Good morning, everyone, and welcome to Fortive's 2021 Virtual Investor Day. I'm Griffin Whitney, Vice President of Investor Relations here at Fortive. We're very excited to present to you today and want to thank all of you for joining us on this webcast. Turning quickly to the forward-looking statements. During today's presentation, we may make certain forward-looking statements. Actual results may differ materially from these forward-looking statements. Please refer to slide number three in the presentation for more information. We've got a full agenda today, which will run a little bit over three hours in total. In between opening and closing remarks from Jim, the program will include a presentation on the Fortive Business System and our innovation and data analytics efforts, updates on each of the three segments, our progress on sustainability and human capital management, and a financial overview.
Please note that we will also have two Q&A sessions during the program, one at the conclusion of the segment presentations and another just before Jim's closing remarks. For the Q&A sessions, please submit your questions through the webcast platform, and we will read them off on our end. With that, we'll start with a quick video and then turn it over to Jim Lico, President and CEO of Fortive.
Oh, hi there. Good morning. Yes, it's 6:00 A.M. And yes, I have this much energy every day. You see, I have a lot to do today. I have to work out, shower, make breakfast, do laundry, visit my sister Jill across town, watch the news, and work with my team of engineers on solving some of the world's most important problems. Oh, did that last part intrigue you? Well, you see, I work at Fortive, part of a global team working to make the world better, safer, healthier, and easier. Allow me to explain. That shower I just took was nice and hot. Why? Because my water heater is built with specialty flow sensors made by Gems Sensors & Controls. And the folks who work at the natural gas plant that power this water heater are kept safe by gas detection products made by Industrial Scientific.
The milk on my cereal is safe to drink because of food safety technology made by Anderson-Negele. And the electronics we use every day are manufactured with the help of oscilloscopes made by Tektronix and testing devices made by Fluke. In fact, I just had a seamless video call with my team in Brazil because the satellites that connect us are propelled into space, yes, space, using PacSci EMC's satellite sequencing systems. And the folks at the power company keep my lights on 24/7 using Qualitrol's transformer monitoring. The average person on this globe may not know much about Fortive, but they interact with our work every day. Like my niece, Malia. Isn't she the most precious thing? She and her mom did great at the hospital, and Fortive was a part of it.
Malia's mom gave birth in a brand new maternity center built with the guidance of Gordian software. To keep her and her baby healthy, the air pressure in the room was monitored by Setra technology. The maternity ward nurses used medical equipment sterilized by ASP and tracked by Censis. And it's all managed by Accruent inventory software. Even as Malia grows up, Fortive plays a part. How she learns, plays, works, travels, even who she dreams of becoming. So now you can see, Fortive technologies are all around us, and they'll continue to drive progress with data-driven innovation and next-generation AI and machine learning. And along the way, everything we do is powered by the Fortive Business System, how we deliver results and bring breakthrough innovations to the world. So the next time you're, well, doing anything, take a deeper look. I bet you'll find us there.
Now, if you'll excuse me, I've got to get on with my day. I have big plans.
Truly inspiring video, for sure. Those three minutes really give you a sense of who Fortive is and what we do for the world. You're going to hear even more over the next three hours in real depth of the power of our portfolio and the power of our culture and how the combination of those two things really builds a great future for Fortive. Before we get started, though, I thought I would take a chance just to say, or take an opportunity to reaffirm our guidance for the second quarter and the full year. April came in the way we expected, and then while there's lots of time between now and the end of June, we feel very good about where we stand today, and we look forward to continuing to talk about our results when we get to the end of our second quarter earnings call.
But for now, let's talk about the long term. Let's talk about the positions we're in. And today, as Griffin said, with the agenda review, really a broad way to really look at Fortive and where we stand today in 2021, almost five years to our anniversary. I think it first starts with our shared purpose. You'll hear today about our segments, our work, the important workflows that we participate in. You'll hear about those operating companies that are so critical to our success. What binds us together, first and foremost, is our shared purpose: essential technology for the people who accelerate progress. And those people are our customers doing great things. And you'll hear their stories of how we're utilizing our technology, our innovation, our commercial capability, as well as FBS to make them more successful. Our core values are really how we do what we do.
Extraordinary teams delivering extraordinary results really is all about getting the best team on the field and making sure we empower them to do great things. You'll hear today from Stacey Walker walk through our human capital management strategies. And I think you'll get the sense of the strong work we've done to really make sure we continue to build the best team. Customers, we know. Customers, when our innovation makes customers successful, we know we build deeper competitive advantage. And our second value is really about that. You're going to hear a lot today about innovation. You're going to hear about the great work we're doing in The Fort to really accelerate data analytics and machine learning.
But ultimately, all those efforts are really to make our customers more successful, to deepen ourselves in their workflows, and to help them really be successful in the things they're trying to do around the world. Our culture is so important to us. And Kaizen as a way of life is our third value, critical to how we continue to build our business and the value we create there, both today and tomorrow and into tomorrow. And you're going to hear from Kirsten Paust really about how FBS is really driving the success we need in the new businesses, but also continues to be the important aspect of the business system for everything we do, no matter how long the business has been a part of Fortive.
And then finally, we know that if we continue to live those values, if we're measurement-driven in their success, we ultimately will do good things for shareholders. We know you all have a choice. We want you to be with us for the long term. And so the work we do around making sure we measure ourselves against those values, quality, delivery, cost, and innovation, fundamentally help make sure that we make progress against those values and ultimately create long-term sustainable competitive advantage for Fortive. What we're going to talk about today, I think, are really around several key themes.
Number one, really giving you an understanding of the customer-centric workflows that we play in today and how we address the critical needs of our customers, the strong secular growth drivers that we now have a part of our business, the well-positioned brands and market positions that go with that, and the expanded innovation capability to really make sure that we can continue to drive accelerated organic growth into the mid-single-digit range, deploy that strong free cash flow that's been a testament to our success in the past and also in the future to accelerate our strategy through M&A and to invest in organic opportunities really to help us compound both earnings and free cash flow.
And then finally, you're going to hear in so many stories within the segments of how FBS is adding value to every one of our companies in new and different ways, as well as making sure that it continues to be the foundation of our culture, enabling competitive advantage and ultimately being that value creator that's so important to how we run our businesses. What Fortive is today is, and with the 2021 metrics, gives you a sense. I'll go through these pretty quickly. Over $5 billion worth of revenue today, very strong margin profile, both at the gross margin and operating margin perspective. We've certainly significantly increased the recurring revenue in our business today at almost over 38%. And really, where we stand today is an incredibly durable revenue model for which to go into the future with.
That strong free cash flow that continues to be a testament to FBS will always be a part of who we are and what we do to make sure that we can continue to accelerate growth and accelerate our businesses through M&A. When you look at our geographic footprint today, a little bit more North American-centric than in the years past, but that really creates, you'll hear today, some of the opportunities to globalize a number of our businesses to really take advantage of the global nature of a number of our markets. Our end markets are diverse, as you see here, certainly with the growing addition of healthcare as a larger segment today, but good, diverse end markets, but the most important thing is the secular drivers that are within those end markets that are really going to propel us for growth into the future.
So we think we're in a range of great attractive end markets, great secular drivers, and well-positioned financially to really take the company forward in the next five to 10 years. Let's talk a little bit about where today we are from a secular driver perspective. And our portfolio continues to evolve into higher growth markets driven by many of those drivers. We've increased our exposure to these markets in many cases. We've become more resilient with more durable business models. And higher recurring revenue really helps us build a deeper relationship within the workflows that you're going to hear today that really give us the kind of competitive advantage we're looking for.
If you think about where we stood five years ago, maybe with the businesses that we were in, and we've continued to evolve into those workflow strategies early on in our evolution, and today attaching ourselves to those secular drivers you're going to hear about throughout the day to really give us about a $40 billion total addressable market, a tremendous opportunity for us going forward to continue to build Fortive for the future. The segments today, and really, we have not had an investor conference for a couple of years, almost two years to the date, and so really being able to give you a good understanding of the segments is a main goal today, and our segment leaders will walk you through, I think, really the depth of understanding of the innovation and technology and competitive positions and how we win going forward within those segments.
What you see today is within each of those segments a strong financial profile, good growth characteristics, strong, resilient brands that really give us those leverage points in which to build the business. Three operating segments, all with great opportunities to really continue to build within those segments and also make sure that we continue to innovate to take advantage of the opportunities that we have with those deep customer relationships that we've built over decades. Our segment strategies, in summary, are incredibly powerful. Our IOS segment, really leading workflows that really facilitate field and facility safety, productivity for our customers. On the precision technology side, that IoT expansion, you're going to hear a lot about accelerating the development of technologies to really help our customers become more innovative.
We'll hear from our leaders within healthcare and our eHS segment, how we're helping healthcare customers, hospital customers today with the essential products, services, and technology workflow solutions that they need to deliver more effective healthcare in a safer manner. And that's only been accelerated with what's happened with COVID over the last 15 months. And then across the board, we'll talk about FBS and how it's continued to be the culture of our company, but also has continued to improve. We always like to say that our continuous improvement system continually improves, and it adapts to our portfolio to make sure we can continue to deliver value across a range of metrics within each of our operating businesses. What you'll hear today as well is those specific drivers relative to all three segments. You can see here the served or TAM associated with each of those segments.
And you see here how a number of these growth dynamics really will propel the company going forward. And so I won't get into the details there. But I think what you can see is certainly across the board, automation and digitization really drive all of our segments. And the opportunity to really leverage what we know to be true with the customer sets we have today, the workflows, and the depth in which we understand the voice of customer help us to monetize that through data, help us to monetize deeper solutions in a differentiated way to build long-term competitive advantage. And you're going to hear a tremendous number of examples today around how we're doing that throughout our segments and operating businesses. And like I said a few minutes ago, the opportunity to globalize across all three segments.
While we have good global footprints in several operating companies, those are really the landing points for us in which to build bigger businesses across the world, and we look forward to doing that in the years to come as another opportunity for growth throughout many of our operating companies, so those customer-focused workflows built on the foundation of great brands and great market positions attached to long-term secular drivers really gives us a great opportunity to continue to build the businesses both organically and inorganically. We thought we'd take a moment first to give you a sense and maybe for those who know us to remind you of our model around M&A. First, we look at markets.
I think what you're going to hear today is a number of examples of how we built positions in markets where we like those structural growth drivers, where they have high barriers to entry and ultimately have consolidation opportunities. We've built several of these workflows from scratch. You'll hear from Justin McElhattan later about our EHS workflow where we built that completely from scratch over the last few years. Then we look at company. Do we like the company? Does it have a strong market position? Does it have that durability and revenue that's important to us? Do we have the opportunity to expand margins from an industry and company perspective? And then finally, can we create value? There are lots of great markets. There are lots of great companies. But ultimately, we know we want to make sure we can add value. Does it have the FBS opportunities?
Can we accelerate strategy through M&A? And do we have the opportunity for strong financial returns? All of those answers to all of those of a yes really gives us the opportunity to really think more broadly about M&A. And you'll hear from Chuck later, our balance sheet is in great position in which to continue to accelerate the company through M&A. Let's hear a little bit about how we're doing. As you know, this summer we'll celebrate our five-year anniversary. And I think one of the things that we often get asked is, are you buying only software businesses? And I love this articulation of our history because I think it really demonstrates how we think about M&A, how we think about accelerating strategy, both on the hardware and the software side. You're going to hear that through a number of our segments.
But as you can see from here, what we've done over the last five years, starting with eMaint, which was our first software acquisition, but then continuing to build each of our segments out, making sure that we're building off our great hardware positions with great software and the opportunity for data analytics, adding great businesses like ASP to accelerate our position into things like healthcare, which have good growth and durable dynamics over the long period of time. And then certainly our last acquisition, ehsAI, which really gives us that artificial intelligence capability to really not only take within our EHS workflow, but also more broadly across Fortive.
We've done some divestitures during this time, as many of you know, and really the constant evaluation of how can businesses that we have within our portfolio be put into opportunities where they can accelerate even faster than where they were. And I think we've done a great job in doing that, whether it be with the Altra acquisition or divestiture with automation and specialty, or what we've done just recently with Vontier, setting those businesses off for opportunities for great success. And then finally, really important investments in growth enablers. You'll hear about the Fort here later. We also hear about our Pioneer Square Labs partnership, which really both of which build tremendous capability for us to make sure that we can continue to build our companies for the future. So we've made a lot of progress around our portfolio over the last five years.
I think what you'll see today is how we're really well served for the future. The software capability that we built over the last several years is outstanding. It's been built on the foundation that we understand businesses from a hardware perspective. We bring a domain expertise to those industries and ultimately a foundation in which to add software to our customer value propositions in which to enable workflows. You see our strategy playing out here in this graph in a number of ways, taking those highly differentiated hardware positions, adding workflow solutions around software, and then ultimately leveraging that domain expertise and the information that we get through software to provide data analytics to customers. All of our businesses are on this journey to continue to enable themselves to take advantage of these long-term growth opportunities.
We're in an incredible position today with over $600 million worth of software revenue and with great growth, great market positions, and the FBS tools to continue to accelerate success. A little bit about where we're at today on some of these deals. Overall, we've acquired about $2 billion worth of revenue. That's growing at mid-single digits or the CAGR, if you will. The operating profit is very strong. You'll hear several examples today not only of how FBS has been used for growth, but how it's also been used within our acquisitions to accelerate operating profit over 60% since acquired. And then obviously the operating margin expansion, a core tenet of how we think about FBS to really drive these businesses to be more profitable as they accelerate their growth rates. Some additional color, certainly on the operating profit side, we've seen incredible success at ISC and Landauer.
You'll hear a lot about those opportunities today, and obviously with the work we've done early to set up ASP, we're in an incredible position since the acquisition to be greater than 20% operating profit. We've had great growth at eMaint, almost three times that revenue growth, and our revenue growth at Censis and Intelex, although a little bit earlier in our acquisition history, really are off to a great start, and we're incredibly excited about the positions that those businesses are going to put us into. You'll hear a number of examples from our segment leaders around how they're using FBS to accelerate those businesses even further. Gordian has been a great acquisition for us. We're incredibly excited about this business. It's almost, I would call it a bastion for FBS across a broad range of parts of what they're doing successfully.
But certainly one of those is really driving incredibly strong high single-digit growth as well as great margin performance. ASP has continued to deal with the pandemic. And despite the challenges of COVID, we've been able to carve that business out, bring it into Fortive, bring it in in a very profitable way, set it up for great growth both this year and into the future. And then finally, a little bit slower start at Accruent. I think we've talked about that, that some of the SaaS conversions are taking a little bit longer than we thought. But we love the position of the businesses. And I think what you'll hear when we talk later about the position we're in at Accruent, we've got a number of strategic growth opportunities that really help accelerate the business over the next several years.
So all in all, we feel very good about where we stand today successfully. You see a number of examples here of how both in total we're doing well, but also within the construct of individual deals, how those businesses are continuing to do well. And certainly we'll reinforce that with the conversations we'll have throughout the day. One of the most important aspects of today will be to help you understand how the Fortive Business System continues to increase the impact it's having in the businesses. We take that traditional model of growth, lean, and leadership and the tools that come with each of those. And we bring that to every Fortive operating company.
We've expanded over the last several years by making sure we add tools that are more appropriate to the businesses we have in the company, the more durable business models like consumables and service, software, data analytics. And what you're going to hear today is a number of examples of how those FBS tools are really driving success and building capability across a broad range of our businesses. We started with the Fortive Growth Accelerator process. This was an early-stage innovation process that we developed internally and really helps create those early-stage ideas, those breakthrough ideas within all of our R&D labs. We've seen tremendous results from this. We've converted a significant amount of our R&D spend away from sustaining engineering into breakthrough types of technologies and breakthrough products.
Our partnership with Pioneer Square Labs gives us that early-stage investment expertise that comes from a company like that, bringing together great skill sets with our Fortive team to help us really understand how we can continue to invest in early-stage disruptive technology. You'll hear a lot about The Fort and the work we're doing in terms of accelerating data analytics and artificial intelligence into our business, not only in our internal operations, but also for value propositions for customers, and then finally, a set of tools that we've had for a while, our Fortive Digital System, we're really bringing that digital marketing and that digital capability to our commercial activities to make sure we can continue to really accelerate lead generation, accelerate funnel management, and really build bigger growth opportunities for all of our businesses.
We're incredibly well positioned from an FBS standpoint to really accelerate our hardware, software, and our data analytics offerings across Fortive. You'll hear from Pete later around sustainability and our commitment to it. I'm incredibly proud of the work we've done to take our shared purpose and really convert it to our vision around sustainability, accelerating progress towards a sustainable future. While there's a tremendous amount of detail that goes into all of this, I would say our sustainability pillars not only give us the strategy in which to go forward and really have an unbelievably positive impact in the world, but it also helps us deliver on those commitments because of the power of FBS. The combination of the strategic pillars and FBS really gives us the confidence to take the incredible impact we've already had and take that forward.
And then finally, our flywheel model, which you've seen over the years, we've obviously updated it for what I would call even better performance than what we've seen over the last few years, mid-single-digit growth, driving core margin expansion of over 75 basis points, taking that strong, durable businesses and operating margins and cash flow that comes from that and accelerating strategy through M&A and then ultimately accelerating it through FBS. What you're going to hear from our leaders today is how we're incredibly well positioned to do that. I could not be more excited for today.
We've had this date circled on the calendar for a long time because we knew that today would be the day in which we would be able to tell our story in a complete way and in a way that not only displays the power of the portfolio and the power of the culture, but also the power of our leadership team. So I'll look forward to seeing you a few times throughout the day. Thank you for joining us today. So with that, let's get started. Coming up to talk about FBS and innovation is Kirsten Paust, our Vice President, Head of the FBS Office, and Israel Al-Busaidi, the founder of the Fort and our Vice President of Analytics. Kirsten.
Thanks, Jim. I'm excited to be here today with you to share how FBS is driving progress across our portfolio. I'm going to be joined by Israel, who's going to share how data analytics is changing the way we're bringing value to our customers, but also pushing forward a frontier of FBS. To get us started, I want to talk about FBS and how it spans more than just a set of tools and processes. FBS has brought great productivity and efficiency to our businesses, but it's about more than just that productivity toolset. It's about driving growth and innovation, and it applies equally in our software businesses. Over our many years of experience with FBS, our toolset has become a mindset. It has become the way that we work and engage with each other across our businesses. It has truly become our culture.
Through the segment presentations today and through my opening here, I hope you'll come to realize how core and fundamental it is to who we are and how we drive the performance that we do in our businesses. You see on here our core value drivers. FBS plays a critical role in each and every one of them. FBS is driving our ability to deliver above-market growth rates, and it's producing the free cash flow that's so incredible to our story and what we're able to do with our portfolio. FBS is truly a unique and powerful toolset. I want to give a little bit of a picture into how FBS has evolved. We have a very proven foundation, as you see there in the middle, of a productivity and efficiency toolset, really born of what we call our lean tools.
Over the years, we've added on to them with growth and leadership and what we call our fundamentals, the FBS tools that we expect everybody in the business to live and use to drive results. We've taken this incredible foundation and have built on it a toolset around growth and innovation. I'm going to spend today really talking about that toolset and how it's driving results across our portfolio. But it's important to take a little bit of stock on how we do that. We are constantly, continuously improving our own continuous improvement business model. In fact, we go out, we benchmark, we acquire businesses which bring new best practices and approaches to us. We get new people into the organization that push our thinking. As Jim said in the opening, we are always evolving our learning and understanding and incorporating that into what is FBS.
Today, Israel and I are going to focus on three areas: innovation, how we're bringing breakthrough solutions to our customers. Software, how we're driving results in our software businesses through the use of FBS. And Israel's going to talk about data analytics and the value we're creating there. To get us started, I want to spend a little bit of time on innovation. What we have in the FBS toolset is called the Fortive Growth Accelerator, a set of tools that allow us to deeply and uniquely understand workflows so that we can ideate and create breakthrough innovations and solutions that don't exist in the marketplace, but that should. We bring our process orientation and mindset to what we do there. We also, in the last year, have forged a partnership with Pioneer Square Labs, or PSL.
With them, we formed a studio, which is external to Fortive, but is a space where we create completely new startups that bring strategic value to Fortive. This unique partnership with PSL allows us to attract entrepreneurial talent and allows us to learn what it takes to create truly early-stage companies that ultimately we intend to be part of the Fortive portfolio. This collection of toolsets and approach has enabled us to grow our market opportunity by more than $2 billion just through the activities in this area. In the area of software, we have proven tools and software that have been part of the portfolio for many years. Not surprising, FBS and its process orientation has helped improve the way we do software development, bring productivity and efficiency to software development teams.
How we've evolved FBS in that space and to ensure that we are supporting the evolution of our portfolio is extending the FBS toolsets and how we manage larger portfolios of software development and how we drive commercial execution in our software businesses. You can think about that in terms of how we drive cross-sell, up-sell, and all those critical things that occur over a lifecycle of software usage. This is driving real results in our portfolio. And I'll share more about the software journey and story in Fortive. But just to call out, we've improved net dollar retention, which is the culmination of all of those commercial levers that we drive in our software businesses, over 400 basis points. And finally, data analytics. Israel's going to join me for this part.
We'll share with you how AI is not only changing the way we view internal productivity and driving performance through FBS, but also changing the solutions that we bring to our customers, which unlocks growth potential. In fact, Israel's going to share with you how we have identified over $250 million of growth opportunity through the application of AI and ML to our businesses. To get us started in understanding a bit of these three areas, I want to spend a little bit of time on innovation. In FBS, we have a toolset called Lean Portfolio Management. This toolset encompasses the full product development portfolio from early-stage ideation, what we call dream, all the way through to how we develop and deliver what we come up with to how we commercialize that in the marketplace or deliver.
This full lifecycle of Lean Portfolio Management enables us to take more shots on goal. We're creating more ideas faster and better that we push into our development engine. With the application of FBS and our development engine, we're improving the quality of our development and the ability to bring that to market at schedule or ahead of schedule in some instances. You'll hear many stories as we go through the segment updates today of where Lean Portfolio Management is having material impact on bringing new innovations to our customers, enabling our operating companies to grow, and at the end of the day, bringing better return on the money that we spend in R&D. A very powerful story of FBS playing across the whole product development lifecycle, and this methodology applies equally in software and hardware businesses.
I want to focus for a minute on software and how FBS plays in our software businesses. We have a variety of tools that come to bear in software, but the mindset that I spoke about at the beginning is critical to our belief that we can always do better and be better. And these businesses, all of them new to Fortive in the last couple of years, have adopted that mindset and really driven results in the business through it. You can see a sampling here, whether it be through improving the way we manage our accounts, we manage the lifecycle through daily management and standard work of how we engage with software customers, to improving our internal processes that allow us to increase our working capital turns.
You're seeing impressive results on a top line in terms of growing our business, whether it be customer renewal improvement or driving growth in leads, ultimately revenue growth for the business, but also how we're driving cash flow through margin expansion in these businesses and earnings. A powerful story of how FBS applies in software. I want to show you two case studies here that give you a bit of a sense on what it looks like to apply FBS in our traditional hardware businesses versus our software businesses. Many of you are very familiar with the story that is Fluke, which is quite impressive. Over 20-plus years of experience with FBS, we've driven tremendous returns in Fluke, from driving the top line to improving our operating profit.
From a business that started at less than 60% on-time delivery to customers and low single-digit working capital turns to a business that now is in excess of 95% delivery to customers and a threefold increase in working capital turns. Just a tremendous story of bringing powerful cash flow as well as growth to the portfolio. eMaint is a software acquisition that we executed a number of years ago. What you see here is a slightly different journey with FBS. While equally focused on continuous improvement, we got started at eMaint in a different way. Instead of working on our operations or our traditional productivity and lean space, we get started in the commercial space. We add on improving the way that we developed the software to accelerate our delivery to customers, and this creates a powerful engine in the business.
What I think you'll find remarkable about the eMaint story is the speed with which it was done. The story of Fluke is a 20-plus year journey. The story of eMaint is under four years of incredible results, over 3,200 basis point improvement in operating profit, 20% annual recurring revenue growth, just an incredible story of the power of FBS applied in a software business. This has set eMaint up very well for its important play in our Connected Reliability solutions, which we'll go into later when we talk about eMaint and what we're doing there in the segment updates. I hope from what I've taken you through, you understand the power of FBS in driving results in our portfolio and how important it is in software.
We will continue to evolve the FBS toolset to ensure that we are delivering the results needed at the Fortive level and continuing to serve the needs of our operating companies. I'm now going to hand it over to Israel, who's going to take you through the journey of FBS and what we're doing on a data analytics front to really bring value to our operating companies and value to our customers. With that, Israel.
Good morning. I'm really excited to talk to you today about our progress in artificial intelligence. But most importantly, I'm very excited to talk to you about The Fort. The Fort is our artificial intelligence practice that started two years ago as a small startup. Since then, we have built capabilities to sustain the entire lifecycle of our AI work. At The Fort, we build the capabilities and the talent that can help us broadly apply and scale AI throughout the company. We're very fortunate to be co-located with Industrial Scientific in Pittsburgh, what I call the heart of the AI movement. And our efforts are to connect the company so that everybody has access to AI with our guidance. We also work in building solutions that are both common to our different segments, but also that are strategic to our work.
Finally, we also guide our collective learning around AI. We enable all of this by building reusable components, cloud computing platforms, and tools that enable all the operating companies to play into the AI opportunity. The Fort is what I would call Fortive's AI movement. And I'm very, very proud to be leading this effort for Fortive. I wanted to share two ways in which we tap into the vast opportunity and foundation that our hardware and software companies have created for us. We use the data that they have gathered and the systems that they have built to create advantage in two places: in the form of continuous improvement for ourselves, but most importantly, creating acceleration for our innovation journey. And I wanted to share to you two examples. One is from a company called Intelex, where we're working jointly to enhance customer retention.
We do that by building AI models that tap into both product use data as well as customer behavior to assess the health of an account, to identify at-risk customers seven months into the future, and to provide countermeasures that the success teams can use to ensure that customers are getting the full value of their investment. By doing this with Intelex, we've been able to save. We've been able to expand our annual renewal by $4 million, which directly impacts the growth of the business. Now we're moving that work into the area of up-sell and cross-sell to create even more advantage. The other example that I wanted to share with you is Tektronix. At Tektronix, we're working to automate the quote resolution process.
When we do that, we're able to take an incoming order for a calibration and route that to our external partners so that they can, in turn, fulfill that calibration request. We do that based on the type of equipment that needs to be calibrated, the equipment and the procedures that are required at the partner site, the geography, as well as the complexity of that task. In doing so, we're able to reduce the time to process an order from 50%-90%. In some cases, for larger customers, we're able to save them 16 weeks of waiting time, and most importantly, we're creating efficiencies for Tektronix in the order of $1.5 million a year. These are just a couple of examples of the work that we're doing with our operating companies in the area of continuous improvement.
I'm even more excited to talk to you about our work in innovation. Today, you'll hear throughout our presentations references to companies like Fluke, ISC, Intelex, Gordian, Accruent that are all working with The Fort to create the new generations of products. They bring in their data and their expertise. We provide them with tools and capabilities, and together, we're building the next generation of products. The interesting and fascinating fact is that we are stewards of billions of assets, data, and that data and the capabilities that we're building positions us at the center of the opportunity to build better reliability, better utilization, better availability, and better safety for our customers. We apply AI techniques like image processing, natural language processing, and predictions to tackle problems that AI works to solve beautifully.
These are things like prognostics and advanced diagnostics for machines, automation of workflows, and pattern recognition and classification. Based on the work that we do, we have defined very specific use cases working with customers. But at the same time, we're very conscious of the fact that there are many AI projects that are not as well defined. So the growth accelerator is including now innovation tools that allow us to do digital innovation specifically. In closing, a few takeaways. FBS is the cornerstone of our culture. We use FBS to drive our values, and it's how we create advantage. The innovation is a big focus for us. We have built both internal and external ventures that will allow us to tap into this opportunity and create growth. AI is at the center of what we're doing.
This is our AI moment, and we will continue to expand on our capabilities. Recently, we bought a company called ehsAI, and you'll hear more about this later, that is actually bringing tremendous powerful capabilities in natural language processing. I'm very excited to be here today, to be part of Fortive, to lead this journey, and I look forward to continuing to share with you our progress, and you will hear about our new products in the coming months. Next, I'd like to introduce Barbara Hulit. She's our Senior VP of the Advanced Healthcare Solutions segment.
Thank you, Israel. Good morning. It's so great to be with you virtually to share all that we've been doing around advanced healthcare solutions. We're so excited about the progress we've made to date, but even more so how it sets us up for future growth and margin expansion. I want to talk a little bit about the segment. It's about $1.2 billion in revenue with operating profit in the low 20s. We participate in a market that grows a little bit faster than mid-single digit. What we aim to do is serve primarily our hospital or healthcare customers by allowing them to deliver safe, efficient, timely healthcare. It's a really important task. It was before COVID, and certainly still is today. There's more to come. Much growth that we can see here.
If we look at margin expansion that we've considered to date, and I'll share some examples here in a little bit, we still have room for geographic growth. We have plans in place that I'll share with you around expanding workflows, new solutions for our customers, the application of FBS to drive improved performance, and of course, the deployment of M&A into acquisitions to accelerate our strategic plans. We like the business as it exists today, but we're even more excited about what we can build for tomorrow. So let's go back to the time of the creation of Fortive. We had exposure to the healthcare market back in those days, primarily through Fluke Biomedical and Invetech.
If you look at what we've done over time, applying FBS to drive continuous improvement, organic growth, we've also deployed money into acquisitions as you see here: Landauer for radiation compliance, ASP around sterilization, and Censis for instrument tracking software. We've totally transformed this business. Today, we participate in a market that's 10 times bigger than what we started with. We've got revenues that are over $1 billion of really high quality, over 70% recurring revenue. And both the growth profile and the margin profile are significantly enhanced. And this is where we are today, and we've only gotten started. So the macros behind these businesses are very compelling. We purposefully made a decision to invest here because we like these secular drivers. Think about some of the things going on. Aging demographics around the world mean that people need more medical attention, and that drives more procedures.
And these are procedures that grow over time in complexity with technological advancements like robots. There's a global phenomenon here as well. You see governments around the world continuing to invest in infrastructure to build out greater quality of care, safer care, and access. It's interesting because healthcare today, at least in the developed markets, sits at about 17% of GDP, but it's growing faster than GDP. And that puts incredible pressure on our customers, our hospital partners, to perform better and to drive efficiency. Now, when you think about doing that, they also have to do it in a time where the technicians are starting to retire out and the inflow of new talent isn't replacing at a fast enough clip. This is hard work. Now, these trends are not new. Certainly, they were there before COVID, but COVID has put more pressure on these businesses today.
If you think about it in the U.S. as an example, even with the CARES Act that was a big help to the hospital systems, the hospitals, on average, saw their median operating profit go down 17 points. That creates such a great opportunity for us to come in and try to solve some really big challenges. And that's really where we see ourselves going in this business. We believe that we can make a difference in healthcare and participate in what is a really healthy and growing market. Now, our vision is to create a leadership position in what we call the operational workflows within a hospital system. And I got to tell you, as long-time practitioners of continuous improvement, we see an endless set of opportunities to help hospitals operate better, safer, be more efficient, and provide a higher quality of care.
This vision guides us both organically and inorganically. Driving these workflow improvements is a big push in healthcare today, as you can imagine. But it's such a natural fit for us given our continuous improvement mentality. So let's talk about Advanced Sterilization Products, or ASP. This is the largest operating company that we have within the segment. Now, ASP, as you may know, is responsible for capital consumables and service that ensure that instruments and robots are clean and don't cause infections. Think about this for a second. You pick your doctor, you pick your procedure, you pick the hospital. But you don't pick the company that takes care of the instruments that are going to do the work on you. And that's a big deal. ASP takes us on to protect patients during the most critical moments.
Since we've closed on this acquisition, we've made significant progress even in the midst of a global pandemic, and we're really proud of the work that we've done to stand up this carve-out acquisition. It's a strong business today with great growth potential and margin expansion potential, and we're already seeing progress made in that regard. I'll share a couple of examples with you in a minute, but in the future, the business that we're building will be even better. We're working on innovations today that will help our customers optimize their workflows. This will be a business that's rewarded with even greater customer loyalty going forward around the world, a business that consistently grows a little bit faster than mid-single digits and has margins well into the 30s, so we're now in what we call Chapter Two.
We've just exited the first chapter of owning ASP, and our goal there was to establish the company. Now, in Chapter Two, we're even much more focused on applying FBS to drive growth. And we're encouraged about what we've been able to accomplish to date. We have successfully stood up the company. I'll say more about that in a minute. We've turned around share declines, and we are back to growth, all while we're still starting Chapter Three to make sure that we're innovating these workflows that can help our customers deliver the kind of quality care they expect to. So let's talk about Chapter One. So, as you all know, ASP was a carve-out out of J&J. It came to us as what we consider a partial organization. That means we had to create infrastructure for the business. Think HR, finance, legal, IT.
All of that had to be built from scratch. In addition, we had to build systems from scratch: ERP, CRM, quality management system. We had to establish legal entities around the world, and we had to either transfer or reestablish licenses to operate in those countries. It was a significant undertaking. But we've done this before. Think back to the days when we were separated from Danaher, and we built a capability. We further refined that skill as we carved out the automation specialty business and, of course, Vontier. Now, the work was significant, and I'm not going to call out all the things in the slide here, but I wanted to highlight a couple. We have converted over 10,000 customer contracts. We transferred over 700 registrations in over 100 countries. And we simplified and created 28 logistics hubs, all while holding on-time delivery and delivering working capital turns.
It was a big bit of work. We had several consultants that came in and gave us proposals to do the work. We were able to complete our stand-up in about half that time with significant improvements in cost savings and timing. Now, we expect to be running this business with operating profits in the mid-20s this year, despite the slowdown in COVID, and we're already seeing some accelerated growth, and let me give you an example of that, so in Chapter Two, I mentioned that this is all about applying FBS around growth. We inherited a business that had an installed base that was declining. You could say we were losing share. The installed base is really an important metric because capital stays in the field typically for seven to 10 years, and the capital, of course, brings with it service and consumables, revenue, and margin.
Now, if we simply replace our own units, we won't grow. In order to grow, we have to place new units and have competitive conversions. FBS tools have been very useful here. Policy Deployment allowed us to take our strategic plan and put it into action. Our growth Obeya room gave us focus around the actions that we were taking. Funnel management allowed us to look at our wins and losses and learn so that we could describe and establish a standard work playbook to take the winning recipe and go out and do it again and again. The results speak for themselves. Last year, we increased the installed base about three points, and we're on track to do that again this year. We've seen this kind of progress over the last six quarters with more to come.
But there are other things that are happening around the growth agenda in FBS as well. Let me give you a quick example around service. Service in our business is pretty important because that's what allows us to make sure that our customers are properly taken care of. It builds close relationships. It allows us to understand pain points and fix issues, and it builds that loyalty that we talked about before. Now, service for us has historically been primarily a U.S. business. So, the international team got to work around problem-solving and kaizens to figure out how to build that attachment rate. So, think of that as the number of service contracts relative to the size of the installed base. Through experimentation, again, the recipe for driving success was dialed in, and the team has seen some great results.
Over the last six quarters, we've seen a thousand basis point increase in this attachment rate. So, FBS is alive and well at ASP and helping us drive growth, and that growth drives margin expansion. So, where do we go from here in Chapter Three? Let's talk about Censis. Censis was a very strategic acquisition for us. We've already experienced some of the benefits of being together: account planning, talent development, market work, to name just a few.
But looking into the future, we can take the hardware component and installed base of ASP, combine it with the software capabilities of Censis, to start to create and deliver actionable data to our customers that will allow them to do things like reduce infection rates, increase the throughput of surgeries, which, of course, is the primary profit driver within a hospital, drive down costs, and make sure that these technicians are able to do the right work right the first time. Censis is well on its way in terms of being a Fortive company and has also dove into the world of FBS. Now, this is a software business, and we sell subscriptions that help hospitals manage the sterilization workflow and also tracking and tracing of surgical instruments and medical devices. Now, like most software companies, we see revenue recognition around implementation milestones.
During COVID, the Censis team started to see slippage from the implementation timing standard. They held a virtual Kaizen, so you can imagine what this looks like in the time of COVID, where we did Value Stream Mapping, got a lot of VOC back from customers, and started to reimagine what implementation might look like. And here again, the results have been pretty fantastic. If you look today, the time that it takes us from close to getting data received and processed is 75% faster. If we think about the time when we kick things off to when subscription revenue starts, that's been cut in half. And overall, the process time has been improved by a third. I'll tell you that the Censis team have become great FBS believers, and in fact, they have a Kaizen ongoing this week. So, let's move to Fluke Health Solutions.
This is the second largest operating company within the segment. And I'll go back to the time when Fortive was created. I mentioned earlier Fluke Biomedical. So, this was the business that we had at the beginning, and through the use of FBS, we've made organic investments in things like expanding the base of instruments. We've used lean software development to develop products like OneQA Optimize, and we've put acquisition dollars to work in properties like Landauer. But this is fundamentally a different business from what it was five years ago. The TAM has more than doubled. The revenue is three times greater. The recurring revenue is an order of magnitude better. And here again, the growth profile and profit profile are much, much higher than they were only five years ago.
This has been a great playbook for us, and we'll continue to see it in action across the segment. I gave you one example about OneQA and Optimize with lean software development, but there are loads of examples of where FBS has been relevant in our software businesses. I'm going to share one more example here where we're building a software-advantaged and hardware-advantaged business. So, a biomedical technician takes care of the equipment in a hospital. Think about when you and I go to the hospital, we're kept safe, and the equipment's operating the way that it should be. They're taking care of oftentimes thousands of different kinds of equipment. As I mentioned before, there are more technicians that are retiring than are joining the workforce.
There's this move for efficiency that we talked about, but all the more so as hospitals consolidate and have a need to drive standardization across the system. This makes it really hard for a biomedical technician to do the important work that they're there to do. So, we put a team in the growth accelerator process that Kirsten mentioned earlier. Think of that as VC-type work around finding a problem we're solving, doing rapid-scale prototypes, experimentation. We were able to iterate and iterate around a product offering. We worked hand in glove with our OEM partners and have secured $500,000 of recurring revenue. We've launched software that takes almost half of the work time out for the biomedical technicians, allowing them to do more work reliably and consistently. The funnel is strong, and orders are up 30%.
It's a great example of what we see, both hardware and software-advantaged, and what we're seeing from an FBS tool perspective, so I hope you can see why I'm as excited as I am about this segment. The businesses that we have today are great as they are. They help propel Fortive forward. The margin profile, the growth profile, and the installed base gives us a foundation on which to grow. FBS, as you could see in the examples, continues to drive improvements in growth and margin expansion, and there is work underway across the entire portfolio to become the leader in intelligent workflow solutions. We're seeing early traction there. We have the capacity to invest in acquisitions to accelerate our progress. We have the anchor points today with lots of adjacency and new workflows. I love our start, but I'm even more excited about our future. Thank you.
Let me now invite Pat Murphy to the stage, who's going to walk us through Precision Technologies. Pat?
Okay. Thanks, Barb, for that introduction. Good morning to everybody. I'm really glad to have the opportunity today to talk to you about the Precision Technologies business here at Fortive. This is a business that's about $1.8 billion in revenue and runs operating margins in the low 20% range. I want to give you a little perspective on the workflow that we operate in here in Precision Technologies. We break the workflow into four different pieces: product development, product validation, full-scale production, and the services piece. In the EMC business and Sensing Technologies companies, we play in this segment, in this workflow, by providing either components or subassemblies into the product itself.
While at Tektronix, we provide instruments that are used to verify the electrical specifications are being met of any new product development. Jim mentioned the secular drivers across Fortive, and these drivers are important to us in the Precision Technologies business. In terms of the IoT solutions, the impact is most significant in our Sensing Technologies business. This is both through connected sensors and full IoT solutions. In Tektronix, we see significant opportunity in the growth of applications of wired and wireless communication and a continued use of our drive for higher power density in both wafer and device applications. So, those are going to be significant drivers for Tektronix going forward. I wanted to say a few words about our customers. As we look at EMC and we look at the Sensing Tech business, the primary persona that we deal with is a system engineer or a product engineer.
From a secondary persona perspective, it would be a process manager or a manager on a production floor. This is especially true for Anderson-Negele or Hengstler-Dynapar, where it's not uncommon for their products to be used in actual production equipment. At Tektronix, it's all about the hardware engineer, the electrical hardware engineer as the primary persona. The secondary persona for them would be a calibration manager or a calibration tech that would be the primary customer for the services business at Tektronix. I also wanted to share a little bit about the key markets and customers that we serve here. As I go through these five key markets, know that almost all of the businesses in Sensing Tech and in Precision Technologies more broadly play in these segments to some degree. But we do have people that are businesses that are primary in each of the segments.
In aerospace and defense, that would be the PacSci EMC business. In electronics and semiconductors, it's certainly Tektronix. Power and energy is a big market across Sensing Technologies, but specifically for the Qualitrol business there. And medical and life science is an important market for both Tektronix and the Sensing Technologies companies. When we think about Tektronix, we think about the base and the really strong foundation that we have there. We have, in that workflow that I described, in the development piece of that workflow, we have a very strong position there. We've got strong positions in general application and general application equipment, and a really strong position with our mainstream oscilloscope products. Again, we have a global base, a global customer base here, and we have extensive embedded software capability on our instruments today.
As we think about the future, we have the opportunity to actually grow a recurring revenue stream at Tektronix, and it's specifically around application-specific software going after the markets that I described earlier of wired and wireless communications and in the power markets, and I'd like to tell you a little bit more about that and how we're going to go after that at Tektronix. So, if you look at the core business at Tektronix and you think about that business historically, we sell instruments that have embedded software in a one-time purchase model, and the software that's on those, we will continue to upgrade for the life of the instrument, and that's how Tektronix has operated historically. As we look at the opportunity to go after these high-growth applications in power and communications, we're going after that with a combination of a solution that includes both hardware and software.
The hardware that we're bringing to those solutions, we're bringing through as our standard upfront model, and the application-specific software that we're marrying with that hardware is actually being sold through a recurring revenue model. We've already launched a couple of these solutions, and as we go further into 2021 and into 2022, we see this as a significant growth opportunity for us. Also, in 2020, we launched the TekDrive data platform, which is a cloud-based solution that allows customers to upload data off of a scope or a series of scopes, aggregate that data, and to do analytics on that, which historically would have only been possible to do on the instrument itself.
This is, again, a solution that we've gotten good uptake from customers so far, and as we continue to increase the capability of that solution, we believe this will be a strong growth driver for Tektronix going forward. You heard from Kirsten a little bit about our new lean portfolio management tool, and I wanted to talk specifically about the Dream phase of that process. The Dream phase is all around vetting ideas, making sure that we get more high-quality ideas into development so we can improve the returns of those investments once we get into the development phase. But I'd like to just talk through the Dream Phase for a moment. The first thing we do, or the first gate that we encounter there, is about making sure that the idea is big enough to be meaningful and that it's aligned with our strategy.
The second gate is around making sure we have a problem we're solving, that we can actually fall in love with the problem before we do the solution. If we're able to confirm that we have a problem that customers care about and is meaningful, then we're able to bring and test solutions for that problem and make sure that the solutions that we intend to bring are going to be valuable to our customers. And finally, we test whether customers are willing to purchase. Are they willing to make a commitment to buy in the pricing structure and in the business model that we are choosing to take it to market? This is a bit of a challenge, especially in cases where you have not fully developed the product itself.
During the last nine months or so, we've brought enough programs through this process at Tektronix to actually expand the served market that we have availability to by approximately $1 billion. It's a really significant opportunity for us at Tektronix, and it's going to be exciting to see this as we roll this out more broadly across Fortive. I want to go ahead and switch over to talk about Sensing Tech now. The graphic that you see at the top of this page talks about the five operating companies that make up Sensing Tech and the core of what we do there. Each of these businesses has a core sensing modality and really strong positions in their sensor markets. These sensors are communicating either with discrete or system controls in our existing applications.
There's a couple of focus areas from a strategic perspective that we have going on here. One is about our next-generation technology that we're bringing into our sensor platforms, making sure that we can keep competitive advantage both from a cost and a capability perspective. The second focus area in that core is around making sure that we have full digital communication capability across the entire portfolio. This is really important for our customers as they try to bring more advanced solutions to market and also super important for us as we try to bring IoT solutions to the market ourselves, and I'd like to use the next slide to talk a little bit more about what we are bringing to the market in terms of direct-to-end-user IoT solutions.
If you look across the five Sensing Tech businesses, each of them has at least one IoT solution that they're bringing to market, either that they've already launched or that is currently in development. As we look at this, they're based upon utilization of inputs from our base sensor platforms, and they're based in markets and vertical applications that we have a lot of expertise in with our core business today. As we look at our three-year planning horizon, we see more than $60 million of incremental opportunity here based upon the hardware and software elements of these solutions, and I'd like to use an Anderson-Negele example to give you a clearer indication and a clearer picture of what type of solutions I'm talking about. Anderson-Negele, as you saw in our video, participates in the dairy market in the pasteurization of milk and dairy products.
For more than 50 years, we have produced and have been a market leader in providing a mechanical process recorder into that marketplace. It is that process recorder that creates the records that the FDA utilizes to make sure that the pasteurization process is done safely. In the fourth quarter of last year, we launched the first digital version of that recorder that is FDA compliant. This system utilizes the Intelex proprietary workflow software. It's a cloud-based SaaS solution that uploads data from that recorder on a very regular basis, allows for the continuous monitoring of that process, has performance dashboards so that the operators on the floor can maintain performance metrics. It provides automated alerts in case there are, in any instance, the pasteurization process goes out of control limitations.
Another really significant opportunity here is that the FDA regulators who monitor this space are able to actually confirm compliance without actually having to be in the facility itself. This is an example of a great solution. We're getting great customer acceptance of the solution and just, again, as I said, a great example of one of the solutions we have under development and just in the launch process in Sensing Tech. FBS continues to be a significant driver of margin expansion for us. It doesn't matter whether we're talking about businesses that have been part of the portfolio for a long time or new to the portfolio. This is an example with the Gems business and the production floor in our facility in Plainville, Connecticut.
This was a challenge that we had with productivity and quality, not only from a cost perspective but also from an output perspective, where our largest customer of Gems was asking for additional output off of this line as well. As we normally do, we brought the lean tools that we know so well. We brought Value Stream Mapping, the use of standard work, and line balancing to really make a huge difference here. We were able to improve the process flow and eliminate a lot of waste that we found in the process itself. We were able to eliminate waiting times for the operators by changing the order of the operations on the floor, and we were able to bring critical quality alerts to each step of this process to make sure that we had quality in mind at every step of the way and at the source.
The results here were fantastic, not unusual for us, but really, really significant. In this, the outcome, we were able to nearly double the output per operator per hour on this line. We were able to reduce the quality defects by over 90%, and we were able to reduce the cost of quality and the cost of scrap here by more than 40%. So, just a great example of the use of FBS in one of our traditional manufacturing operations here at Fortive. So, just a few takeaways that I hope you'll take from my presentation today. First of all, if you look across this segment, we have significant brand strength and a really strong global customer base and leadership positions across the majority of the core product spaces that we occupy.
Inside of Tektronix, we believe we're going to be able to use the domain expertise that we have to be able to drive this recurring revenue model that I described and go after those really high-growth applications in communications and power. In Sensing Tech, again, our strong position in the applications that we serve today gives us great confidence that we're going to be able to deliver the IoT solutions that I described for that business. And then finally, we are super excited about the opportunity to bring lean portfolio management across all of our businesses and what that's going to do in terms of accelerating innovation, what it's going to do about providing us with more high-quality ideas, and help us to get better returns on the investments we're making in our product development activities. So, thank you very much for that.
I believe we're going to go to break now, and we'll plan to see you all back in about 10 minutes. Thank you.
Welcome back. Incredible presentations in those segment presentations really giving you a great sense of how we're making great progress in both precision technology as well as advanced healthcare. Now it's time to, our largest segment, bring forward the interesting things that we're doing throughout IOS. We're incredibly excited to talk to you about IOS. I'll share the stage today with Justin McElhattan, who recently promoted to group president. Justin runs our EH&S workflow and the businesses associated with that. He'll follow me, and then we'll come back for questions on all the segments in a few minutes. IOS has made incredible progress over the last few years.
Our largest segment at over $2 billion, great financial profile both from a gross margin and an operating margin standpoint. Good market size, $19 billion serviceable market growing at mid-single digit plus. Wonderful market dynamics, great financial profile where we stand today. Our franchises are outstanding here, centered around the workflows that are so important, and we'll give you more detail around those in a minute. But those franchises at Fluke, Accruent and Gordian, Industrial Scientific, Intelex, just great brands, great market positions, and a great launch point in which to build our segment. The segment is more global than some of our other segments. We've got a great presence around the world in places like Fluke and Industrial Scientific. That gives us the ability to continue to expand the segment over time.
Our revenue by market is also varied, with Fluke being the largest business within the segment, but all really credible and scalable businesses in the other operating companies as well. When we think about the segment really focused, our position and our vision really provide solutions to accelerate field and facility safety, productivity, quality, reliability, really bringing across a range of vertical markets with great secular drivers. We first think about facility and asset lifecycle. That starts on the pre-construction phase with Gordian and their efforts there, and then it moves to the work that we do to manage facilities and assets with the Accruent and associated software businesses within Accruent. Connected reliability is a foundation that we built over 20 years ago with Fluke that we've now expanded into a number of opportunities with eMaint and Prüftechnik.
Then finally, our EHS workflow, incredibly important secular drivers for the world today. Justin will take you through that in a few minutes. Across the range of the segment, though, is the opportunity to leverage our hardware, our proprietary sensors and instrumentation to really advance our data analytics strategies and really help our customers really be even more successful in the workflow by leveraging the hardware data, doing that through software and giving them answers to the most challenging problems. Then finally, we're incredibly well positioned across the segment, and I think you'll see that as we go through the various workflows. First, how have we built IoT over the last five years?
With a great franchise at Fluke, with a $7 billion serve market, great, about a billion to, and you can see the associated other numbers, we have been able to significantly expand the segment since then. Now, almost doubling the serve market, almost doubling the revenue of the business with a great financial profile and adding higher growth, mid-single digit or better, as well as high recurring revenue and software capabilities without the business, and a segment that already had an outstanding gross margin profile is even better with the advent of both the M&A and core innovation capability that we've demonstrated over the last several years, so we're incredibly excited about what we've been able to do with the segment.
But I think you'll take away as we go through the session here is really an understanding that, quite frankly, the segment has never been better positioned for growth going forward. And that's what gets us so excited. Many secular drivers here, a couple that I'll focus on. Like you heard from Barb in her presentation, demographics is also a driver here. Number of our professional technicians that we sell to, the skill level of those folks in the challenging environments that they live in every day really gives us more opportunities for higher quality instrumentation, better sensors, and better software to really give them the tools that they need to do their jobs. Everything is connected, and the opportunity within the sensing network to connect those into answers has never been a greater opportunity.
We know the drivers of lowering risk and improving sustainability have never been greater in companies around the world, and Justin will talk about how the advent of that and the digitalization and applying AI and how all of those technologies will ultimately continue to drive incredible growth opportunities for that workflow, and then finally, really the explosion of data across the board. We're continuing to see the opportunities for data analytics here in every one of our workflows, and that continues to be something that we believe is an incredible opportunity, so we have great growth opportunities, great margin profile today, ability to really take those drivers and really advance all of those financial metrics as well as deliver incredible customer solutions within each of these workflows. Let's talk about the first workflow, connected reliability.
Starting with our franchise at Fluke and the deep domain expertise that we built there, we address the needs today. What we do today is address the needs of maintenance professionals around the world. We win by harvesting the tremendous domain expertise, the great skill level that we have in our organization, as well as the great data that we get from having the largest connected world of tools and instrumentation around the world. Fluke equipment is everywhere, and the ability to harness the power of that equipment towards better solutions in the future is a tremendous opportunity for us towards our vision of keeping the world up and running. We're empowering operations leaders today with real-time data through our eMaint solutions and maximizing the workforce productivity and really helping with those uptime and asset downtime challenges that exist pretty much in factories around the world.
an incredible place in which to continue to build our solutions here. We're able to do that first and foremost because of the market drivers. These secular drivers are very strong. The digitization of the factory floor, we've talked in a number of presentations already of how ruggedized IoT connectivity, you certainly heard that in Pat's presentation. These are opportunities for us to continue to elevate our solutions and really give us great opportunities. Our core innovation is our starting point. What we've done recently in strengthening our positions in places like acoustics and in electrical measurement, electrical reliability measurements just are another example of the great innovation we're bringing into the marketplace while we expand our positions in maintenance workflow software through eMaint.
The market expansion opportunities in the future continue around analytics, building our data factory around Accruent, giving our users that single plane of glass where asset health really they can demonstrate asset health to users around the world, and really becoming the industrial asset system of record for true predictive maintenance. A combination of instrumentation that we've sold for decades with IoT sensors as well as software really gives us a connected reliability solution that is second to none in the industry. An example of that really is how we're really utilizing FBS to bring those kinds of solutions to life. The raw data, we're accelerating the pace of change here with FBS in our connected reliability in Fluke Reliability. We start with the application of FBS, really value stream mapping those data sources to make sure we understand where they come from.
And then secondly, applying AI and machine learning to understand capacity, process capacity, and throughput. We run those models, we create those models. You heard from Israel today how The Fort is well set up to do that. It leverages the deep domain expertise that we have in places like Fluke and in Prüftechnik to really leverage these data tools and data models to sell to customers to help them with their uptime challenges. FBS has had tremendous value in this effort. The value stream mapping really drives those number of steps down and automating a number of those steps. And then AI and machine learning really takes and takes that work time and takes that process time or wait time down incredibly low in the 90% kinds of reductions to give our customers fast, elegant solutions for their data needs. Facility and asset lifecycle is another workflow within iOS.
It started with the acquisitions of Gordian and Accruent and have really well positioned us for the future. We knew about asset reliability from our Fluke days in the connected reliability discussion I just had. And with that, domain expertise really helped us understand strategically how to accelerate our positions deeper into the facility and asset lifecycle workflow. We start with Gordian. We're in an incredibly strong position with Gordian from a data standpoint with their proprietary and pre-construction data aligned with the software capacity to give solutions that are second to none. We help our customers deliver on best cost solutions in that pre-construction phase. The growth drivers here and our growth initiatives are really to develop these solutions for the markets that are under-penetrated.
There's an enormous opportunity to take our job order contracting business and expand it throughout the U.S. because of how under-penetrated the market is. We'll focus those in verticals like higher education, state and local governments, and healthcare, and even more today in healthcare, where those solutions we're helping customers understand their construction costs for things like renovation and really be able to implement those with project management and software and analytics to also make sure that that project comes in at a lower cost and faster lead times. We're incredibly well positioned in addition to Gordian because of the work we've done with an internal acquisition of VFA and Kykloud from Accruent.
We've moved those product lines over to Gordian to help us really understand the assessment process, the surveying capability that really comes with those two solutions to really help us even earlier in the earlier stages of pre-construction. That combined with Gordian solutions really gives us that combination of best-in-class pre-construction data and the workflows around giving us a data advantage. So we're just bringing those businesses together recently, and we're incredibly excited about the work we can do together to really leverage those growth initiatives with a broader set of solutions in the U.S. FBS has been an incredibly powerful tool for the Gordian team. We're very proud of the work that they've done to adopt FBS in new and creative ways. One of those was in product development in their job order contracting business.
This is a business where we bring contractors and facility owners together and really use our cost information to bring those project quotes in at best cost positions. The application of FBS allowed for us to apply lean product development. You heard a number of examples today about Lean LPM, really bringing the tools of FBS to the product development process to really deliver a new cloud offering, a new cloud-based platform to one of our largest customers. Our value stream mapping then was used to help our clients get on board to be able to take the solution and apply it into the various applications that they have. In this case, the internal services department in the county of Los Angeles, an incredibly large customer. An incredible success.
Successfully migrated our development in this partnership to over $80 million of construction cost data through the system already, and we've leveraged the value stream map to onboard 73 clients very quickly in order to set them up to be able to utilize these tools in the years to come, so we're incredibly well positioned in LA, and we're using FBS to then expand that capability through cities across America, and it really gives a great example of how combining modern technology, data analytics, and FBS together to really make customers successful. Accruent is really much broader in the facility and lifecycle workflow. Their decision-making and execution tools today across a number of solutions in the workflow give us incredible opportunities to grow the business over time. Our multiple solutions allow for unique opportunities with customers, and really the greatest asset in this business is our presence and footprint.
Over 7.3 billion assets are measured in the company and over 5.3 trillion sq ft. This combination of assets monitored and square footage that we monitor really gives us a great position in which to grow the company. Our growth initiatives here are accelerating our international expansion to make sure that around some of the key growth products. Secondly, and I'll talk about this in a minute, return to work. As the post-COVID world starts to come together, we know that facilities and how we manage facilities will have to change as organizations like ourselves and everybody around the world is trying to understand how to bring hybrid work back into offices, into facilities, and we're well positioned to be able to help clients do that.
We're really supporting the digital transformation of engineering information with our Meridian solution, which is really helping give a SaaS solution in regulated industries, bringing their engineering data to the shop floor in new and unique ways to really help them help our customers really understand how to utilize data better, and then finally delivering data insights across the board. A recurring theme today is how we'll leverage data analytics, and probably no better position to do that than in the multiple software solutions that we today serve our customers with at Accruent. Accruent's opportunity in space management is very strong. As you can imagine, the opportunity here is to help customers around the world come back to work in new and unique ways, and that will be different for all kinds of different customers.
And our solutions can be flexible and adaptable enough in order to do that. Obviously, space is evolving. We need to continue to adapt to help customers meet their needs, and the importance of this has been elevated and made these decisions even more significant. Today, the C-suite is very concerned and very interested in how their organizations are going to come back to work.
That elevates the decision-making and elevates the importance of space management, and we're in a good position to serve those needs with customers by deploying suites in the pre-built industry, so giving people the understanding of a holistic view of their entire operation, both assets and facilities, and the integration of daily use metrics within our software to help them understand how many people are coming back to work on what days, where are their needs, where are the ebbs and flows of people within the facilities is just one example of the kinds of information, the kind of data we can bring to customers to help them really deal with the challenges in a post-COVID world. This market is growing very fast. It's mid-double-digit growth. It's about a $500 million TAM, and we're well positioned to go after that opportunity here.
It's an incredibly attractive way to elevate the growth rate at Accruent over time. A case study, as you've heard a lot of FBS case studies, I think this is a great one. Our Meridian solution here, our engineering information management system, utilizing, as we've talked, one of the most important metrics in SaaS-based businesses is net dollar retention, and one of the main parts of that equation is churn. Our ability to sort of leverage FBS to drive churn by using problem-solving, by using transactional process improvement kaizens to really get after the initial issues, and then leverage AI and ML to do predictive work around where that churn is occurring is just a great combination of traditional FBS tools and The Fort to really help us understand how to drive net dollar retention over time. We've had incredible improvements in retention.
You see over 1,000 basis points through this process, but we've also increased the visibility and opportunities for communication in our customer success organization to make sure we drive net dollar retention within Accruent, so using the Accruent team's done a great job in leveraging on one of their software businesses. Now they can take those same learnings and apply that across the board to reduce churn and increase net dollar retention, not only across Accruent, but we're taking those same learnings across all four of them. EHS is an incredibly exciting opportunity for us in the workflow, so we'll now talk about our third workflow.
I couldn't be more excited to have Justin come up and talk about what we're really doing in EHS to really show how we're not only demonstrating the power of FBS, but really the thoughtfulness of long-term strategic thinking by really getting into this business several years ago with the acquisition of Industrial Scientific. So with that, Justin.
Thank you, Jim. Good morning, everybody. I'm really excited to be able to tell you about a lot of the work that we've been doing as part of the environmental health and safety platform here at Fortive. The work that we do here is incredibly purposeful. We have a statement around our vision that says we're dedicating our careers to eliminating death on the job by 2050. And when I talk about our vision, I'm typically met with three levels of surprise.
One around the fact that there's 2.8 million people globally touched by death on the job. The second surprise people have is how people are getting killed. About 400,000 people are killed in workplace accidents, but there's 2.4 million people who die each year due to exposures or occupational illnesses. And the third surprise people typically have is that we are not getting better as a society. You can look at virtually any metric around how workplaces are relating to fatalities and fatal illnesses, and the numbers are not going in the right direction. And so as we look at the work that needs to be done to address this massive issue worldwide, it is not just work around keeping people safe. It's work that encompasses things around sustainability, environmental work, risk assessments, even into looking at supply chains and understanding what kind of standards companies are setting in that.
So there's a sense of responsibility and duty we have to create a business that can make the kind of impact that's needed in the world today. I've spent 27 years in the environmental health and safety industry, and I've seen more changes in the last 18 months than I have in probably the first part of my career. And it is a really exciting time because we're seeing a couple of things happen that I think have been long needed. One is that the market is changing. For too long, businesses have thought of EHS as something that was critical, but not really strategic.
And so, as we look at the impact that COVID has had on businesses worldwide and look at the explosion of ESG consciousness around the investor community, it has moved something that was critical but non-strategic to something that is now really a strategic enabler in the business. The second is with that change comes an expectation change on customers. Our customers are no longer willing to tolerate disconnected complex systems. And so that bringing to bear technology and things that make it easy for customers to deal with connectivity and get better insights to drive better outcomes in their business, we've seen that expectation arise within our customer base. And so we bring this vision, we bring the state that our market's in right now, and it's a great starting point.
The EHS platform, if you go back to pre-Industrial Scientific, Fortive had a real drive to get in the EHS market. They saw a tremendous opportunity in the workflows that touched on worker safety, on the need for that to merge in with sustainability and how companies thought about that, and Industrial Scientific, the company that I came to Fortive as part of, had been out for 15 years with a differentiated hardware-software service bundle called iNet. It was an IoT, direct-to-user IoT solution, and was really, in my probably a little bit I have a perspective. I think it was a great start for Fortive, so with that, we got into the field of EHS. I had the chance to address the investor day in 2018, and we had been part of Fortive for less than a year at that point.
And so I talked about the promise of this field. We've been busy since then. And if you look at the M&A that we've done, in 2019, we acquired Intelex. Intelex is a leading enterprise SaaS business serving environmental health, safety, and quality needs for customers around the world with thousands of customers. And it really got us into the ability to touch those workflows, whether from job hazard analyses or observations or risk assessments, the kind of things that are helping drive improvement with our customers. Shortly after that, we acquired Safer. Safer is a chemical release and response monitoring program that tied so well to the work that we do in iNet with connected safety and understanding, taking data from sensors and using it, getting it to cloud, and presenting it in a way that helps our customers very meaningfully. In 2020, we acquired a business called ehsAI.
ehsAI is a company that deconstructs those complex permits and regulations that every customer has to deal with. It's not really just enough to make great workflow software. There's so much pain after that of understanding what a company has to be held to the standards, and so ehsAI takes those and, through machine learning and natural language processing, makes it easy to deconstruct those documents and embed those standards into the workflow software with Intelex, so we're really excited about the capabilities that we've built over the last couple of years, and as we look at the EHS platform today, we have a very large TAM at about $6 billion, solid revenue, high single-digit growth potential, and a very high percentage of recurring revenue in software as part of the portfolio. One of the things that we're also positioned in is to go chase these growth opportunities.
We have tremendous growth opportunities in new geos as parts of the world come to higher standards of what they think of with EHS, and we've seen that as iNet has been able to extend into countries around the world, and Intelex has as well. Intelex opened an operation in EMEA two years ago. We've seen tremendous growth out of that, and this year, we're going to be putting our first team into Singapore to really go after the Asia-Pacific market. The second is in connected sensing. This has been a recurring theme throughout the day that you've heard.
The ability to take data and insights from what's happening on the ground with sensors and turn that into meaningful action is something that we not only see in connected reliability, but also in connected safety and how companies are keeping their people safe and healthy and contributing to better outcomes on environmental performance and things like that. Then finally, going beyond workflow software, one of the things I like to talk about inside of the business is that the company that our customers need does not yet exist, and that's what we are building here.
And so when you look at things like artificial intelligence and machine learning and taking the promise of prediction, pattern recognition, and process automation, and applying that to the work of keeping people safe and healthy, keeping communities clean, and protecting the environment, we are so well poised with the companies we have in the portfolio to really drive outsized growth on that. Coming from Industrial Scientific, I also have a bit of a unique perspective into the power of FBS. And I'm going to give you two examples of that as we're applying it across the EHS platform. The first is what you would think of as a more traditional application of FBS. Part of iNet, as I referenced with Industrial Scientific, is that we have a fleet of instruments that we deploy on rental or deploy as exchange assets.
One of the things that FBS has been tremendously helpful for us with regards to that fleet is through value stream mapping and a series of kaizen events. We've been able to really shorten the time to resupply and increase the utilization of that fleet. This is important from a couple of dimensions. First of all, it's made us a lot more efficient. The kind of performance we've had on gross margin expansion around better utilization of these direct materials and the assets of the company has driven gross margin expansions. It's just incredible to me. Better capital utilization, and it's helping us close business. We're able to be much more responsive than competitors. In some of these instances, the availability of product that day wins the business.
And so all of these things have resulted in just a tremendous win for our company and our customers by applying FBS to that. The second application, which has been a lot of fun the last year and a half with Intelex, is seeing how a pretty sophisticated, commercially sophisticated SaaS company has taken the growth tools of FBS and applied them to managing a pipeline. We talk about the size, the speed, the success, and the shape of a pipeline. And over the last 18 months, we've put FBS at work to really improve commercial outcomes at Intelex. Kirsten talked earlier about the work around digital marketing, and the capabilities that the FBSO has built around digital marketing have just been tremendous. And so we've done a series of Kaizen and Ignite deployments to drive this.
The recent value stream mapping and kaizen events we've had focused on pipeline creation have had incredible results. We've been sustainably above 40% year over year in terms of qualified pipeline creation. In Q1 alone, we were over 50%. We're really excited about how FBS is making an impact. To be able to take those capabilities that we have being part of Fortive, the M&A capital capabilities in this market, and then the toolset with FBS to go out and really chase down this vision. Very exciting time. It's a very exciting market, and I couldn't be happier to be part of this team and with this mandate to grow this. At this point, I want to conclude and maybe wrap up a couple of the major themes that came out as part of the EHS segment. A lot of things you heard.
First of all, was the intrinsic instrumentation presence. We have the ability to take the data from sensors and, as I said before, create great outcomes from that. We have a very strong position to address this much-needed EHS need in the market globally. Third, very strong software position. So that combination of not only the hardware with sensors, but the software positions that we can go drive penetration into these three workflows that are part of the segment. And then lastly, the data assets that we have really have positioned us for great growth in the coming years. So thanks for the opportunity to share that with you. At this point, we are going to be bringing up Barb, Pat, and Jim to have the question and answer session. So I'll bring them up now.
So we appreciate the questions you put online. We're going to have Griffin throw those at us, and we'll look forward to the answers. Just maybe as a reference point, we'll take most of the segment questions in this session, and maybe some of the broader questions for Chuck and I will take in our second Q&A session later. Thanks. First question, Griffin.
Sounds like you guys are very excited about the EHS opportunity. How big do you think that platform can become, and what adjacencies would you look to add?
Yeah, I'll take that, Griffin. Great question. I'm incredibly excited about this, as you just heard. We think this has the opportunity to go well beyond $1 billion in revenue.
If you look at the core opportunities we have in EHS and then some of the immediate adjacencies around ESG, even going into some supply chain contractor management, there's just a massive amount of opportunity here that we're committed to going after.
Ce nsis seems like an acquisition that really complements ASP. Are there other acquisition opportunities like that that we should expect to see within AH S?
Let me take that one. We do love Censis, and it has been a good complement to ASP. I talked a little bit about the vision and where we want to go, where we're trying to specifically get after these operational workflows within a hospital system. Many of those opportunities, of course, are going to combine hardware and software in the way that we look at with ASP and Censis.
We'll continue to go down that path to look for these complementary assets that can help us accelerate what we're trying to do to bring those improvements to workflows.
Precision Technologies is noteworthy for slower growth, lower recurring revenue, and lower margins versus the other two segments. How could you build onto the PT base to make this segment more similar to the other two? Or is PT ultimately a higher ranking candidate for future separation?
I'll take that one, Griffin. The programs that we talked about are growth focuses in PT, in IoT, and in software at Tektronix. We believe are going to help accelerate growth and, over time, change the growth profile of our business there. On the recurring revenue side, I think, as an example, this is already impacting us at Tektronix.
17% of our first quarter software revenue was actually in our new recurring model. So we're seeing that impact now, and we expect that to continue to grow. From a margin standpoint, we see a lot of runway to continue to grow margins. And we're able to do that even in an environment, as an example, at Sensing Tech in 2020. Revenue was down mid-single digits in that business, and we were still able to drive OMX at over 100 basis points. So we have a really strong, and we're very confident we'll continue to drive that margin profile as we go forward.
I think Landauer had high teens operating margin at the time of the acquisition. You highlighted it as an acquisition done right. On the last earnings slide, it said 2.5 times OMX. What was special about Landauer that allowed for that margin expansion?
And can you replicate it at Accruent, which has had a slower start?
Why don't I take the first half? Okay. So Landauer has indeed been a great acquisition. There are a handful of things that have contributed to the OMX. The first thing is, of course, the elimination of public company costs that we didn't need anymore. A lot of work that the team did to apply FBS to drive efficiencies and synergies. Synergies, in particular, with the Fluke Biomedical business. And then I'd say the third big pillar here was pricing discipline. Of course, the business transformed over time, also from being one that was declining when it came to us and one that is now growing. And that drives a considerable amount of OMX as well.
And I think relative to what we can do at Accruent, hopefully what you saw today was a similar model in some respects. Probably didn't have the adjacency or the bolt-on nature that we had with Landauer, with Fluke Biomedical. So maybe we'll take a little bit longer, but I think every bit as much of opportunity, given the software profile of the business, the idea that SaaS will continue to be a growing part of the portfolio. And then finally, just these higher growth initiatives that we talked about during the presentation, which ultimately, with the gross margin profile that you get with software, the variable contribution margin that we'll get over time, I think gives us tremendous margin opportunity at Accruent going forward.
In Q1, ASP equipment grew 40%. When does that result in higher consumable sales? What level of equipment growth is contemplated going forward?
It was a great quarter for ASP, for sure. I mentioned in the prepared remarks that we're really focused on growing the installed base. We think we've dialed in the standard work to be able to have the recipe right to do that around the world. We expect to continue to see that kind of progress in the installed base throughout the year. The consumables piece is interesting because, in some ways, we're already seeing a positive impact for that, but it's muted to some degree because the nature of elective procedures being down. We think the power of that installed base and the consumables and service that it brings along with it will really come into full force once the market has fully recovered. We would anticipate that that would happen sometime in the back half of this year.
Impressive performance at Gordian and acquisitions in general. Can you remind us on the entry multiple and how ROI is tracking right now?
Yeah, I think at Gordian, as we really, I think, demonstrate, and I just can't say enough good things about the work that they've done to bring the Fortive Business System into a data-centric, software-centric business. So I think, first and foremost, up until the pandemic, we had double-digit growth in that business. The pandemic, obviously, was impacted with our ability to get a lot of those on-site assessments done. But I think we're coming out of that now, and we've got a great move going forward. I think our multiple on that was about 17 times. And I think we really believe that we'll get to our return profile in the same timeframe we talked about relative to 10% returns in that four- to five-year timeframe that we originally said.
So, a little bit, we'll get there in a little bit of the back half because of a little bit of COVID. But I think at the end of the day, the business is in great shape. The team is doing great work, and as the market comes back, I think we're well positioned to take advantage of the opportunities. It strikes me that a business like AHS, high recurring sales, stable market, can support a much higher OP margin with mid-50s% gross margins. Why is SG&A over 30% of sales for that segment? Was ASP underinvested during J&J, and you now have to catch up? What is the OP margin improvement opportunity for AHS? First, we agree that there's ample opportunity here. We like where we start with.
The biggest driver right now is going to be ASP, and I talked about that a little bit in the prepared remarks. We're really pleased with the way we've set up the business and the resulting cost structure. In fact, today, gross margins are running slightly ahead of plan, which gives us great confidence. There are, of course, all kinds of efficiencies that we can still drive in the business through the application of FBS. And we've got what I would consider to be a very healthy kaizen funnel in front of us that we'll be able to continue to push years and years ahead. Part of our operating model today is that as we drive these improvements, we're going to plow some of this back into growth.
And so we see selective investments today in things like sales feet on the street, marketing lead generation, and the investment in innovation to drive these workflow improvements.
Does the increased automation of the factory floor pose a risk to Fluke since many Fluke products are used manually?
Well, I think, number one, the fact that we have this installed base of Fluke instruments everywhere in the world is unequivocally one of the great advantages that we have throughout Fortive, quite frankly, and all of our workflow strategies. Combine that with the strength of the brand and the customer relationships that we've had over decades is an incredible asset in which to build upon. I think, specifically to the answer, I think we very much see the connected world on the factory floor as an opportunity. Yes, we do have instruments, but we also have installed sensors today.
eMaint as a software platform is a great platform in which to help maintenance leaders really understand that conversion from troubleshooting to preventive maintenance to predictive maintenance. So we're well positioned. But that doesn't mean we're going it alone. I think partnerships that we've had over decades with certain companies around the world will continue to extend partnerships. We'll continue to do some of the disruptive innovation with our growth accelerator process and work with PSL to also make sure that we're connecting things in ways that really help us bring more technology to answer some of the challenges. But I think at the end of the day, we're well positioned for success. But that isn't a zero-sum game. And I think at the end of the day, there'll be lots of companies that will really participate in the digitization of the factory Industrial 4.0.
We will be one of them.
Can you give us a little more color regarding the recurring software opportunity at Tektronix? Is there an attachment rate goal, and what could that mean for longer-term growth at Tek?
Yeah, so as I mentioned, we're already seeing strong uptake from customers there, 17% of our first quarter software revenue there. And so we believe there's strong opportunity. Today, we have roughly $20 million. Or in 2020, we had roughly $20 million of software revenue at Tektronix. We believe we'll multiply that several times over the next three to five years, so we believe it'll be very impactful, not only from a growth perspective, but from a recurring revenue perspective as well.
In PT, Sensing is fairly high growth, but very competitive industry and marketplace. How is pricing pressure there, and how does Fortive differentiate itself?
It's a competitive marketplace that we play in. We've been successful in driving positive pricing in that business for many years and expect that we'll continue to be able to do that. It's based upon the fact that we do have differentiated offerings. We serve very specific markets with very application-specific products, and it allows us to have pricing power in a market that otherwise is very, very competitive.
How did the separation of Vontier impact the evolution of FBS, if at all, at Fortive? Has the increased focus, narrowed scope of the company allowed Fortive to accelerate FBS-related continuous improvement at the remaining portfolio? And if so, in what way?
I think what you see today is just the breadth of FBS throughout everything we're doing today. I don't think the separation from Vontier really impacted us at all, in part because we had plenty of time to plan for it, set them up as well to make sure that they could take the business system forward in the ways that were appropriate for their business. I think as we think about the business model today, what I think Kirsten and Israel really tried to show was the whole cloth of FBS today and how it's just so appropriate to the businesses we have today. You saw examples in manufacturing in a traditional sense with Justin and with some of the other presentations we had. But I think at the end of the day, what we really see is the commercial aspects and the innovation aspects.
So this coming together of lean already being done in our factories today and increasingly more in our commercial operations as well as our labs, I think really speaks to the breadth of what we have. And then you layer onto that the combination of data analytics and machine learning to really even make FBS even more effective and more efficient. I always think about the times, and we've been doing this a little while, particularly Pat and Barb and I. So much time was spent in problem-solving on the understanding of the problem, the analysis of the problem. About 80% of the time traditionally in problem-solving was done on trying to understand the problem and 20% on the countermeasures. With machine learning and data analytics, we can now convert that time to really 20% really understanding the problem and 80% in countermeasures.
We're at the very start of getting the power and seeing the power of that kind of approach to FBS. I think where FBS stands today is an incredible place, and we couldn't be more excited about where we can take it from here.
Can each of the segments talk about what margins they could achieve over the coming years? Can IOS and AHS be 30% or higher?
I think when I went through the remarks before, I talked about the potential that we see in ASP, which is really the linchpin right now towards driving up the margin profile as we like the margin profile of the segment overall. We'll continue to drive these kinds of improvements.
In a way, this is a page out of the playbook that we've seen and experienced many, many times around leaning out reinvestment, driving growth that drives incremental margins as well.
Yeah. Across the precision tech business, as I mentioned earlier, we are very, very confident in our ability to continue to drive OMX improvement across the business. The power of FBS and the utilization of that across the entire segment, we're very confident will allow us to continue to drive significant expansion of OMX.
Do you want to talk about EHS at all? Yeah, sure. Similar with EHS. We've been able to see great margin expansion in Industrial Scientific core going back to 2017. As we look at Intelex, we've been able to grow that business and drive similar kind of margin expansion. We see growth opportunity in parallel to that with great OMX.
And I think the work in the remaining part of iOS, as well as just what we're all talking about in our segments, is really the continued ability to really take advantage of the earnings power that's in the portfolio. We haven't talked a lot about cash flow. I'm sure Chuck and I will talk about it later this afternoon. But I think at the end of the day, it's not only the earnings power that I think we just talked about, but also the free cash flow capability. And then the reinvestment that comes with that in M&A, I think just really continues to accelerate that flywheel. As we said, now we think 75 basis points now of margin expansion opportunity.
So certainly moving that over the last five years from 30- 50, not too long ago, now to 75, I think really shows you the power of the earnings potential that extends in all parts of our business today.
In AHS, what are your thoughts around trends in a post-COVID world? Some think there will be a move to higher quality consumables versus sterilizing for safety reasons. Is this a concern for ASP, or is it something to consider when looking for acquisitions?
When we consider what's going to happen in the future, certainly some things will go back to normal, and some things, of course, will continue to morph. We expect that we'll continue to see things like telemedicine and the rest take off. The bulk of the workflow that impacts our business today, though, is really tied around procedures.
So far, people haven't figured out how to do those things at home. We'll continue to see hospitals and ASCs be the vast majority of what that is. For sure, as we're looking to build the platform and considering what adjacent markets might look like, we're contemplating and taking into consideration all the macro trends and secular trends in the way that we talked about before as well.
I think we'll leave it there. Thanks so much for your questions. We'll have a second Q&A here in a little bit longer timeframe to take some of those additional questions. Please continue to send them in as you have them. Thanks, team, for the Q&A, and we'll look forward to the continued discussion that we'll have here in a little bit.
I'm going to ask these folks to step off, and I'm going to ask Pete Underwood to join us. Pete is our Senior Vice President and General Counsel, leads our sustainability efforts for the company. We're incredibly excited about the work we've accomplished thus far around our sustainability pillars and our initiatives, but even more excited in the years to come to the work we're going to do to make Fortive have an even bigger impact, positive impact in the world. I'll give it to Pete. Thanks.
Thank you, Jim, and good morning, everyone. As Jim said, my name is Pete Underwood. I am Fortive's Senior Vice President and General Counsel, and I also lead our sustainability program.
I'm very excited this morning to be able to have an opportunity to talk to you for a few moments about our sustainability vision and our strategy and how we intend to get there. When we think about the connection between Fortive and sustainability, it always starts for us with our shared purpose and our values. We often say that our shared purpose imbues us with a spirit of generosity and optimism. It's that spirit of generosity and optimism that forces us to want to understand as much as we can, how can we go build better workplaces for our employees? How can we go build better communities for our families? How can we go build a better planet for all of us? It's our shared purpose, which you've heard so much about today.
It's our shared purpose that pushes us to create innovative and sustainable products and services and technologies for our customers who are out trying to solve some of the world's biggest sustainability challenges. And so when you bring that spirit together with that shared purpose, you come up with our sustainability vision, which is accelerating progress toward a sustainable future for all. Now, to help us achieve this vision, we believe it's really important that we understand what our external constituents, our stakeholders like our investors, as well as our employees think are the most material issues from an ESG perspective for Fortive. So in 2020, we undertook our second materiality analysis, a deep dive into exactly that. We surveyed our external constituents, including investors, and we talked to thousands of our employees around the globe.
What we learned from that analysis is contained on this slide in the five sustainability pillars that now form the basis for our strategy and allow us to focus on the things that we think are the most important to the organization from a sustainability and an ESG perspective. First on this list, we empower diverse and inclusive teams. I'm going to have Stacey Walker is going to be talking about this here in a few moments. So I will go on to the next, which is investing in our community is the second pillar and extremely important. We understand that our connection to our communities is really our license to do business. It's our license to operate.
We know that people are increasingly putting their trust and confidence in corporations like Fortive to help them deal with their own life challenges as opposed to maybe more traditional institutions like government, and so we understand that to attract and retain the best talent, we need to be a force for good in the community. Some of the ways that we do that to help enable positive change. Last year through the Fortive Foundation, we made donations to organizations like Direct Relief and Feeding America and the Equal Justice Initiative and the American Red Cross, but for us, it goes beyond cash donations. We also last year ran our Day of Caring again for the fourth time since our company has been spun off from Danaher.
In that time span from 2016 on, we have accumulated 330,000 hours of employee volunteer time to help over 300 communities in 30 countries across the world. Another one of our pillars is our efforts to protect the planet. To start here, we focused on reducing carbon emissions. In 2019, we announced our goal to reduce our Scope 1 and Scope 2 carbon emissions by 40% on an intensity basis by the year 2030 compared to our baseline of 2017. Aided by our adoption of Intelex's sustainability tool, we've seen tremendous results to date. And so today, I'm announcing that we are accelerating that goal, both the amount and the timeframe. Instead of 40%, we are now shooting for a 50% reduction. And instead of 2030, we're accelerating that target date to 2025.
Using FBS tools like Energy Kaizens, we've identified multiple projects that will assist us in achieving this more aggressive timeframe and target and help us reduce operational costs as we move forward. Our next pillar is working and sourcing responsibly. Working responsibly means a lot of things to us. Most importantly, though, it means safety. All of our operating companies maintain robust EHS programs that are designed to detect, identify, and mitigate potential threats and risks to human health, safety, and well-being, and to make sure that we are keeping our employees out of harm's way, both our employees who are working on-site as well as our employees who are working remotely. Again, aided by the adoption of Intelex, this time their incident management and audit tools, and our proprietary risk score system, we continuously assess our risks at our EHS significant sites around the globe.
Every six months, we calculate our scores, and our goal is to achieve continuous improvement in those scores every time. When it comes to sourcing responsibly, we take seriously the need for us to understand both the labor and the human rights practices of our supply base. We are a company that is committed to doing things the right way, to conducting business responsibly and ethically, and we expect the same thing out of our third-party partners. To ensure compliance with our supplier code of conduct, we maintain a supplier audit program that we seek to continually enhance every year. In 2020, we focused those efforts on completing additional audits of our highest risk suppliers, and I'm happy to say that we had a 100% completion rate in terms of both questionnaires and audits for our 40 top highest risk suppliers identified through our supplier risk program.
Finally, from a sourcing responsibly perspective, we initiated a supplier diversity program this year with an initial goal of spending with diverse suppliers at least 10% more than we've spent in the prior years, with additional and more aggressive goals to follow in the coming years. Lastly, we operate with principle. We maintain a best-in-class ethics and compliance program. We've recently increased our use of data and data analytics through the Fort to help bolster the effectiveness of that program. We have a robust third-party compliance program as well. We do our diligence on literally thousands of suppliers and other vendors, and we offer training and education to our suppliers to make sure that they are equipped with the tools that they need to ensure our compliance.
We've made significant investments in data privacy and data security to ensure the integrity and the safety of our employee data, our business data, and our customer data. And as you heard from Kirsten today and Justin and others, we are continuously finding ways to adapt our FBS tools to reflect the evolving nature of our business. And in this context, we have adapted our FBS tools to help ensure the compliance and privacy aspects of our software development efforts. I mentioned in the introduction how our shared purpose drives us to enable our customers' sustainability efforts through the variety of sustainable products and services that we design and sell. Let me give you just a few quick examples by segment. In our IOS segment, you just heard Justin talking about ISC and ISC's mission to eliminate death in the workplace by the year 2050.
We talked about Intelex, a leading provider of EHS software solutions to help companies manage, track, and therefore reduce employee injuries in the workplace, and also to collect and report on sustainability data like carbon emissions, water usage, and waste generation. And there are many more examples in IOS at places like Fluke, places like Accruent, particularly places like Gordian, as you heard, has the most comprehensive set of construction cost data in the country and is now offering a means to put its customers together with diverse contractors to allow them to start fulfilling some of their own sustainability efforts. In our Precision Technologies segment, Tektronix plays a role in enabling the development of next-generation technologies that are increasingly energy efficient and our sensing technology operating companies provide critical sensors across multiple industries that enable our customers to pursue and optimize their processes and to reduce waste.
Same story in our AHS segment. We talked about ASP, a provider of products and services that exist to keep patients safe from infection in the surgical environment. Similarly, our Landauer business is primarily focused on ensuring the safety of healthcare workers by providing software and hardware services that monitor radiation exposure. And 100% of the revenue derived from our Fluke Biomedical business comes from the sale of products and services that calibrate, test, and analyze medical equipment to assure its optimal efficiency and therefore the safety of the patients that need that equipment. These are just a few examples of the many technologies and solutions that our opcos provide that contribute directly to our ability to accelerate progress towards a sustainable future for all. And now a few words about moving forward.
While we are early days in our journey, we are extremely well positioned to make an increasingly positive impact in the future from a sustainability perspective. I say this for four reasons. First, we have the right business model. We've just spent a lot of time talking about the multiple businesses that we have who are focused on providing products that increase the health and safety of people and planet and the operational efficiency of products around the world. That means that for us, sustainability is not just a goal. It's an organic and inherent part of our business model. Secondly, we've got the right tools.
With our culture of continuous improvement, our bias for action, and FBS and what FBS is able to do for us, we are better positioned to tackle big challenges like the more aggressive carbon emissions goals we talked about today because we know how to do it, and we do it all the time, and that's what FBS does for us. Third, we have the right focus. We're dedicated to understanding those issues that are most material to our stakeholders and most material to Fortive from an ESG perspective, and we are aligned and committed to our sustainability pillars, which means that we have alignment with our stakeholders and we have clarity in our mission, and fourth, we've got the right people. We have a sustainability team at the corporate level and at our opcos that is experienced and driven to help lead this effort for us.
One of the things that we've accomplished in the most recent time is we have expanded our ability to disclose and the types of disclosures that we're providing to our stakeholders. Last year, we adopted the GRI index in our sustainability report. And this year, we will align to the SASB and SASB framework as well with a TCFD alignment to follow in the near future. So to close, Fortive is truly an incredible place to work if you want to make a positive impact in the world. I'm extremely confident in our ability to achieve our sustainability vision because our spirit of generosity and optimism and FBS provide us with the tools to achieve it, and our shared purpose gives us the mandate to go boldly pursue it. And I look forward to tackling an aggressive sustainability agenda on behalf of Fortive in the years to come.
Thank you for your time. And now I will turn it over to Stacey Walker, who's going to talk a little bit about human capital. Stacey.
Thanks, Pete. Thanks so much. I'm delighted to be here with you today to talk a little bit about the culture and the importance of talent and human capital at Fortive as we continue to build towards a very exciting future. From the start of Fortive, we've been working to build a strong culture and talent brand. It's fundamental to the work that we've done in establishing our shared purpose, one that excites our employees around the world and ignites a passion and a deep desire to delight customers and ensure that we're creating environments where people can do their best work. Jim walked through our values earlier this morning, and I thought it was important to really accentuate for us how this really came to life over the course of the last 18 months.
Importantly, I think our teams showed up in brilliant ways, really ensuring that they were focused on delivering on a consistent basis for our customers, but importantly for one another as well, and ensuring that they continue to learn, grow. They were flexible. They were adaptable. They embraced the Fortive Business System in many ways, ensuring that sense of optimism, that sense of spirit in everything that we did to ensure folks were kept safe and healthy throughout 2020 and, of course, into this year as well. In addition to our shared purpose and our values, we've also established a unique set of leader behaviors. That's the Fortive 9. It balances both what has made us successful previously and historically, things like the Fortive Business System, certainly results, building extraordinary teams, and important new capabilities that we're looking to build for the future: customer obsession, innovation, courage.
The Fortive 9 is a proven blueprint for building exceptional talent. It is a blueprint that we use, regardless of where you may sit within the organization, early career to senior leader. It establishes a view to what good modeling coaching looks like at all levels within the organization. It allows for a consistent approach, regardless of how you've come into Fortive, a consistent approach to how we're assessing talent and how we're preparing talent for future opportunities. It's one of the key ways where we can ensure that talent is fungible across the portfolio, not just within operating companies, but across operating companies and even segments. We want to ensure that we are building for the future. We want to ensure that we're enabling people to be in the best position to perform at their best today as well.
It also allows us to invest in consistent ways across the organization in leader development programs and tools and resources that enable continued career growth. This has enabled us to build big leadership programs for the future, leadership summits, enhancing our skills and capabilities with presidents and senior leaders across the organization, accelerated leader experiences for high potential talent, and importantly, in the last 18 months, we've made big investments to digitize the Fortive Business System fundamentals, and what this has really done is bring FBS to our 17,000 employees across the globe in a consistent way that, of course, supports us continuing to get strong results, but notably creating a more inclusive and strong team and environment. It's through this disciplined approach that we're able to consistently develop strong organizations, strong teams, and build for the future.
Along with the Fort, we use a talent and organizational process that enables us to look at the skill sets we have, the skill sets we need to determine where we're going to accelerate internal talent development, and importantly, where we'll go externally to bring in new skill sets. As you might imagine, as we've transformed the portfolio, this has become increasingly more important, but we feel like we found a balance here between ensuring culture continuity and the roles that matter most. You can see here how we think about president, internal fill, and ensuring that we have culture continuity and consistency, but strategically going after external talent where we want to bring in value-add talent that might have different skill sets than we have or experiences that we've had.
Blending these actions, internal and accelerated talent development, and accelerating our view to external talent acquisition is an important part of us building a strong bench for the future. You, of course, had some exposure today to Israel and his team. What a great example of building capability today and for tomorrow, not only as it relates to the things that are happening within the Fort, but of course, the influence that he's having in the operating companies and helping us to think about where we're upskilling and reskilling our teams. Realizing the promise of Fortive, we are all accelerating our work to strengthen our inclusion, diversity, and equity view. It's critical, of course, to our ESG efforts, but more importantly, it's critical to us building a strong and sustainable organization for the future of Fortive.
In so many ways, we long to return to pre-pandemic norms, but I would tell you that we've learned a lot. There's been some tough learnings in 2020, but we've learned a lot in 2020 that's made us stronger and better as we think about the kinds of investments that we want to make around inclusion and equity. We've made some good progress, but it's not nearly what we know we can do and what we'll continue to do and invest in in the future. As we think about living both our shared purpose and our values, it's important that we show up here for our teams at Fortive, but also recognizing that we feel like we can have a bigger and better impact more broadly in the world. We do believe that we're simply stated better together.
And we're also committed to long-term improvements across and throughout our organization and also, importantly, committed to ensuring that we are being transparent about our goals and the improvements that we're making over time. So, in summary, it's an incredibly exciting time to be part of Fortive and to be part of building strong and sustainable organizations and teams for the future and for results today. As we continue to get stronger, as we continue to learn, we'll continue to invest in the Fortive business system and the tools because they are an important part of how we're learning. Similar to our businesses, we use the voice of customer tools, but in this case, we use the voice of employee tools to learn, grow, get better, stronger to create great places to work. And with that in mind, I can't imagine a better place to be.
So, with that, I'll invite Chuck McLaughlin. Chuck.
Thanks, Stacey, and good morning, everyone. I'm Chuck McLaughlin, Chief Financial Officer at Fortive. Over the next few minutes, I'm going to take you through a closer look at the evolution of Fortive's financial portfolio since 2016, where we started, where we're at now, and for some of you, probably the most interesting part is where we're going. Back in 2016, we talked about the Fortive Formula. There's four key parts to the Fortive Formula: core growth, margin expansion, free cash flow that gets deployed towards M&A, and then, of course, FBS is the foundation for everything. A lot's changed over the last five years, all for the good. Our core growth has doubled from low single digit to mid-single digit. Our core margin expansion has improved as well. Back in 2016, we started off talking about 30- 50 basis points.
Now we're talking about going forward at 75 basis points on average per year. Our free cash flow has gone up meaningfully over that period of time to being much stronger at 18% this year and will continue to compound going forward. As I'm sure you noticed today, many examples of the Fortive Business System becoming and being as relevant and impactful today with our software businesses as it's always been with our hardware businesses. The Fortive Business System, like everything else, has been evolving and growing and will continue to do so. When you put this all together, this is a significant engine financially of how we create shareholder value. What we expect over the next five years with this Fortive Formula is double-digit earnings growth and double-digit cash flow.
Let's talk a little bit more and a little bit more detail of some of the critical financial factors. First, let's look at the segments. Today, we've been giving you the beginnings of a deeper understanding of our segments. We've simplified the business. The portfolio is now structured around three strategic segments focused on customer critical workflows. We're starting from a very strong position financially. Each of these businesses has strong margins, strong cash flow, good opportunities for organic growth going forward from the base that we have today. When you couple that with free cash flow that will then turn into M&A, we also have tremendous capacity for each of these segments to accelerate their strategy through the deployment of that M&A with the cash flow that they create. Let me click down a level on a couple of other metrics that are important to talk about.
We've already talked about the top line and how we've evolved that, and we think it'll be mid-single-digit% through the cycle going forward. This year, of course, it'll be elevated at something much higher than that, high single- to double-digit% with our current forecast. What's also improved since five years ago is our recurring revenue. It's gone from high teens% to high 30%. It's a significant improvement, but that's not where we're going to end. We're going to continue to build from there. We have over $600 million of software revenue in the portfolio now. This is also growing at the highest rate of any part of our business in their low double-digit% growth going forward. Our gross margin and our EBITDA margins have both expanded substantially.
With our gross margins in the high 50s%, this is what's enabling the mid-20s% EBITDA margin today and also the accelerated cash flow at 18% of revenue, which is up substantially from before. When you think about the compounding of the top line growth and the margin expansion, these metrics are going to continue to evolve going forward. I'll talk more about that in a minute. But first, let's talk about the recurring revenue. Back in 2016, we talked about a business that we wanted to be less cyclical, higher margins, and higher growth. Recurring revenue is a key metric for understanding cyclicality. At 18%, that was up from where it was 10 years before, but now at 38%, you can see how we've taken a big step forward.
The rate at which our recurring revenue portion of the business, that's roughly 38%, is growing faster than the fleet average, particularly driven by the software businesses that are growing in that low double digit. That organic compounding is really going to continue to lift the mix of our recurring revenue business and make this more of a less cyclical, more durable business going forward. Now, on top of this, of course, we're going to deploy M&A, and we'll continue to look for businesses that have these same profiles of strong recurring revenue. So I would expect, we expect that we'll continue to help us expand going forward. And that's why when we look out on the compounding impacts of these forces coming together, that we should be in the high 40s, maybe even 50% of recurring revenue in the future.
We've done a lot with our margins, both gross margins and EBITDA margins and obviously operating margins, but we're not done yet. We see significant opportunity to continue that, but continued by focusing on FBS and also what we'll do with M&A, focusing on higher margin businesses. We expect our gross margins will go from the high 50s into the 60s in the very near future. We expect our EBITDA to be, that's in the mid-20s today, to continue to grow into the high 20s and maybe beyond given time. Remember, what we're talking about over the next five years is not a destination, but the next checkpoint along the way. As we expand our margins and increase our growth rates, we're generating more and more cash flow.
When you look at what we've done over the last three years on this portion of the business, we've had significant cash flow growth. This is starting to accelerate as our margins expand and we've got a bigger business now. So when we look forward over the next five years, on average, we expect free cash flow to be and earnings to be growing at double digit. We would expect over $1.6 billion in five years' time of free cash flow. Jim talked earlier about the M&A playbook and what we're looking for. What I want to talk about a little bit is the capacity that we have. Over the last few years, we've done a great job about delevering our balance sheet. I think most of you have taken quite a bit of notice of this.
When you couple our delevered balance sheet with the strong free cash flow that we're generating and how it's going to accelerate, we're sitting here today with more capacity, ample capacity to do what we want to do to accelerate our strategy. More capacity than we've ever had in the history of our company when you look forward. So we're in a great position to continue to run our business, but also deploy M&A capital. So let's bring it all together, what we expect over the next five years. Mid-single-digit, on average, core growth rate over the next five years and beyond. Recurring revenue will be in the upper 40s%, maybe as much as 50%. Software revenue should grow to be 20% of a much bigger portfolio, and our margins will continue to expand.
Gross margins up 50%, EBITDA up 50 basis points, excuse me, and EBITDA up 75 basis points per year on average as we move through time. This will give us double-digit free cash flow and earnings growth that should compound and accelerate and increase the cycle as we go forward. We want to step back and think about what we've done. We're very excited about what we've accomplished in the last five years. I'm very proud of what we've done. We've established a great base from which we can move forward, and we're excited about what the next five years will bring. We've got a higher it's a high-growth business that we've built. It's higher than it was before. It's got margins that are expanding and will continue to do so.
And we've got a great team of people that you saw and segments set up ready for us to continue to use the Fortive Business System to work and deploy our cash flow going forward. Thank you for your time today. And with that, I'd like to invite Jim Lico to come up for Q&A.
It's great to be back. Well done, Chuck. We'll certainly take our second set of questions and our second Q&A. Griffin, I'll throw it to you to give us a few questions here.
What excites you most about the road ahead for Fortive over the next five years? How do you rank the key strategic priorities?
I think at the end of the day, you couldn't be anything but excited across a broad range of initiatives that you heard today. We're a more focused, less complex company than we were five years ago with an incredible set of opportunities. It's hard to pick any one that I think at the end of the day is something. I think what we really get excited about every day is the positions we have, the permission we have today, and the permission from customers to do bigger things. I think that is an incredible place in which to grow from. It's an incredible place in which to solve customer problems. You saw on one of the slides that Pat Murphy showed where we want to fall in love with the problem before we fall in love with the solution in our innovation process.
And I think that just speaks to the fact that we have incredible opportunity to really solve bigger customer problems and with that create a bigger, better business over time. So I think that's maybe a more general answer to the question, but I think as you see today, there's so many examples of how we can go do that. It's hard to pick any one that is any less exciting or any more exciting than another one.
How do you guys feel about the challenge of attracting the software and healthcare talent you'll need to deliver on your long-term targets?
I think first, I think we've got great talent. We've been incredibly fortunate. As you heard from Stacey's presentation, for sure, you hear about the great retention that we've had of our team members. You hear how we're building talent through our human capital management programs. We've never been in a better position from a skill set standpoint around what we have in the business. Now, that doesn't mean we're not going to also avail ourselves to being a place that people want to come to from the outside to really bring in new talent, whether that be on the healthcare side or on the software side or, quite frankly, more broadly across the organization. We have historically always had real pride about the development systems that we have within the company to give people bigger and better opportunities.
But by the same token, we always want to be a, particularly on a global basis, want to be a destination for talent. I think we've demonstrated that in the last few years as we brought in some outstanding folks, and I think we'll continue to demonstrate that. So those combinations, I think, give us great confidence that we'll have the team members we'll need to really take advantage of the opportunities that are in front of us.
Here's another in the same vein. It sounds like there are a lot of possible software extensions to your existing products. Do you envision this opportunity to be mostly captured by hiring and growing this internally or via M&A? In other words, can you elaborate on the existing base of software engineering capabilities at Fortive that you could leverage and scale?
Yeah. Well, I mean, I think when we think about our engineering organization today, the majority of our engineering capability today is in software engineering, whether it be in software products like Accruent or Gordian or eMaint or in embedded software that we have within our products like Tektronix. So that's a great base in which to manage. And that's why our product development tools around software have been so mature. So I think first and foremost, we're in an incredible position to continue to add to that capability in the organization to take advantage of the opportunities. Relative to the inside versus outside, I think what we've demonstrated here is really both, whether it be the internal development that we've continued to do. Pat mentioned in his presentation around some of the work Tek is doing. That's an internal group. We're growing that group.
We've built that group over time. But then on the other hand, you hear from Justin about our acquisition of ehsAI, which really gives us a big step forward in data analytics and machine learning to really combine with the efforts that Israel and team are doing organically around building capability in the organization. So I think it's both, and I think we've demonstrated the ability to do that, and I think we'll continue to do those kinds of things to make sure that we continue to have the best technical talent that we need to really meet our growth aspirations.
Relative to the longer-term margin framework, can we confirm that you're now targeting incrementals in the mid-40s? It also suggests that you expect significant SG&A efficiency. Where do you see the opportunity set there as it relates to selling versus G&A?
I'll take that question. I'll take the second part first. We're always going to be looking for efficiencies everywhere across the P&L, but there's probably more in G&A leverage that we would expect. On your question about the incremental margins, I think that as our gross margins go up, I think it's reasonable to expect that our incrementals will go beyond 40%, yes.
The Pioneer Square Labs relationship is fascinating. How do you envision the types of early-stage companies that evolve from this initiative? Any examples would be helpful. And how does Fortive benefit, be it via an acquisition opportunity or IP licensing?
It's a rich question. We're incredibly proud. I think we're right around our one-year anniversary with our relationship with PSL. I think all parties would say that the relationship has been outstanding across the board. We've got a number of investments we're working on. I think our first investment, TeamSense, which is really a software package to connect hourly workers around a facility and more broadly is one of the great applications we have. That team, which is a combination of folks we brought in from the outside, but led by a Fortive employee, I think is a great example of the combination of talent and the combination of innovation ideas that come together.
Relative to monetization, I think that's what sets this relationship apart for many is that we have multiple degrees of freedom, whether that's a spin-in in order to take advantage of that opportunity within the construct of how a Fortive business might be able to take that business to the next level at an accelerated rate. On the other hand, if we think outside funding is necessary in order to keep the business growing and maybe in an earlier stage, we have that opportunity. And obviously, we have the expertise of the PSL team to bring forward and do that in an effective way. So we have multiple degrees of freedom in order to take advantage of the opportunity. And I think as we've seen a number of great ideas, and we've also been a destination to the question about talent. We've been a destination for talent.
We've had lots of folks from outside want to come in and join these efforts as well, so it can also be a bastion for talent acquisition as well over the long term.
How do you measure success at the Fort? It seems at odds with traditional FBS view of decentralization, accountability of the opcos.
Yeah, I think it's exactly the way we've done things in the past. And I'll get to that in a second. But I think first, like any great R&D effort, we will measure returns by either the cost savings that we get from the internal projects or the revenue capability that we generate when we make our commercial operations more effective or for new offerings in software data. So those returns we expect to be good, and that's how we'd measure them. Israel talked about $250 million worth of revenue opportunity as an example. And that's really very focused and very disciplined around projects that we have in the funnel right now and are actively working on.
Relative to maybe the broader question, I think, is just when we really think about the capability and how we bring that into the opcos, this is how we've always started things in our history. We start them in a central way with an effort and a sort of strategy around deploying that back into the operating companies. Kirsten talked about the growth accelerator process that four years ago started as a corporate effort, if you will, and is now being pushed into the operating companies for them to own and for them to drive, and that's our model, and we've done that with FBS tools over the years, digital marketing over a decade ago as an example, and the Fort will be no different.
Israel and the team are building tremendous capability, but they're also doing that in a way that they can get that capability built into our operating companies, into our segments in ways that ultimately meets the accountability model that is so important to our structure and how we win in the marketplace.
Does the $1.6 billion of free cash flow five years out include capital deployment?
The simple answer is yes. Both our earnings growth of double-digit and the Fortive formula, as well as the cash flow, assumes that we're going to be deploying capital going forward.
Over time, what percentage of earnings growth do you think comes organically versus inorganically? If you're growing sales mid-single digits and expanding margin 75 basis points, then that is already high single-digit earnings growth.
I think that probably it's in the 60/40. Certainly, I think you've got the organic portion roughly correct in terms of what 75 basis points does. It really depends on the timing of the M&A. We're confident that we will do it. One year to the next might vary depending on that one rather big factor.
Can you please talk about the funnel of potential software acquisitions? Are you looking more for adjacencies or new platforms at this point? Lastly, is there a mid or longer-term target for percentage of software revenues for Fortive?
I think in both cases, certainly probably both is certainly the answer to the M&A question. We've seen things like eMaint, which have been outstanding acquisitions for us and have really accelerated capability. On the other hand, Accruent, which is really more of a separate business, has got great revenue growth opportunity and puts us into some new markets that are incredibly exciting. We're going to continue to have a funnel that's both broad and deep relative to those opportunities for sure. I think relative to where we think that software revenue will be over the long term, it's certainly going to continue to go up. I think in the near term, in the next several years, it gets to 20%, but it does have some acquisition dependency to it.
But we continue to believe, and our investments would suggest that our hardware and our software capability can be extended through M&A. We always say accelerating strategy. You saw that, I think, throughout the segment presentations today and how we think about the workflows. And I think our overall goal is not a certain software revenue percentage, but rather how we position ourselves in these workflows for long-term success and competitive advantage. So I certainly think it'll go to 20%. I think it'll go above 20%, but I think we don't have a specific target. I think ultimately what we want to make sure we do is continue to create better positions in those markets. We can do that through a variety of ways. And I think what you heard from our segment leaders today is how excited they are about those opportunities.
Can you please share a specific example that shows how you get paid for AI/ML offerings today? How big is this opportunity today, and what do you envision it to be in two to three years?
We talked about the overall $250 million opportunity long-term, and that's in the next three, four years or so. So I think that's the first answer. Relative to what we're seeing today, I would sort of break that into two places. One, I think the question would say, where are we getting revenue from a data perspective? And I'd certainly say almost all of Gordian's revenue is that way. A good chunk of Intelex's revenue is that way. Most of Censis's work today is that way. So the software businesses that we have in that upper tier are getting revenue today from data.
Now, whether or not they're being monetized through machine learning, in some respects, is just another opportunity to be able to gauge the revenue models and to be able to upsell, in many cases, those data opportunities that we have today and now take it and really, from an effectiveness and from a breadth perspective, use AI and machine learning to really give customers deeper solutions. So today, we might give them a pane of glass with metrics and understanding, and that's the data. But in the future, they're going to get answers. They're going to get perspectives. We see that in the example of Fluke Reliability, where they're not only going to understand what's going on, but they're also going to understand what to go do. And that's where we get into that predictive analysis across the portfolio.
We're getting paid to do this in a number of places today. Predictive solutions in EHS is one example. Certainly, in the ehs AI business, we're certainly getting paid today. So we have a number of places where we've already monetized and we're in AI models from a revenue perspective. But certainly, I think what you heard today across every workflow is that we have an AI and machine learning capability that we're building that ultimately will give us much more revenue opportunity in the future.
How much R&D are you spending as a percentage of sales in your software businesses?
Yeah, these answers mid-teens.
Mid-teens.
And I think what you see us is constantly evaluating the opportunities. What you heard today was the rigor and discipline that we're putting into product development and hardware and software businesses, which allows for us to get higher returns from that spend. And we feel really good about the innovation assessment that we do on a regular basis through our operating reviews and things like that. I think we feel really good about how we're spending R&D. We'll always continue to look for opportunities to do that. That's why our variable contribution margin is less than our gross margins, because as we see more and more opportunities, from time to time, we'll take advantage of those and really make sure that we're building the business for the long term.
Given high valuations, how likely is it that Fortive undertakes acquisitions that may struggle to meet the 10% ROIC hurdle by year four or five?
I think number one, we continue to be disciplined about R&D or excuse me, acquisitions and M&A. We have been for five years. We believe in the returns. By the same token, that's not a hard steadfast line. So that 10% return in five years is not a hard steadfast line. Where we see opportunities to bring great businesses and really accelerate our strategy in unique ways, we're going to take those opportunities. And that might mean that we're a little bit lower on the ROIC in five years, but that doesn't mean we don't get to 10%. So we'd be in the high single-digit returns in five years in any case, and the ability to get that to 10 and beyond, I really think is really a part of how we think about it.
But the takeaway I would say is fundamentally, I think we're going to be disciplined. That's why we do a lot of market work, what you heard today, and that $40 billion worth of total addressable market, a range of opportunities for us across both, as we always say, both breadth and depth. And I think with different valuations, and we feel really good about getting to strong returns with our M&A efforts over the next several years.
The organic growth rate of acquisitions undertaken in the last five years is mid-single digits. This is no higher than Fortive's overall organic growth target. Should we expect that future acquisitions will see organic growth above the existing fleet average, or do high valuations prohibit this?
I think there's a couple of things. When you look at how the acquisitions have played so far, they've been mid-single digit, but keep in mind that's with a pandemic. So really, what we would expect, how they're performing is much better than that. I think that you can see us continue to focus on higher growth additions to the portfolio.
Yeah, and I think last year, even in a pandemic, the SaaS businesses grew 10% or better. So I think we've seen good growth on the SaaS side last year despite the pandemic. And we believe, as Chuck said, that we believe in the really strong growth opportunities within those businesses. And it's certainly what you see today in the presentations throughout the segments.
Can you elaborate on white space relative to M&A focus areas?
I don't love to give a perfect definition to this, but I think what you would really direct everyone to is the workflow conversations we had within the segments. In many cases, we don't have complete solutions as we would like. We have great competitive advantage with what we're doing, but we see bolt-ons. We see abilities to fill the basket with technology and innovation. So I would probably say that when you look within the construct of those workflows, you're going to find a lot of white space. One example maybe that we've talked about, but maybe just to bring to life, is Gordian. Gordian has very much been in an under-penetrated market, a lot of white space in that market.
When we did the market work there, the market itself for business today was not as big as we would typically see a market, wasn't $1 billion or $2 billion at the time. But the white space opportunity was enormous. And so I think we're always looking for those opportunities. It's part of the market work we do. And certainly, when we can find those opportunities like a Gordian and several others that we talked about today, it really gives us the confidence that we can continue to grow that business for a long period of time.
How much capital do you hope to deploy to M&A during the next five years?
It depends on the opportunities. The question I can't answer is how much capital do we have to deploy. I think we've said $4-$5 billion in the next three years. You keep with the cash flow that we're talking about and add a couple more years on that, you can see that it's quite a bit.
Regarding M&A, are we likely to see a series of bolt-ons or a big, large acquisition over the next 12 months? How much capital would you be willing to deploy for a large deal?
I'm going to tag team that a little bit. I think at the end of the day, we have a broad set of opportunities. I would never begin to say that one versus the other is going to happen. We said last year that we were more likely to do bolt-ons when the balance sheet was, our debt was a little bit higher, but as Chuck showed, the balance sheet's in such great shape right now. I think we have multiple degrees of freedom to do things, and we're certainly very active.
Yeah, and I think just the timing of which whatever creates value for shareholders and accelerates our strategy, those are things that we're going to consider. You're always got a certain level of constraints, but we're as unconstrained in terms of ability as we've ever been.
Which area is a higher probability for your acquisition activity, software or hardware?
It's the fundamental question we get. Good to see Griffin's not taking just the easy questions today. I think at the end of the day, first and foremost, it will sound like a broken record here. It's about accelerating strategy. I think we have plenty of hardware opportunities within the construct of all three segments to be able to do hardware deals that we love and create tremendous value. That said, when you look at the secular drivers and you kind of understand where the step function growth opportunities are, they're in software, they're in data. And so you would think that we would see real opportunity there. But timing of acquisitions is always tough to predict. And so I think that's why we stay active. It's why we maintain a large funnel.
And I think hopefully really what you get from today is the construct by which those opportunities would become available, why we would do them given the presence in those customer workflows and the importance of the work we're doing today from an organic perspective to set us up to be successful no matter wherever we do a deal.
You've built a lot of new platforms over the past few years, EHS, health, software, etc. How would you characterize the critical mass in these relatively new platforms and your ability to better leverage these platforms for cost synergies and achieving the return hurdles as we think about future deals?
Yeah, I mean, I think what you would see is everyone has a little bit of a different perspective. But you take a connected reliability workflow where we've acquired Prüftechnik, where we've had eMaint, and where we have our largest single business. You would say we had scale today with that customer base on a global basis with Fluke, and now we've really added to that. And that's a good example of, I think, how we've built on a strong presence. I think what we did with ASP in the early days was buy Censis and immediately create a strong presence in that workflow as well. And certainly heard from Barb around those opportunities. EHS, I think, is very unique. It's a very under-penetrated market. I love Justin's words. The company that customers need does not exist today.
And I think that's a great example of where no player of scale sits today. It's a lot of white space opportunity. And certainly, our perspective and how we're building things gives us an incredible opportunity given the natural secular drivers that are out there around ESG, around employee safety, just really gives us great opportunities. And I think the other part of that is the reason why we're doing the organic work that we described today in places like the Fort and our early stage innovation with PSL is to make sure that we're not only thinking about the M&A work of today, but also thinking about the technologies of tomorrow. And doing both of those things in tandem allows for us to envision the future, but build what we need today in both cases.
I think in all of those workflows, we've done tremendous work over the last couple of years to really position ourselves to be differentiated with customers and build the companies to win.
How are SPACs and private equity impacting your ability to find acquisitions?
They're not. So we get this question a lot. And I think, obviously, a lot of SPAC activity that was occurring, I think, slowed a little bit. But I think at the end of the day, when we're looking at a deal, we should be differentiated. We're a strategic partner to an acquisition. And if we do our work right and the deal's right for us, there's no SPAC alternative that, quite frankly, could compete with us.
How is Fortive thinking of setting goals for diversity and leadership, especially with respect to BIPOC? What structures does the company have to ensure it will reach its diversity goal?
I think Stacey did a great job of articulating our progress, acknowledging we've got work to be done for sure. We continue to, I think we made incredible progress over the last several years. I think we'll continue to do that. We've built out the I&D capability within our organization to support the work. We set up our employee and friends resource groups, which are so important to getting work done within our operating company structure. The other thing is we have FBS. We use an FBS tool, one of the most powerful FBS tools, policy deployment. We use around inclusion and diversity to make sure that we've got not only do we have the strategies and the ideas that are great, but that we're enacting those and we're deploying those on a global basis. We're well set up to continue to resource that.
We're continuing to add resources to make sure that we can be an employer of choice for folks around the world of diverse backgrounds, and I'm highly confident we'll continue to make progress. We had our highest employee engagement scores in the history of the company during a pandemic, and I think that just articulates how well-positioned we are with our team today and how our visions and strategies and actions can build the team for tomorrow, and I see the time is up, so with that, I'll say goodbye to Chuck, and we'll conclude our remarks here. Thanks, everybody, for your questions. Appreciate the lack of softballs. We certainly prepared for this, so we appreciate. I just want to say a few things in closing around what you heard today.
And I hope the first thing that you heard was certainly the quality of the conversation and the energy and enthusiasm from a broad range of leaders about the future of Fortive. That's what today's about. It's about giving you a deeper picture. We know that the segments are relatively new to you. And so hopefully today, you got a real sense of the depth of strategy and the quality of execution that we have available to us to really go and execute what we want to do over the next several years. I'm incredibly proud of the work we've done in the last year or so during COVID. We've deployed our organization virtually, and we've accomplished a lot. You heard from Barb the quality of work we did to set up an entire operating, almost $1 billion-dollar operating company.
The work we did to separate and set Vontier off for success. The work we do is meaningful, and the work we do around our really centered around our shared purpose really drives our organization to really be thoughtful about how we continue to engage with customers. You heard from me earlier about how our core values are how we do what we do, metric-driven in the sense that we want to make sure that we continue to make progress around those core values, which are so important to who we are today and who we want to become. We're building a stronger Fortive, and you heard that across a range of not only in a hard-coded way relative to the strategies and actions, but in other ways relative to what we're doing in sustainability and certainly what we're doing around human capital management.
Diversity is incredibly important to how we want to be successful. It's as important to our culture as FBS, and we are making progress in that regard. We're enhancing our talent acquisition capability, and we'll continue to do that over time, and I think we continue to make sure that FBS is where we need it to be in order to make sure we're continuing to be successful. I'll come back to where I started around the platform strategies and how we accelerate value creation. I think what you heard today in summary is how the strength of our positions and the quality of our strategies will help us win in the marketplace in the years to come, and we're building the core capabilities that we need to build to not only be successful for today, but to make sure we're successful in five to 10 years.
It's been said that the digital transformation that's occurred in business today has occurred at a rate and pace we've never seen before. We've heard that years and years of digital transformation have occurred in the last year that really would have taken three, four, five years in years past. And we're well-positioned to take advantage of that. And you heard that not only in the segment presentations, but how our FBS and the Fort are really making sure that we're collectively building the kind of capability that we need to build in order to be successful.
And we'll do that with a culture that is really building our organization for the future, that culture of continuous improvement, that culture that says every day can be better than the day before, that every week can be better than the week before, every month can be better than the month before, and every year can be better than the year before that. And it's the intense, focused discipline that has taken us to where we are today and will propel us forward in new business models and new companies, doing that around the culture that has made us so successful in the past, but also embracing the need for change where needed in order to make sure that we're humble about where we stand today. And that opens our eyes to the future potential of opportunity for the company. And I hope today you heard that.
I hope you're as excited as I am to be with this team every day, a little bit less virtually these days, be with them in person every day to really do what we do every day and to take forward what you heard today. Thanks for your time. We appreciate you spending time with us today. We're always available. Stay safe, and we hope to see you real soon in person. All the best.