VDC Research: Industrial Sensing, Networking & Control Market Blog

Predictions for Data Acquisition Solution Markets in 2012

With the last of eleven market studies covering the data acquisition (DAQ) solutions markets now being published I decided to take this time to reflect on what I learned over the last several months and to blog some informal predictions on what I may expect to see happen in the DAQ market in 2012 (admittedly I am not going out on many limbs with these).

1. 2012 shipments of external chassis & modules (i.e. DAQ systems), plug-in data acquisition analog I/O boards and standalone (non-bundled) data acquisition software will likely exceed $1.5 billion globally, with DAQ systems accounting for almost 76%.
2. Demand for modular data acquisition systems (one of eight platforms under study) will continue to grow at an above average market growth rate, comprising ~23% of DAQ systems shipments by 2012, as users desire the greater flexibility and ability to mix and match sensor inputs to meet their specific needs without spending on functionality which they do not require.
3. The number of data loggers designed with LCD displays will increase as other suppliers begin to realize that offering video graphic type functionality in a data logger is a sure way to gain market share in that category, just ask Graphtec, Keyence, Hioki E.E. and Dranetz-BMI.
4. Paperless chart recorder suppliers, for units with both >144 mm  and <144 mm panel cutouts, will continue to make inroads into non-process focused markets as an increasing number of these customers realize the benefits of greater real-time visibility into their operations, most of which are increasingly being automated through technology investments.
5. Demand for plug-in analog I/O boards will continue to lag that of most external chassis & module products as an increasing number of users seek out USB PC front ends as they are attractive as peripheral add-ons to computers that are portable and can easily be moved to another platform in a different location. Expectations in usage of USB 3.0 in all new PCs going forward is also expected to help fuel this trend.
6. There will be at least one merger and acquisition within the data acquisition solutions marketplace. The overall market is too large and too fragmented to not experience continued consolidation. Assuming that some predict the future by looking in the rear view mirror of history, some likely targets to consider watching may include Spectris (HBM and Bruel & Kjaer), National Instruments and DynamicSignals LLC. Who knows, maybe ABB or Honeywell will decide to get a little more active in the market and decide to expand their product portfolio beyond paperless chart recorders by acquiring a smaller player.

Okay, so maybe I decided to go out on a limb somewhat with the last prediction but that is what makes these things fun. I welcome to learn about any predictions you may have and/or what you think of mine.

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.

 

Data Acquisition Products Market is Consolidating

Based on soon to be published research VDC determined that the market for data acquisition products has not only grown faster than previous expectations, thanks in large part due to strong demand for modular data acquisition systems, but it continues to experience consolidation.

In 2008, back when the market was just over $920 million, VDC determined that the top 10 suppliers controlled just over 52% of the market for data acquisition solutions (external chassis and boards). New research indicates that the top 10 suppliers now control almost 55% of the $1.4 billion market in 2010.

The composition of the top 10 data accquisition solution (chassis, boards and software) suppliers themselves has also changed dramatically since 2008.

	2010 Shipments
1	National Instruments
2	HBM
3	Yokogawa
4	Agilent Technologies
5	Bruel & Kjaer
6	Campbell Scientific
7	Dewetron
8	Advantech
9	GE
10	VTI Instruments

In 2008 National Instruments was still #1 but most of the other suppliers have either changed position (only Agilent remained at #4), dropped out of the top 10 (Dranetz-BMI and Fluke) or completely exited the market as Sony did over a year ago. 

Companies such as VTI Instruments and Dewetron have made material gains in market share due to strong product offerings, strong technical support and savvier marketing. B & K was not covered in the 2008 research.

The size of the data acquisition market is materially larger than our 2008 research forecast due to expanded coverage which included modular data acquisition systems and standalone (non-bundled) data acquisition software as well as new coverage of VPX and XMC plug-in data acquisition analog I/O boards. Despite the expanded coverage the research indicates the core product markets have rebounded nicely since the global recession of 2009.

The modular systems category comprises the largest share among the external chassis & modules segment and is forecast to experience the strongest growth in demand through 2015. Clearly customers are demanding solutions which offer flexibility and agility in the ability to mix and match sensor inputs while also delivering required performance. Growth rates among VPX and XMC boards are also at well above average board market growth rates due to their enhanced performance, rugged design and growing popularity among military and aerospace applications.

 

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.

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.

 

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.

PAC Man Strikes the Data Acquisition Market - DynamicSignals Acquires Signatec

Back in May I posted a blog raising the issue of possible mergers and acquisition activity in the data acquisition solutions markets. Well it looks like my crystal ball was working pretty well that day as Dynamic Signals LLC has added to its small/mid-size, but growing, portfolio of brand names (including Gage, KineticSystems, Preston Scientific and Cyber Systems) by acquiring Signatec, Inc. at the end of August of this year. Dynamic Signals is a provider of high performance data acquisition and control solutions and its various brands also provide instruments and modules for PC-based test and measurement systems.

The two companies will be covered in VDC's 2011 Data Acquisition Solutions Technology Opportunity Analysis comprehensive regional supply-side analysis reports which will be published later in November as they both provide external chassis & modules such as data loggers, PC front ends and customized standalone systems as well as plug-in analog I/O boards across multiple platforms such as PCI Express/PCI, PCI, PXI, VXI and CompactPCI. These companies' solutions serve higher performance applications found in military and aerospace, communications, computers, automotive, research and educations. Applications served include lasers/LIDAR, spectroscopy, ATE, manufacturing test, testing of nuclear reactor tubing, etc.

In a recent WebCast I discussed two basic strategies that suppliers looking to succeed in the data acquisition solutions markets should consider - take actions needed to get bigger or stay small and remain focused on serving niche segments in which the firm has best in class application level expertise.  Dynamics Signals seems to be achieving both goals with its strategy of acquiring companies to gain economies of scale while also remaining focused on serving segments of the market which require higher performance data acquisition solutions.

I am keenly keeping watch to see what companies may become the next PAC Man merger that takes place as those savvier suppliers further capitalize upon the "clustered" fragmentation that comprises the $1.2 billion data acquisition solutions opportunity.

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.

Accuracy Remains #1 Technical Requirement of Data Acquisition Hardware Users

Based on soon to be published research generated from VDC's 2011 Data Acquisition Solutions Market Intelligence Program in which VDC surveyed almost 600 end users, OEMs and other 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) accuracy remained the #1 most often cited hardware product selection criteria (rated #1 in 2008 VDC Research). VDC asked survey respondents to select their top 5 most important factors (out of 24) they considered before investing in a data acquisition solutions.

However the remaining top 10 product factors respondents selected varied by hardware platform such as external chassis & modules vs. plug-in analog I/O boards. In fact, the top 10 technical requirement selections even varied among respondents of the eight different vertical markets under study as users in different market segments possess some unique requirements and/or perspectives on what is deemed most important to them.

VDC provided new analysis in the 2011 research asking software respondents to rate their top 5 most important factors when considering their product selection. Among software respondents the most important factor was the compatibility with their operating system. Accuracy was rated the 3rd most important factor and was preceded by ease of use.  Users may associate accuracy as being an issue more relevant to hardware and thus place less emphasis upon it when considering data acquisition software.

VDC also asked respondents to rate their top 5 most important commercial requirements (out of 16) they wanted to see provided from suppliers of the data acquisition solutions from which they are considering purchasing. That information and some of its ramifications are saved for a blog on another day.