Allen Avery is automation research analyst and Larry O'Brien is vice president for research at ARC Advisory Group. Jim Montague is Control's executive editor.
It's good to be big because there are some huge bones that need chewing, long roads to run, and problems to be solved. Just as the largest oil tankers, container ships and offshore platforms are better at smoothing out the ride on stormy seas, the Top 50 global and North American process control and automation suppliers are better at weathering economic upheavals and increasingly volatile markets, and responding to accelerating and multiplying technological innovations.
Though there's always some minor jockeying based on year-to-year sales, most of the Top 50 suppliers ranked by ARC Advisory Group confirm their preeminent status by maintaining their overall positions each year, while still achieving successful and steady revenue sales growth both in North America and worldwide.
In fact, based on their sales revenues in 2013, Vega emerged as the only new member of the Global Top 50 for this year, and Krohne, Pentair and Harting were the three new members of the North American Top 50. Likewise, the collective sales of the Global Top 50 increased by more than 4.8% from almost $102.4 billion in 2011 to more than $107.3 billion in 2013, while sales by the North American Top 50 swelled by more than 15.6% from almost $24.4 billion in 2011 to close to $28.2 billion in 2013. As usual, these kinds of results are easier said than done.
Even when the news is positive—exemplified by ongoing U.S. and global economic recoveries or hydraulic fracturing aiding energy independence—major economic and technological shifts can create challenges and stress levels that it seems only the largest, multi-skilled organizations can handle. Shifting liquid natural gas (LNG) facilities from import to export is a hugely complex job, right? Well, so is ramping up tracking and tracing for pharmaceutical, food and beverage products from raw materials to consumers to meet new regulations and demands; or using big data in mines to direct autonomous drilling and transport vehicles; or fracking without damaging groundwater aquifers and shifting from trucks to railroads to pipelines to transport oil and gas from new sources.
The difficulty of these epic projects is compounded by the fact that refineries, process plants, transportation networks and other infrastructures take years to build, while market conditions and requirements seem to emerge or dry up in months if not weeks. For example, during recent debates on the Keystone XL pipeline, U.S. gas prices dropped back to averages of $3 per gallon from the $4 per gallon that made scrubbing Canada's oil sands profitable, so how long will the pipeline extension and all those plays and supporting controls in Alberta remain economically viable? How can necessarily slow-to-deploy process applications hope to keep up with fast-changing opportunities and markets?
Size in the form of tens of thousands of employees and partners in dozens of not a hundred countries can help, of course, but only if they're all well-connected and nimble enough to use their early intelligence effectively. Today, this knowledge is all under the cloud-enabled, big data, Internet of Things (IoT) and smart-industry umbrella, and is another skill at which many of the Top 50 excel. However, even when they find a capability they can't develop organically, they usually have the resources to acquire the know-how and people they need to plug the holes in any niches in they require.
Views from the Top
How do you get nimble? Hire a good leader. The ability to bring resources and people together to solve users' problems and partner with them to complete big projects is what the Top 50's president and CEOs do best, and they're looking at North America and IoT too.
There's strife around the world, but the North American market has been a stabilizing force, according to Steve Sonnenberg, executive vice president and president of Emerson Process Management. "In fact, it's become the new emerging market," said Sonnenberg at Emerson Global User Exchange 2014 in October. "Our orders for the first three quarters were up 6%, and North America was more than double that."
These results were fueled by oil and gas projects in North America, with international activity recovering in Asia, Latin America, the Middle East and Africa. In the past year, Emerson has added more than 3,500 staff, and acquired four companies, including Management Resources Group (MRG) for reliability solutions, Virgo for on/off valves, Enardo for safety and environmental equipment for tanks and terminals, and APM for level instrumentation for bulk solids.
Vimal Kapur, new president of Honeywell Process Solutions (HPS), also emphasized the emergence of natural gas in North America. "China and the Americas continue to lead in capital spending, but Europe, Middle East and Asia (EMEA) and Asia Pacific are recovering as well," said Kapur at Honeywell Users Group Americas 2014 this past June. "The oil and gas industries in the Americas continue to dominate capital spending in the region, especially as they migrate to new natural gas sources. These changes have been having a profound impact for the past two or three years, and this trend is going to continue for several more years.
"Fortunately, HPS is in a unique position to integrate and serve users all along the oil and gas value chain from upstream to midstream to downstream with new SCADA, RTU, DCS, safety, advanced and field instrumentation solutions. The other challenge is that large capital expenditure projects are growing more complex, expensive and time-consuming. So instead of us coming in and adding automation and control at the end of a project before start-up, it's becoming increasingly critical for us to execute automation and get it out of the critical path of these projects."
Merge Today, Sales Tomorrow
While trends like economic recoveries and slowdowns, conversions for fracking and other shifts are ongoing, several recent acquisitions, mergers and divestitures by the Top 50 will help them, but won't affect their positions on the lists until 2014's financial results are compiled next year. However, even as these moves give them new capabilities to serve their customers, they can still be drawn into some unfamiliar process control territories.
Most notably, Schneider Electric completed its purchase of Invensys earlier this year, and has spent much of 2014 integrating Invensys' many divisions and solutions, such as Foxboro, Triconex and Wonderware, into its existing portfolio. This acquisition and merger is most likely to reshuffle the Top 50's traditional order because it combines two of the list's longtime members.
Likewise, Emerson's acquisition of MRG this past spring is expected to help it reduce downtime, enhance safety and improve compliance, mostly in upstream oil and gas applications. This investment leverages Emerson's "pervasive sensing" strategy, and complements its existing lifecycle services offerings.
In addition, Rockwell Automation recently entered the wireless sensor arena by buying vMonitor, which has the world’s largest installed base of wireless, wellhead monitoring systems for natural and artificially lifted wells with more than 6,000 well sites at major oil and gas facilities worldwide.
Meanwhile, ABB reports it's selling its huge Full Service business to Nordic Capital. This division provides fully outsourced, industrial maintenance services. It was developed as an adjacent business to ABB’s lifecycle service business, and has become a successful, standalone unit. ABB reports it's divesting Full Service because of limited synergies with its core portfolio.
Also, Siemens agreed in October to buy Dresser-Rand Group for about $7.6 billion in cash, and close the sale nest summer. Siemens reports that it will run Dresser-Rand as its oil and gas business, enabling it to become the leading, rotating equipment and process system integrator for the oil and gas industry.
Finally, General Electric secured approval in June of its $17-billion takeover of Alstom's gas and steam turbine business. The deal will reportedly allow GE to develop joint ventures in the steam turbine, renewable energy, electricity transmission sectors.
To help them and their customers navigate these new waters, most Top 50 members plan to use IoT, cloud-based services, and reliability and predictive maintenance tools and software. The major process control suppliers are already one-stop shops for most products, so these latest tools will allow many of their existing solutions to work together more effectively, securely, safely and profitably.
To develop the Top 50 lists for North American and worldwide, the analysts at ARC Advisory Group use publicly available financial data wherever possible from the leading firms supplying process control and automation technologies. Even though firms with increased sales are added and those with decreased sales relative to the others or those that have been acquired are subtracted, the Top 50's basic analysis methodology hasn't changed for several years. When these big companies have businesses unrelated to automation and/or don't provide details of the extent of their process control activity, ARC uses other publicly available information and its database to calculate a meaningful determination of the scope of their automation business. This scope is based on ARC's definition of which technologies constitute control and automation and which do not. If anything, ARC's scope and focus on revenue generated by process control and automation activities has only grown tighter.
Technologies included in the Top 50 definition:
- Process automation systems and related hardware software and services;
- PLC and 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 multi-loop controllers;
- Process safety systems;
- SCADA systems for oil and gas, water and wastewater, and power distribution;
- AC drives;
- 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 Other automation-related services provided by automation suppliers;
- Condition-monitoring equipment and systems;
- Ancillary systems, such as burner management systems, quality control systems for pulp and paper, etc.
Technologies not included in the Top 50 definition:
- Pumps and motors
- Material-handling systems
- Supply chain management software
- Building automation systems
- Fire and security systems
- Processing equipment such as mixers, vessels, heaters, as well as process design licenses from suppliers that have engineering divisions
- Electrical equipment, such as low-voltage switchgear, etc.