Pinto's Prognostications 2011
By : Jim Pinto,
By : Jim Pinto,
Automation growth is occurring primarily in international markets. Automation systems security has become a critical issue after the Stuxnet attack. The Top-Ten automation supplier line-up will certainly change, with mergers, acquisitions and divestitures. The question remains—which company is large enough to acquire whom?
In the second decade of the new century, things are different.
Most companies have been through a decline, but are growing again, with the recognition that things will continue to change. Automation growth is occurring primarily in international markets where new factories and plants are being built. New systems are not generating the large productivity increases that justify more than just maintenance and replacement in domestic markets.
In its “Control System Migration Survival Manual” (March 2010), ARC Advisory Group suggests, “Migration could be the biggest single issue facing automation end-users today.” ARC estimates the value of the installed base of automation systems reaching the end of their useful lives at approximately $65 billion. ARC says that migration is no longer strictly a DCS issue, but has grown to encompass other types of automation systems. In the United States, this is perhaps the biggest real revenue opportunity.
The Top-Ten automation supplier line-up will certainly change, with mergers, acquisitions and divestitures. The question remains—which company is large enough to acquire whom? Siemens remains the largest automation supplier, with a large European base and good global presence. ABB just recently acquired Baldor, which just about four years ago bought Rockwell's divestiture of Reliance Electric. Interesting twist.
In a tough, global environment, organic growth will not come easily, and growth by acquisition is risky. My own opinion is that the smallest of the majors, Rockwell and Invensys, are vulnerable as independents; the other large companies are all diversified in other than purely automation markets. Invensys has a growth strategy, but is weighed down by its Rail division, previously a cash-generator. Rockwell is growing again, but can that growth continue? They are both acquisition possibilities. But by whom?
As China and India advance rapidly in the new decade, expect one or both countries to make major automation acquisitions to enter U.S. and European markets. Both Rockwell and Invensys have major development presence in India, which may provide the link, or the catalyst, for being acquired. But, it's a long shot.
Innovative and well-organized mid-size independents such as National Instruments and Beckhoff continue to advance steadily toward the $1 billion benchmark. Mini-conglomerates such as Ametek and Spectris will continue to grow through judicious acquisitions of smaller companies.
Security advancesAutomation systems security has become a critical issue after the Stuxnet attack. This heightens awareness of what can really happen when critical computer infrastructure is deliberately attacked with creative use of legitimate product features common to all modern controllers. Security mitigation must be at the point that controllers connect to the control network. Security chips will now be in every switch port, right in front of the CPU.
After a lot of side-tracking over standards, industrial wireless growth is slowly starting to emerge. Emerson and Honeywell report wireless-related revenues in the tens of millions, but these include accessories and support products and services; no large coups to brag about. Hopefully, the initial success will stimulate wider usage in larger projects in the coming year.
With not much in the way of R&D funding available, lots of new features, functions and add-ons will begin to show, with usage of iPad, iPhone and Droid apps. More diagnostics and service functionality will be accessible via mobile phones, with two-way audio and video visibility to aid troubleshooting and service procedures.
Today's new products and services produce relatively small productivity gains by comparison, hence produce only incremental growth. An inflection-point of substantial productivity increase with resultant revenue growth is overdue in the automation arena—look for it to happen in this next decade.
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