Pinto Prognostications - 2007

By : Jim Pinto,
San Diego, CA.

Most automation companies showed reasonable growth and profit in 2006, and some good-sized acquisitions will occur in 2007. Offshore outsourcing will continue growing at 20% annually. The companies that succeed will be those that understand how to combine new organization, new technology and new management thinking for global competitive advantage.

This article was published by:
January, 2007

Most automation companies showed reasonable growth and profit in 2006, signaling a turnaround from leaner years. Now emboldened by better results, many of the majors are seeking new growth opportunities. Beyond just consolidating mergers - some good-sized acquisitions will occur in 2007.

Rockwell divested Reliance, which was engaged primarily in old businesses such as motors, bearings and gears, and will utilize the money to fuel growth in new technology businesses. Honeywell and Emerson are doing fairly well and will likely acquire smaller companies that fit their wireless strategies, plus some larger mid-size players to strengthen their portfolios.

ABB has emerged from its debilitating bout with losses after settling its asbestos litigation, and after divesting the multitude of acquisitions which were too divergent from their core businesses of process controls and power management. With its stock climbing again, the company may fuel growth with judicious acquisition choices.

After divesting the more profitable companies in the group, Invensys has recovered from its bout with bankruptcy. Foxboro, Wonderware and allied process controls businesses are now the central focus.

Aggressive French giant Schneider is busy buying many mid-size pieces, putting together its bid for significance in a fragmented automation marketplace. It is evident that, unlike Siemens’ mishandled U.S. acquisitions, Schneider is managing its newly acquired brood remarkably well.

The Japanese Omron and Yokogawa continue to look for growth and market leadership. Because the Japanese don’t really understand how to make acquisitions, they will only attempt smaller buyouts. Most of their expansion will come through strong growth in the Far East.

By the end of this decade, look for the automation big-10 list to shrink to about half that size. 2007 will bring the first of the major buyouts to start the reshuffle.

Offshore outsourcing is expected to continue growing at nearly 20 percent annually over at least the next couple of years. Honeywell, Rockwell, GE, Emerson and most of the majors are going offshore, for manufacturing as well as development and systems engineering. Honeywell and IBM just recently announced that they will be doubling their employment in India.

New technology adoption

Adoption of wireless technology, already widely used in commercial applications, has been delayed in automation markets because major suppliers are still debating standards. But industrial wireless is at the “tipping point,” and significant new products and applications will emerge this year, that could spark a new phase of growth.

Mirroring the accelerating technology treadmill, automation equipment will keep adding new, incremental features and benefits such as embedded operating information and self-diagnostics. Machine-to-machine (M2M) communications will start to generate increasing efficiencies and productivity as end-users demand visibility for improved asset management, and suppliers build in proprietary service mechanisms.

Production and business systems will increasingly be working together, integrating real-time plant-floor, process and business applications to enhance collaboration among work groups and multi-location plants across the enterprise. Web delivery of process and business data will enable real-time response to changes—in some cases, in as little as a few seconds to an hour, allowing quick, effective, agile decisions and generating increased productivity.

Staying competitive demands agile adaptation to changes. The companies that succeed in this new age will be those that understand how to combine and coordinate new organization, new technology and new management thinking to gain sustained competitive advantage in global environments.

Book Choice
Pinto's Points
Pinto's Points
How to win in the
Automation Business

Click to visit
Go shopping - books, electronics, CD/DVD

Selected advertising coming here.
Contact Jim Pinto
for rates.

Return to Index of all JimPinto Writings Return to Index of all JimPinto Writings
Return to Homepage Return to HomePage

If you have ideas or suggestions to improve this site, contact:
Copyright 2006 : Jim Pinto, San Diego, CA, USA