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.
Walt Boyes is Control's editor in chief. David Clayton is Senior Analyst and Inderpreet Shokar is an analyst at ARC Advisory Group.
Walt Boyes has more than 30 years of experience in sales, sales management, marketing, and product development in the automation industry both for sensors, devices and control systems for industrial and environmental controls, including Executive Committee and Board experience in several companies. Walt served as Editor-in-Chief of CONTROL and www.controlglobal.com.
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."
A question that keeps coming up is how the Top 50 will stay on top. This may be decided by their ability to improve their marketing and sales technologies to 21st-century levels. Marketing in the 21st century is a moving target. Large automation companies are at a significant disadvantage because by the time they have spent six months developing their online marketing strategy, it's time to crumple it up and start over. The marketing landscape is changing that quickly thanks to the head-spinning pace of innovation from the likes of Google, Facebook, LinkedIn and their ilk.
As if that's not bad enough, automation companies are at a disadvantage for another reason.
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.
The Service Economy
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.
The question is, will they permit their systems to be run inside the cloud, and not just in a virtual server? Some automation vendors say no. Others are working hard to convince their customers to virtualize as the first step toward cloud-hosted services. After all, how much safer is your data if you store it on the server rack in the dirty old closet behind the control room than if you stored it at Apple's $1-billion server farm in Maiden, N.C., where there are redundant power backup, redundant server backup, automatic failover and high-purity HVAC?
The charts pretty much speak for themselves. In the top 10, Siemens, ABB and Emerson all held position
globally, while Schneider and Rockwell changed places. GE moved up significantly, while Mitsubishi and Danaher moved down. A significant move was that Endress+Hauser, which only manufactures field instruments and analyzers, moved into the 12th spot without owning a DCS or PLC, or even a valve manufacturing facility. Its partnership with Rockwell seems to be helping the company greatly.
Every year, we find more companies to add to the list. If you spot one we haven't listed and that should be, let us know. Even though we add companies and subtract the ones that have been acquired, we haven't changed our basic methodology of analysis for the past several years.
Here's what we include in our definition of the 50 largest companies and what we don't.
Amid rumors, Invensys dropped to 16th from 14th, while the azbil group, formerly Yamatake, rose to 22nd from 25th. At the bottom of the Global Top 50, Badger Meter moved from 48th place to the Honorable Mention list.
In North America, the first three on the list are the same as last year, and then things start to move around. Siemens moved to 4th, Danaher moved from 4th to 7th, and Roper moved up two places. Companies move up and down a couple of places every year.
We want to remind our readers that this list is a work in progress every year. Every year, somebody points out a company we have missed, or a vendor suggests better numbers than we have been able to find. We regret any errors, and we very much welcome corrections and additions.
So What's Coming?
We have mentioned cloud computing and virtualization as upcoming trends. These are both sneaking up on automation end users faster than most of us think. The pervasive use of wireless in the plant and the bring your own device (BYOD) movement are poised to seriously change the way we work both in the plant and in the control room. Virtualization aids security, but vendor companies now are working hard to produce the most secure products they possibly can—now that they have woken up to the danger to their controllers and their field devices. In Siemens' new S7-1500 PLC, for example, engineers have embedded an "edge device" firewall of their own making.
There is a great deal of discussion about "one big network" again, and it will be interesting to watch what happens when customers start to insist (you will insist, won't you?) that products from disparate vendors plug and play nicely with each other.
And there are serious questions about the global economy. What's going to happen with China? According to gongkong, the huge Chinese analyst firm, the Chinese economy is growing at a low single-digit rate. Many people expect that the new government in China will have to "prove itself" to the people by increasing spending on infrastructure and modernization of both facilities such as water and wastewater and power systems, and many quasi-private companies will be invested in and encouraged to invest in turn.
According to Lutz Liebers, director of European business for Pepperl+Fuchs, South American hotspots include Argentina, Peru, Bolivia and Chile. He is less sanguine about Brazil, because of its middling poor infrastructure. Russia, he notes, figures largely in his growth regions, and Liebers echoes Satoru Kurosu of Yokogawa in pointing to the United States as one of the highest new growth regions in the world. Yes, the place where it seemed for decades that manufacturing was dead. It appears that the United States is more productive and produces higher quality than everybody believed, and can compete on price with the rest of the world.
As far as the euro crisis is concerned, most people think the EU will somehow figure out how to solve it. Chancellor Merkel is dancing as fast as she can to keep any one of the sick countries of the Eurozone from defaulting, and the smart money in Europe is betting that she can.
So what will happen next? Most people believe that there will be a flat first half in 2013, followed by an uptick. How big, or how long will the uptick in late 2013 and 2014 be? The conventional wisdom from the hot seats of the major automation companies is that we don't really know. That isn't likely to inspire you to great heights of happiness, but that's the way it is. This economy is growing very slowly, with all the economic and political time bombs and land mines affecting it. It is like the dancing bear. The thing about the dancing bear is not how well he dances, but that he dances at all.