VDC Research: Industrial Sensing, Networking & Control Market Blog

Spectris Continues Building its Empire via Acquisition of Omega Engineering

On August 15, 2011 Spectris PLC announced the acquisition of Omega Engineering for about $475 million, a multiple of more than 2.8 x 2010 revenues of $168 million. I remember seeing the large and colorful Omega product catalogs in the office when I started here at VDC over 14 years ago.

As I recall Omega seemed to sell just about everything under the sun when it came to process measurement and control instrumentation including temperature, pressure, flow, level, humidity, strain and force; HMI, electric heaters and data acquisition products and software. Omega Engineering enjoys a strong brand name, enjoys high levels of repeat business, some customization capability and a reputation for providing quality customer service.

Omega Engineering will serve as an additional growth platform from which their Industrial Controls business, which is already comprised of Red Lion Controls and Microscan, will continue to expand its presence regionally as well as from a product platform basis. Spectris had already acquired N-TRON back in Q4 2010 as a means of expanding its footprint in network connectivity and to further leverage the company's industrial controls and test & measurement businesses.

No doubt Spectris will likely leverage the synergies afforded via the combined products and channel networks of Red Lion Controls and N-TRON along with the new product additions via the Omega acquisition to grow its presence in the process measurement and instrumentation, test & measurement, academic and even in-line instrumentation market segments. Omega enjoyed a wide base of customers that relied on the company's one-stop shop product portfolio to handle their small-scale project needs.

VDC believes the greatest value from this acquisition will come from being able to leverage a diverse product portfolio of products to gain traction with new customers with larger project requirements that prefer to deal with a supplier than can provide all their product and service requirements.

Internet Remains #1 Information Source Data Acquisition Users Rely On

Based on recently published research generated from VDC's 2011 Data Acquisition Solutions Market Intelligence program in which VDC surveyed 600 end users, OEMs and related stakeholders involved in using, purchasing and/or specifying data acquisition solutions (i.e. data loggers, paperless recorders, Compact PCI plug-in analog I/O boards, etc) searching the Internet remained the #1 information source respondents turned to when they wanted to learn more about data acquisition products and suppliers. VDC conducted similar research on data acquisition products back in 2008.

VDC added some new, more granular selections in terms of information sources from which respondents sought to learn more about data acquisition products and suppliers. Included among these new information source selections were Internet-search, vendor websites, direct email, professional networking sites and social networking sites. I already addressed the results from the latter two new selections in a blog posted back in June.

Interestingly the emphasis that survey respondents placed on different information sources varied by platform type as searching the Internet was the only one in which users of external chassis & modules, plug-in analog I/O boards and data acquisition software agreed upon as being #1. For example, vendor websites was cited as being the 2nd most sought out information source by users of boards and software while chassis users rated it 3rd most leveraged medium.

What is clear is that users of data acquisition solutions rely on a mixture of both traditional and digital mediums when they seek to learn more about data acquisition hardware and software solutions. Suppliers need to better understand what those preferred mediums are if they are at all interested in maximizing any marketing investments being made to capture greater mind share and, more importantly, greater business from both existing and new customers. Tailoring a marketing message chalked with informative and actionable information to the right audience is the holy grail of marketing 101. VDC's research into the purchasing behavior of data acquisition solution customers could prove to be an effective tool when employed properly.

We welcome the opportunity to learn more about some of your marketing success stories and which mediums your firm employs to reach your target audience.

George Devol - A Pioneer in Industrial Automation

This morning VDC Research Group's Industrial Automation & Control practice would like to note the passing of George Devol at the age of 99. George Devol was the inventor of the first industrial robotic arm that was placed into service at General Motors in 1961 which was the same year his 1954 patent for "programmed article transfer" was approved. Since then, automotive and industrial production facilities have never been the same. In the intervening time, industrial robots have moved to the mainstream from niche products designed for one-off hazardous location or extremely repetitive applications involving heavy materials. As many of our reports show, the position sensors, and machine safety products that go into industrial automation products can individually represent markets with hundreds of millions of revenue dollars annually.

In our opinion, all industrial automation market participants should have a few moments of reflection for George Devol as it appears we all have something to thank him for.

Data Acquisition Applications Coming to an iPad, iPhone or Droid Near You?

The influence of Apple's innovative products such as the iPhone and iPad is real and its impact has been significant and such products have help shaped many different markets in as many news ways as there are the plethora of applications being developed around these platforms.

Feedback from almost 600 survey respondents who participated in VDC's 2011 Data Acquisition Solutions Market Intelligence program indicated that a growing number of them expect to be accessing their data acquisition applications through a mobile device operating with Android or IOS OS within the next five years. In fact almost 17% of respondents are expecting/desiring to be using external chassis & modules with Android by 2015 while almost 14% of external chassis users indicated some future usage of IOS.

It is only a matter of time before savvy suppliers of data acquisition solutions begin to develop ways in which users can begin to access data being collected via their various data acquisition solutions with an iPhone or iPad equivalent mobile device.

It is also very likely that within the next couple of years savvy suppliers will be offering cloud-based services in which they manage the data traffic, storage and perhaps even data management for companies that seek to outsource such data acquisition related activities.

We welcome any feedback on data acquisition applications which may already be out in the market and what are the initial thoughts on their effectiveness and how may they be improved or enhanced to enable the user the ability to more fully exploit the power of their smart phone or tablet.

 

Industrial Supplier Business Strategy Options Employed During Downturn

We have a Process Level and Inventory Tank Gauging (ITG) supplier strategy survey that is still open for more participation but, even so, we took a few moments to tabulate the preliminary results and send them to our sponsors last month.One of the questions centered on what companies did during 2009 - 2010.

When the downturn started at the end of 2008 it was clear by the start 0f 2009 it was going to be long and ugly. Leaving out the Mil/Aero segments, most suppliers were left with several likely business levers they could select including outsourcing, downsizing, and reorganizing. I was a bit surprised when I saw that ~65% of the survey respondents indicated doing no such thing.

I was a little surprised by this until I remembered a key difference. Although publicly traded companies are under pressure to maintain profitability in the short term, a good portion of industrial process product suppliers are privately held. This is particularly true for many sensing companies. Being privately held, can allow many of these companies to take the longer business view and avoid the drastic cost cutting measures that can hold them back during recovery cycles. That is of course assuming they have enough cash flow and reserves to survive. In some cases, these well positioned but potentially low on cash entities can be attractive nuggets for larger conglomerates and some of them could be scooped up which could be the case for machine safety equipment supplier Jacob Safety which was recently acquired by ABB group.

Would you like to see more of the results from our survey? If you are a supplier of process level and/or ITG products there are 2 options. You can purchase some volumes from the report, or you can take the short 5-10 minute survey at the following link: http://www.surveymonkey.com/s/5DFMYXJ

We are also offering you 1 chance in our iPad raffle for completing the survey. If you have already taken the survey, please stand by for the aggregated results which we will send you in 3Q. We will also alert the winner at that time.

Foxconn Initiative Shows a Growing Trend of Factory Automation in China

An article in today's Financial Times described the initiative of Foxconn in China to eventually replace and/or augment their workforce of 1 million workers with increased automation. Foxconn which is a leading contract manufacturer known for their work with Apple products including the iPad currently only uses approximately 10,000 robots. They plan to increase this number to 1 million by 2013. I had several thoughts on what this means.

The Financial Times article cited Alvin Kwock from JPMorgan where he noted ' that the cost of capital for purchasing and operating a robot has now met the cost of the workers it replaces.' In my opinion, the fact that this is happening in China is a particularly big deal. Why do I say this? In a highly automated factory, the main operating costs are for the facility, energy and raw materials. After that, you have the costs for a much smaller number of higher skilled workers. The tipping point comes at the point where China either has enough of these skilled workers to meet the increased demands or the labor costs for them increase to the point where there is not a significant Chinese advantage. At the same time, the governments in EMEA and the Americas are looking to increase job creation. Empty / underutilized factories, available workforces that have re-set expectations, and possible government incentives could drive a shift in the marketplace. The benefits that many N. American and European companies saw from outsourcing over the last 10 years are now drying up to the point that the problems from the logistics and quality are not being offset.

We saw some of this in the preliminary results from our recent level measurement survey. In the survey, we asked 'Do you see the regional percentages for your organizations demand for products changing in 2011 or 2012? Please indicate where you see your regional percentage for your company’s demand for Process Level and/or ITG Products and systems decreasing and increasing in 2011 or 2012.'

Quite simply, it looks like the trend moving the market demand from Americas and EMEA to APAC is slowing and even likely to be reversing.

My other thought is that's a lot of robots and it should make a pretty good impact on the industrial automation market regardless of where they are made.