Top 50 – Who’s on YOUR Playlist?

By Walt Boyes and Larry O’Brien

The economic situation certainly reminds us all of an amusement park rollercoaster ride, maybe Disney’s “Mr. Toad’s Wild Ride.” But as we can see from the growth of the automation industry in 2007, there’s plenty to be happy about. While these numbers are for 2007, the first three months of 2008 continued the mostly double-digit increases in bookings for automation companies.

As always, we have a formula for our ranking of the Top 50 Automation Companies. We have ranked them for sales in North America (Canada, U.S., Mexico) and global sales. In some cases, we’ve had to make some educated assumptions based on annual reports and other published data.

Here’s what we’re including in our definition of the 50 largest companies:

• Process automation systems and related hardware software and services
• PLC business, as well as related hardware, software, services, I/O and bundled HMI
• Other control hardware components, such as third-party I/O, signal conditioners, intrinsic safety barriers, networking hardware, unit controllers and single and multiloop controllers
• Process safety systems
• SCADA systems for oil and gas, water and wastewater treatment, and power distribution
• AC drives
• General motion control systems
• Computer numerical control (CNC) systems
• Process field instrumentation, such as temperature and pressure transmitters, flowmeters, level transmitters and associated switches
• Analytical equipment, including process electrochemical, all types of infrared technology, gas chromatographs for industrial manufacturing and related products
• Control valves, actuators and positioners
• Discrete sensors and actuators
• All kinds of automation-related software, from advanced process control, simulation and optimization to third-party HMI, plant asset management, production management (MES), ERP integration packages from the major automation suppliers and similar software
• All other automation-related services provided by the automation suppliers
• Condition-monitoring equipment and systems
• Ancillary systems, such as burner management systems, QCSs for pulp and paper, etc.

What we’re not including are:

• Pumps and motors
• Robotics
• Material-handling systems
• Supply chain management software
• Building automation systems
• Fire and security systems
• Processing equipment such as mixers, vessels, heaters, etc., as well as process design licenses from suppliers that have engineering divisions
• Electrical equipment, such as low-voltage switchgear, etc.

What’s ahead? Nobody really knows. The discrete industries have taken a significant hit because of the stalled automobile industry. Consumer industries are dependent on buying, and we’re seeing consumer spending slowing down substantially.

“The important thing is not to panic,” says Jim Porter, who recently retired as chief engineer at DuPont. “Stay calm, stay focused on the customer. Panic makes bad long term decisions. Stay focused on core values. Do not lose operating discipline.”

Demand side conditions are still strong in the process industries, with some softening in North America. Tom Archibald, vice president and director of engineering at Rohm and Haas, said at the recent PlantSuccess conference, “We under-invested in the 1990s too. You have to keep beating the evergreen drum. If we have 75% capital in North America, why aren’t we thinking about closing some of those plants? All our growth now is in the rest of the world.”

The suppliers who are heavily invested in the oil and gas and refining industries have seen a resurgence that doesn’t seem to be abating. There are very large backlogs, with some EPC companies showing contracted engineering and design projects out to 2017 or even longer. The recent dip in the price of oil, we believe, is only temporary. The supply/demand curve for petroleum continues to demand an increase in the price of oil. High gasoline prices will be baaaaack!

Hermann Ortega, of Honeywell Specialty Materials, ranked automation third after work process re-engineering and moving toward proactive maintanance in his list of things to do to create operational excellence in his keynote at PlantSuccess in November. Infrastructure, including automation is critical to survival. “You must keep your plants evergreen or you will not sustain 98%+ attainment,” he said. It is up to the end users at the plant level to make the business case for automation projects, but they will be listened to.

Regardless of the economic situation, there are some key technology advancements that will have a significant effect on the business case for automation, including plant asset management (PAM)  software, wireless, fieldbus, and the use of Next Generation Object Technology to make integration easier.

Several companies on the Top 50 list this time, like MTL and Hirschmann,  will not be on it next year because of acquisition. Acquisitions and mergers are an important part of the modern automation and controls landscape. Who you’re buying from today may not be who you’re buying from in five years. It is important for end users to understand how mergers and acquisitions work. We thought that you would like to see the picture from the other side, so we invited Jack Calderon and David Kidd, both of Lincoln International, a prominent mergers and acquisitions firm, to produce a short sidebar on the M&A situation going into 2009. They provide another window into the health of the automation industry, showing that growth continued unabated through the first three quarters of 2008. As they note in the sidebar, “Whether these trends continue through Q4 2008 and into 2009 remains to be seen. However, what we can say confidently is that the controls and automation industry has been a more attractive place for capital for the first three quarters of 2008 compared to the market as a whole.”
So, make sure your seat belt is fastened, and keep your hands and feet inside the car. The next year will be a wild ride, but all the signs point to the automation industry riding it out reasonably well.

See the Top Global Automation Vendors

See Top 50 North American Automation Vendors

To find out more read "Financial Crisis: Effect on the M&A Market and Controls Transactions"