VDC Research: Industrial Sensing, Networking & Control Market Blog

Recent Acquisition of Invensys Rail by Siemens, Is Invensys Operations Management Next on the Block?

Siemens recently announced its plans to acquire Invensys Rail for about $2.8 billion (~$1.7 billion Euro) and the deal is expected to close in Q2 2013 assuming it meets no regulatory obstacles.  In VDC's opininon this deal thereby opens up the possibility that Invensys may also spin off its Invensys Operations Management and Climate Controls businesses as a means of maximizing its value to shareholders, something that was at least speculated based on reading some articles in June and September of this year.

Apparently there were (are?) several interested parties in a possible acquisition of Invensys Operations Management (or perhaps Invensys overall) including Emerson, ABB and GE. An acquisition of IOM by anyone of these companies would definitely represent a major shake-up in the competitive landscape as it would bring in over $1.6 billion in revenues and a great deal of sizeable customer accounts and a pretty strong product portfolio including leading brand names such as Foxboro, Eurotherm, Wonderwre and Triconex, among others. The addition of such a product, solutions and services portfolio to anyone of these rumored acquirers would be a real competitive advantage.

I have written several blogs in the past regarding my analogous use of PAC Man to explain industry consolidation occuring in any number of different product and technology markets. If an acquisition of Invensys overall and/or Invensys Operations Management went down then that would represent a pretty sizeable example of PAC Man in action. You can learn more about several of the key markets in which Invenys and its rumored suitors compete by checking out VDC's Industrial Automation practice homepage.

Security vs. Efficiency? I Could Not Have Said it Better Myself

Recently I read an excellent article in Automation.com written by Eric Byres, CTO and VP of Engineering at Byres Security, Inc. which was acquired by Belden earlier this year, which discussed the ongoing dilemma between industrial automation companies' concern over security (and for good reason in most cases) versus the need and desire to connect the factory floor/plant operations to the rest of the enterprise so as to maximize ROA and to improve corporate competitiveness.

I am a firm proponent in encouraging companies to invest, wisely of course, in products and technologies that will enable greater productivity, increased operational visibility, greater agility and increased profitability. Traditionally industrial automation operations have operated as walled off silos from other parts of an organization and have not been connected into the larger corporate enterprise; historically this was done in many cases for good reason as the potential impact of a security breach or communications error may have had dire consequences for the company itself as well as perhaps the surrounding public.

What I really liked about this article was it touched on several different markets such as industrial networking - both wireline and wireless, functional safety and data acquisition, as after all one needs to acquire data before it can be actionable and tied into the enterprise, on which VDC has been covering for decades and it imparted a sound rationale for achieving both greater security and operational efficiency.

I strongly encourage anyone interested in, or concerned over, security and efficiency as it relates to industrial automation operations to read this article and think about how it may relate to your own organizational and/or operational issues and how you may put some of the information imparted to good use.

Happy New Year wishes to you and yours

 

A Few Thoughts on Solyndra

As the debate still rages on what happened with Solydra I thought I would weigh in with my opinion. I have never had the benefit of visiting that plant but have seen countless times the stock footage of President Obama's visit when things were going well. What you see in that footage was a lot of production cells with industrial robots moving solar panels through the various process stages. What you see in that picture correlates very well with what I saw when I did have the benefit of a detailed plant tour at Spire Solar in the fall of 2009.

Spire Solar is in the business of selling production equipment used in the manufacturing of solar cells/panels. Solar panels start with small cells that are tested and then progressively wired into larger and larger arrays in order to increase the voltage and current that is produced. Each circuit group is limited by the weakest cell in the group and so there are design trade offs to maximize efficiency and lower costs. The solar cell arrays are then connected together and encased in the panels that protect them from the environments they will be installed in. One last test involves exposing the newly manufactured panel with a calibrated amount of light that is evenly made across the entire panel. The panel output is carefully measured and the panel is graded. Some panels are much better than others.

So this leaves the question of what happened to Solyndra and why they could not compete with Chinese manufacturers and I think there are several factors that we should look at.

Industrial Automation: Solar Panel manufacturing almost demands automation. Manual processes risk contamination (think fingerprints) of the solar cells and weak cells mean less efficient and lower quality panels. Therefore, the labor head count and amount of automation should have been similar between Solyndra and its Chinese competitors. In an efficient process, the difference in labor costs should be a factor but not a show stopper.

Materials: This should be about equal between China and the US as the silicon materials are not exotic or in limited supply or any other global factor other than perhaps having a lot more semiconductor Fab facilities in the APAC region than the US.

Management: This I'm not sure about. How committed was the company to making solar panels as opposed to getting money and spending it under the guise of being a "green" business. I'll let the congressional investigation solve this one but it does seem clear that contributed capital was not efficiently applied to the facility and design/creation of the panels and processes to create them.

Power Costs: I am fairly certain that the cost of electricity to run a highly automated solar panel plant is significant and, costs are likely much higher in California than say China. This also by itself would not be a showstopper.

Machine Safety: Looking back at the stock video of the Obama visit to Solyndra you see that the automated robots have safety enclosures and features in order to bring them into compliance with OSHA and/or other standards such as EN ISO13849-1 and EN/IEC 62061. In our recent report on Machine Automatic Safeguarding we saw APAC as a smaller but growing market in that there is a lot of room for safety improvement - particularly in China. Machine Safeguarding adds expense and usually lowers efficiency to a sight degree. Let's consider this as a burdon for Solyndra that its Chinese competitors don't have and call it at that. A showstopper? I don't think so.

Economics: Two things are mainly at work here, a glut of solar panels and a decrease in demand as government subsidies dry out and the recent recession makes money tighter. Then, we have the fact that China is holding its currency down and that is a significant factor. If customers are buying on price alone and not taking panel quality and grade/efficiency into consideration this does put companies like Solyndra at a disadvantage.

In summary, I think it was not any one or two factors that caused Solyndra to fail. It was likely to be the combination of all of them happening at the same time for an extended period that did it. Certainly there are a number of valuable lessons to learn and business/economic factors that have to be corrected.

 

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.

Take our Sensing and Instrumentation Survey

The IAC team is conducting an end user/OEM/System Integrator survey of the Pressure and/or Temperature Sensing and Instrumentation product market.  The areas covered include Pressure and/or Temperature Sensors, Transducers, Transmitters, and/or Switches. The covered products can be used as part of controlling processes at industrial facilities as well as inside equipment/products that are being manufactured.

By filling out this survey you can convey your needs and expectations to senior industry executives. If you are involved in the use, purchase decision, or selection/consultation for any of these products this may be your best chance to influence key product suppliers and provide input.

Click here to complete the survey.

The IAC team is planning to analyze and report on the latest technology trends and preferences from the process control/safety as well as the OEM community and your thoughts will help to influence the next generation of pressure and/or temperature measuring/switching products. In addition, VDC will provide all respondents who complete the survey:

• Entry into a prize drawing for one of five $150 U.S. (Amazon gift card, check, or charitable donation) prizes. (must provide e-mail address to enter)
• A summary of the report survey findings once the project is complete later this year.

*Note: To minimize the time needed for completing the survey, respondents will only be directed to one of the two main sections of the survey and detailed questions of no more than four products. The section and products selected will be the one that respondents indicate as being most important or relevant to their overall experience.

Click here to complete the survey. The survey will close when we have received the required number of responses covering each market.

If you are a supplier/manufacturer of these products we are looking to work with you. Our research team will be looking to contact you to get your views on the market and offer you several ways to participate and benefit. Please contact us for more information or look to this blog for upcoming surveys you can take part in.

 

Thank you very much for your assistance.

Privacy Policy: VDC will not sell, rent, or in any way provide your contact information to any 3rd party. Your individual responses are strictly confidential. The information obtained by VDC will only be used to develop market insights.

 

Industrial Sensing Market - Problems With Doing More With Less

Recently, I have been making a lot of channel and OEM interviews supporting multiple projects we have running. There have been many interesting insights I have learned as part of this work but several conversations have correlated with recent demand side survey results we have provided to our clients.

The quick takeaway is that it is likely that some suppliers are losing business they could have easily won. Several distributors have griped that it takes a long time to get responses for quotations and delivery times. As a result, the customer who might have been attracted to a particular product goes another way with respect to product, brand, or channel. This latter is obviously irksome to the distributor who might have invested sales and even technical expertise in problem solving and product selection.

As I mentioned previously, this is a theme I picked up previously in our demand-side surveys. In fact, one vendor was repeatedly called out for not providing timely quotations to customers that attempted to buy from them directly. If the channel partners that deal with suppliers constantly are similarly being ignored this is significant. It is not a business strategy of driving low volume direct sales to distributors for aggregation, it means that suppliers are just not being responsive.

My theory is that suppliers may be asking their employees to do too much for too long and, as a result, things like responsiveness break down particularly during any uptick in business. Too many things are automated and/or being done by fewer people and some of the personal touches and details are being lost. In project management, you have three general pillars to any project that are applicable to this situation. They are Time, Scope/Quality, and Resources. Basically, if you reduce resources, time and/or quality suffer.

I'm kind of interested in what other sensor product distributors, OEMs, and Systems Integrators are seeing and what opinions they have about it. If you would like to chat about it, drop me a line.

Siemens Completes Exit Plans for Nuclear Market

As of yesterday, Siemens has announced plans to exit from the nuclear business. The final sticking point was the agreement with Rosatom which is a Russian state controlled nuclear power company. There was a risk here that this would offend the Russians who are or are likely to be customers for many of the other products and services inside the Siemens vast portfolio. Even so, Siemens still intends to supply the generator/turbines and control products that are used in both conventional and nuclear power facilities. This also frees up resources that can be applied to creating new products for renewable energy.

The breakup of the Rosotom deal also presents a benefit because it ends any non-compete complications that arose as a result of the Areva deal ending.

If there had been any doubt, the fact that Germany itself was phasing out nuclear, pretty much forced the hand of Siemens to take the risk of offending Russia instead of the German government and people that constitute a major share of its market. The fact that it might help appease Areva is a bonus.

Siemens does intend to continue supplying replacement parts and service for its installed base of reactors including the 17 in Germany.

Isolation: A Smart Form of Insurance for your Data Acquisition Solution

Back in early March I blogged on the topic of isolation as it related to industrial networking products and the concept of investing in isolated network products as a form of insurance. It turns out the topic of isolation is also relevant to data acquisition hardware solutions. This topic is also relevant to a more recent blog in which we discussed the importance of accuracy and how that rated as the most important technical requirement cited by almost 600 survey respondents.

As the accuracy of a user's data acquisition measurements go up so does the need to protect their signals from noise as well.  The user needs to protect their signal on its entire path from the sensor input to the point of data conversion. In harsh environments such as those found in steel mills, automotive assembly, food & beverage and other applications in which the adverse impact of EMI, noise and other threats maybe more prevalent as is the need to protect against ground currents. Isolation eliminates ground loops between the measurement system and the signals you want to measure and protects the operator and equipment from effects of ground loops and high common mode voltages.

Isolation is defined as separation of one signal from another to prevent unintentional interaction between them. All multiplexed data acquisition systems contain a certain degree of channel-to-channel isolation; relay-based systems have galvanic isolation while solid-state systems do not. Galvanic isolation is the absence of any DC path. Most isolation methods eliminate all DC paths below 100 MΩ. Three major benefits of galvanic isolation are circuit protection, noise reduction and high common-mode voltage rejection, especially those developed by ground loops.

PC based data acquisition solutions makes possible an array of multiple channel measurements previously beyond economic reach of many applications. This has been accomplished by two major compromises, multiplexing and non-isolated inputs. Multiplexing is successful when the sampling rate is adequately high and the source impedances are sufficiently low. Lack of isolation places an entirely different kind of limitation on the type of input signals that can be connected.

If an application operates in an environment in which the need for isolation is prevalent VDC recommends users consider investing in a data acquisition solution with built-in isolation. Although there may be a cost premium associated to investing in a data acquisition solution with isolation, VDC believes that this will prove to be a wise investment in insuring that the data acquisition solution and equipment being monitored will provide a quick payback if the catastrophe of equipment failure is averted. 

Although the topic of isolation is not an integral part of the scope of VDC's 2011 Data Acquisition Solutions Market Intelligence Program we are always interested in covering topics which are germane to relevant research related issues or dynamics impacting the industrial automation world.

 

Can There Be Too Much Automation?

Within the VDC Industrial Automation and Control Practice we are always applauding the ever expanding role that automated processes are finding in new regional and vertical markets. In most cases, responsible/safe automation products and solutions are clearly superior to the manual industrial processes of the past. Outside of industrial plants there is another area where increased automation has paid dividends and that is in modern passenger aircraft. In either case, well tested industrial and aeronautic automation solutions transfers the control of mission critical processes to avoid operator/pilot type errors.

An article I read last week focused on some aircraft situations where the automated systems failed and, it appears the pilots had lost some of their edge with respect to the correct response they had to make. Planes that are in near stall condition need to point the nose down in order to pick up air speed. Pulling the nose up which might be the intuitive thing actually makes the stall condition more likely. Could there be a parallel from these aircraft situations and those that can take place in industry?  In my opinion, similar unexpected problems with automated processes could happen at almost any industrial facility. Most systems are designed with redundant and ultra-reliable components calculated to have the appropriate Safety Integrity Level (SIL) for the safety/process risk that is present.  On the other hand, recent events have shown that problems have already occurred in situations where combinations of failures and events overwhelm the automated systems. I was thinking about two obvious ones where this could have happened.

• At Fukushima Daiichi, from what I understand, the earthquake severed the facility's connection to the electrical grid and, then, the resultant tsunami almost simultaneously, destroyed the backup power sources. In such a case would it have been better to keep generating power with at least one of the reactors to keep the facility pumps cooling pumps running? I would estimate that the safest conventional and likely automated process thinking would be throwing the control rods in the reactors and isolating the steam pipes but perhaps this was the wrong move because of the other combined factors.

• In the case of the Deepwater Horizon, which was a well automated modern marvel of engineering we again see a chain of miss-interpreted tests, overridden alarms, and dependence on automated systems that could possibly delayed the reactions needed to save the rig by cutting the it loose from the blown out well. There were other factors in place here that I have discussed in earlier blogs but there is case to be made in that the automated safety systems fell short and it is likely that some manual reactions were not made or at least not in the correct timing and sequence.

Before I close, I do want to take some time to laud the efforts of the personnel directly involved with both cited incidents. They were in desperate situations and had to make difficult decisions and actions and, in many cases, lost their lives doing so. This posting was never intended as a slight to these fine individuals.

In closing I think that in many cases, industrial facility owners are increasingly looking for outside expertise to provide complete automated solutions with respect to process control and safety integrated systems. OEMS and equipment specifiers claim that 55% of their revenues are service related while at the same time end users are claiming ~38% of their expenses were for non-hardware related categories. To me that translates into a lower level of expertise at the point of use. It is unlikely that the automated systems that are put in place will fail but, if they do, hopefully the on-site personnel will have the expertise, decision making, and necessary reactions to prevent disasters.

 

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.