The process control and automation businesses of the Top 50 global and North American suppliers still face some challenging headwinds, and 2016 was a tough year. Traditional automation suppliers are betting on big transformations into the world of the Internet of Things (IoT)—or to the Industrial IoT (IIoT) in the case of automation—to rejuvenate their businesses. ARC Advisory Group also sees an increasing focus on cybersecurity as the critical infrastructure and manufacturing sectors continue to experience high profile cyberattacks.
In addition, “lower for longer” seems to be the mantra when it comes to oil prices. Higher oil prices had driven much of the investment in new projects before the price crash, but the new reality isn’t betting on a fresh increase in prices to save the day. Instead, both end users and suppliers are focused on improving operations, increasing reliability, reducing downtime, and providing a path toward truly predictive analytics.
In a highly transformational period such as the one we find ourselves in now, it’s normal to see a lot of merger and acquisition activity, emergence of new competitors, and a focus on transforming the installed base—all of which we're witnessing today.
Overall, automation suppliers saw their revenues drop by 1.7% during the first quarter of 2017. Depressed oil and commodity prices continued to hamper growth prospects in the worldwide automation market. However, order activity improved somewhat, particularly for discrete automation suppliers. Process automation suppliers continue to suffer most from exposure to low oil prices, though many have been able to stem revenue declines by shifting from major capital projects to maintenance, repair and operations (MRO) activities. Many discrete automation suppliers fared better, thanks to stronger investment activity in the electronics and automotive industries, particularly in Asia.
IIoT gets real with sensors, edge devices, networks
Last year marked the launch of the first wave of supplier solutions to address the emerging IIoT. Just about every major supplier introduced its IIoT platforms last year, and they continue to expand on those solutions and partner “ecosystems.” ABB, Emerson Automation Solutions, Honeywell Process Solutions, Rockwell Automation, Schneider Electric, Siemens, Yokogawa and many other suppliers introduced their IIoT strategies in 2016, and continue to refine and build on them. There are just too many to list here, but most supplies have partnered with Microsoft Azure for their cloud platform, and we're seeing a huge wave of introductions for new, cloud-based Level III manufacturing execution system (MES) applications, ranging from alarm management to simulation and control system engineering, available on the cloud.
It's important to begin by recognizing that Internet-enabled strategies represent and necessitate a departure from the traditionally and vertically siloed “us” vs. “them” (production/OT vs. enterprise/IT) mentality that historically pervaded manufacturing firms. Success with Internet-enabled business improvement requires a true convergence of information technology (IT), operations technology (OT) and engineering technology to enable the access, transparency, security and execution capabilities needed to deliver on its significant promise.