Consultancy flags rapid shift toward software, data and AI-driven industrial value creation
The extent to which AI is disrupting business as normal across multiple industries is highlighted by a new report focusing on one of the biggest sectors – manufacturing.
A growing share of industrial automation revenue will be powered by AI by the end of the decade, as the sector undergoes a fundamental economic realignment, according to the new research from Bain & Company, underscoring how quickly value is migrating away from traditional hardware-based systems toward software, data, and intelligent technologies.
The shift marks a major departure from the sector’s long-standing structure, where control systems historically dominated both performance and profitability. Instead, Bain describes an emerging “hourglass” model, where value increasingly concentrates at two ends of the stack—advanced software and data platforms on one side, and smart field devices on the other.
Under this model, more than 80% of industry profit pools are expected to sit in these high-value layers, providing a steer for investors towards those that are aligned with the opportunity.
AI-enabled software and data capabilities alone are projected to represent over half of total profits, while connected devices could contribute an additional 25% to 30%. Meanwhile, the once-central control layer is expected to face mounting pressure on margins.
Bain estimates that artificial intelligence will unlock nearly $70 billion in new market value over the next five years, representing roughly 22% growth for the industrial automation sector.
“What’s changing is not just the technology, but where economic value is created in the market,” said Adrien Bron, leader of Bain & Company’s Advanced Manufacturing & Services practice in the DACH region. “As software, data and smart devices take on a larger role, industrial automation companies will need to rethink how they maintain and continuously enhance differentiation, where they find sources of scale and leadership, and where they can capture value over time.”
The report underscores a broader transformation already underway across manufacturing and industrial sectors, where intelligence-driven systems are replacing traditional automation approaches. Rather than simply controlling machinery, next-generation platforms are designed to integrate data, predict outcomes, and optimize operations in real time.
For firms operating in the space, the implications are significant. Legacy advantages tied to hardware and control infrastructure are eroding, while competitive differentiation is increasingly tied to digital capabilities, ecosystem positioning, and the ability to scale AI-driven solutions.
As the industry pivots toward this intelligence-centric model, companies that fail to adapt risk being squeezed out of the most profitable segments of the value chain—while those that successfully reposition could capture outsized gains in the years ahead.
