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The U. S. presidential election is over, as of this writing, and by the time you read this, politicians are arguing over whether to jump over the fiscal cliff, or whether there is, actually, a fiscal cliff or just a fiscal curb. We may be headed into another recession—or maybe not.Every major automation company and most of the smaller ones posted large sales increases throughout 2011 and into 2012. But one by one, at the fall user groups meetings, vendor executives warned that, while things looked good now and the pipelines into next year looked full, things didn't look all that rosy from mid-2013 onward.
At the recently concluded Automation Fair, I asked Rockwell Automation CEO Keith Nosbusch if I was right in concluding that everything was going along swimmingly. He replied, "It's like the swan floating on the surface of the pond. Everything looks serene as it glides along, but under the water the feet are churning furiously."
Dr. Mark Douglass, senior analyst with Longbow Research, agrees. U. S. demand for automation products is flat to slightly down, he says. Oil and gas activity appears to be the strongest segment within process automation, with demand driven by oil fields, shale gas and biofuels in Texas, California, Florida, Washington and New York. Specialty chemicals were mixed, he says, and pulp and paper, along with food processing, were generally weaker.
Internationally, Douglass says, demand for new automation products and systems is mixed. In Europe, German demand remains relatively healthy, but his respondents tell him that while demand appears to remain positive, there are signs of cooling off. France is harder to quantify, but here too, demand appears to be slightly positive.
It is when we get to the BRIC countries (Brazil, Russia, India and China) that things get very interesting. China's economy, the mainstay of the recovery from the 2008 recession, appears to be slowing, and some people report negative growth. This is difficult politically as the new government of Xi Jinping takes office. Mr. Xi, it is universally acknowledged, will face challenges no Chinese government has yet faced.
China is no longer the "low cost of manufacturing" leader it once was. Wages, according to Peter Orszag, former director of the Office of Management and Budget, writing in the Bloomberg View, rose from about $1000 in 1978 to almost $5500 in 2011. This is in part due to the same shortages of skilled workers the West has confronted for the past 10 years or more. It is also because sometime during Mr. Xi's term, China will cross the Lewis point, where the economic gains from moving workers from agriculture to manufacturing no longer obtain.
Douglass believes that there are still signs of strength in China's petroleum, chemical and power generation sectors, though.Quoted in Steve Minter's article in IndustryWeek on Nov. 14, 2012, Schneider Electric's president of U. S. operations, Jeff Drees, sees a more positive view. Drees says that the rebound in U.S. manufacturing is real, not just wishful thinking. According to Minter, Drees believes that Schneider will outperform expected U.S. GDP growth of 2% in its hardware offerings and move into software and services.
Satoru Kurosu, executive vice president of Yokogawa Electric, appears to agree with Drees. In his keynote address to the 2012 Yokogawa USA user group meeting in October, Kurosu claimed, "The U.S. is our newest emerging growth market," and added that the reason was the offshore oil and natural gas markets.
Although his company's feet are pumping furiously, Rockwell's Nosbusch declared himself bullish on the Rockwell Process Initiative (PlantPAx and allied products), and told analysts at Automation Fair that the Process Initiative would double its revenues by 2017.
Every major automation vendor announced a new or an expanded service offering in the past year. They've all seen the handwriting on the wall: fewer employees, higher throughput, less well-trained operators and engineers, and they're all lining up to help their customers remain their customers by providing cradle-to-grave service packages for their systems and other products. The mantra seems to be as Emerson Process Management business leader Steve Sonnenberg said in his Emerson Exchange keynote, "We want to be your trusted partner."
The cloud is coming, the cloud is coming! At every user group this year, there was an offering of virtualization software and programs to help clients keep using obsolete software and operating systems. Virtualization also provides a handle on reducing downtime, high availability, automatic failover and other very critical features that automation users want and need.