Honorable Mention should be given to Krohne, Pyromation, ICS-Triplex, Pavilion Technologies, Racine Federated, Opto 22 and Controlotron (now part of Siemens) who are 51st through 57th,respectively.
The Merger Urge Is Still With Us
Merger activity is still alive and well. Emerson acquired Bristol Babcock in early 2006; Siemens bought Controlotron; and recently, Baldor acquired the Dodge and Reliance businesses from Rockwell.
Of course, this activity brings with it the seeds of new company development. Spinoffs and startups after an acquisition or divestiture are a rich tradition in the automation business, and we expect the trend to continue.
While large fish are gobbling up smaller fish, there won’t be many, if any, large fish going after other large fish. All the leading automation companies are reporting 2006 quarterly numbers in advance of sales for 2005, and many are reporting double-digit growth in both sales and profit dollars, yen or euros—meaning end users won’t have to decide their automation strategies based on a best guess about who might be still in business two to three years hence.
Would You Like Fries With That?
Automation services are now becoming a mainstay for the automation suppliers in the face of declining hardware revenues. Users have realized that even in-house services have a cost—sometimes a premium one—so they are outsourcing more of these service functions to automation suppliers.
Service is the fastest growing segment of the automation market today. The vast pools of engineering expertise that used to exist at major user companies have shrunk to critically low levels. Many automation services required throughout the life cycle of a plant or factory can no longer be performed in-house, providing a boon to service suppliers. Furthermore, those pools of engineering expertise have shrunk in general. So many of the supplier companies who’ve been aggressively pursuing outsourced services business are finding qualified personnel scarce. Salaries are going up fast as companies bid for the smaller numbers.
It’s All a Blur Anyway
The lines between process and discrete automation continue to blur. Rockwell Automation and Siemens, for example, are aggressively targeting the process industries. It is no longer a DCS/PLC game. The value proposition of a completely integrated manufacturing plant is one that has eluded many users in the batch and hybrid industries, particularly among second-tier manufacturers, where process and discrete operations tend to be separate. This has allowed end users to have two or more strategic automation suppliers. Companies whose focus has been traditionally on either process or discrete automation are moving toward the other automation areas as fast as they can. Honeywell, added another 10 years to its agreement with Rockwell to provide discrete products to its customers in 2005. In turn, Rockwell has bought companies such as Datasweep and made alliances with software companies such as OSIsoft to enable it to be a vertical player in the process industries. Groupe Schneider has acquired ProFace, Citect and others for the same reason.
True operational excellence and maximum plant performance cannot be realized without the integration of all aspects of the manufacturing process. Add to this the need to maximize the use of human and capital resources, and you can see why every major automation company and some second- tier players have announced an integrated architecture to get from the plant floor to the executive suite and the boardroom. These schemas offer a complete view of the entire plant with a single, unified platform for engineering and configuration, visualization, control and asset management. Even companies that do not produce hardware, such as Matrikon and Iconics, are developing integrated architectures, hoping to find a niche between the ERP and the MES/plant-floor spaces.
The Cloudy Crystal Ball
Demand-side conditions are still strong and growing, although there are some signs of softening growth in North America. The main thing that suppliers must address in North America is the considerable installed base. That’s why we’re seeing such an emphasis on competitive migration programs right now in the DCS market. All the suppliers are trying to convert the installed base to their platform, and the easier they make that conversion, the greater their chances of success.
Rockwell, Siemens, Schneider and the other PLC-like DCS platform vendors believe they can provide detailed, defined migration paths from traditional DCS to their platforms. Emerson, Honeywell, Yokogawa, ABB and Invensys, the traditional DCS companies, all have developed detailed migration paths to their systems because they are aware of the huge installed base in both North America and Western Europe. End users are understandably reluctant to “rip and replace” control systems to change suppliers or upgrade, and suppliers who insist on “R&R” are finding less-than-warm welcomes.
Tough times on the automotive side are having an impact on the discrete suppliers, who are trying to reduce their dependence on it, pushing the move toward batch and process automation, since the process industries are countercyclical with the automotive industries.
After an absence of several years, suppliers are refocusing on the water, wastewater and utilities spaces. Companies all over North America are replacing, upgrading and repairing infrastructure that was built in the 1970s and 1980s and migrating to new control systems, data historians and entire existing systems (see the article “Water Works” on p. 52 of this issue).
They’ll Come Back!