VDC Research: Industrial Sensing, Networking & Control Market Blog

The Time When 'Made In America' Actually Means Something Again is Drawing Near

After reading a short article in the December issue of Control Design (Machinery Could Make U.S. Comeback) I began to think back to another Bloomberg BusinessWeek article written by Andy Grove that I blogged about back on December 20, 2010. I have been developing a hypothesis over the last 6-12 months based on the belief that as the wages of workers in countries such as China, India and Vietnam increase over time, the cost advantages enjoyed by those countries, and the companies outsourcing manufacturing, R&D and even some services (i.e. call centers, etc.) to those countries relative to the U.S. will diminish.

When companies factor in the financial cost of shipping as well as the opportunity lost cost due to delays in shipping, along with ability to gain competitive advantage by advertising “Made in America”, they will begin seeing even more politicians who are receptive to providing tax breaks and other incentives to create jobs in our own country. And as the workers in China, India and other countries continue to experience the benefits of capitalism and increased standards of living, they will continue to demand higher wages, thereby closing the gap which led to the stampede to outsource U.S. jobs to begin with.

In the future it will not only be politically expedient (or PR driven) to begin making more products and providing more services in the U.S., it will also be more economically prudent. The article in Control Design lists seven “tipping point” sectors that are set to return to the U.S. for manufacturing. The other six sectors besides machinery include computers and electronics, fabricated metal products, plastics and rubber, appliances and electrical equipment, furniture and transportation goods, according to a recent study by the Boston Consulting Group (BCG).

I recalled in that 12/20/10 blog asking the question, something to the affect of, ‘who will buy all the vacuum cleaners being made in China if no one is working here in the U.S.?’ Andy Grove was even more intellectual than I when he opined that our country is not only losing out on jobs, but the country was gutting its spirit of innovation and ability to develop an ecosystem which fosters innovation, ingenuity and the real American spirit. If you have not already read Andy’s article, I strongly recommend you do as it expressed the concerns that I had, much more intelligently and coherently than I could ever have.

In the final analysis, I believe that more and more companies in the future (and politicians giving them tax breaks) will begin looking to bring back jobs to America not just because it is the patriotic thing to do, rather because if they do not, then they risk losing market share to those firms that do.

 

Wondering When PAC Man Fever Will Strike Level Measurement & ITG Markets

For those that have been following my blogs over the last year or two you will be quite aware of my references to PAC Man to signify the impact previous mergers and acquisitions (M&A) had on markets such as industrial networking and data acquisition products.

After taking over the market intelligence activities in support of VDC’s ongoing 2011 Process Level Measurement and Inventory Tank Gauging Market Intelligence Program combined with just having completed eleven market studies covering data acquisition solutions, and having had several in-depth discussions with suppliers, it became quickly evident that ABB’s acquisition of K-TEK back in the summer of 2010 would likely not be an isolated event.

Most of the smaller to mid size suppliers I spoke with noted an increasing trend involving larger industry players such as Emerson, Endress + Hauser, Invensys and Honeywell deciding to move away from private labeling agreements. This trend does not favor some of these smaller players, since larger players are either developing a new product or technology in-house and/or considering acquiring a company that can help fill a gap in that supplier’s product or technology portfolio. Conversely it seems a few of the suppliers that are based in Europe or Asia-Pacific that to until now been supplying these larger (or even smaller) suppliers are starting to desire making inroads by marketing their products under their own brand.

It makes sound business sense, given that our research indicates that more level measurements customers are seeking out partnerships with suppliers that can not only provide “one-stop shopping” but also best in class and world-wide technical and application level support. Suppliers naturally have a vested interest to not create a situation in which a customer has to look somewhere else to meet their needs, since an overall market opportunity likely totaling over $2 billion in 2011 shipments is not chicken feed.

RuggedCom In Play, A Valuable Investment? Yes, But at What Price?

It looks like I have been too heads down in my activities involving research process level measurement & ITG as well as pressure and temperature instrumentation markets, and/or my automated information sources failed me, to notice the recent all-cash offer made by Belden to acquire RuggedCom.  It is nice to know that one of my crystal ball predictions made in a 12/10/10 blog may be coming true and RuggedCom's attractive performance, strong product portfolio and attractive customer base (i.e. smart grid and transportation) made them such an attractive opportunity that someone would have to acquire them. It looks like I was once again a little early in my prognostications as I would have wagered an acquisition to take place in 2011.

What struck me most by the news was not that Belden was one of the interested parties, although they told me that prior to GarrettCom acquisition they felt RuggedCom's price was too steep, but rather that they are agreeing to pay $280 million for the chance to bring RuggedCom into the fold of Belden's embrace.

I am not privy to how many other serious potential suitors really are pouring over the company's books, although I am checking my traps as this blog is being written, and therefore I have no real hard basis for recommending that Belden hold the line (i.e. not raise) on their cash offer despite RuggedCom's management's recent efforts to persuade shareholders to reject the offer made on December 19, 2011.

In my personal opinion I can say that RuggedCom might make an attractive acquisition to a number of potential companies including Cisco, Rockwell Automation, ABB, Invensys, Emerson and perhaps even Siemens. There are other tangential players in related markets that may benefit from both RuggedCom's product portfolio and customer base so as to better leverage their own complimentary products and gain access into new markets. I cannot list those companies in this blog as I may be privy to information that is not publicly available and I do not want to betray confidences.

The trick in any of these types of acquisitions play is to buy the company without getting into a protracted and heated bidding war, especially if the other potential suitors may have deeper pockets or a greater strategic objective to pull the trigger.

All I can do is wish Belden the best in their attempts to acquire an attractive company in RuggedCom and hope that if they are successful that they can effectively manage the integration so as to ensure the greatest value to the customer and the marketplaces in which they operate; since after all without that, this entire financial exercise will prove to be an unwise investment.

Should another company(s) express serious interest in acquiring RuggedCom then Belden's management better get to know the lyrics to Kenny Rogers song "know when to hold them and know when to fold them" pretty well so that they are aware of what they may gain versus what they may lose, and at what price.

It will be fun to see how this entire process plays out regardless.

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

 

EtherNet/IP Leads the Way in Industrial Automation Connectivity

I hate giving any attribution to ARC Advisory Group, a well respected and worthy competitor of VDC's Industrial Automation Group (legend has it that founder Andy Chatha worked at VDC in 1985), but I must concur with their recent findings that EtherNet/IP usage is growing and that it is likely the leader of Industrial Ethernet application layer network protocols in the industrial automation space.

Based on VDC's recently published Global Wireline Industrial Networking Products market intelligence, the largest share by far and away of the ~$2.6 billion in wireline networking product (i.e. connectors, cables & cordsets, device servers, gateways, routers, switches, etc.) shipments by type of network were shipped with standard Ethernet (TCP/IP, etc.).

However among networking products shipped with industrial Ethernet application layer network protocols by type, EtherNet/IP edged out ProfiNet on the worldwide basis. However ProfiNet dominated usage among networking products shipped in EMEA and, not surprisingly, EtherNet/IP dominated usage in the Americas. EtherNet/IP networking product usage edged out ProfiNet in the Asia-Pacific region based on extensive discussions with 55 of the leading wireline networking product suppliers.

I am not going to discuss or debate the technical aspects of each industrial Ethernet application layer network protocol in this blog and which one provides greater performance over another, rather I am going to simply state that our end user data collected from over 600 respondents did not provide any information that would not support our supply-side findings. Perception is reality and it appears that Rockwell Automation's dominance in providing industrial automation solutions in the Americas slightly outweighs Siemens' similar dominance in EMEA on a global scale. Both companies offer high quality and industry setting standard products and solutions. Both companies are clients of VDC Research Group, I almost wish the data showed a dead even tie, and I am pretty confident that both companies are clients of ARC.

To show that I am completely unbiased, our data shows that Cisco is the industry leader in wireline networking products followed by Belden in 2nd, Harting in 3rd place with Siemens close on their heels in 4th and Phoenix Contact rounds out the top 5 in worldwide shipments.

 

ABB Finally Enters UPS Market with Acquistion of Newave

ABB is a major supplier of power and infrastructure products but it has had a gap with respect to power protection in that they did not have a significant line of Uninterruptible Power Supply (UPS) products.

In June of 2010 ABB thought it had solved this problem when it had an approved offer for Chloride which was a significant UK based supplier of industrial UPS products. A few days later, ABB was outbid by Emerson Electric. In an industry where the market for large industrial and data-center sized UPS are dominated by a handful of large suppliers such as Emerson, Schneider Electric (APC), and Eaton there was likely some relief the ABB had been rebuffed. Although there was some market and product synergy for the Emerson/Chloride deal, it would have been a better fit for ABB and Emerson likely overpaid with part of the strategy being to keep ABB out of the market.

ABB was left to console themselves with a partnership with General Motors to use electric vehicle batteries in grid power storage/stabilization projects that were similar/adjacent to the UPS market. This will likely be a growing market but it is at least a decade out before it becomes significant.

In mid-December, 2011 it looks like ABB finally found its extended UPS product line as it has an agreement to purchase fellow Swiss company Newave. Like before, it's a perfect match from a product line perspective and it gives the Newave UPS line the global ABB support and sale presence it needs to expand beyond the European market. As Christmas has now passed it looks like there will be no Grinch to step in and outbid them.  It looks to be getting more interesting in the UPS market in 2012 and beyond now that ABB has increased their presence.

Study Shows Most Companies Not Equipped to Use Data Effectively; Is an Effective Data Acquisition Platform the Solution?

After reading a recent article in Sensors magazine in which the results of a study conducted by EMC Corporation indicated that almost two-third of companies surveyed were ill-prepared to take advantage of the explosion of digital data created by mobile sensors, social media, surveillance, medical imaging and smart grids. Although the article was not directly related to data acquisition as VDC defines it, I imagine that a larger number of companies are better prepared to deal with different types of analog data being collected from any one or more of a plethora of sensors that act as the "tip of the spear" in industrial automation and process automation applications across the world.

I imagine that a larger number of companies are better prepared to deal with the analog data being collected from any one or more of a plethora of sensors that are the "tip of the spear" in industrial automation and process automation applications. This blog will focus not just on the actual process and platforms used to acquire analog data so as to make actionable decisions based on digital information but the greater importance of what to do with the data once it has been collected.

Based on VDC’s recently published 2011 Data Acquisition Solutions Market Intelligence program, the global market for data acquisition solutions will likely exceed $1.5 billion in 2012. It appears on the surface that companies are investing in platforms such as paperless recorders, data loggers and plug-in cPCI data acquisition analog I/O boards designed to convert analog data into digital information which can then be, theoretically, used to make actionable decisions and effective action.

In my humble opinion, based on a quick 'back of the envelope' analysis, I estimate that probably less than 60% of the total available application opportunity for data acquisition solutions is likely being served by one or more of the product platforms under study; that still leaves a great deal of need, and opportunity, for data acquisition solutions which can more effectively enable users to acquire data and also process it into actionable information and action.

People seem to want more convenience, comfort and information about the world around them. The digitization of data through a growing number of platforms is providing that. As I have always said, be careful for what you wish for since you just may get it and the price we pay to get it may not be what we bargained for. 

Another Futuristic Blog - Plastic Logic and Future of Plastic Displays

Recently I came across another exciting new development related to futuristic display technologies, which was the topic of another recent blog post, being offered by a company called Plastic Logic. Plastic Logic is developing some exciting new technologies involving plastic displays and plastic electronics which may turn out to be a “game changer” in the way humankind acquire, organize and consume information. Information leads to power and knowledge is power.

The first thing that pops into my mind when I think of plastic displays is the Nook® e-reader (similar to Amazon’s Kindle) that my parents rely on religiously to fulfill their voracious appetite for reading books. They even purchased Kindle’s for my nieces and nephews who are also avid little readers themselves. I must have overlooked putting an e-reader on my Xmas list since I never got one.

Michael Palmer, himself a best-selling author and friend of my parents, recently told me at brunch the other day that electronics books have now surpassed paper books and that paperbacks will likely be going the way of the Dodo bird in the coming years. I can only imagine that we are talking about unit volumes in the billions of readers globally and likely growing at a healthy clip as the share of literate human beings only grows over time, especially in the developing countries. The below graphic provides eBook sale shipments over last 10 years by quarter; it is important to note that price of a typical paper book is probably 3-4 times greater than an eBook so unit shipments are much greater.

Another application in which the use of plastic displays and electronics might be beneficial include those in the military special operations units for whom the ability to read a map, review airstrike coordinates and/or get real-time actionable intelligence without having to worry about the information getting wet, the display being scratched and any other number of problems would literally mean the difference between life and death and mission success or failure.

There are a plethora of other consumer and commercial related applications for which the use of plastic displays and/or plastic electronics could benefit greatly from; however those will have to wait for another blog on another day. But the possible viable market opportunities for employing plastic displays and electronics are almost, figuratively, infinite.

Plastic Logic is an investor back company which boasts some pretty impressive backers including Intel, Dow Venture Capital, BASF and RUSNANO (Russian Corporation on Nanotechnologies), among others. I figure that these guys at Plastic Logic may actually be onto something and that the way we interact with the world around us may just get that more interesting and exciting in the years to come.

Below are some additional links in the event you want to learn more about Plastic Logic:

http://www.redferret.net/?p=29734  

http://www.reuters.com/video/2011/12/05/russias-ipad-alternative-to-text-books?videoChannel=2602&videoId=222207609

Best wishes for Happy Holidays to all.

 

Some Futuristic Display Technologies to Check Out During the Holidays

I just read an interesting, albeit brief, article outlining 15 futuristic display technologies that may change the way we see the world in the years to come. I love any articles or stories that provide coverage on where technology may be taking us as human beings into the future; having been intimately involved in our wearable technology and smart fabrics initiatives I am particularly fond of developments in these emerging areas on a personal level.

The neat thing about the article I am blogging about is that it actually provides actual pictures of the futuristic display technologies and also has its own link to some futuristic input peripheral technologies as well as a link to a video created by Microsoft on holograms.

I encourage you to check out these links (and other articles on futuristic trends) and to open your mind to the almost infinite possibilities on where mankind may take technology (of all types) into the future as we continue to evolve as an intellectual life form in an unfathomably large and expansive universe.

Predictions for Wireless Networking Product Markets in 2012

As a follow on to last week's blog on wireline networking product market predictions I am making my 2012 predictions for noteworthy things to look for in the smaller, but faster growing wireless networking products markets.

1.  By the end of 2012 the global market for wireless networking infrastructure products, including standalone network management software, will exceed $600 million. Shipments of access points and wireless modems will account for almost 72% of total on a dollar volume basis but will account for only 38.5% of unit shipments.

2.  The reasons for robust growth of wireless connectivity are many and well known but I can highlight a few key ones fueling the robust growth in adoption over the forecast period. Among some of the many benefits of wireless connectivity include: improved efficiency; cost reductions; ability for install where wired solutions impractical or impossible; reduces the majority of the cabling required, thus the associated costs, which is can be more expensive to install in certain locations;  wireless networking allows easier add-ons, changes and removal of functions and is perceived by many users as being more scalable, where this is most valuable where changes or expansions are frequent and expensive; greater flexibility in operations enables companies to run leaner and meaner and maintain responsiveness to changing customer and/or market requirements; increasing trust in wireless networking and technological enhancements made to overcome previous concerns over reliability, latency and security; perceived ease of implementation and lower implementation costs as well as perceived lower maintenance and installation costs; and to obtain greater mobility in industrial facilities which provide benefits of real-time response to machine problems, real-time optimization of machine performance, reduce personnel required and increase productivity, and reducing downtime of both equipment and time to repair.

3.  The fastest growth in demand will come from wireless network switches which currently represent a small niche market which will grow to over 4% of the total wireless networking components segment (excluding standalone network management software) by 2015. Companies such as Motorola are developing increasing traction as companies operating in industrial facilities are both increasing their reliance on wireless connectivity and also increasing the number of devices connected to the network wirelessly.

4.  Laird Technologies will remain the dominant player in antennas, representing the 3rd largest product segment under study, with almost 4x the market share of its nearest competitors in PCTEL, Nearson and Cisco. Antennas segment is forecast for above average market growth as users are expected to increasingly integrate antennas onto existing devices.

5.   Cisco will remain the dominant player in overall wireless networking components shipments but that is a result of their 800 pound gorilla position in the access points segment.

6.  Several other suppliers enjoy leadership positions in the other wireless networking components product segments, among them include GE, ELRPO Technologies, Prosoft Technology, Landis & Gyr, Motorola and Apprion.

7.  Although there is always the chance that an acquisition might take place within the wireless industrial networking infrastructure products market, I am at still trying to think about which companies and/or product segments make the most sense for future PAC Man activity.  I guess Cisco could always decide to acquire someone that will help fill a gap in their product portfolio or Belden could decide to make a quicker entrance into the wireless segment by buying rather than building their own solution(s).

8.  There will be no clear dominant winners among future wireless networks supported but the largest shipment shares of wireless networking components by type of networks in 2015 reveal that 802.11g, b and n networks will be in strong demand and there will still be a sizable share of shipments with the proprietary narrow band networks for applications requiring longer distances and greater security concerns in play.

9.  The five largest consuming markets of oil & gas, power generation, automotive/motor vehicle, water/waste water, and petrochemical and oil refining combined on a global basis for over 58% total 2012 shipments.

Now I am trying to think about what other predictions we can make on other industrial automation markets of interest. I welcome the opportunity to learn about any predictions you may think might come true in 2012 or beyond. I am always intrigued to learn about any rumors on which companies may be on the prowl for a new target to acquire or which supplier may be seeking out their own "white knight".