Global market shifts
- Significant manufacturing shift to China
- Emerson - systems integration & complete project management for Far East
- Development jobs now moving
- GE, Honeywell, IBM, Rockwell others have shifted R&D, software dev. to India
- Other countries competing fiercely
Global supply chain
- Proposals & quotes
- Multiple locations for large jobs
- System design & documentation
- Manufacture panels and parts
- Installation - Customer site
- Services - Customer site
Products vs systems - Traditional split
- OEM equipment
- Maintenance & upgrade
US Automation Systems Integrators - Summary of US SI analysis
- 1000 companies
- 80% major suppliers’ SI services
- 20% "independent"
- 50% $ 1-5 million annual revenue
- Only 15 “independents” $10-25 million
- Only 7 over $25 million
- Only 3 of the 7 >$25 million located in US
Suppliers seek growth through internal/captive SI services
- "Total solutions" providers for end-user
- Proprietary product knowledge
- Capture revenue growth
- Push higher-margin products
- Keep integration margins in-house
- Develop in-house SI expertise
Internal/captive SI Services - strategic error for product suppliers
- Cannot compete with small, local independents
- Local territorial focus is vital
- Cannot scale up on a broad front
- SI margins are much lower
- Independent SIs will compete – migrate to other "commodity" products
Independent SI assets
- Knowledge & Experience
- Relationship with specific end-users
- Applications knowledge & experience
- Local availability – the key asset
- Provide all required systems services
Key SI services
- Primary customer values
- Design to suit needs
- Early partnership to maximize ROI
- Build to meet budget & schedule
- Internet-based support
- Installation & commissioning
- Service availability
- Repairs, maintenance & upgrade
- Training of customer personnel
Major suppliers – competitors or allies?
- How long is "long term" contract?
- Preferential pricing
- Relationship between sales channels – Internet, Distributors, Sales Reps, SIs
- Consistent policies across territories
- Mutual exclusivity
- Mutual dependency
Consulting/Engineering firms - Partners? Or competitors?
- Will they "automatically" choose the major suppliers (Siemens, Rockwell, etc.?)
- Small SI has "credibility gap"
- Multi-national design, configuration, services
- Vendor-selection power
- Shared between Engineer & end-user
- Approved list – tool to favor "friends"
- Manufacturer "upstream"
- End-user is the "customer"
- All sales channels are the "intermediaries"
- Sales Reps
- Distributors - stocking & what else?
- Systems integrators
- Internal sales people
- Products have become "commodities"
- Manufacturer is in the "distribution" chain – no "upstream profits" anymore
- Distributors & Systems integrators can migrate to competition
- Good SI has territorial supremacy – the key link to the Customer
Growth through SI partnerships
- Partnering basis
- Territorial bias
- Global linkage
- Specialized market bias
- Shared knowledge (software)
- Access to services
- Example: Automation Alliance
- Focus on key markets, customers
- Develop alliances
- Other US territories
- Other local markets/applications
- Never, never be the lowest bidder
Suggested Reading (Click on weblink)
The Disintermediation Series
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