VDC Research: Industrial Sensing, Networking & Control Market Blog

A Few Thoughts on Service Related Revenues

Throughout the economic downturn, companies have been looking to maintain/increase revenues in all areas even as customers defer greenfield projects and brownfield upgrades. When customers have been spending, they are increasingly looking for support particularly in all areas of functional safety.

Recently, the IAC team released a demand-side webcast and supporting research note that emphasized how services can be an important opportunity for industrial automation suppliers. Even so, I believe there should be some caution/restraint taken by suppliers to avoid alienating customers particularly in front of what should be an upturn in business in 2012. I will give you a little background for this opinion which is actually grounded in a consumer experience I had recently.

As part of a kitchen upgrade, my wife and I replaced appliances with higher end stainless steel energy efficient units. Within the warranty, one of the units had a problem and we called the appropriate places to get the repair done. The wait time was over a week. The service person when they did eventually arrive did not have either of the likely parts needed for the repair. There were insinuations made that the problem was likely our fault or the fault of the installer. If this was proven to be the case, we could avoid the charges by buying the extended support package. To make a long story short, we refused to buy anything, the service person ordered the necessary parts and installed them after another week of waiting. Suffice it to say that in the future when my wife and I are making another product purchase we will avoid the offending product manufacturer and channel partner at all cost. I think the following are reasonable takeaways that can be applied to industrial products as well as consumer appliances.

• Do not try to use every customer problem as a new revenue opportunity.
• Minimizing inventory expenses is important but availability of replacement parts is very important for customers. This was in the top 5 business attributes needed in our survey.
• Making sure that service people are prepared and equipped to provide solutions on the first visit will save money for both the suppliers and customers.
• Having an adequate number of service people or channel partners can ensure that service delays are minimized.

As the election year approaches and solutions are found for the European financial problems as well as worldwide employment and consumer confidence, suppliers that have followed these rules will have built up a significant advantage in the eyes of the customers than those that didn't.

US Manufacturing Profits Hit a New High

In the midst of mixed economic news from Europe a significant bright spot has been recently released by the US Census Bureau about manufacturing profits. In Q2/2011, manufacturing profits have hit levels that exceed even late 2007/early 2008 levels.

 

While some of these profits can be attributed to a weaker dollar, the interesting thing about this is that these profit levels were achieved at similar sales levels as 2008. It is worthwhile noting that even though the manufacturing companies are based in the US, the actual manufacturing being performed is, in many cases outside the US. Even so, in 2008, off-shoring was, for the most part, an already done deal. Therefore, in my opinion,  the profit improvement is more likely due to more efficient manufacturing processes which are often include industrial automation.  There is also a chance that some of this profitability is the result of deferred spending but that was more likely to happen in 2009/2010. Here in 2011, it is likely that manufacturers are spending and will continue to spend on process improvement and that bodes well for economic and, eventually employment recovery in 2012.

Calling All Pressure and Temperature Sensing and Switching Suppliers - iPad2 Raffle

If you are a manufacturer/supplier of Pressure and/or Temperature Sensors, Transducers, Transmitters, and/or Switches we would like to hear from you.

As you probably saw in a previous blog, we have already started our End User/Demand-Side research for this project.

Now, we are kicking off our Supply-Side research in support of our 4 volume report on Pressure and Temperature Sensors, Transducers, Transmitters, and Switches. VDC Research will be committing a team of 3 analysts that will be contacting well over 125 suppliers of these products. It is our aim to have all four volumes of the report available for the important planning period in Q1/2012. Therefore, all 4 volumes are now planned to ship by the end of 2011. In order to do this, we need your help.

To make things interesting, and add some excitement to the project we have decided to let suppliers of the covered products have a chance to win an iPad2 if they participate.

Here’s how it works:

• If you spend 5-10 minutes on our Supplier Strategy survey, you get a single “ticket” in the raffle. Do it before Friday October 14^th, 2011 and that’s doubled to 2 tickets.
  • In addition to the raffle ticket(s), you would also get the aggregated results of that strategy survey in late December.

http://www.surveymonkey.com/s/3HPHN8B

• If you provide us with a short ~30 minute interview to get some insights into your company, its pressure and temperature products, and your view of the market that’s worth 5 tickets.

• Not enough time for an interview? That’s OK, you can take our streamlined “just the basics” on-line survey and that’s worth 3 tickets.

http://www.surveymonkey.com/s/7CHHC87 

• If you take the streamlined survey or grant us an interview, you will also receive a participant’s edition of the executive brief from the reports in early January when the reports are complete.

Note: In all cases, your/your company’s participation will be kept confidential. All insights and analysis that are published as a result of supplier participation will be identified as VDC estimates/opinion.

If for some reason you are not the correct person to work with for this these types of products and/or this type of inquiry, we would appreciate it if you could please forward these links and information to the correct parties. You would figure that if they win the iPad2, they would at least owe you a nice lunch/dinner.

 

Spectris, intent on winning Pac Man game, Acquires Sixnet

Hot off the presses is news that Red Lion Controls, parent is Spectris PLC, acquired Sixnet LLC on October 6, 2011 for the reported price of $72 million. Sixnet will join Red Lion Controls (and N-TRON) as part of the Industrial Controls segment of Spectris PLC. Sixnet will be led by Red Lion Controls' President, Mike Granby.

Sixnet employs over 100 people and provides Red Lion Controls with industrial connectivity and automation solutions such as industrial network switches (compliments N-TRON's own network switch line), remote automation devices such as RTUs, industrial distributed remote I/O and wireless routers and modems. Sixnet’s cellular wireless portfolio for the machine-to-machine market represents a new area of business for Red Lion.

Most of Sixnet’s sales historically have been to the US domestic market, but the acquisition provides a good opportunity to expand Sixnet’s overseas sales using Red Lion's international channel networks, particularly in China. “The acquisition of Sixnet will enable Red Lion to provide a broader range of solutions to our customers, and expand both our global presence and our strategic business segments,” says Granby. “Sixnet’s solutions and 35 years of experience in the industrial space are a great addition to our team. Over time, we intend to share technologies within our solution portfolio which will allow us to bring even more value to our customers.”

VDC is covering both Sixnet and Red Lion Controls in its upcoming 2011 Data Acquisition Solutions Technology Opportunity Analysis supply-side research. The pros and cons of leveraging acquisitions as a growth strategy will be analyzed in the research.

VDC believes that the expansion strategy via acquisition taken by companies such as Spectris, Beijer, Belden and others may lead to increased consolidation as other suppliers realize the benefits of building and developing more complete product and service portfolios, something industrial automation customers are increasingly demanding from their suppliers.

Based on VDC's own research it is increasingly more evident that customers seek out suppliers with which they can develop meaningful partnerships and want to deal with suppliers that really understand their business requirements and which are committed to helping the customer's improve and develop their operational capacities.

 

Steve Jobs Touched Us All

I would like to take this opportunity to recognize the lasting impact that Steve Jobs made not only on personal computing and communications but also on how human beings interact with each other and their electronic devices. His real genius lay in the relentless pursuit of perfection and desire to make product design and innovation as user friendly as possible.

I believe that Steve Jobs' influence in designing the iPod, iPhone and iPad had an immense impact on the growth and influence of touch technologies used in electronic devices of all types. Prior to the release of the iPad, the tablet market was confined to relative niche market segments and the continued promises of "explosive future growth" that really never materialized, at least living up to the hype heaped upon it. Post iPad, the market for tablets has reached the mainstream status, with unit volumes in the millions, that was long since projected by Analysts galore.

VDC's touch screen displays research revealed Apple's reliance on projective capacitive technology and its unique multi-touch product designs and application development led to an explosion in demand for all types of electronic devices, typically mobile devices, that offered the intuitive benefits of a touch interface. Apple's development of multi-touch projective capacity design was truly a game changer and brought demand for touch interfaces to a new level.

Word has it that Steve Jobs decided to drop out of college, found a job and then went in search of his true purpose in life by climbing the Himalayas and meditating in search of truth and meaning. I am not sure if he found Nirvana but it certainly seems Steve Jobs found his true purpose in life and we are all better off for it. Steve Jobs may you rest in eternal peace.

A Few Thoughts on Steve Jobs and Apple's Unsung Heroes

As the world mourns on the passing of Steve Jobs I thought I would put an industrial perspective on some of his accomplishments. Thomas Edison was credited with saying that genius is 1% inspiration and 99% perspiration. Without a doubt, Steve Jobs had tons of inspiration but there are likely many genius caliber personnel inside Apple that were able to implement Steve's ideas and concepts and turn them into reality.

I have been on many product launch teams involving cutting edge technologies and I can attest that it is not a simple thing. The products I was involved in were capital equipment type semiconductor testers and the instruments that went into them. These were high tech to be sure but the quantities at launch time were in the dozens not millions. In Apple's case, the innovative products often required new manufacturing techniques and ever smaller/thinner cases. Each product contained new components and everything had to be designed, tested, produced, acquired, and then manufactured in eye-popping quantities in order to have a successful launch. This truly required an army of talented engineers and programmers, as well as supply chain and manufacturing specialists. Each product upon release was under a huge public and analyst/critic microscope and therefore any product problem was magnified to an incredible degree. Despite this, most Apple product launches were very smooth and the demand for the Apple products was usually met in a timely manner.

So, in summary we have to give a lot of credit to Steve Jobs for his inspiration and contributions towards assembling the Apple team and culture but, we should also give credit to the unsung army of Apple's personnel and manufacturing partners for the work they have done making Steve's visions come true. As we say goodbye to Steve Jobs let us hope that the Apple team can continue to execute as they have in the past.