JimPinto.com - Connections for Growth & Success™
No. 143 : 28 January 2004

Keeping an eye on technology futures.
Business commentary - no hidden agendas.
New attitudes, no platitudes.

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Second tier automation companies

My commentary (eNews Jan 20, 2004) on the startling lack of automation companies with revenue in the $100m to $1 billion range, brought a lot of comments and feedback. It seems that many people didn't know this interesting fact. Indeed, in a recent pop-quiz, the question "How many industrial automation companies are there in the US with sales between $100 million and $1 billion?" brought a typical response of 100; some even said 250 or 500.

Lots of people brought up examples of companies (Endress+Hauser, Pepperl+Fuchs and others) which they thought were in the $1 billion sales range. I had mentioned these in my book, "Automation Unplugged" as being well below $1 billion. Some "big" companies cited were actually below $100m. Perhaps their advertising campaigns make them look bigger than they are? If you know of any automation industry companies above $ 1 billion, but not on my top-tier list, please let me know.

In my recent eNews, I had mentioned the German terminal-block manufacturers, Phoenix Contact and Weidmuller, as nearing $ 1 billion annual sales. Apparently, I had lost touch, because their size has actually reduced in recent years. Sales for Weidmuller in 2000 were 412M Euro, 2001 - 377M Euro, 2002 - 349M Euro, and even lower in 2003. If you recall, I mentioned in April 2003 that Weidmuller had exited the electronics business with sale of their US & Canada Divisions to Rockwell. Phoenix Contact, with annual revenue now approximately 700M+ Euro, is now larger than Weidmuller; clearly they have had more success with I/O and electronics.

Interesting sidelight: When I introduced my friend Dick Morley to a Weidmuller executive some years ago, I mentioned that Weidmuller was the leader in "terminal blocks". Dick spontaneously remarked: "Terminal blocks? That means 'end stops'. I think you mean 'connection facilitators'."

Dick was right. The strong growth in I/O networking and wireless connections is causing reduced need for conventional electrical terminations and "terminal blocks" are clearly on a significant downtrend. Weidmuller, Phoenix, Wago and others are correct to make a strategic business shift towards electronics and I/O. Those that make the shift will survive. The others will simply continue to sell buggy whips.

Click JimPinto.com - The shrinking ranks of the automation leaders

Click Book: "Automation Unplugged" - read the Table of contents

Click The Pinto List - Automation Majors financial rankings

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Automation Systems Integrators - growth ceiling

In my discussion about tomorrow's automation leaders, I mentioned "Systems Integrators" who look like they are serving big markets and can grow. But I could find no evidence of many (any?) above about $10-25 million in annual sales. I suggested that this was because of their inability to "scale up" in vastly fragmented markets - specialized requirements, geographically spread out.

It takes good systems talent to design and install a system, to develop the right cost tracking and controls, to expand beyond a home territory without running out of talent or money. Go to the Control System Integrators Association website, and find out how many systems integrators there are beyond $10m. Not too many.

In their search for growth, many major automation suppliers have expanded in to systems integration - to become "total solution providers". In my opinion, this is a mistake. It simply puts them into direct competition with some of their best customers - the local systems integrators. Itís true that the manufacturer has the advantage of additional margins and proprietary product applications knowledge. But the integrator has the advantage of being local and can easily defect to competitors' products.

Vance Van Doren, who compiles the important "Integrator Guide" for Control Engineering, has generated a significant database of Systems Integrators. He mentioned that there were several in the $100 million range. But clearly, the larger companies were simply the automation majors who provide integration services. When Vance narrowed the search to integrators who describe themselves as strictly independent, the distribution was further skewed to the lower revenue ranges.

Here is Vance Van Doren's summary:

Annual Revenues for Companies Listed in
Control Engineering's Automation Integrator Guide
All integrators Independent SIs

Number % Number %
< $1 M 214 22% 48 26%
$1-5 M 429 44% 92 49%
$5-10 M 159 16% 25 13%
$10-25 M 108 11% 15 8%
> $25 M 70 7% 7 4%

Interesting point: Only 3 of the 7 integrators with sales of more than >$25 million are located in the US, which pretty much proves my point about the growth ceiling.

For those interested:
The Integrator Guide is Control Engineering's annual directory of system integrators and contract engineers serving the industrial automation industry. It appears in print every December and is available year-round on the web (see weblink below). Users can register for free then search for integrators that match any combination of these criteria:

  • Annual revenue
  • Industries served
  • Areas served
  • Engineering specialties
  • Product experience
  • Corporate affiliations
  • Professional affiliations
Over 1000 companies are listed in the Integrator Guide, making it the most thorough review available of the system integration market. You can get customized reports and data sets from Vance Van Doren.

Click Contact Vance Van Doren: controleng@msn.com

Click Control Engineering Integrator Website

Click Control Systems Integrators website

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More on American Energy independence

Feedback and interest in the topic of American Energy Independence continues to be strong. Now, in election year, several presidential candidates have made eloquent statements on this subject. Hopefully, this important issue will come steadily to the forefront, to generate the investment it deserves.

Our modern world must politically come to terms with energy needs, global warming and environmental pollution - all related topics. But still, we must move beyond the political and business barriers. Powerful lobbying will seek to stop, or at least delay, any major advances that threaten the present power structure and business flow. hat do YOU think will happen to the oil companies when a cheap alternative fuel is available?

Interesting - if you type the words "American Energy Independence" as a Google query, my friend Ron Bengtson's website appears near the top, right along with several important links and speeches by presidential candidates on the subject. The website has now been re-designed, and has become more focused, while at the same time providing more information and links on many energy alternatives.

The feedback already received makes it evident that there is a polarization of extreme views, similar to politics (liberal vs. conservative). There are those who think that clean, safe nuclear fuel will solve all our problems for the foreseeable future. And others who think "nukes" are a disaster waiting to happen. The pro-environment presentations on AmericanEnergyIndepedence.com will appeal to "moderates".

Clearly, the solutions to energy independence are to be found in technology. The promise of nanotechnology provides a glimpse into the future of the relationship between man, hydrocarbons and the environment.

Our past excesses are catching up on us fast, and the future brings hope with several energy technology alternatives: solar cells, hydrogen storage, clean coal, CO2 recycling, synthetic fuels, and safe nuclear power.

Click American Energy Independence website

Click American Energy Independence - Now More Than Ever

Click Take the Pledge of Allegiance to American Energy Independence

Click Fighting for America's Energy Independence

Please provide your feedback and comments directly to Ron Bengtson.

Click Ron@AmericanEnergyIndependence.com

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Awesome images of the Universe

You don't have to be an astronaut to see extraordinary views of Earth, the planets and the galaxies from your spaceship window. Happily, there are several wonderful websites that allow you to view the awesome sights. I have selected some of my own favorites for your enjoyment. When you have time, stop and take a look....

Click Astronauts views of the home planet

Click Hubble images - Galaxies being born, and passing away

Click Rover images from Mars

Click NASA Planetary PhotoJournal

Click Astronomy Picture of the Day

Earth Lights at Night - A panoramic picture of the Earth taken from the Boeing built Space Station on a perfect night. The lights clearly indicate populated areas.

Click Earth lights at Night

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Michael Moore's book: Dude, where's my country

According to best-selling author and filmmaker Michael Moore, people in the US have been tricked by fat cats, gun nuts, lying politicians. When widespread dissent over war was being suppressed, Moore stood on the Oscar stage in front of a billion people (Academy Award - Bowling for Columbine) and blasted the bogus president and his bogus war. Bogus president - because he believes (like 30-40% of people in the US) that the 2000 presidential election was "stolen". And bogus war - because he thinks (like a clear majority of Americans) that the Iraq war was being planned long before 9/11, and terrorism was just the excuse for occupying Iraq.

This book is full of laughs that combine with clear arguments on tax cuts, corporate welfare, the Patriot Act and Iraq. It presents a broad range of bewildered, enraged, funny and surprisingly upbeat points of view. It is funny, non-intellectual and yet startlingly realistic. To be angered and amused, stimulated and challenged, read this book!

Click Buy Michael Moore's latest book: Dude where's my country

Click Read a chapter from "Dude, where's my country":

Click Michael Moore's website

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David Leske [david.leske@invensys.com] from Australia had these interesting and insightful comments about democracy and voting mechanisms:
    "About 15 years ago I wrote to my local Member of Parliament (here in Australia) suggesting electronic voting using bank ATMs. My premise being, a proven secure system of verifying identity and processing significant transactions should readily be adaptable to electoral purposes. The conflicting requirements of verifiability and anonymity could be addressed in the manner of "e-cash", where you are issued with a unique once-use code number which carries its own proof of authenticity without being traceable. My MP wrote "thanks for your submission" and forgot it - there were no votes to be gained by her in pursuing the matter.

    "I believe that of all the possible political systems, Democracy is both the most inefficient and the least flawed. (a benevolent autocracy or technocracy is more efficient, but hard to keep benevolent.) Effective Democracy requires an informed & involved population, and the goodwill to accept consensus decisions. The greatest threats to democracy are apathy and propaganda. Certainly worth fighting for and improving.

    "In Australia, voting is compulsory, so voter turnout is >95%. I often thought we must be so complacent about democracy that Australians had to be forced to vote! Compulsory means everyone has a say, but most are "sheep" following the crowd with little idea what it means. Voluntary means the most motivated get their say, the apathetic accept whatever others choose, and if things go bad then the silent majority can suddenly become vocal. Probably makes for a healthier system.

    "The problem with voting every few years for one of two major parties, is having no real say on specific policies - just "all or nothing". I like the concept (Switzerland, California) of petitionable referenda to decide issues, but with an e-voting twist: If every MP represents (say) 100,000 people, you could allow individuals e-voting (at any ATM or home PC) with parliament on any item of legislation, with a weighting of say 10,000 individuals equals one MP's vote. Then, controversial decisions could be influenced by the public in proportion to the level of interest.

    "Another concept I had for elections was to vote my choice on each of a list of nominated policies submitted by the candidates. The majority would win on each policy, and the candidate would be elected whose policies best matched the vote, but required to support the winning policies.

    "Something I liked in Student Union elections at Adelaide University was an option "No Candidate" along with candidates for each office. If "No Candidate" won, the office was left vacant for the year. How many government elections would be won by "No Candidate", if offered? More clear & legitimate than unhappy voters deliberately spoiling their ballot paper!"

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Graeme S Philp [gphilp@mtl-inst.com] Managing Director of MTL in the UK wrote about fearless journalism:
    "While we're on the subject, let me also point you in the direction of the Andrew Bond's "Industrial Automation Insider", a monthly news magazine in the UK. For me this has just the right blend of up-to-date and readable industry news coupled with a healthy dose of skepticism. Like your own forum, Bond's "Insider" is compelling reading. And, acknowledging a point you made in eNews, the fact that it does not have to placate advertisers certainly helps.

    "But hey! Hats off to CONTROL magazine (which does have advertisers) for their fearless journalism! The automation industry appreciates people like this, who strip away the BS and tell it as they see it. Thanks for leading the trend!"

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Richard C. Wargo [rwargo@specllc.com] wrote regarding Peter Drucker's latest wisdom:
    "I do not dispute Mr. Drucker's analysis. I think he has a good feel for the true reality (not the false "reality" so often forced upon us by those with political agendas).

    "My questions to Mr. Drucker would be, however, "Have we reached a point, similar to the transformational shift in agriculture during the 20th century where we just don't need as many people in industry and manufacturing? If so, what are all these 'unnecessary' people supposed to do with themselves? How are we to transition successfully to a "leisure-based" economy?"

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