Winners and Losers
On an industry-by-industry basis, the growth leader is the upstream oil and gas industry, with refining and petrochem close behind. Life sciences, food and beverages, and other regulated industries still strong, but not growing as fast as they were in past years. The electric power industry remains strong, as the price of energy is high. Water and wastewater activity is strong and will remain so, as infrastructure in North America reaches the end of its 30-year design life from the first very large buildout of pollution control plants in the 1970s.
Continued water shortages globally will maintain the strength of this market segment, and all the major automation suppliers have offerings in it.
Rockwell Automation, GE Fanuc, Siemens and other major players in discrete automation have found that the real growth opportunities lie in process, batch and hybrid process automation and have moved strong offerings into this market. Rockwells acquisition of Pavilion Technologies and ICS Triplex indicates how serious this move is for the PLC giant. The traditional DCS suppliers are thus seeing new competition in their backyard.
But the fastest growing segment of the market right now isnt products or systems; it is services. As we mentioned earlier, there is a standing lack of skilled labor, coupled with a wave of retiring baby boomers and a shortage of resources. This is causing end-user companies to seek the help of suppliers to provide more and more of the services that users used to perform in house. The trend toward main automation contractors handling big projects is also increasing.
In North America, the declining U.S. dollar and the increasing value of the Canadian dollar (higher than parity for the first time in thirty years) has raised the specter of a recession, especially with the credit crunch caused by sub-prime lending in the housing market. Many economists, however, believe that the markets have already discounted those effects, and were likely only to see a slowdown, rather than a full-fledged recession, in the late 2008 to early 2009 time frame.
We continue to see merger and acquisition activity, as is demonstrated by the latest entries in our Directory of Lost Companies Wiki. Emersons acquisition of Bristol Babcock and production management software supplier DMI, as well as the Rockwell acquisitions, Honeywells acquisition of Enraf, and smaller acquisitions by companies at every level, indicate that automation companies have money and are not afraid to spend it. ABB is sitting on a pile of cash valued at over $3 billion, and it has indicated that it is looking to make a major acquisition. Rumors abound.
While this sort of discussion tends to make end users nervous, it shouldnt. Companies with lots of cash and a booming market combine to make the current scene a buyers market for end users.
In addition, the increasing connectivity of the entire enterprise and the new, game-changing technology of industrial wireless have the suppliers poised to bring even more functionality to the users, and profit greatly thereby.
Accompanying this article will be a 30-minute podcast presentation by Boyes and OBrien inaugurating the new ARC/Control Process Automation Podcast Series.
Walt Boyes is editor in chief of Control. Larry OBrien is Director of Research at ARC Advisory Group.
Want to read what other voices in the industry had to say about this report?
Check Andrew Bond's report Japanese Players Move Up the Automation Rankings.