VDC Research: Industrial Sensing, Networking & Control Market Blog

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.

 

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".

 

Predictions for Wireline Industrial Networking Product Markets in 2012

As we head into the final month of the year it is always a fun time to ponder what the future may look next year. As a Boston area sports fan I can always hope the crystal ball calls for a Patriots Super Bowl win, a Boston Celtics NBA Championship, another Stanley Cup for the Boston Bruins and/or another Red Sox World Series Championship.

Another fun thing to blog about is what the future may hold in product technology markets that I have covered during 2011. Recently I blogged my informal predictions on what may likely transpire in the data acquisition solutions markets. Today I am blogging about my predictions for the wireline industrial networking products markets.

 Among the most noteworthy predictions (not going too far out on a limb here) I see for the coming year include the following:

1.  The global market for wireline industrial networking infrastructure products, including industrial-grade interconnect products and networking component products (but excluding standalone network management software), will exceed $3 billion in 2012 and will be comprised of over 26,000,000 units.
2. Global demand for network switches for use in industrial facilities will exceed $1.4 billion in 2012 and shipments of managed network switches will account for almost 77% on a dollar volume basis but will account for less than 42% of unit volume shipments.
3. Harting and Molex will be battling it out for leadership of the global market for interconnect products (cables & cordsets and connectors) but will be fighting other suppliers such as Siemens, Japan Aviation Electronics, Belden and/or Erni depending on which product and/or major geographic region is at stake.
4. Cisco will remain the 800 pound gorilla in global shipments of wireline routers across all major regions with no one else even remotely close in market share.
5. Cisco will hold the overall lead in toal network switch shipments but Belden holds a firm grip on 1st place in EMEA and is also a relatively close 2nd place to Cisco in the Asia-Pacific region where Moxa is closing ranks fast in 3rd place.
6. Should Belden make another acquisition of a network switch supplier in the coming, the race for the lead of the largest product segment will really heat up. Given their track record in making acquisitions it is quite possible Belden wants to overtake Cisco for the lead in the industrial networking switch segment. Conversely Cisco could easily expand on their leadership position through an acquisition of another supplier such as RuggedCom, for example.
7. Spectris PLC may decide to continue building its empire in the networking products after having recently acquired N-TRON and Sixnet to join Red Lion Controls as part of its Industrial Controls business.
8. TE Connectivity (fka Tyco Electronics) may decide to acquire another interconnect product supplier to overtake Belden or Siemens and make the top 3, or perhaps TE Connectivity wants to develop a presence in the networking component segment through the acquisition of a supplier offering one or more of the six networking component products under study.
9. Among the Ethernet-based application layer network protocols suppliers are supporting, the battle between EtherNet/IP and ProfiNet is not nearly as intense since each enjoys the relative dominance within the Americas and EMEA, respectively; however the real battle is for dominance in Asia-Pacific and further encroachment on the other's respective regional strongholds going forth.
10. Networking product shipments to the top five consuming markets of automotive, power generation, food & beverage, water/waste water and oil & gas will combine for almost 54% of the worldwide total in 2012.

Okay, so I decided to go out on a few limbs on predictions 6-8 but that is what makes blogging predictions so much fun. Perhaps next week I will blog about my 2012 predictions for the wireless networking products marketplace.

 

As Supporters of WirelessHart and ISA 100.11a battle it out, Are Users Sitting it out on the Sidelines?

There was a couple of different articles recently which discussed some of the issues inhibiting even greater wireless adoption (our networking research shows it already enjoys robust growth) in the industrial automation space. One article that really caught my eye discussed the impact that competition between Wireless HART and ISA 100.11a over which standard will be the dominant enabler of smart instrumentation is potentially having on user adoption rates.

Another reason the article was of interest was because it discussed many of the same hurdles which have previously been holding back greater wireless adoption and also the new technologies are also eliminating many of these same obstacles.

Although our recently published research only covered industrial wireless networking infrastructure products, which represents only a AMll share of products relying on Wireless HART and ISA 100.11a networks, our user survey respondents (comprised of end users, OEMs and channel) indicated a strong demand for networking products using both of these networks.

Expected Trend in Types of Wireless Infrastructure Networks Being Used in Industrial Facilities (Percent of Respondents)
Networks	Current                           Expected
	Share	in 2014
IEEE 802.11g	49%	29%
IEEE 802.11b	40%	31%
Proprietary in 900 MHz Band	37%	36%
IEEE 802.11a	33%	29%
Proprietary in 2.4 GHz Band	33%	35%
Bluetooth	32%	35%
IEEE 802.11n	31%	47%
Wireless HART	28%	40%
IEEE 802.15.4	17%	27%
ISA SP100.11a	15%	31%
ZigBee	6%	8%
Proprietary in 400 MHz Band	4%	6%
Proprietary in 800 MHz Band	4%	4%
Note: Percentages sum to over 100% due to multiple responses

The reason why the article really caught my eye was because it reminded me back in the day in 2001/2002 when I was covering the nascent markets for wearable technology and smart textiles. I remember speaking to some people over dinner, after a conference at which I presented on smart textiles, and I told them not to worry fighting over share position of a small, emerging market, and to focus on growing the pie (i.e. market) until it is big enough to be worth fighting over.

The arcane analogy is somewhat relevant since based on extensive discussions with 50 wireless networking suppliers the global share of wireless industrial networking infrastructure products for use in industrial facilities relying on Wireless HART and ISA 100.11a was 1.6% and 1.3%, respectively. In addition, this situation is frighteningly familiar to the wireline fieldbus network wars that I first covered back in 1997; some of those same wars are still being fought today at the Ethernet-based application layer network protocols in the wireline networking products market.

I am not going to debate the technical or commercial merits of either wireless network in this blog as the article in question does a decent job in covering the basics. I am also not going to publicly state which of the two networks I believe will eventually win out as we have clients in both camps.

Rather I am raising the question as to whether customers really are waiting on the sidelines for an eventual winner to emerge and what the potential impact will be on overall wireless adoption in industrial automation today and into the future. I welcome any thoughts or opinions you may have on the matter.

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.

 

Belden Looks to Secure Its Dominance In Industrial Networking, Acquires Byres Security

Belden continued its plans of maintaining, and expanding, its lead in the industrial networking space with the recent acquisition of Byres Security Inc. (BSI).  BSI’s award winning Tofino™ Security product line will strengthen Belden’s leadership in industrial networking solutions, and the deal will lead to higher investment in Tofino Security technology. BSI will continue to operate independently as a business unit under Belden and its security solutions will most likely be used with Hirschamann's and GarrettCom's branded industrial networking products. The Tofino Security brand remains. The result will be enhanced cyber security for critical industrial automation systems.

It appears that Byres Security can thank the creators of the Stuxnet cyber attack (speculation is that elements of US and Israel governments wanted to thwart Iran's nuclear plans) for the renewed interest in securing industrial automation networks and the acquisition by Belden. Although no details were provided one could speculate that BSI will receive much needed funding for new product development, channel expansion and perhaps a windfall for the husband and wife team that owned the firm.

Although most of VDC's coverage related to security issues as part of its Industrial Networking Infrastructure Products Market Intelligence program dealt with security concerns related to wireless networks, the concern over securing networks and data integrity is also as important factor among wireline networking operations. Belden's ability to market its industrial networking products as “Secured by Tofino” may provide a similar marketing advantage along the lines of "Intel Inside" did for PC suppliers.

Based on VDC's extensive research the markets for wireline and wireless industrial networking infrastructure products will grow at CAGRs of over 20% and 28%, respectively through 2015. It is our belief that the spending on industrial automation related security solutions will grow at even faster rates as a large share of the market is most likely lacking sufficient levels of security to fully protect their automation networks and equipment.

Belden's acquisition will help secure its dominance in industrial networking solutions by further cementing its capabilities in being a supplier of a comprehensive portfolio of networking solutions, of which security related solutions are a major component.

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.