All the wells, mines, platforms, refineries, plants, columns, pipelines, sensors, analyzers and instruments are still chugging away as usual. Everything else is changing. Everything, that is, related to data acquisition, monitoring, process control, analytics, modeling, simulation and optimization, which are quickly moving into software, Ethernet-based, Internet protocol (IP) networking, and server-based data processing.
This storm surge of digital transformation, driven by the Industrial Internet of Things (IIoT), cloud computing, advanced analytics and the push to managed services, continues to transform how the Top 50 biggest worldwide and North American automation suppliers do business. We’re witnessing several overarching trends in the automation marketplace:
- Digital transformation is accelerating the push of major automation suppliers into the software business, with corresponding IoT and IIoT platforms, analytics applications, cloud technologies, and advanced engineering software focused on creating digital models of plants, products, facilities, buildings that can all dynamically change .
- Bundling of IIoT-enabled software and hardware to create managed services and software as a service (SaaS) typically offered as annual subscriptions. These managed services are increasingly becoming outcome-based, where users pay based on desired outcomes, instead of paying for just the service. Desired outcomes can include continuous hours of control availability or cost savings related to predictive maintenance of field instrumentation.
- Transformation of traditional control and automation system components, architecture, and engineering processes by technologies like virtualization, edge computing, advanced networking technologies, and adoption of industry initiatives such as the Open Process Automation Forum (OPAF) and NAMUR Open Architecture (NOA).
- Looming over all of the above issues are concerns about cybersecurity and health, safety and environment (HSE). Large automation suppliers are bolstering their cybersecurity capabilities as threats continue to increase in scope and impact, including recent attacks on highly specialized systems such as process safety systems. Many startup companies have emerged and continue to enter the ICS cybersecurity marketplace.
All about the data
The software business has been growing and expanding for most automation and control suppliers during the past two decades, but the past couple of years have really accelerated this trend. Their evolution into software companies is showing that intellectual property (IP) is really in the data rather than in assets. Suppliers and other companies must continue to become more software-focused if they wish to survive in the digital new environment. Hopefully, the software pulls in high-margin hardware business, too, but the software portfolio is expanding.
Today, every major supplier has an IIoT initiative, including their own cloud services, with sweeping digitalization initiatives that cross the breadth of their software offerings. All suppliers are pursuing their own IIoT and digitalization strategies and solutions. ABB has ABB Ability; Emerson has Plantweb; Honeywell has Connected Plant; Rockwell Automation has Connected Enterprise; Schneider Electric has EcoStruxure; Siemens has MindSphere; and the list goes on.
Top 50 N. American Automation Vendors2017 N. American revenue (US$ millions)
Top 50 Global Automation Vendors2017 Worldwide Revenue (US$ millions)
|azbil Group (Yamatake)
|Thermo Fisher Scientific
In addition, there's an increasing push by many suppliers into engineering and simulation to create digital twins of plants or facilities that dynamically changes as plant conditions change. Suppliers are continuing to focus on new system designs that reduce the volume and importance of hardware, bringing more aspects of the system into the digital universe, such as virtual and flexible forms of I/O and cloud-based system engineering and design capabilities.
Transformation to annuity business
Most of the major suppliers are talking about a future where various aspects of automation are purchased by the end user as annual subscriptions. This kind of annuity business has already transformed the overall software marketplace, where business-level and desktop applications are purchased as part of an annual subscription service featuring automatic updates, security patches, etc. The transformation of the automation system business into an annuity format will mean much more cutthroat competition among automation suppliers. In many cases, suppliers are slashing margins on new systems installations in the hopes of capturing this annuity.
Some position shifts, same players
While the automation marketplace continues to experience significant technological change, the overall positions of the leading suppliers remains relatively stable. Traditional large suppliers such as Siemens, ABB, Emerson, Schneider Electric, Honeywell, Rockwell Automation and Yokogawa continue to dominate the landscape of automation, even if fundamental aspects of the technology underlying their systems are changing significantly. The common denominator is that all of these companies are committed to this business; they see manufacturing as a huge opportunity.
Smaller, independents thrive; startups pop up
While the same suppliers still occupy the leading positions, mid-sized suppliers are continuing to do a good business. Companies like Roper Technologies, National Instruments, Pepperl+Fuchs, Endress+Hauser, Ametek, PAS and Phoenix Contact continue to grow and expand their businesses. Meanwhile, a whole new crop of smaller startup companies is being born that are focusing on analytics and ICS cybersecurity. There are literally hundreds of these companies emerging, but some key names include Bayshore Networks, Dragos, Bedrock, Nozomi Networks, Seeq, Owl Cyber Defense and Inductive Automation.
Many large suppliers are reforming, reorganizing and even “deconglomerating” in some cases. Even as they split up, however, they're holding onto their automation businesses because they're committed to their markets. For example, Siemens will be reforming into three primary business units and combining its Digital Factory and Process Industries and Drives divisions into one unified business. Honeywell has announced that it's taking the Honeywell Homes product portfolio and ADI distribution business, and creating a spinoff business called Resideo, while Honeywell itself intensifies its focus on its PMT business, which is where its automation solutions reside. And, Schneider Electric completed its “reverse acquisition” of AVEVA in 2018. As part of the agreement, AVEVA merged with Schneider Electric's industrial software business to expand its portfolio of software products and services. Schneider Electric retains 60% ownership of the combined portfolio.
Process industries grow again
So far in 2018, automation suppliers continue to see robust revenue growth. Acquisitions and favorable currency exchange rates aided the revenue growth of many suppliers, but many majors are reporting strong organic growth, too. The discrete automation sector added considerably to gains, with healthy activity in the electronics and automotive industries. After a period of doldrums following depressed oil prices, the oil and gas sector and other major process industries are seeing more investment activity. While most continuous process industries saw stable growth prior to 2015, the drastic drop in oil prices changed everything. Oil prices now appear to be stabilizing at around $60-$80 per barrel, which means many postponed projects are being resurrected or reconsidered.
Beyond combining its Digital Factory and Process Industries and Drives businesses, Siemens is further demonstrating its commitment to the automation and manufacturing sectors by embedding its MindSphere cloud-based, open operating system for IIoT in its strategy and solutions portfolio. MindSphere focuses on improving plant efficiency by recording and analyzing large volumes of production data. Siemens is consolidating software functions and providing MindSphere support for modular automation using OPC UA and module type packaging (MTP).
Siemens is also emphasizing a digital twin of entire value chains, and letting users virtualize entire lifecycles. This modeling produces efficiencies in development, operations and maintenance. Siemens no longer focuses just on one piece of equipment, but on larger digital twins of plants or operating units. Bentley Systems and Siemens recently briefed ARC Advisory Group about their vision for an open, cloud-based solution for engineering and operations. The cloud solution—a portal accessed through a browser—will federate data sources, provide functionalities, and facilitate management of digital engineering models of an asset throughout its lifecycle. Siemens and Bentley's alliance plans to generate business value by accelerating digitalization to advance infrastructure project delivery and asset performance in complementary business areas.
Likewise, Siemens’ acquisition of Mendix this year and its entry into the IoT integration services business lets it expand its digitalization portfolio. A leader in the market for so-called "low-code application development platforms,” Mendix lets programmers develop and deploy apps as much as 10 times faster. Siemens expects this technology will let MindSphere customers develop apps faster and at lower cost. The transaction is valued at about €600 million and is expected to close in 2019.
News of Emerson Automation Solutions' bid to acquire Pentair created quite a stir when it was announced in 2016, as the acquisition pairs the leading global supplier of control valves with the leading global supplier of isolation and pressure relief valves. Valued at $3.1 billion, the Pentair acquisition was huge for Emerson, but the company has made other significant acquisitions since then. In 2017, Emerson acquired GeoFields, a leading global supplier of software and implementation services for pipeline integrity data collection, management and risk analysis for the oil and gas industry. Also in 2017, Emerson purchased oil and gas software provider Paradigm for $510 million. And in 2018, Emerson announced its acquisition of alarm management software supplier ProSys, as well as its recent acquisition of GE’s Intelligent Platforms business. GE Intelligent Platforms is a $210 million business consisting of PLCs and PACs, industrial PCs, I/O and related hardware/software, as well as machine control technology.
Emerson's Plantweb Digital Ecosystem, delivered via Microsoft Azure, plays to its premier position at the sensor/actuator level of the IIoT stack. Hardware innovation to ease the complexity of installing, commissioning and connecting devices wirelessly is augmented with analytics and applications to provide deeper insight into asset and plant performance to empower digital workers.
The company is also taking an innovative approach to delivering its domain expertise. Plantweb Insight applications target asset classes to identify and resolve issues. Plantweb Advisor Suite leverages the open data infrastructure of OSIsoft PI to monitor plant asset health, plant performance and energy consumption. Connected Services lets Emerson deliver its expertise via the software as a service (SaaS) model.
In late 2016, ABB released its integrated industrial Internet platform, ABB Ability, with cloud infrastructure based on ABB’s expertise in technologies, industries and digital. The platform enables users to securely integrate and aggregate data, combine with wider industry data, apply big data and predictive analytics, and generate insights to help them drive performance and productivity improvements. Likewise, ABB’s new Select I/O offering offers intelligent, single-point I/O for process automation systems that reduces footprint and time-to-project completion, while its Intelligent Projects approach eliminates interdependencies between the Select I/O hardware from the control system software. This allows a system to be developed in a virtual environment, where it can be merged with the physical system after the full system is developed and any late changes are already made.
In 2017, ABB also completed its acquisition of Austrian factory automation supplier B&R. While these added revenues aren't reflected in the 2017 numbers, they'll have an impact on the 2018 report because B&R added approximately $600 million in additional revenue. Although electrification is not part of the scope of the Control Top 50, ABB continues to make investments in this sector with the recent acquisition of the GE Industrial Solutions (GEIS) global electrification solutions business in June 2018.
Update: Rockwell Automation
Rockwell Automation continues to staunchly maintain its independence despite acquisition attempts by other large automation suppliers such as Emerson, which bid almost $28 billion for the company last year. It also recently bolstered its independence with a large stock buyback program worth $1.5 billion.
The common denominator for Rockwell Automation continues to be its Connected Enterprise program that integrates control and information in an open, secure and scalable environment, while leveraging its application expertise with tools, such as FactoryTalk Analytics, an open-architecture platform that extends to a full ecosystem of IIoT data sources.
Rockwell Automation and PTC recently formed a partnership in which Rockwell Automation is investing $1 billion in PTC and CEO Blake Moret is joining PTC’s board of directors. The partnership will include technical collaborations and joint global go-to-market initiatives. They also agreed to align their respective smart factory technologies and combine PTC’s ThingWorx IoT, Kepware industrial connectivity and Vuforia augmented reality (AR) platforms with Rockwell Automation's FactoryTalk MES, FactoryTalk Analytics and Industrial Automation platforms.
Update: Schneider Electric
With the reverse takeover of AVEVA, Schneider Electric continues its focus on software, IIoT and solutions for digitalization through its EcoStruxure platform. Schneider Electric reports that joining its software with AVEVA gives it the “Power of Two,” a hardware company with strong discrete, process and building automation and data centers combined with AVEVA's software.
With a technology stack that includes connected products, edge control and applications, analytics and services, EcoStruxure for Industry is a portfolio of energy, automation and software in packaged solutions. It lets users leverage opportunities created by digitalization, and provides an integrated framework to solve complex industrial operations, further optimize assets and adapt to changing business conditions.
The newer products will include software that enables plug-and-play with the EcoStruxure platform. In general, it appears that Schneider Electric understands the value these product lines bring and will continue to invest to keep them current and contributing to the selling proposition of the company’s EcoStruxure platform and AVEVA software offering, respectively.
Honeywell continues to demonstrate a strong commitment to its installed base. Because the digital transformation of the process industries is shifting competitive advantage away from physical machinery and toward information, Honeywell is leveraging its Connected Plant program to integrate processes, assets and people to help users digitalize their legacy hardware to software, especially its large base of TDC3000 DCS users.
Honeywell recently introduced a product called ELCN that combines emulation and virtualization to replace its 1980s-era Honeywell Local Control Network (LCN). ELCN enables legacy application software and management interfaces to use modern execution platforms, including on-premise cloud systems. ELCN is a classic lift-and-shift solution to obsolete hardware. In the view of large end users, ELCN has “reset the odometer” for the obsolescence of legacy systems. In other words, TDC 3000 users now have an option for moving to much more modern hardware, while maintaining their existing, albeit very old, configuration and management software. ELCN also resolves the problem of scarce hardware replacements for old LCN devices.
In addition, a year after acquiring secure remote access solution provider, Next-Nine, Honeywell Process Solutions now has an expanded suite of cybersecurity offerings. Just as Honeywell is moving to outcome-based solutions and services with its Assurance 360 program for operations, its also looking at providing complete managed cybersecurity services under the CyberVantage brand.
Update: GE Digital
GE’s Predix Platform is described as a distributed edge-to-cloud-and-back application development platform for the industrial Internet. It includes software and embedded hardware. Separately, GE also offers a range of programs and services to help OT and IT leaders identify and engage in digital transformation.
GE Digital built and uses Predix in its own operations, improving its ability to use GE as a test bed and demonstrate proof of outcomes. Many solutions have been developed because of this internal full-production environment. An example is the use of Predix Asset Performance Management (APM) apps in GE’s monitoring and diagnostics center. The center tracks data from 1 million sensors embedded in 5,000 assets to across more than 900 power plants globally.
GE Digital and Microsoft are bringing together the industrial platform services of Predix with the enterprise-proven services of Microsoft Azure. This partnership extends the accessibility of Predix to Microsoft’s global cloud footprint, including data sovereignty, hybrid capabilities and developer and data services, enabling customers to better capture intelligence from their industrial assets.
Yokogawa’s vigorous acquisition activities in 2016 included industrial software technology and consulting expertise in the forms of Industrial Evolution (cloud-based, plant data sharing-as-a-service), KBC Advanced Technologies (oil and gas consulting services and process simulation technologies), and Soteica Visual MESA (energy management and optimization solutions). Both Industrial Evolution, now known as Industrial Knowledge, and Soteica Visual Mesa have been integrated into KBC Advanced Technologies which, while firmly a part of Yokogawa, continues to operate under the KBC brand.
Yokogawa also recently unveiled its Synaptic Business Automation concept, which is the successor to the VigilantPlant program launched several years ago. With Synaptic Business Automation, Yokogawa is widening its scope from plant process automation to business process automation and aiming to create sustainable value for customers.
By combining Yokogawa’s expertise in OT, plant operations and management, industrial applications, IT, consulting and services, Synaptic Business Automation seeks to enable customers to achieve an ideal business state. Yokogawa defines this as a state in which the synthesis of data, systems, organizations, knowledge and supply chains add value and strengthen competitiveness.
Larry O'Brien is ARC Advisory Group's vice president for research; Craig Resnick is ARC's vice president, consulting; and Allen Avery is ARC's automation research analyst.