fundamental ones.
Obviously the whole emerging market story on the grid as an investment, but also the upgrade, retrofit, and life cycle services for the existing mature market where investments are rolling. What is also important, we saw roughly 3% average market growth in this $110 billion market that we're covering. That is on the medium to long term. We also have areas where this market is actually, or segments of this market are actually going two to three times what we see compared to the average. HVDC, one example, the grid automation, roughly 5%, the whole software space, 7%. Obviously we have, even though smaller from a size point of view, but micro grids growing at double digit. This is a relevant part of our portfolio. The more important piece also to keep in mind is this will be even more relevant in the future.
The DC links, the capacity of managing those links, the power quality with FACTS devices and so on, all of that will be more relevant going forward because of the increased complexity that we talked about. Also to answer one of the earlier questions, that part of the market and that part of the opportunity that grows well above market, is representing for us roughly one-third of the growth that we are reflecting in our plan. That's not over. What is happening out there, the industrial revolution and the energy revolution, is also impacting from a digital standpoint across the value chain. That's a very important key element, which actually, when we went through the exercise of analyzing all the components of this transformation, we really spent time to understand how do we drive this part.
I will come back to that, but basically, this is also what our customers see. They see that challenge and also that opportunity from their side, and they're actually expecting us to support them in that area. To support them on the equipment level, to be able to deliver transformers, to deliver breakers that actually are able to connect and to speak and to send signal back to someone and then can use those signals in a smart way to optimize the maintenance, to reduce the outage. Also on the system level. On the system level, we can use digitalization to reduce time for installation, to improve the management of the increased volatility that we have in this market. Last but not least, on the other extreme, what Uli mentioned at the beginning, the heart of our know-how is in the control room.
That's very much the case also for Power Grids when it comes to the control rooms where we have our SCADA systems, where we have our network control, where we have with our EMS, meaning the energy management system, that basically take into account large grids out there and manage all the power flow, but also manage all the data. We are in there, and we need to make sure that we connect all that. The differentiation will come also for the Power Grids by connecting intelligent products through communication and leveraging the software. It's happening now, and for the customers, it's basically improving productivity. Same as in any other industry. They look at uptime, they look at yield, they look at speed. All of this will help in that direction. On the sharpening of the portfolio piece, we have announced today two new partnerships.
Obviously, you've seen the cable divestment. I think the rationale there is clear. We want to divest to a partner that will also secure the future collaboration with us. That's why, as part of this divestment, we also sign a strategic cooperation agreement with them so that we can continue to collaborate on the innovation side, for sure on the HVDC aspect, so that we can continue also drive innovation for our customers and make sure that technology will continue to support, for instance, renewable integration. The partnering, it's very simple. We started the journey by saying we want to focus on our key competence, delivering engineering, delivering system integration, but we need to strengthen the way we approach the market when it comes to the EPC turnkey large projects. We created that consolidation within ourselves, and now we are taking the next step.
We're taking the next step where we find a partner, and I'm really happy and proud to present that we have one of the strongest, if not the strongest, partner when it comes to EPC globally. Fluor has all the experience. We have 100 years of experience in dealing with designing equipment, transformers, designing the automation system on a grid. They have 100 years of experience in dealing with large, complex projects. Great starting point for us to strengthen and make sure that it's not just about de-risking that part of the portfolio, it's also making sure that we can continue to leverage that as an access to the market, because some customers are still requiring from us a turnkey approach, but we want to do it with new business models. Very same one for Aibel together with us when it comes to offshore wind connections.
There was a question on how do we do that, where one example Uli gave is exactly what we're now doing with Aibel. In that case, we actually have decided, and yes, was not a business model that was accepted just two years ago, but we're driving also the market toward that approach. Aibel will take the EPC responsibility, will be in front of us, and we concentrate to deliver the HVDC technology in our core, while the customer will see a seamless system delivered, but yet from the party that knows how to do that from a contractual point of view. Last but not least, as part of this, we continue to strengthen our core. What do we need to do in order to further leverage the strong presence that we have in transformers? We're by far the largest manufacturer.
We're by far the best manufacturer, also in terms of profitability and performance. We need to leverage that. We need to leverage the scale. We need to leverage the install base. How do we do that? It's not enough to do what we do today. We need to add the digital element on top. We want to make sure that our portfolio will, in the future, be digital, meaning it can communicate and can generate additional revenues from an advanced service point of view and software applications. Last but not least, we definitely want to drive much stronger the install base penetration. This is one of the single largest assets that we have. Copying the build-up of an install base that we've done in the last decades, if not 100 years, you don't do that overnight.
We just need to make sure that we grab that opportunity, that we leverage the new technology, we leverage the digital, and we go through that part and build that additional opportunity. That's on the portfolio part and on the business model. Partner is also about how do we partner better with our customers, particularly looking forward as they are challenged in terms of business models, in terms of how to generate revenues in a totally different market environment. Here in this chart, you see at the center, this is what we do today. We're very strong in supporting our customers with our technology on delivering our products, our systems, our technology. Going forward, it's not going to be enough. What we want to do is become also the partner of choice to our customers on the planning side.
Expanding at the beginning of that value chain on the planning side, connected to that, we will do the same at the end of their value chain when they operate and they maintain their assets. By expanding on those two areas while we keep on strengthening on our core, we will remain number one across the value chain. We need to change also, again, our business model, our approach, and that's why the transformation plan addresses those elements. World-class Execution, the other building block of the transformation. This is a must. We will invest, and I'm going to come back to that, to also make sure that we invest in areas that help us in driving a fundamental change in how we execute our projects, how we execute in our factories, how we deliver our products, and how we deliver our engineered solutions.
On just a few examples, though, to give you a sense that we're not starting from scratch. We've been leveraging the economy of scale. We've been leveraging the leading position that we have, for instance, in transformers. We are the only one that basically have a global engineering platform that allow us to leverage across the globe the customization of the design of the transformers, very close to the customers, but driving through the modularization in the back end and consolidating that know-how to drive better productivity, to drive better also results in terms of performance of those transformers. We have a unique position because of the scale compared to any other players.
The other two examples that are as important is for us to drive the cost, when we do that, we also have a unique advantage, which is not only using locations like India to manufacture, to take out the cost, but also using markets like India that are, as we know, very competitive, design those products for that market and making sure that we also leverage the whole supply chain. Once we have that, we have a very competitive product. This is just one example, a breaker, a high voltage breaker. We were almost nowhere a couple of years ago. The team decided to localize this fully, and now we have increased our market share by 15% in that specific product line.
The other part, that's the last example here, is leveraging also markets like China and the footprint, the capacity, the knowledge that we have built over the last couple of decades in terms also of innovation to design products that will be also used for markets outside the emerging markets. In that sense, they also differentiate, for instance, by having smaller footprint, lighter, and by the way, also more efficient in terms of greenhouse effect. We're uniquely positioned because we can combine our global scale with the capability of not only manufacturing in country, but also design in country. That's what makes us also differentiated from our competitors. What does this mean all when we put it together? It's basically transforming the business mix supported by the execution. When we come to that chart, you've seen it already.
Basically today, we have one third of our portfolio, so we're a bit behind in terms of average compared to what Uli showed. We have one third of our portfolio that is related to software at this point in time. Going forward, we will have to basically change that ratio. Going forward, we're targeting at least two-thirds of our portfolio will have to be connected to software, will have to be digitalized. That's not just about the services. By the way, on the service side, we also have set ourselves a clear target that we want to double in terms of share of the total revenues from the service in the next few years. That is going to be fundamental for us, not only to drive the business mix, but also to drive the profitability.
As we know, service is accretive in all sense in terms of profitability. The other part that you see in the middle here is digitalizing our portfolio. We will leverage our install base, we will leverage our footprint in terms of manufacturing and so on to make sure that we not only digitalize the new products, but also start digitalizing the existing footprint, what we have already delivered out there. How do we do it? Power Up, that's our program. The two pillars, clear, the portfolio mix, the business models, the world-class execution. We will concentrate on three key elements. The one is the leading in cost and quality. We need to drive that very hard. A lot of opportunities for us to further improve. As you've seen, we are already in that journey.
Also we need to drive this service penetration combined with the digital aspect. The two go hand in hand. Last but not least, because of the changes that we see in the market and what I showed you before in terms of more partnering, in terms of planning, in terms of OEM part, we want to drive also world-class front-end performance, which will mean for us to also change the way we approach with our customers and we get close to them. We will invest. That's part of the reason why we said we'll be strongly in that new margin corridor in 2018. When we did all this comprehensive review, we said we also need to invest in some areas. We can't afford to do this in two to three years. We need to start and somewhat do a quantum leap also in that respect.
Part of those investments, by the way, are also related to the digital aspect which Uli was mentioning, which will be between divisions and the group. We will run this program through the businesses. This will be a business-led program. We have more than 500 already identified people that will be dedicated to this exercise. Again, we're going to invest, and we will make sure that we have aligned incentives so that everybody drives in the same direction. This is a holistic transformation. It's not only addressing one aspect of the business, it's addressing all the dimensions. Where does this will take us? On the left side, you've seen already the slide. Once we put it all together, we are convinced that this business should steadily be within the 10%-14% EBITDA margin corridor. We see that once we have invested, we'll be there in 2018.
We also see that by 2020, we want to target that to be on the upper range of that corridor. Now, how do we get there? We also need the growth. The market is at 3%. We want to grow above the market. Therefore, we say, and we see that we will be within the growth corridor that the group has defined, between 3%-6%. We're going to drive both of that, and it's going to be a staged approach similar to what we showed earlier. This will unlock the value for our shareholders. How does this happen? It's important to understand, if you look at the two pillars that we just talked about, the business model and the world-class execution, those two are delivering the accretion on the margin to be well within the new margin corridor.
Obviously, we will have to drive the growth to be on the upper end of that corridor. Most of it, two-thirds of it actually, it's in our control. Challenging, but that's why we're confident that we're going to deliver, because we started already in that way. You've seen the first two quarters. I think the team has done an excellent job to be on that trajectory, and we want to do more, going forward in the next couple of years. Massive margin improvement, it will be done with investments, as I mentioned before. To summarize, I hope it's clear to everyone that we are in an attractive market. There are changes out there. There are huge changes. The complexity of the grid is much higher than it used to be. Customers are asking us.
I've been spending quite some time with customers in the last few years after I came back, and I was in this business before. I stepped out and I came back and I saw a huge change, on how customer approach us in terms of, it's not just about how many transformers you can deliver. It's also about a lot of what we talked about. How can we partner together? How can we see where the business model are going from our perspective as well as from an innovation point of view, and making sure that we optimize that part also on the operations and maintenance. The market is attractive, is growing, and today we're number one in that market. With this transformation program, we want to retain our number one position five, 10, 15 years down the road. The transformation, it's a holistic one, as I mentioned.
We will invest, we will dedicate resources, and that's why, because of the granularity, that's why we're confident that we will deliver on that. Last but not least, I think this is a very important point. We could do this transformation in any of the scenarios that Uli has presented. The chart that was shown before, it's basically leveraging the synergies within the group. There is a baseline, which is the synergies on, obviously, the supply chain. Eric showed one chart that basically some of the areas is at 50/50. That scale. We have synergies on the R&D, which we are already leveraging today. Synergies on the SG&A cost. All of that give us already a very strong foundation, not easy to replicate.
On top of that, we have the customer across divisions is a key driver for growth opportunities that can differentiate compared to many other players that don't have that customer base as we have. Last but not least, this is really a key element, that it wasn't seen probably as relevant just a few years ago, today it's not only relevant but is a must, it's fundamental for this transformation and for the success, is the digitalization piece. Leveraging the scale and the competence that the group can bring into this team and help us in driving that digitalization transformation for us as a division, as part of a group, is going to be a key differentiator.
With that, I think I have given an overall picture on where I believe and where my team believes that we can take this business within ABB. Delivering significant value for our shareholders, for our customers, and being there, leveraging more and more the attractive market and leveraging more and more the resources and the great team that we have with us. With that, over to JC.
Ladies and gentlemen, good afternoon. I am very pleased to report on the progress made with our White Collar Productivity transformation program. If I'm so excited this afternoon to talk about the achievements, it's because we're truly proud of what the teams across the world have done in this respect. Indeed, you've heard already today that the in-period savings for the calendar year 2016 are going to be more than $550 million versus the anticipated $400 million, and our target of $1 billion is increased to $1.3 billion run rate savings at the end of 2017. It is not only about a cost reduction program. It is a full transformation of our company. We are today leaner, we are more agile, and we're closer to the customers. As you well remember, we have structured the program in three buckets.
The support functions with the GBS, Global Business Services, implementation, the business functions, as well as the organizational simplification. I will walk you through these three buckets in showing where we started, where we are today, where we're going to, and more importantly, we will also go through three deep dives. I will hand over to Daniel Helmig, who is our Head of Supply Chain Management, for a deep dive in his function. I will hand over to Sylvia Hill, who is Head of Global HR Services and the HR transformation for HR. Finally, to Heather Rashid, who is the leader of the White Collar Productivity program, and he will walk us through the changes made in organizational simplification. Where did we start? With respect to the business functions, we had done quite some progress. We were still challenging with some fragmentation in front of us.
Fragmentation is an example in the R&D function, whereas all our R&D resources were scattered around 260 locations, and if we take even the 100 locations where we had least employees, in these 100 locations, we had less than 10 personnel in R&D. Another example is the tools that we didn't have enough, and in particular, the standardization and processes that were lacking. As an example, I would mention our marketing and sales function. In the support functions, we had done quite some progress. Indeed, we had 68 shared service centers, but they were in the countries, so locally managed, and very little in low-cost countries. Finally, the organization had quite some hierarchical levels. We had more units and quite an important number of layers, and the span of control that was quite limited.
This was also represented in a way in the headquarter, where not only the typically governance and control and strategic functions were represented, but also we had business functions within the headquarter, meaning business leaders and even some transactional activities. That was really the starting point which we also portrayed a year ago. Where are we today? Let me give you some snapshots. Marketing and sales. I've just said, not really enough tools. Not enough time with our customers. Today, I'm very pleased to report that we have implemented the Salesforce, a tool that we've implemented at the speed of the light across 92 countries. Today, we have 20,000 employees who work with this tool and are able, on their handheld, to see what meetings have happened just recently, what opportunities we have with our customers across the BUs.
Today we have a single customer relation management tool available across the company. Moreover, we have today a new customer model, which we call Cost to Serve, that has been implemented in two of our divisions. That allows us to today be equipped across 16 countries already with an additional tool available for our businesses. If I move now to the support functions, what have we done in this respect? I will start with engineering. Obviously, the engineers are there at the core, at the heart of our great company. Traditionally, we had our engineers more located in the mature markets. Not only do we need to put them into the growth markets, emerging markets, but also serve the more mature markets from the emerging countries, and that has been done. We have today 1,500 engineers in the Czech Republic and in India.
We have today a standard tool which allows us to plan better the engineering resources in two divisions to make sure that the right engineers with the right capacity, competencies, experience, are at the right moment on the right projects. I move to supply chain management. There, we suffered from fragmentation. Well, today, we are transitioning, and Daniel will talk about this, 90 factories in 15 countries into what we call transport management centers. Finally, with respect to the Global Business Services, we went from the 68 we've seen before, shared service centers, to two global and four regional centers. We are very well on track for the implementation of these GBS centers. Indeed, today we have already 2,000 people who are serving 24 countries across the world.
In summary, you've understand with these few examples that we are transforming all functions in the company, starting with R&D across the entire value chain to not only how we are distributing our products, but also how we're servicing our products and solutions. All this supported by the support functions and the GBS. That's the snapshot at this stage I wanted to provide you with. We are working today differently, we will continue to transform to make ABB even stronger. It's now the time to go into deep dives. Daniel, supply chain management.
Thank you, Jose. Good afternoon, ladies and gentlemen. My name is Daniel Helmig. I'm the head of supply chain management, which entails procurement and transportation and logistics. To give you a feel for that, we talk approximately $16.5 billion in terms of spend, plus another $1.5 billion in terms of commodities. We have in total about 4,000 people that are working in this area. I joined about seven years ago, after 20 years in the automotive industry and as well in the semiconductor industry, and must say it is fascinating to work in ABB with the opportunities that are there. On the one hand side, we're working on sourcing out of 550 different categories. We source out of over 100 countries, we do this in a way that we actually have the ability to emphasize and drive basically quality throughout our own supply chain in total, which is fantastic.
When we entered into the area of White Collar Productivity, we did it from a position of strength. Over the last couple of years, we developed an engine in terms of cost reduction. According to the Hackett Benchmark, every year we are in world-class with regard to cost reduction, we do this for quite some time now, which is a significant portion of what you overall seen over the last couple of years in the cost reduction that have been reported as such. We as well have been recognized as a leader in the industry with regard to training our people, with regard to experience and competence in the area of supply chain management over the years.
When we then turned as part of the White Collar Productivity program, a step back and look at the opportunities that we still have in our organization, we found quite a number of things. Let me talk about the three different areas which normally represent the area of my organization as such. We have on the one hand side, transportation and logistics. There, we have a spend of about $1.5 billion and done with over 3,500 forwarders. On the air and sea side, over the last years, we consolidated very much already, but here on the road side, we still have opportunity. If you think about point-to-point connections, plant selling or shipping to customers, plant shipping inside of the company, you have no optimization with regard to overall the capacity utilization of the trucks. That's something that we can fix.
On the transactional procurement side, every day in this company, we produce 26,000 purchase orders, and we do that locally. When you think about the opportunity that we have in terms of standardizing and optimizing the work patterns of these buyers, you see an opportunity right there. Although we already have 50% of our plants connected with EDI, still the information data exchange that we have with our suppliers was patchy. On the strategic sourcing side, which overall is our engine to get to the cost reductions that we had on a regular basis, yes, we had great performance. On the other side, there were still a lot of elements that were done locally. If you have buyers sourcing locally, they do this with local suppliers.
If you have local suppliers, you need to qualify them, you have to evaluate them, you have to classify them. All of that takes time, all of that takes a lot of resources, as well opportunities for us overall. We were clearly benchmark and very good with regard to our cost reduction. On the other side, we had clear opportunities. We were under par with our benchmarking on productivity. Let's see what we have done. Together with the BUs, together with the divisions, actually we wrote our own future. We sat down and inside of blueprint teams figured out, okay, how do we want to work going forward? Out of this, these three initiatives basically come about, and again, I will do it in the same kind of way that I've done it before. Transportation and logistics, we move into 10 transportation management centers.
You can call them as well control towers globally. Out of that, we are going to manage the whole transportation and logistics of this company, and we do this via 21st century excellent logistics software that enables us to fully manage and control the transportation globally, providing us as well a lot of data that we can harness, not only for ourselves, but as well for our customers. We already started with a transportation management center in China, and since this is already live, about 30% of the cost could be saved in this area. As JC mentioned so far, already 90 plants are right now in transition, and more will come very soon. On the transactional procurement side, we move to the Global Business Services together with our brothers and sisters from HR, from IS, and as well from finance.
There, we are going to consolidate and standardize our processes as such, and we'll have a better process as such. Today, 26 plants are already in transition or even in transition they are actually already there, and 60 are right now in transition. In addition to that, we are going to roll out a fully digitalized communication platform with our suppliers that again, enable us to take better opportunity with regards to the data that we can collect from each other. Last but not least, strategic sourcing. Together with the BUs, we have identified out of the 550 categories, 130 that we actually can rise up and can do on a larger level. That in total will represent 70% of our spend.
That is going to be managed by our 250 experts that are going to take care about the spend globally with great market knowledge and so on. We again tried this already in a pilot with our indirect team, which is about $4 billion of our spend, and in the meantime, already have 25% higher cost reductions by overachieving on our productivity targets so far. In summary, we are on our flight plan already well ahead in terms of achieving the 20% productivity that we would like to see and will have additional savings that help us to fuel our world-class performance with regard to cost reduction. Thank you very much. I'd like to hand you over now to my colleague, Sylvia.
Thank you very much, Daniel. Hello, good afternoon, ladies and gentlemen. I'm pleased to be here. I am Sylvia Hill. I'm the Head of Global HR Services, and I'm running at the same time the HR transformation for the ABB Group. I've seen in my life a lot of changes, but this is a true transformation. I've been with ABB for more than 20 years. I've been an HR partner, a generalist in several businesses. I also actually was responsible for countries as well as I was responsible for a region. Prior to I took the role in 2014, prior to that, actually, I also headed HR of one of the divisions. As said, this is a true transformation story.
This is actually a story about HR moving from a localized, scattered, and fragmented organization to a real global world-class HR function, supporting the business with more added value and delivering at the highest standards with speed, simplicity, and efficiency. This is on our agenda since 2014. What we have done, what we have found at the starting point, you see here actually, roles and responsibilities. It was no wonder coming from a country organization that we had excellence in countries, but we did not really have consistent, coherent roles across the group. In terms of transactional activities, our HR business partners who are at the core of the business actually, were very much looking into day-to-day. They were very much into solving ad hoc questions rather than supporting the business in business growth and development.
In terms of HR analytics, you all know this is the topic today for the press if it comes to where HR can add value with. Again, good practices on the country level, less on the scope of the global group. The end-to-end processes for HR, this means the overall hire and retire process, starting with the recruitment, going over talent management, all the way through to learning and development and reward. In these processes, we were lacking consistency and clarity across the different businesses across the globe. Last but not least, we also were looking into our vendor landscape, and we found only in learning and development more than 4,000 different vendors. What have we done with all of that in the meantime? Roles and responsibility. As our colleagues of Supply Chain Management, we have looked into our blueprint.
We wanted to understand and also design how are we going to operate in the future. We did that by basing ourselves on the three different strengths of HR. What is the HR business partnering, working very close with the business. What is the Centers of Excellence, who should and are to deliver excellence across the globe. Then it's naturally the global centers, the delivery centers we spoke about, who are looking into high volume activities as well as they are looking into the transactional activities to release the HR business partners from this work to make sure they can do what they are actually best at. The transformation has started already. What I can report out to you today is that already today, 50% of our employees, so means more than 60,000 people, are served by the centers, the global and the local centers in ABB.
What we can also report out is that we are showing more than 30% of savings in the different countries where we are migrating work, transactional administrative work, to our global low-cost centers. In terms of HR analytics, we have established global reports, dashboards, KPIs. We are, as one of the examples, tracking now the progress of the White Collar Productivity program as the 100% source of truth for the Executive Committee here. The looking at the standardization of the processes has also helped us to automate some of our activities. Today we have established delivery capability for 70,000 individual performance scorecards supporting the performance management culture that we have established here. In alignment and collaboration with our dear colleagues in Supply Chain Management, we have also been able to realize 25% savings on our external spends.
Just recently we did a survey amongst our HR colleagues to say, how do you feel about that one, what we are doing in terms of the transformation? Really encouraging was that we saw that the employees working for the early adopting countries, they were actually the ones that showed improved employee satisfaction. Also in that respect, we have the high commitment of the HR community in that one. All in all, what I can say for today is ABB HR is committed and ready to partner with the business if it comes to speed, simplicity, and efficiency. Thank you very much for your attention, and now I hand over to my colleague, Heather Rashid, who will speak about organizational simplification.
Thanks, Sylvia. Good afternoon, ladies and gentlemen. My name is Heather Rashid, and I lead the overall White Collar Productivity program. I've been in ABB for 13 years now, done a variety of roles. I started off as our CIO running IT for ABB, then did other headquarter tasks. I was responsible for finance and controlling our global accounting shared service headquarter companies, even real estate. In 2011, I moved to Singapore to be region president of our South Asia region, moving back in January 2015 to work on the White Collar Productivity program. I'm going to give you one slide on what we've done on organizational simplification, which is the third leg of what we're trying to do in White Collar Productivity, and then there will be one slide trying to bring together everything else that you've heard on WCP today.
Let's talk about complexity reduction that we've done, market-oriented complexity reduction. A year ago, we stood in front of you and talked to you about the complexity we have in ABB. We talked about an organization that was too complex. We talked about an organization that was comprised of five divisions, eight regions, reporting to the CEO. 13 people managing the interface between countries and divisions. Today we have about half that amount managing that same scope of affairs. We've also reduced the number of global business units, the number of local units, and overall, we've achieved a 20% reduction in organizational simplification. Part of the complexity that we had in ABB with the organizational complexity was also the number of layers we had in the company.
You saw last year that in many parts of our business, we had up to 12 management layers between frontline management and our executives. That meant by the time it took for messages to reach from senior executives down to frontline white-collar employees and vice versa, was far too long. Within a year, we've changed all that, as of today, almost all white-collar employees in ABB are within the top eight layers of the company. The last part of organizational simplification that we'd like to talk about today is our headquarters. A year ago, our headquarters was a mix of classical headquarter functions. It contained business leaders as well, we had transactional services. In the last year, many of our business leaders have moved closer to markets.
Much of our transactional services are moving or have moved into the Global Business Services, we focused our headquarters on the core headquarter task of strategy, governance, and control. As a result, as of July the 1st this year, we were able to move our headquarters from four locations in Oerlikon into one main location, which meant a 30% reduction in the size of our headquarters, all achieved well ahead of schedule. Let me try and bring it all together. You've heard JC give you an overview of the changes we are driving. Daniel has done a deep dive into supply chain. Sylvia has talked to you about the support functions. In essence, these are the three cornerstones of how we do WCP. We're driving a transformation in the organization.
Everything from the way we do R&D to the way we do engineering, the way Daniel's team delivers products to our customers, the way our salespeople engage with our customers, and even our service people will work in different ways to then service our solutions and our products after they've been installed with the customers. Supported by the support functions, finance, HR, IT, we're all transforming across the company. That's the what do we do. Now comes the question of how do we do it. We do it with three things. First of all, we invest. J.C. has talked about how we've invested more than $90 million in our Salesforce solutions. We're investing in our Global Business Services. We've ramped up two large global centers in Bangalore and Kraków. We've built hiring engines for our Global Business Services and training engines.
We're building an organization of more than 4,000 people. We've invested in tools and processes to improve ABB throughout the company, and we've invested in people. It's not just the four of us who are driving WCP. We represent over 300 people, 300 colleagues throughout the organization who are engaged full time in driving the transformation. That's the first bit, invest. The second bit is we safeguard. While we're transforming ABB, we have to safeguard business continuity. We've invested in a bunch of change management tools and a range of change management tools to make sure that as we transform the enterprise, we don't lose our focus on customers, and we don't lose our focus on delivering results. Thirdly, we ensure. We ensure the savings, and we ensure the transformation. We track the projects, we track the program, we track the spending.
We make sure we're delivering the savings, and even more importantly, because WCP has to be more than a simple cost-cutting program, we have to drive a transformation. We ensure the transformation by such things as tracking transformation markers, which measure month by month how we're transforming the company. With the what do we do and the how do we do it, we've been driving ABB with a rigor and a result focus that has enabled us to find more savings than we at first anticipated and enabled us to find those savings faster. As a result, and you've heard it many times today, we've managed to deliver these results, and today we've announced an increase in the WCP target from $1 billion to $1.3 billion with the same scope as originally envisaged, with the same timeline as originally envisaged, and with the same cost as originally envisaged.
On behalf of the team here and on behalf of the 300 colleagues who are working to drive WCP, we thank you very much for your attention. We will now have a 20-minute break.
Take your seat please. If you weren't already excited from the morning and part of the afternoon, I think definitely you will be excited in this next group here. I would like to invite Guido Jouret on stage, our Chief Digital Officer.
Great. Thank you. Thank you, Alanna. I'm feeling the love. I enjoyed all of those questions about digital. First of all, I'm going to talk a little bit about myself, what the opportunity is in digital for ABB, and I'm going to invite my colleagues up on stage to help tell the story. Just a little bit about myself. I'm an electrical engineer. I'm also a doctorate in computer science. I know what transformers are, inverters. I've worked in pharmaceuticals. I've worked in the telecommunication industry. I've worked in a renewable energy company, and my most recent opportunity before coming to ABB was in the consumer side of the Internet of Things. I have been involved with some of ABB's major customers. I was the corporate sponsor for Rockwell Automation as well as Duke Energy, as well as Pacific Gas and Electric.
I've done products in the smart grid space, including a joint venture with Itron. I've built smart routers that push the computation from the cloud to the edge, what we call fog computing. We also built telepresence technologies. My team also developed the HoloLens technology that we licensed and sold to Microsoft that Uli mentioned earlier. For the last 25 years, I have been building connected products. These are all hardware, software and connectivity to the cloud. Now when you think about a company like ABB and you ask yourself the question, what does it take to become digital? What does it take to become an industrial internet giant? First, ideally you want a big install base. Claudio shared with us this morning that ABB has one of the largest install base in the world in the whole smart grid space. Good point to start.
You also need this operational technology or industry expertise. You need the domain expertise. You need to understand how these technologies are used. That's very important for the next point, because as Uli was saying, mastering the control room, understanding the control loop. All too often, a number of our competitors will talk about sensing information and bringing it to the cloud. That's not enough. You have to sense, analyze, and act. The act is the automation. It's taking the human out of the loop. It's closing that loop that's important. For that, you need this industrial expertise. Then you need to be collaborative. You cannot do this all yourself. You need to basically invent industry standard protocols.
For example, OPC, IEC 61850, a number of other alphabet soups of acronyms that essentially represent a standard language in which devices can talk to each other, because there will be multiple devices from many different companies. Lastly, in order to not reinvent the wheel every time, in order not to have the Toblerone of different pyramids that Uli showed, you ideally need a horizontal, reusable platform of digital assets. This is frankly where ABB has been falling short. The technology stacks that ABB has built are silos today. That is why the ABB Ability platform is so important. Some of you might be asking the question, wait, you mentioned earlier today ABB Ability, Microsoft, Azure, where does that fit in? Let me walk you through the stack. You first start with the devices. There's embedded software in there's intelligence in there as well.
That is the beginning of the ABB Ability stack. You move up to the control systems, the automation in the control room, what some people would call an Internet of Things gateway. You're in the cloud. In the cloud, you have multiple components. There's industry standard web services to ensure reliable, secure communication, for example. There's other services that actually act on the data itself. That's an important distinction because in a moment, I'm going to describe where Microsoft's Azure environment fits and where ABB's differentiation on top of that platform will reside, because that was a question that came up earlier today. Now let's look at ABB plus Microsoft. The interesting thing about Azure is not that it's a cloud. A cloud is just a collection of servers in different places that are connected over the internet.
The value is not in the hardware that Microsoft has built. The value is in the software, in the millions and millions of lines of code that standardize certain types of capabilities, device management, security, hybrid cloud, how you can have a gateway talking to something in the cloud. All of that exists in the Azure environment today. Microsoft has an unparalleled advantage in one major factor, which made them a very natural choice as a strategic partner for ABB. In the '90s, Microsoft proved that it could attract an ecosystem of developers like no one else, and it made Windows the premier development environment. In the 2000s, it did it again, this time in gaming with the Xbox. It came from behind and became the leader in gaming, attracting more developers for its environment than anyone else.
Now we believe under Satya's leadership that they're going to do so again in the industrial internet space, specifically working with enterprises, attracting tens of thousands of developers onto the Azure platform. For ABB, this means we can stand on the shoulders of a giant. There's tens of thousands of people maintaining, evolving, creating further extensions to the Azure environment. We can build our industrial applications on top of that. It won't be directly to the application. We will have our own set of services, domain expertise in workflow, in protocol automation, in analyzing data that will be specific to ABB. That's our own proprietary knowhow. That is decades of accumulated industrial expertise codified into software.
The reason that I'm very excited to be at ABB is that I spent 20 years in advanced technology companies, and those companies are well on their path to being digitized today. Their internal operations are digitized, their products are digitized. They are reaching diminishing returns on this journey. Uli explained how the sectors that ABB is involved in, whether it's utilities or factories, transportation, are still at the beginning of their digital journey. There's many reasons for this, some of them related to technology. Connectivity, for example. If you're in oil and gas or in mining, as you'll hear shortly, that could be a challenge. Up until recently, there were no good solutions for connecting these areas. In some cases, it's the cost of computing. Adding a sensor, making a device smart was prohibitive. Now it's not.
Technology like machine learning that have the ability to look at terabytes of data and detect patterns that people cannot detect. These are massive industries, and they're just getting started. In order to make this less abstract, in order to make it very concrete, I'm going to invite my colleagues up on stage, and each one of them is going to walk through one specific use case in their industry, and they're going to describe to you how already today, we are providing digital solutions. Gentlemen, please join me. Our first solution is with Massimo.
Thanks, Guido. Let me introduce myself. My name is Massimo Danieli. I'm running BU Grid Automation within Power Grids division. Today I'm very excited to be here to tell you about a business case that we have, where we fully integrate end-to-end digital technology from ABB to help our customers to run the transmission and distribution grid. Let me tell you firstly, very simple terms, what the transmission distribution grid is. It's made of power lines, which transport energy in form of electricity to nodes which are called substations, where this electricity is further distributed to consumers. 95% of electricity in the world runs through substations every day. You can understand how relevant, how critical these assets are for the economy of nations, even for our life. $340 billion U.S. dollars every year are spent to maintain, operate, build new substations.
It's a huge spending, but there are challenges. The bigger challenge is aging. Some of these substations are, especially in mature economy, the complete infrastructure is there for several decades, 50, 60 and more years. That means that components out there are aged, old, they can fail at any time, but also there is very little visibility of the status and condition of these components. It's just unknown, unless one goes in front of the component. A failure of these components means that the power can be interrupted. Only in the U.S., there is an estimation that about $80 billion U.S. dollars every year are burnt in terms of loss of production and disruptions due to power interruptions.
The other big challenge is that with the increase of renewables, which is integrated into the grid, these substations are now running in a much more dynamic way, compared to they were used before. That means more stress to components and also require more flexibility, which means more automation. These are the challenges that customers are facing. What ABB does in this space, well, as you have heard from Claudio, we have been a pioneer in technologies for grid since many years. We have been the first company introducing digital technologies in protection control and monitoring in substations. We have a long experience there. In recent years, we have stepped up further and introduced new technologies and components which allow us to completely digitalize the substation. We call it a digital substation.
What that is, we have replaced all the measurements, which are further time ago, made of conventional instruments with smarter digital instruments, which allow to collect information with a much smaller footprint. They are more accurate. They also allow to collect more information about the condition of components. We have further connected this to our control systems with digital networks, which replace a lot of cabling, but also allow us to have a much richer information in the control system. Now we have very rich control systems for substations, which can also be engineered and modified very quickly. There are hundreds of these substations out there in the grid, and they have to be controlled from remote because they are unmanned.
ABB provides the network control center software, which are very large software systems, allowing operator to manage the grid, to also interact with the grid in case of upset, in case of an outage of a substation or a power line, divert the power flow. Very complex and sophisticated system. You can understand how many information are sitting in these systems. Millions of data points, which are every second collected.
With all this information, the next step is that we have introduced analytics technologies, all this information can be made available on the cloud and can be consumed by our analytics software called Asset Health Center. Asset Health Center continuously compares the status and condition of components like transformers and breakers with engineering computerized models, and tells the operators if a component is working in the right condition or if it is deviating from an optimal performance. Maintenance crew know, well, this transformer is not working well. I need to schedule maintenance for it, or it can also be at risk of failure, I need to shut this substation out and then move the energy to another substation. In that way, they can operate in a much more dynamic way, the network. What does it mean to our customers?
Well, first of all, by utilizing ABB digital substation technology, customers can execute their substation projects with lower cost. Lower cost comes from lower footprint, therefore lower real estate cost, lower civil construction cost. We can achieve up to 50% reduction in space for a substation. It also comes from reduction of cabling. Cabling can be reduced up to 80%, with all the cost reduction which comes with it. On the operating side, because the operators can now focus on maintenance only where the condition requires it or where the risk is high, then they can reduce the cost of maintenance as compared to routine maintenance, and the potential is up to 50% reduction.
Not only that, because we focus on where the risk is higher, we can avoid outages, which means disruptions, as we have seen the $80 billion of disruption costs, and can increase the uptime up to 50% or reduce the outage time up to 50%. Now, if you transform this in US dollars, you're speaking about $360,000 that every year a customer can save if utilizes the full set of technologies for his substations. What does it mean for ABB? Let me tell you why I believe that this is great. If we consider there are 65,000 substations out there today in the world, and we consider this average saving, we are speaking about $23 billion of savings that every year the industry can harvest by utilizing this technology. About 20% of those substations utilize ABB technology in various forms.
Because of, as Claudio said, we have a really high penetration in this type of industry. The industry is under pressure to reduce cost, to resolve the operating challenges. We have a great opportunity to utilize these technologies, helping these 20% of customers to start getting their savings and their operating costs down and efficiency high. Not only that, by integrating the third-party technologies, we can tap into the whole 23 billion pie, because there is also other third-party stuff out there. Further on, we can utilize the same type of technology in other industries. Take railways, for instance, very similar one, or part of these technologies can be utilized in other sectors. Let me conclude with this.
I believe we have a sector here, T&D, which is growing, has challenges, and ABB comes with all the set of digital technologies which allow customers to solve many of these challenges. Therefore, I believe that this is a great opportunity for us to penetrate it, to continue growing, and to also reaffirm our leadership in this sector. Thank you very much for your attention.
All right. Now Clyde Covert is going to talk about the mining industry, and he's going to give us an example of a use case that we've developed there.
Good afternoon, ladies and gentlemen. It's a great pleasure for me, Clyde Covert, to talk about ABB's experience in digital in underground mining. $230 billion is invested in OpEx in the underground mining industry each year. A lot of this investment goes to supporting the lifestyle that we have got used to. 18 tons of minerals and metals is available to each person living in a developed country. This doesn't come for free. It takes roughly 7.5 million people working in the underground mining industry to deliver this each year. The mining industry is not without its challenges, though. Mines are getting deeper, ore bodies are getting more complex, this has had an impact on the industry. The fact that we have to move material much further distances means that we consume much more energy.
The fact that ore bodies have got more complex has had a negative impact on productivity. One of the issues that the industry is working very hard on is looking at how to increase the utilization of equipment underground. This is also compounded by the fact that the industry has typically a lot of point solutions which have created islands of data and information that are not really being used to support the optimization of the whole value chain. I'd like you to use your memory a little bit now. How often have you been driving in the car, singing your favorite song on the radio, you enter a tunnel, and you find out you're singing on your own? Even more importantly, you have that critical business discussion on the telephone, drive into the tunnel, and you lose the call. Okay?
Now I'd like you to imagine that you are responsible to move 28 million tons of ore each year. Using 300 vehicles from 100 sources in a single mine, there are 450 kilometers of tunnels. You don't know in real time are you achieving your goals. What ABB did was it brought the digital truck into the mine operation center. By doing this knowing exactly where the truck is at any one time, knowing the health of the truck, then looking at what is the plan, we can start to understand, are we on target? Will we achieve it? Is the truck capable of achieving the task that we've set it? Will it break down? Are there other disturbances, we can replan?
This has led to about a 10%-20% increase in utilization of those pieces of equipment through not having to queue and wait for the next task. Even more importantly, if we know exactly where the truck is, we can deliver the right amount of ventilation to create a safe working environment for those people doing the work. This also implies that where we are not working, where there are no vehicles and no people, we can have the lowest amount of air required to support it, and this has a tremendous opportunity in energy saving through ventilation. ABB is also a major supplier for electrical drivetrain systems for grinding. Grinding is the art of taking large rocks, making them very small, exposing the metal, and using that to liberate in the downstream processing.
If the grinding process stops, you have assets that are lying idle and not being used. For the last four years, ABB has been collecting condition, and looking at the condition of these electrical drive systems, taking it remotely, looking at and analyzing that, looking at it in the context of the work that it is doing in terms of the process, and then giving advice back to the mine operation center so they can either reduce what they are doing to avoid an outage or to plan for the future maintenance in the system. If I look at ventilation, we have seen that we can reduce that energy consumption in ventilation by as much as 30%-50%. Then that example that I gave you to think about where you were moving 28 tons, if you consider that that mine consumes 100 gigawatt hours of energy for ventilation each year.
If we take the gearless mill drive application for grinding in general, we have seen over the last four years that we are able to increase the availability of the equipment by as much as 95 hours in a year, and it has an incredible savings. What does it mean? It means for an underground mine, we are able to have a savings of $5 million per year per mine. If we then look at that in the context of the opportunity, I believe that we have demonstrated that ABB has the capability to integrate other people's equipment, has the ability to break silos of data, and has the ability to unlock potential for a customer. We believe that this has the potential of about $7 billion in the industry looking at those two applications.
What we also see is that there are many, many other opportunities out there. The announcement of Ability today will help us to accelerate that so that we can unlock further potential for our customers. Thank you very much.
Thank you, Clyde. Next, a product which is already quite digital, but I think Per Vegard is going to explain how beyond what's already inside the robot, we can add additional digital technology.
Thank you. My name is Per Vegard Nerseth, and I have the pleasure of running the Robotics business in ABB, and I am very excited to be given the opportunity to give you an overview of how our digital offering actually can help improve in the business in the automotive industry. Almost everyone today would like to have a car, and the automotive industry is really a strong growth engine in the whole global economy. The business is still running very well and growing, and we expect also the business to continue to grow in the next foreseeable future. Robots and the robot systems is a very, very critical component for a car factory when they want to produce cars.
The good thing with this, and you can see here that we are already the strongest or the biggest installed base of robots in the automotive industry, and we expect that growth just to continue as we move forward. The two main challenges that the industry has is all around the shorter launch cycles of the cars. This is very much driven with us as consumers, how we want to buy cars. We want to change our cars more and more frequent, and that is a big challenge then for the automotive industry. The second major challenge is around the cost of unplanned downtime. An average plant today produces about one car every minute. Then you can just imagine the cost it will be if that line is standing idle for a minute or two.
In fact, one hour idle time costs the car plant about $1.3 million. Our digital offering today are able, throughout the whole value chain, to help these customers in an excellent way. In the engineering and the commissioning, we help them to reduce the time spent, and during the operation and the maintenance, we can also help reducing the incidents and the downtime of the plants. RobotStudio is a simulation and an offline programming tool that enables the automotive customers to plan and reduce time when planning and installing a new line. They could also, actually, when they want to introduce a new car model into an existing line, also do that without interfering with existing manufacturing and the production. If I move over to the Connected Services. We started in Robotics and in ABB back in 2007 with something we call the remote services.
We have today already more than 5,000 robots in 30 countries and with 700 customers, robots connected. Early this year, in fact, in June, we introduced a new operator solution called Connected Services. Today, every single robot we ship out from our factories to our customers are enabled to be connected to the internet, and we are then able to send important information up to the cloud. By adding analytics, we can get great information that helps the automotive, both to improve the efficiency of the line, but also to improve the reliability of the line, basically avoiding unplanned stoppages. By optimizing both during the planning phase as well as in the production phase, we are able to save 25% during the installation phase, and we are also able then, during the manufacturing part or the production part, to reduce incidents and the unplanned downtime.
How does this convert into financial benefits for the customers? Well, the time and the money it takes to plan and to install and commission a new line is around $20 million. Shaving off 25% of that gives you then a saving potential of $5 million just during the built-up phase. The story gets even better when we're moving over to the Connected Services. Today, the cost of unplanned stoppages driven by robots or robot systems are estimated conservatively to around $80 million per year. Again, taking out 25% of that time gives an opportunity for saving of $20 million every single year all the time for the plants. Finally, how can you then leverage that even further? Well, the first thing we can do is then to replicate or to penetrate this into every single car plant in the world.
That gives you a saving potential of $15 billion. We also have the opportunity to take the strong learnings from the automotive industry into other industries, such as the electronics industry, the food and beverage industry, where there are 800,000 robots already today. The calculation I just took you through are based on today's install base of 1.3 million robots. You heard Ulrich saying that this morning, but also then other analysts and the International Federation of Robotics believe that by 2020, the number of installed robots in the market will be doubled. Thank you.
Thank you very much, Per Vegard. The next use case you're going to hear about is from Juha, and this is from our marine division.
Good afternoon. My name is Juha Koskela. I'm head of business with marine and ports in Process Automation division. I'm happy to be here to introduce our capability in marine and ports industry in the digital space. Let me start from the state of the industry, which currently doesn't look too good, actually. 90,000 ships transport over 90% of the world trade, spend $450 billion for OpEx, and burn 400 billion tons of fuel every year. Today, shipping lines are challenged by the overcapacity and the lower freight rates. There are some exceptions that are performing better, like cruise shipping. In general terms, today, shipping business is struggling with high operational cost and low profits. There are also challenges in terms of disconnected and incomplete information in terms of how the actual ship and logistics is optimized for the lower cost.
New regulations for the emission control, energy efficiency, safety are really good for the industry sustainability, also represent a major additional cost item for the required technical upgrades. The good news is that digitalization and ever improving satellite communication respond to these challenges and provide with the industry a major savings opportunity. At ABB, we have a unique position to change and digitalize marine industry as a major system supplier. Our portfolio to ships include propulsion, electrical power plant, automation, various kind of control systems, turbocharging and so on. Basically, we cover everything from the command bridge to the propeller. For example, the biggest and newest cruise ships are operating with ABB's leading Azipod technology. Also, oil drilling rigs are keeping position while drilling with the help of the ABB's electrical power plant. The largest container vessels are planning their voyage with the help of the ABB software.
The Integrated Operations system is our platform for digital production systems for the marine and ports industry. It's end-to-end solution, it connects ABB customer shore operations and ship into the same cloud-based ecosystem. ABB collects vast amount of data with the sensors from the ship's equipment, processes, and operations. This data is collected into an onboard computer and transferred via satellite communication into a data cloud. With the help of the Microsoft Azure cloud software, all three parties can access to the same data on real-time basis. Should there be any problem with ship's machinery, this can be solved without any delay in a remote collaboration between ABB specialist in the Integrated Operations center, ship's crew on board, and customer's fleet operations. This will increase the ship's uptime and reduces the repair cost.
On the other hand, when all this equipment are monitored continuously and real-time, maintenance can be scheduled based on the real condition rather than with fixed time period. We estimate that total savings due to the digitalization and advanced data analytics in services and maintenance can be up to 20%. In addition to equipment monitoring and diagnostics, Integrated Operations include broad range of digital decision support services called Octopus Marine Software. Imagine yourself as a captain of the cruise vessel of 5,000 passengers. You have three priorities. You want to, of course, reach the next destination port on time, even more important, you want to take care of your customer comfort and safety so that they are enjoying their cruise without becoming seasick. You want to avoid excess swing of the vessel.
The third target that you have, you want to run this voyage with the lowest possible fuel consumption and emission. Our software help the captain with all these three priorities. If you first of all optimize the energy consumption on board the vessel, and it based on the operational data collected and the weather forecast, it optimize the sailing route and speed to the next port, minimizing excess motion on board the vessel and fuel consumption. Sorry. In addition to savings on service maintenance fuel, by the help of data-driven decision making and automation of work with the help of the software, there is also opportunity to improve the productivity at the back end of the operations, both in customer and ABB side. Adding all these great customer values together, we estimate that the total savings potential on each vessel is $350,000 in average per year.
We have already 650 vessels connected into the Integrated Operations system. It is applicable to all 90,000 ships in the world, with the savings potential of $32 billion based on the services and software available today. We continue to develop new digital services based on the vast amount of data collected. The potential for the future is even greater. We are also able to integrate third-party equipment to the Integrated Operations system. The next, we are going to replicate this also in the port side of our business, where we already have an installed base of the crane and terminal automation. By that, we are able to further optimize the entire cargo logistics all the way from the ship to the terminal gate.
Industrial technologies, digital technologies continue to transform industrial processes. Shipping and logistics are no exception. It is a great opportunity for our customers. It's also a great opportunity for ABB. Thank you for your attention.
Thank you, Juha. Last but not least, Mike is going to tell us about intelligent buildings.
Good afternoon, ladies and gentlemen. My name is Mike Mustapha. I lead the business unit of Building Products in ABB. I've been in ABB now for five years. It's been a great five years. Prior to that, I worked for a company called Atlas Copco, I know a lot of you that know it, for 21 years and seven different countries. Always the mandate was the same, grow the business. I joined ABB and I've been also told to grow the business, and I'm going to talk about a topic which is nothing but growth. Smart buildings is a great potential, and digitalization plays a big role in the growth of this business. If we look at some facts, urbanization is extremely important and is the key. Today, 50% of the world population lives in cities.
As Olive said earlier, by the year 2050, more than 70% of people will be living either in cities or working in cities, which creates a tremendous opportunity for this business. This is one of the fastest-growing business in my unit today. 60% of the world consumption in energy is consumed by buildings, whether it's residential or commercial. More than $600 billion is being invested in this business on operating expenses on yearly basis. This is the growth opportunity, but there are some challenges as well. Energy used and management of these buildings is inefficient today, and digitalization is only scratching its surface.
If we look at the growing business of building automation, which relies on the different communication protocols, in type of buildings, on those buildings, being able to integrate the different type of protocols is difficult today, and the solutions to integrate this is quite difficult. The speed of innovation is so fast that us and the different people in this industry, they need to develop business for the future. We need to scale this business for the future. I'm lucky to be responsible for a simple business, so I like to simplify it. We will take you through a building and what type of products we have inside a building. Starting from the access control. When you come to a building, the first thing you see in a building is either a bell or some kind of a door entry system to get you into the building.
There's all the security functions that goes with it, whether it's the cameras or the videos. The cameras helps you to know who's at your door. It helps you to look at an image who's standing there. If we're talking about a video, a lot of us travel in this room, and I see a lot of you traveling. If you're in a different location, you can have a video call with whoever is standing on the call. Particularly, you're receiving a package from somebody, you can say, "Please drop it on the second floor. I'm out of town for a couple of weeks." This is quite strong thing for us to use. Looking at the temperature control. You come home, you're used to a certain temperature in the house.
By setting up one button, you can control your temperature, your heating, your cooling, your ventilation in the house. Most of us like a certain temperature in the house. I see there's a lot of male dominant in this room. Always we like it three degrees cooler than our wives. When you come home, we don't want to get to any trouble between you and your wife. We will set it all the way based on what you want. We can control the shutters and blinds inside the house to reduce your energy bill, and also to be able to harvest on the daylight and to maximize the amount of daylight you can use into your house, keeping in mind saving energy. Not to forget the very important parts is the emergency lighting. I think here you see there's a lot of green lights across the room.
We are able to control from which door you can exit or enter in case of a fire. As you can see here, this light is off, in case of a fire, God forbids, don't try to go out of this door. We will try to maximize it for you. This is a great business that we can control it and interface it via a smartphone. It could be interfaced via a laptop, via a touch panel in a room, or even voice-activated. You can come back at home and say, "Light on," the light is on. You can say, "Light off," the light is off. The strength of this is, besides all what you see from the lighting, this hotel I checked, and I can confirm it, is controlled by ABB.
With a touch of a button, we can control the light and the scene in the room from a meeting or at home, if you want to have a romantic evening after a long day, you can push one button, the music is on, the light is controlled, everything there is easy, you can imagine what you want to do next. I don't want to discuss that. This is a great opportunity for our business. Besides all this, there is 30% energy savings. I discussed the control, light control, temperature control, harvesting on the daylight. This 30% is energy savings and it's money, and it's 20% lower maintenance cost. We build products that are long-lasting. I live in Dubai and I run the unit out of Dubai.
We have checked with a lot of hotels and they say, "You guys build products that never break." This is one of the major things in the maintenance cost that we save. On top of it, the predictive maintenance that we do. This is guaranteed with a lot of the hotel operators we checked. There is two very important points besides the savings of money and the benefits and all that we're talking about. Is that 40 miles away from here in one of the elderly houses where there will be 100 apartments commissioned very soon, we can check from the irregularity if your parents or grandparents live in that house If they're used to watch a certain TV channel at a certain time during the day, 6:00, the TV is not on.
If they're used to have a cup of tea at a certain time, and there's a lot of English people, I know that tea is very important in the afternoon, and the tea kettle is not on or off, we can immediately send a message to the concierge in the building to check on your parents. Today, more than 450 million people are over the age of 70, and by the year 2050, more than 1.5 billion people will be more than the age of 70. Not to depress you, most of us in this room will be living in one of these hospice houses probably by 2050. If you are used to travel to a hotel, we all like to feel important in hotels.
With the guest management system, we can know what type of pillows you like, what type of light mood you like in the room, what music, do you like the TV on and off when you enter into the room, and most importantly, the minibar, what do you like inside, alcoholic or non-alcoholic drinks? Again, I leave it for you. This is a huge potential. We have checked the top 10 hotel chains in the world. More than 5.8 million rooms are available to be retrofitted. On an average, the saving per room is $2,500 per room per year. If you multiply this, it's more than $15 billion of potential in energy saving. The payback is less than one year with our products. One country which I know of, where we have more than 70% hit rate with all the hotels, is Dubai.
By the year 2020, more than 50,000 rooms will be available. On an average, any hotel of a four to five star, the CapEx is $3,000 per room. Alone, you can calculate it. With a 70% hit rate, more than $120 million, Frank, you should be very happy, will be from now till the year 2020 there. This is a huge potential for us. If we replicate this and we look only on shopping malls, more than 400 million square meter of built-up area will be constructed yearly in shopping malls. We have big references in big shopping malls worldwide. Airports. More than 2,300 airports are being constructed today. You could look at the top airports, Beijing Airport, Dubai Airport, the new airport in Saudi Arabia that's being built in Jeddah. Most of these airports are equipped with our products.
We look further into offices, today we've been talking about Microsoft all day. The headquarter of Microsoft in Denmark is equipped with ABB. We checked with them, and they guaranteed that from the first year of service, they have more than 30% energy savings. We could look at stadiums, the Bird's Nest stadium in China and Stadia in Rio that you just saw lately with the Olympics. All of them are equipped with ABB. This is a huge, tremendous We have noticed, again in Dubai, because of our good building automation relations with a lot of the customers and the owners, we've been able to pull a lot of other products for ABB from another division than another business unit within our own division. This is a great opportunity. I'm very excited about this, I think most of you had an iPad.
This is the first part of the investment. Now you just need to invest in a bit of smart home functions, and then you'll have the complete operation for you. We have some business cards with any orders after this meeting. Thank you.
Thank you. All right. Thank you very much, Mike. JC from HR would like to have a little chat after, okay. Let me bring it home. You saw a lot of different numbers, a lot of different benefits. Let me explain a little bit how we come up with some of these numbers. In particular, if you look at what we just saw, this is just five use cases, just a little sliver of a digital pie for each of these customers. These five slivers create $90 billion of customer value, energy savings, reduced maintenance costs, higher productivity for their employees. We believe we can capture $2 billion of that in terms of products and services from ABB that are digitized, that have this digital component. These are just the slivers.
What if we captured or addressed the entire digital pie, other solutions for those very same industries? The total value created for our customers goes to $315 billion. The ABB portion that would translate to revenues goes to $6 billion. We've only seen five markets here today. ABB is present in 15 different markets. What if we created digital solutions for all of these markets? We're looking at close to a trillion dollars of customer value. Ladies and gentlemen, this is why I came to ABB. All of our customers are in the knee of this digital S-curve. Their digitization potential is ahead of them, not behind. It's yet to come. When we put all of that together, that translates to $20 billion, roughly 50% above the current revenue of ABB. This is why I'm excited. I'm excited about the platform.
I'm excited by the fact that we have use cases we can sell already. This is not learning something dramatically new. In fact, each of the division heads has either already spoken today, like Claudio, in terms of how important digital is to him. Where I've been having some chats with Sammy. He's invited me to come and meet with his team. I'm not pushing a rock uphill. I'm not trying to get ABB to do something that it doesn't already want to do. This makes my job very fun. Let me tell you what I'm going to do next. First, we have to take these systems that are not yet on Ability and start migrating them over, moving our applications progressively so that all future applications are built on top of Microsoft Azure infrastructure and ABB proprietary know-how.
We can sell, we can penetrate the markets we're in already. We can sell these use cases that we currently have. We can expand. As we solve problems, and these problems start to look very similar. We're doing asset management, we're doing integrated operations, we're doing preventive condition-based maintenance. A lot of those become templates. Because once you solve it in one industry, from a code perspective, from a software perspective, it's fairly easy to then apply these templates and replicate them to a series of other markets. That's why I'm excited, because I believe that with our customers, we can write a digital future together. Thank you very much. I'd also like to invite Ulrich back for Q&A. Thank you, gentlemen.
Thanks a lot, Guido.
Very good. Thank you.
Now we have learned the true reason why you all got an iPad. We want to get you on this home automation system. You can hook up with Mike very easily on that one. Ladies and gentlemen, thank you very much for your patience this afternoon and during the entire day. I hope you are as excited as I am about the future of our company. We have made a commitment today that we will drive growth and continue the operational journey of ABB. We are firmly of the opinion there's a lot of value to be unlocked, not only in the very exciting digital space that we just shared with you, but also in all the other areas that we discussed. To sum it up, ABB is truly at the heart of the energy and fourth industrial revolution.
You have seen today not a single presentation that this doesn't impact our customers, our businesses, in a very significant way. I shared with you this morning the opportunity is now, and you have hopefully realized what is out there, what tremendous opportunities there are, and we are ready. We have done our homework in phase one and two. We have very carefully orchestrated the first pilots on the digitalization side. We got the partnership signed. We have the team up and running. Guido has hit the ground running, works together with the colleagues that are already active in that space. We will unlock the value through driving our businesses in a more entrepreneurial way, I think you have seen Claudio's presentation today, a true entrepreneur that really knows what he wants to do with his business going forward.
We will give him oxygen to really drive his business in a remarkable way and deliver the transformation that we have in front of us. The quantum leap in digital, ABB Ability will be the key enabler. Guido will be the leader working with our businesses in a natural way to really scale up and drive growth momentum in a significant way. Whilst doing all of that, we will not forget how important it is to deliver on daily execution. Lower cost, higher productivity, better cash. That's what we're committing to you. We are raising our target on White Collar. We commit to continued cost out to safeguard the quality of the margin of ABB. Today you experienced a new visual identity of ABB. You experienced us as a new brand.
We are bringing together to play team sport in a much better way, our external positioning, and we are firmly committed to write the future together with all our customers and our employees. Thank you very much. May I now invite the EC colleagues that were on stage today, together with Guido, to come quickly up here, please. Because we will weather the storm of your questions all together.
Can I still get a block?
No.
Do you want to come here? Okay.
Do you want to be here?
That's okay.
Okay, Guillermo. Oh, sorry. It's Guillermo. Yeah.
Thank you. It's Guillermo Peigneux Lojo from UBS. Actually, first question to Guido and Ulrich may be regarding the Microsoft partnership. I wonder whether the partnership is exclusive
No.
Secondly, sorry, who owns the data in the new partnership structure? How do you structure data ownership?
I take the formal part and let Guido then talk about the data. It's not exclusive, and it should not be. We should be both open. We have great opportunities to work with others. Microsoft is a company that works with others. As my good friend Satya said today very clearly, this is one of the partnerships that are thriving, and this is one of the partnerships that we'll be having in the space of the IoT. On the data, Guido, I hand it over to you.
Thank you very much. On the data side, the data belongs to ABB. Even though we're using the infrastructure of Azure, the data and the encryption keys as well are controlled by ABB.
Thank you. Maybe a follow-up actually to Claudio as well. When I look at slide seven, I want to take a look at the dark side. Basically, what's not growing, in terms of segments of the market, and if there is actually any of those segments overrepresented in ABB that you can highlight? Thank you.
Yeah, sure. There is clearly an area where the growth is not as expected, and where we are also exposed, they're actually not so much on the utility, but on the industry, in particular on the oil and gas. We have the distribution part of the portfolio, particularly on the transformer side with the distribution transformers, dry type transformers, that is exposed more into that area. That one, obviously, is definitely a low growth for the time being.
Okay. I think our next one is with Jonathan Mounsey. He's in the back.
Hi, thanks. Yeah, it's Jonathan Mounsey from Exane. Just kind of one area of interest, please. In terms of Power Grids, the partnerships you've entered today, I guess there's people in ABB who are currently doing the kind of things that, going forward, your partners are going to do. Obviously with the order book, I assume that everything you've entered into is under the old regime. Going forward, as you win business, it's going to be in the partnership structure. I mean, what happens? How long does it take to transition? When we have or during it, do we need to take more restructuring charges? Do these people need to be repurposed? I mean, are we going to have more costs in terms of restructuring to come in, say, two years' time as the new projects start to enter the P&L?
Look, Jonathan, in general, when we enter these partnerships, we ramp them up over time. This is not a process where you overnight go full steam right away. Typically, we ramp up, we do a couple of pilots, we get the people together, then we bring the teams together, we work it up, and it works very well. It is very important for us that we don't lose talent, because talent on both sides is scarce in very experienced workers. This is the overall perspective. I hand over to Claudio for some comments for the specific ones in here.
Yeah, absolutely, Uli. Just to give you an example on these partnerships, this is not kind of coming out of the blue. As I mentioned in my presentation, we started this journey internally to create the proper environment. We basically consolidate units that are dealing with that type of business, and we created the proper environment then with those units by being selected from a market point of view, from a process point of view, then finding the right partner to complement.
Okay.
Maybe one slight follow-up then, sorry.
Oh.
If I ask the same question a different way. Say, in three years' time, five years' time, how much of the EPC activity will be done through partnerships?
A very significant part.
Thank you.
Next one is with Graham. He's also over there in the very back.
Yes. Thank you. Graham Phillips from Jefferies. Two questions. First of all, on the share buyback. I think you announced two years ago it was going to be $4 billion. It ended up being $3.5. You're now saying $3 billion over the next two years. Clearly, what we've heard more about is more cash, possibly some assets to sell. What's going on behind here? Are we keeping some money back for M&A? Why not actually at least stuck with the $4 billion or increased it?
Where is Eugene? Yeah.
The buyback that we completed last week was originally a $4 billion buyback, with $3 billion for cancellation, which is a real true buyback where the shares are getting canceled, and $1 billion to hedge employee share programs, ESOP, MIP, option programs, and so on.
There we have seen during the period that it's enough to go to half a billion, that is why we didn't go all the way to 4. That's the answer to the first part of the question. That means that the new scheme we put in place with the $3 billion for cancellation, i.e., a real true buyback, is the same size as we had before. We are playing the piano, all the levers of the capital allocation: organic growth investments, dividend payments, inorganic opportunities, as I described before, and share buybacks. We have judged that the size of the buyback is the right size in that balance. We can always adjust the size of a buyback as we move forward, but that is the judgment we have today.
Okay. That's clear. Thank you. My second question is on the size of the markets. If I look at the size of the potential markets for each of the 4 divisions that you gave a year ago, they're a lot smaller. I know there's been some rejigging of some of the assets from some of them to others. Just take, for instance, Power Grids. It's taken from $160 billion down to $110 billion. Okay, you're out of the EPC, but why have these markets shrunk? Is it because actually ABB, as you envisage going forward, is perhaps slightly shrinking, or is it that there's something else going on here?
There's a simple technical explanation. Last time it was the unconsolidated market, and this time it's the consolidated market.
It's in the footnotes.
It's different levers.
There is someone in the middle here. I can't see who actually it is, but second row. That was earlier
Thank you very much. Gael de-Bray from Deutsche Bank. The first question really is for Power Grids. It still seems that about 70% of the addressable market size is expected to grow below GDP, sort of 1%-2%. Around half of the mix for the Power Grids division is probably still made up of traditional transformers and switchgears and the like. I guess the question here is, how quickly can you realistically transform and refocus the entire business on the most attractive areas without really dampening the top line for the division? Perhaps in relation to this, I'm not sure about it, but it doesn't seem too difficult to add connectivity features to transformers and the other high voltage products. I would expect probably most of your competitors to do probably the same and add sensors to their products.
In the end, the real value added will probably still be in data analytics and not in the hardware itself. So far in your experience, as you've added already some connectivity features to your products, have you been able to raise prices for these connected products versus the other more traditional products? Or does the connected functionality simply comes for free for the client?
Let me take the second one first and then I hand over to Claudio. Looking at connected products altogether, you need business model innovation as well. In the past, very, very long ago, we sold a kilogram of robot. We sold a robot with a purpose. Now we are selling a robot with a purpose that you as a customer, get the benefit from using the way we use the data in the operation to get more uptime and reliability. There is a standard. You can have a standard fee where you pay a certain amount of dollars per robot per year, and we give you all the data. We give you all the planning for it. We tell you when you should do something on maintenance. We help you to drive uptime reliability.
I think this is one topic that we haven't expressed that strongly today. Business model innovation, finding new ways to extract the value and extract a fair share of the value that we have created for the customer is one of the tasks in the digital space that will be on Guido's list quite highly when we had our discussions and started to sniff each other and see how we would work together. That was one of the key topics that I would like to see. What is the business model innovation? How can we extract that value? All the big numbers that you have seen there will not happen with the traditional ABB business models only. There will be software as a service. There will be certain data utility. We might, in certain cases, give you a certain kind of an annuity instead of the product.
All of that needs to be worked on in a disciplined way. We have today use cases. Per Vegard is selling today a service suite where you can contract it that way. Now with the smart sensor motors, it's coming out. That's the direction that we're taking on the business model. Claudio, this should have given you enough time to now think about the answer to the first question.
Thank you. Two points. One is on the bigger picture, what was presented earlier by Guido and Massimo on the digital substations. If you look at the way the digital substation technology allows customers to save both on CapEx and OpEx, it has a lot to do with what is reducing in, what I would say, the non-core part of what we deliver from a technology point of view. It's reducing 80% of the copper cables, which is not obviously our core technology. It's reducing installation time, construction because of the footprint and so on. That's one way where we should make sure that we, and that's what we do with the team, to grab higher value add within that core technology that we deliver.
Another example, very specific one, is when we, Massimo alluded to that, the Asset Health Center, we sell that solution with both third-party models and ABB models, precisely to address your point. Our intention is there to support our customers, not only for our install base, but for their install base. They have then the ability to choose. The feedback we get from our customers today is actually from a modeling point of view of the key core components, breakers, transformers, the automation part that Massimo deals with. They like much better our, because they see the key domain competence. Guido mentioned that it's about install base, but together with that is also how well we know how that install base operates and lives throughout the operation.
Thank you. Simon. Hey, we're almost getting through everyone that had questions earlier.
Thanks very much. It's Simon Toennessen from Berenberg. You said earlier in your presentation that you didn't communicate your digitalization strategy well in the past. When I listen to some of your competitors, they talk a lot more about the size of their software business, the revenues they generate, the different software layers, margins. They're not only saying margins are higher than their product business. We haven't really heard much about that today. Is there anything you can tell us? You did acquisitions like Mincom, like Spirit, in the supervisory control in the operations and the asset management layer. Is there anything you can talk a bit more about sizes, revenues in that area? Secondly, also some of your competitors seem to be quite active with startups, with innovation funds, with working together with venture capitalists
Particularly in the digital space, it seems like quite a big opportunity to work with these companies on that space. Is that part of your strategy as well to just be more engaged in that area? Thanks.
It looks like we take the second one first. 2009, we set up ABB Technology Ventures, some of our competitors are copying that at the moment. That's great to see. We are active out there in quite some of startups. We, for example, invested in Vicarious, which is an artificial intelligence piece. We invested in multiple startups in the field of digital. Naturally, we drive it into future even more. You know that we have moved the startup activity under Bazmi Husain, our Chief Technology Officer. Between Bazmi and Guido in the future, I expect them to collaborate in pointing that into the right direction they're going. Looking on the software side, I think the one is to talk about the numbers, the other one is talking about the value proposition. We will do it in that sequence.
First, we will articulate to our customers out there the value proposition that we really have on ABB Ability, over time, we will increase the disclosure, we'll bring you more data and more granularity on the software space. Give us a little bit of time to work on that one now that we have the act together, we have the offering, then we will also communicate more in that field.
Martin?
Thank you. It is Martin Wilkie from Citi. The first question is just on the revenue and pricing model for the software side. One of your big U.S. competitors seems to sort of give the software away for free and hope to make it up on spares. I know it is obviously a bit more complex than that, but it seems to be a very different model than, say, one of your German competitors does, where it is much more about subscription license and so forth. I know obviously very different depending on your divisions and your products and so forth, but my understanding from here or the impression is that this will be a subscription, or you will get revenue for the software. If you could just clarify how that will work.
Well said. First of all, the competitor that is the first one is not in the control room. If you are not in the control room, you sell the data in an area where you say, like a consultant, "I give you a study on something." We are in the control room. We can influence directly to operations and the uptime speed and yield of our customers. With that, you extract much more value than just having data available. You will see all kind of business models because it depends also on the customer's choice, how they want to work with us. There is definitely a commitment that we will attract more of the value because when you have 70,000 control systems out there running, when you have 70 million devices already connected, where you get the data today, where we are already doing something in that field.
Yes, absolutely, we can do more also in the classic and traditional software and new business models rather than just the utility side that some others are doing.
Please, the second question was just, I know today is obviously all about the growth platforms and the strategy and so forth, but you must have, in the back of your mind, a sort of view of the cycle in terms of what would need to happen just to hit your organic growth targets. If you could just give us some sort of sense as what you are thinking. Are we sort of at a bottom and we stay there, and that is enough to get to your targets? Just some ideas on that. Thank you.
First of all, yes, we have an understanding on that one, Martin, how we attract it. If you look at the situation that we are in, it's quite amazing. I think the team should get credit for what it has done. Some of our most profitable segments have contracted brutally. At the same time, we held the top line stable by growing new segments, younger segments, which might not be as profitable. Number 2, at the same time, the transformations that we showed you today cost a lot of money. We're spending a lot of money making ABB better, more agile, putting systems in place. Despite that, we have better margins. The money that we are spending on the transformation will come down. Hopefully, the bottoming out of the contracted areas is now there, and the growth areas are coming back up.
When then the other areas come back at the time, you do your models yourself, but it's definitely a pretty bright future. The only question is when. It's not a question of if. We are prepared for it. I think the team has done a really good job to get margin accretion going against all the headwinds that we have been facing. Let's assume the headwind stops, that will be a good one. If the tailwind comes back, then we're really rolling.
Thank you.
You're welcome, Martin.
There was someone in the first row here that had a question or no? Yes.
Thank you. Andrea Rich, Bank am Bellevue. Some of the applications that you highlighted in digital clearly go into the private sphere of customers, like knowing when a kettle is on, knowing when a TV is on or somebody's at home. What's your position on data ownership, data sharing, and how do you make sure that this might not actually backfire on you because you might sound to be too intrusive? Thank you.
Sounds like a question for our digital expert. Guido.
Thank you. I think this is a great question, and I really look forward to that because you're right. In many ways, we will touch the private sphere. I know that in particular here in Europe, there's a lot of sensitivity to that. I think the best stance is that we should make it very clear when data is being asked from people. Ultimately, people are in charge. Like if you're in this home, let's give the example that Mike was talking about, right? If you were signing up to live in that retirement home, they could not provide some of the benefits in terms of monitoring, making sure that people are okay if they don't gather the data. They have to make it very clear that that data is getting gathered.
One of the things that I think we can adopt in this area would be sort of a data privacy code of conduct, which is our preferred stance. Ultimately, ABB is a provider of a system that goes into this home. At the end of the day, the home is being operated by the customer. Clearly, we can't tell our customer exactly how to conduct their business. I think what we can do is suggest best practices. I think some of that best practice is to disclose when information is being gathered, what we do with the data, and why we need it. I think if that can then be transposed to the end customer, the person living in the house, then I think this will be a good way to go forward.
Look, trust if you go to the private houses, sometimes what we can do is give people their dignity back. If you are a 90-year-old person that relies either on somebody permanently being around or living independent by giving up some data, the person might happily share this data. That gives me a certain dignity and a certain freedom to move around, a certain convenience and assertiveness of certain services that I pull in. It really depends on the situation and the specific customer, that's what we will be working on in a very segmented way.
There. Let's see.
Hi, Olive Katri from Supply Chain. Thanks for taking my questions. I have a couple of ones. Firstly, just coming back to the growth targets. Clearly, if we assume the target is set at 3%-6% still, 2016 looks to be quite tough. Then we're probably getting nowhere to that number. To then get to the 3%-6% annual growth rate for 2015 to 2020, you need to deliver something like 6% over the next two, three years. It seems a bit of a stretch. My question in this sense is a two-part. One is, should we be thinking about the 3%-6% as a bit more of a corridor in which you want to get to during the period, or is it still a CAGR sort of target?
If it is still a CAGR target, if you could just elaborate a bit more on what sort of businesses do you think will get you there, how much of that is dependent on a cyclical recovery like you referred to earlier? Perhaps you could just use the 14, 61, 25 grid that was mentioned previously and maybe help us out with that. That was question number 1. The second bit was a bit on the purchasing side. I think the reference was there's about an $18 billion pool of sourcing which you can target to take costs out 3%-5% per annum. Now, you've done a pretty good job over the last 5 years. My question is, how much room do you really have to extract further savings within that $18 billion pool?
Because at some point, we might start to hit the bottom on that. Those are 2 questions.
Okay. Sounds like a CFO and a CPO questions. Let me just get that for Eric and Daniel.
Yeah. On the growth side, it depends, of course, which assumptions you are making in the near term. As I showed on one of my charts, we are at 0% CAGR for the first 18 months, and we have 4 and a half years to go in the strategic period. I don't think the number you mentioned is the right number for that period, it is clear that the target is for the entire period, as we said from the beginning, to be on a CAGR basis, to be on an average basis, excuse me, to be on an average basis over the period on comparable numbers of 3%-6%.
With that, over to Daniel.
I give you just one number. Every year, we have about 970,000 new part numbers. All of these part numbers, the new products that are coming out, we have always new opportunities to go after the additional saving. Beside that, with the whole drive that we have in the SCM environment, I see for the foreseeable future, no problem on this regard.
Daniel, be careful, it's budget time.
Andreas back there, then I saw someone in the very back next. I think it's Andrea.
Yeah. Two quick questions, please. The one on digitalization and the opportunities you've shown. You talked about the $20 billion revenue opportunity resulting in $1 trillion of savings for customers. We see a lot of these savings indirectly or directly come out again of providers like ABB that provide spare parts, services, traditional equipment, substations that are 50% smaller in the future, and energy savings that hurt some of your customers. Have you tried to quantify, compared to the $20 billion you want to gain, how much you're going to lose from digital taking away revenue opportunities out there? Because these are big numbers, and they need to come from somewhere in terms of the savings for the customers. The second question, if you have a specific example, maybe for if a substation gets tendered in the Middle East, how is it going to work?
Fluor has to bid with you, or Fluor can bid by themselves looking for third-party component supply or Chinese components for some of it, and ABB for some of it. How does it work in practice if some of these bids come up now between you and an EPC partner? Or also you are still going by yourself in the meantime?
I would suggest to Tony.
Okay. I'll take the first question. Then I'm going to invite Claudio to join me as well, because part of the answer is in his area. First of all, it's not a zero-sum game when it comes to some of these customer benefits. It's not like just because we win, then somebody else has to lose. Some of the things like, for example, energy consumption, well, clearly maybe a utility providing power, but overall power consumption might vary, the mix might vary. I believe that, in fact, in particular, when it comes to the Power Grids, some of the examples that Massimo shared, the savings in terms of smaller equipment are in other areas like land and other things, which again, is not detrimental to ABB.
I think when you look at all the potential value from the customer, it's everything from productivity, availability, just better asset utilization, longer asset life. In some cases, that could be something where that could be an asset from a third party. I think it's not so easy to say, well, just because we save here, we automatically lose in one of our businesses. I don't believe that that's straightforward.
Maybe just one additional point. Yes, lower CapEx on a digital substation, but that reduction is mainly in non-core ABB areas. The technology still needs to be provided. On top of that, the digitalization also drives lower OpEx. Of course, if we do it right with the support of Guido and the whole team, we're going to be able to capture a higher share of that OpEx for the services that we provide. That's a key important point, and that's why we see that we can double the revenue share on services in Power Grids. I'm pretty sure that similar dynamics will be in other areas. On the EPC, the whole model is for sure not for us to compete with a new partnership, on EPC.
We do that because we firmly believe that this new partnership will be able to capture growth by managing in a much better way and enabling us to de-risk our portfolio. Now, we're going to keep a multi-channel approach. We're going to serve this partnership. Fluor might go out together with us. As you know, many of this, and you mentioned specifically the market in the Middle East. You need to be qualified. You need to be qualified with utilities. We today are qualified as ABB. We're going to go through a process where we will qualify this new partnership as we go. We will select the right projects, the right customers to start that journey together.
The more we do that, the more we will basically hand over the EPC approach to Fluor, we will concentrate with obviously delivering our technology in terms of products, system integration, and automation.
Okay. If I may just quickly go back to the digital substation. If we go together to the mayor of New York, and he needs to renew a substation, he can either choose a conventional one and get it from us or from an emerging market competitor, or we can offer him a digital substation. Then he has about 30%-50% less space requirements. He can do with the space, a lot of things. He can build construction in there. He can build residential or commercial offices on the same space that he needed before for the same functionality. That's true value added to this specific customer.
A customer in the middle of the forest in Sweden doesn't pay us the same amount of money for it, and therefore, the whole segmentation, our approach where we are much better granular in understanding the specific customer requirements and how we change the value proposition to each of our segments, will be the key differentiator in the future.
May I just ask that the clock has another 10 minutes put on, please? We have 10 more minutes. Andre first, and then Ben here.
Yes. Thank you. It's Andre from Credit Suisse. Can I just ask firstly on the $20 billion plus opportunity, how should we think about this by division? Where do you expect that to make the difference earliest and what we should monitor in terms of your announcements, product launches, or other publicly available information sources to see that you are making progress in this?
The $20 billion is all in Claudio's business. No, I'm just kidding. You will have an equal split. Each of the divisions has an opportunity, and that's the reason why we picked the examples today for you, that basically each of the divisions was presented today. You saw we can do a lot in Power Grids. We can do a lot around robotics. We can do a lot in Industrial Automation, and we can definitely do a lot around electrification. What Guido will now do together with his colleagues and the Executive Committee members that are once responsible for the businesses, we're going to draw up the plan, and we're going to make it more serious. At the moment, yes, we have a lot of ambition in our budget, but I think we can do much more.
Give us a bit of time, then we will come with a pretty material plan how to realize a significant share of that point at a high speed. One thing is very clear. The pace of ABB will be changing. We have already changed. If you look at the speed with which we got YuMi out, with which we got new innovations out, that is a drumbeat that we really need to drive up to make sure we are staying ahead. If you take the scaling of applications, historically, ABB has talked, in some cases, years. In the future, we will talk weeks and months, and we will get it out very quickly. One of Guido's key tasks in his job description is get faster. Innovation and speed is one of our value pairs.
We will lift this in this space in a completely different way than you're used to ABB.
Ben here.
It's a question for Claudio. It's been a while since we talked about competition and commoditization, et cetera, in the Power Grids business. Can you give us an update? I know you're pretty familiar with the China market. How you see the pace of the Chinese competition at the moment, certainly in the last couple of years. When we think about the core areas, let's call it the higher capability areas of ABB, I'm thinking about HVDC and ultra-high voltage. How significant is the challenge now from the Chinese companies? 10 years ago, they were nowhere. Are they now knocking on your door? That was question number 1. Question number 2. It's unbelievable that we're in ABB Capital Markets Day, we've really not talked about power pricing. It feels like something's missing.
Ben, we are there, baby. Want it to be?
I determined it for you.
How do you see price dynamics in the last, say, six to 12 months? Are they as horrible as they ever were? Are they improving? What's the general price landscape, please?
Should I start? Look, you and I had this conversation for the last couple of years. Yes. I would say, in general, the Asian players, and particularly, obviously, the Chinese, are catching up. They have technology. They have improved. They're trying to expand also beyond China. They find it probably a bit tougher than they thought. All in all, we have to respect them. They've been investing, they've been learning, sometimes going back and forth in technology, creating also problems in terms of performance of the assets on the field. At the end of the day, they will come up. How do we make sure that we maintain that delta, that differentiation, is two points that I mentioned also earlier. One is, we are present in China, as you well know.
We have a very strong footprint from an ABB standpoint, but also from a Power Grids point of view. The whole portfolio, all the way up to the ultra-high voltage DC technology, it's localized in China. We use local teams to also help us designing and optimizing the cost, leveraging the local value chain, the local supply chain. That's one key element. The other one is, again, the footprint that we have, the global footprint, and the installed base. As I mentioned before, whatever anyone will do, it will take them at least a few decades to build something that could be close to what we have today in terms of installed base.
That's why the whole story about how do we make sure that we shift our portfolio, we shift our mix to really capture a much higher share of that installed base, of that penetration, combining the software, the services, and the digitalization. If you do this right, I fully agree with Uli, we need to accelerate because some of those are coming up faster than what we thought. If we do that right, we're going to create the next step of differentiation. When you talk about the pricing, look, particularly in our field, it's same for every industry. Yes, in our field, there is a competitive landscape there. When the market slows down, there is a higher pressure. As you know, we're working on that. We've been working with that price pressure on a pretty consistent way.
We are driving all the savings that Daniel is helping us to get in terms of supply chain, all the savings that we're driving with the operational excellence, the examples that I gave you here in terms of improving the operational excellence, in terms of improving the quality. All of that is basically helping us in offsetting that price pressure.
Mark, I think that's going to be pretty much it for today. Will.
Thanks. I'd just like to explore again the partnerships around substations with Fluor. You've said you wish to keep or maintain a multi-channel approach to market, yet you've partnered with Fluor. Naturally, you'll become closer, there are many other EPCs that you no doubt work with to reach the substation market. Really, I'm trying to understand what the advantage is for Fluor to partner with you, given that they can multi-source from many channels, and this may end up being a preferred relationship, which would exclude them from those channels. Yeah. That's the principal first question. The second, which I think we've tried to ask a couple of times, what are the resources that ABB today has tied up in the form of engineers quoting, project proposal preparers, and the like, to address the EPC market in the substation space? What will happen to them?
Yeah. Thanks.
On the advantage of this partnership is that we are today present in that market, we want to find a way to better execute and to de-risk our profile. The advantage from Fluor is that they're not really present in that market. They are dealing with a larger type of projects, more complex, they're also not so present in the utility T&D type of turnkey business. They're more on the power. When they talk about power, it's more power generation, obviously, all the industrial oil and gas refinery type of market. For them, this is a growth opportunity. As they are better placed than us in terms of managing that risk and delivering those projects in terms of EPC, we're going to join forces and leverage that thing. Yes, we are in a process.
As I mentioned before, we already prepared ourselves internally, with this new partnership, we will continue to basically hand over to them as a partner, the EPC or let's say the PC part of it, so the procurement, the construction, the management of the project. While we will deliver to that partnership our products, but also our engineering. The difference will be with, let's say, our regular EPC channels, what we do is generally we supply products, we supply technology. With this partnership, what we want to do is make sure that we create a channel that also adds into being more competitive. When you look at also what we want to do in terms of delivering a value with a different business mix, this, I'm convinced, will be one of the ways to drive us.
How many people or how much business we look at it? Today, we have created a team of roughly 1,000 people that is addressing that part of the portfolio.
With that, I would like to say thank you for the day. Thank you for your attention. For those of you who actually flew in, really appreciate you making the trip in. One reminder, specifically for the sell side, because I know you guys are going to be asking. We go into quiet period on Tuesday next week, if you want to talk to us, it's now or never. Thanks again.