VDC Research: Industrial Sensing, Networking & Control Market Blog

Economic Indicators Update - June

Factory Orders (May)

• Orders fall 0.5% in May due to a larger drop in military spending, concluding the consecutive three months of gains. It follows the +0.8% in April, +1.5% in March, and +1.7% in February. Economists originally predicted the factory orders to slip 1.3%.

GDP (1Q14-T)

• 1Q14 came in weaker than expected, down 2.9 percent following an increase of 2.6 percent in the fourth quarter of 2013. This is far below the expected -1.8% and the worst reading since Q1 2009.

Durable Goods (May)

• Durable goods in May fell 1%, due to the decline in demand for transportation, machinery, electronic products, electrical equipment, appliances, and defense capital goods. Many analysts predict that the economy will increase by 3.5% in the April-June quarter.

Chicago PMI (Jun)

• Chicago PMI down 2.9 points to 62.6 in June. Although it is a decline, it is still above last year’s 52.0 reading. June’s data mark the 14^th consecutive monthly expansion as well as the third consecutive month above a 60 reading.

Construction Spending (May)

• US construction spending rises slightly by 0.1% in May, following a gain of 0.8% in April. The severe winter contributed to the industry’s struggle, causing reduced building productivity in many areas. Economists predict that housing and overall construction will improve in coming months.

ISM Mfg (June)

• ISM index of national factory activity remains almost unchanged from May’s 55.4 to June’s 55.3 reading. Although economists polled by Reuters expected a 55.8 reading, a reading above 50 indicates expansion in manufacturing for the 13^th consecutive month.

Auto Sales (June)

• Auto sales in U.S. increased 1.2%, the best annualized number in 8 years. With low interest rates and a brighter economic outlook as its main drivers, the sales of new-vehicles grew to 16.98 million vehicles in June, dispelling fears of a market slowdown. 

 

 

-Regina Yip - Research Associate, IAS

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.

 

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.

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.

Foxconn Initiative Shows a Growing Trend of Factory Automation in China

An article in today's Financial Times described the initiative of Foxconn in China to eventually replace and/or augment their workforce of 1 million workers with increased automation. Foxconn which is a leading contract manufacturer known for their work with Apple products including the iPad currently only uses approximately 10,000 robots. They plan to increase this number to 1 million by 2013. I had several thoughts on what this means.

The Financial Times article cited Alvin Kwock from JPMorgan where he noted ' that the cost of capital for purchasing and operating a robot has now met the cost of the workers it replaces.' In my opinion, the fact that this is happening in China is a particularly big deal. Why do I say this? In a highly automated factory, the main operating costs are for the facility, energy and raw materials. After that, you have the costs for a much smaller number of higher skilled workers. The tipping point comes at the point where China either has enough of these skilled workers to meet the increased demands or the labor costs for them increase to the point where there is not a significant Chinese advantage. At the same time, the governments in EMEA and the Americas are looking to increase job creation. Empty / underutilized factories, available workforces that have re-set expectations, and possible government incentives could drive a shift in the marketplace. The benefits that many N. American and European companies saw from outsourcing over the last 10 years are now drying up to the point that the problems from the logistics and quality are not being offset.

We saw some of this in the preliminary results from our recent level measurement survey. In the survey, we asked 'Do you see the regional percentages for your organizations demand for products changing in 2011 or 2012? Please indicate where you see your regional percentage for your company’s demand for Process Level and/or ITG Products and systems decreasing and increasing in 2011 or 2012.'

Quite simply, it looks like the trend moving the market demand from Americas and EMEA to APAC is slowing and even likely to be reversing.

My other thought is that's a lot of robots and it should make a pretty good impact on the industrial automation market regardless of where they are made.

Marketing Data Acquisition Solutions in the 21st Century

One of the benefits of being a founding sponsor of VDC's market intelligence is the opportunity for clients to review the survey tools and make suggested questions/inputs for considerations prior to launching the web survey and phone interviews. Here is a short blog about one such interesting example from our ongoing 2011 Data Acquisition Solutions Market Intelligence project.

I must admit that when one of our sponsors wanted to add professional networking sites (i.e. LinkedIn, etc.) and social networking sites (i.e. Facebook, etc.) to the list of information sources users rely on to learn more about data acquisition solutions and suppliers I did not anticipate getting much, if any, responses from survey respondents. Regardless I added them to the list so as to provide that benefit and was interested to see the results.

Feedback from over 220 respondents indicates that I may be operating from a 20th century mindset when it comes to marketing.

Below are the top level breakdowns of survey results and where these two mediums fared amongst of list of 19 different information source selections.

Professional Networking Sites

24% of external chassis & module users cited professional networking sites (10th out of 19). 

28% (8th) of plug-in boards users cited relying on professional networking sites

16% (11th) data acquisition software users rely on professional networking sites

As a member I know that people utilize various LinkedIn groups to ask questions about products, solutions, suppliers, etc. Perhaps suppliers can become active participants in such discussions by using "soft sell" approaches which offer up helpful recommendations, perhaps even citing their own solution. Advertising on websites such as LinkedIn may be another way to reach a targeted customer segment. Personally I recommend the "no-cost" solution of being an active group participant; but even that takes time and consistent follow up to have any chance of being effective, so there is no free lunch.

Social Networking Sites

16% (15th) of external chassis users cited visiting social networking sites  indicating their belief that they may learn something on Facebook or some other related website about DAQ.

17% (19th) of board users cited visiting social networking sites

only 8% (19th) of data acquisition software users cited visiting a social networking site

I am not sure why someone would visit Facebook to learn more about data acquisition solutions and suppliers. Perhaps our respondents were using Facebook to keep in touch with colleagues or to utilize that venue to engage in discussions about data acquisition solutions from people they know and trust. With over 500 million users on Facebook I imagine there may be a few data acquisition solutions users, suppliers and/or related stakeholders lurking around who may be happy to share an opinion or suggestion.

If you want to learn more about the other 17 information sources users rely on to learn about data acquisition solutions and suppliers or the plethora of additional analysis on users requirements and preferences, adoption plans, purchase plans, technical and commercial requirements and much more, drop me a line at [email protected].

 

Hope to See You at the Sensors Expo on June 8th in Chicago

I will be presenting some interesting top level findings from VDC's ongoing 2011 Data Acquisition Solutions Market Intelligence program at the Sensors Expo on Wednesday, June 8th. My presentation will be taking place during the Wireless Sensor Data Track from 2:30 - 3:10 PM CST. The previous link provide details on the presentation and the summary findings being presented based on feedback from hundreds of respondents using, specifying and/or for use with equipments/systems being sold (i.e. OEMs) data acquisition solutions.

It will be good to be back at the Sensors Expo again this year to learn more about what's new in the world of sensing, data acquisition and much more. 

If you will be attending the conference on June 8th perhaps we will get a chance to say hello or even have a brief meeting anytime before 2:00 PM to discuss all things data acquisition, networking, wireless sensor networks or something related to pressure, temperature, position or level measurement. If you are interested in scheduling a meeting on June 8th please email me at [email protected]. Thanks. Hope to see you at the conference.

VDC Research Partnering with Sensors Magazine for Data Acquisition Solutions Research

In 2008 VDC asked respondents using data acquisition products how they learned about their data acquisition products and suppliers. The 2nd most cited information source, behind using the Internet, was advertisements in trade periodicals (seems marketing does pay after all). When asked which trade periodical they read to learn about data acquisition solutuions, the #1 trade periodical cited by user respondents was Sensors magazine.

Well the early results from our 2011 Data Acquisition Solutions research tell us that some things do not change, and for the better in this case. The #2 most cited information source among respondents, behind searching the Internet, was ads in trade periodicals. Yet again Sensors was the # 1 cited periodical, and this was before we even agreed on a partnership.

Naturally I was pleased to learn that we would be partnering with Sensors to launch our web survey to their e-newsletter readership. So hopefully if you are a recipient of their weekly newsletter you, or one of your customers, will be receiving an invitation to participate in VDC's online web survey in the near future. We hope to hear from you, your customers and/or especially companies that you may want as customers.

We greatly value feedback from users of data acquisition solutions across many different industry segments and vertical markets. For their participation and a valid email address, respondents will receive an Executive Brief on the findings, and will be entered into a drawing on 1 of 5 $US 100 checks or $US 100 Amazon.com gift certificates to be awarded.

Or if you simply cannot wait you can click here and participate today or share this link with other users of data acquisition solutions who can share their perspectives.  

Data Acquisition Solutions - As the World Turns (Part Two)

Back on March 22nd I blogged about our ongoing web survey in support of VDC's 2011 Data Acquisition Solutions Market Intelligence Program and my preliminary expectations on what users might tell us. I indicated that, based on tracking this segment on and off for over a decade, I did not expect to be too surprised by the results which indicated, as expected, users are demanding greater performance from their data acquisition solutions.

However one result that did suprise me was the indication that users were demanding such improvements without overly unrealistic price expectations (i.e. a decline). Many indicated their belief that prices would either hold steady or even experience a slight increase over the next five years. Obviously there were some respondents indicating their desire to see prices decline 1% to 5% (or more) per annum but most realized or accepted the fact that "you get what you pay for".

Comparing the most most important product features and performance criteria in 2010 to those cited in our 2008 research yielded some interesting results.

Not surprisingly, accuracy remained the number one issue among users of both external chassis and modules and plug-in analog I/O boards. Interestingly it appears that suppliers are doing a better job designing their data acquisition solutions with the user in mind since ease of use did not make into the top 5 criteria in 2010 whereas it was cited by the 2nd largest share of respondents back in 2008.

Conversely it seems that data acquisition software providers may need to focus more on ensuring their data acquisition solutions are more compatible with the user's OS as it was rated #1 factor by respondents in 2010 but did not make it into top 5 criteria cited by respondents back in 2008. There are more such interesting data and insights as VDC's 2010 data provides much more granular analysis among users of external chassis & modules, plug-in analog I/O boards and data acquisition software with their preferences and requirements which were analyzed separately, whereas in the 2008 research the key performance criteria analysis was all lumped together.

However since this is only a blog and it is way too early and too public (only clients get to see the real good stuff) a venue to share the rest of this rather interesting data and story, I would tell anyone interested in learning more about this compelling user analysis to contact Bob Perugini, Account Director, for more details.

I will share more in the coming weeks as more data becomes available but rest assured it will only represent the "tip of the iceberg" in terms of data, information and insights.

My condolences to anyone that follows the two soap operas - One life to Live and All My Children that were cancelled recently. It appears that the As The World Turns soap opera still marches on. Personally I would rather have my teeth drilled than watch any of those silly things.