VDC Research: Industrial Sensing, Networking & Control Market Blog

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.

Storm Power Outages - Raise Tempers & Outcry

As the days drag on since last weekend's unusual October snowstorm these are still thousands of households throughout the US Northeast states without power. With each newspaper or TV newscast, you see stories of hardship and outrage over the delays in restoring power. Politicians make public proclamations about utility company incompetence and poor response and it's an easy target. While I'm pretty sure there are at least a few things that utility companies could do better, for the most part they are the doing the best that they can given the circumstances.

Pretend for minute that you are a utility company executive. You have stockholders to answer to and rates are often capped/regulated. Picture the manpower and equipment that you would need to provide the service that everyone is expecting in the wake of the storm. Everyone wants power back on within 24 hours if not sooner. The Northeast based utility companies have brought in crews and equipment from as far as Michigan and, as of today, they still have not finished. What does this mean? If you tried to have resources to deal with the situation in the manner expected, you would have to have at least 3 or 4 times the workforce and equipment. This means that for the other 95% of the year when there were no storms/crisis you would be paying 2/3 of that utility company workforce to do nothing. Electrical rates would have to go up greatly and then there would be a domino effect of consumer cutbacks and manufacturing jobs leaving the Northeast states for lower rate regions.

In closing, working with electrical grid high voltage lines and infrastructure has to be done in a controlled manner to avoid costly mistakes and delays. The crews are doing the best they can and pushing them harder or longer puts their lives at risk. Power companies do make plans and expand / share resources to deal with the seasons and anticipated weather events but this last one was so unprecedented, unexpected and widespread it would be impossible to ramp up for even if cost was not an issue.

I'm sure my view of this matter might be tested if in fact my power was out but give those utility companies and especially the crews you meet a break.

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.

US Manufacturing Profits Hit a New High

In the midst of mixed economic news from Europe a significant bright spot has been recently released by the US Census Bureau about manufacturing profits. In Q2/2011, manufacturing profits have hit levels that exceed even late 2007/early 2008 levels.

 

While some of these profits can be attributed to a weaker dollar, the interesting thing about this is that these profit levels were achieved at similar sales levels as 2008. It is worthwhile noting that even though the manufacturing companies are based in the US, the actual manufacturing being performed is, in many cases outside the US. Even so, in 2008, off-shoring was, for the most part, an already done deal. Therefore, in my opinion,  the profit improvement is more likely due to more efficient manufacturing processes which are often include industrial automation.  There is also a chance that some of this profitability is the result of deferred spending but that was more likely to happen in 2009/2010. Here in 2011, it is likely that manufacturers are spending and will continue to spend on process improvement and that bodes well for economic and, eventually employment recovery in 2012.

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.

 

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.

 

Steve Jobs Touched Us All

I would like to take this opportunity to recognize the lasting impact that Steve Jobs made not only on personal computing and communications but also on how human beings interact with each other and their electronic devices. His real genius lay in the relentless pursuit of perfection and desire to make product design and innovation as user friendly as possible.

I believe that Steve Jobs' influence in designing the iPod, iPhone and iPad had an immense impact on the growth and influence of touch technologies used in electronic devices of all types. Prior to the release of the iPad, the tablet market was confined to relative niche market segments and the continued promises of "explosive future growth" that really never materialized, at least living up to the hype heaped upon it. Post iPad, the market for tablets has reached the mainstream status, with unit volumes in the millions, that was long since projected by Analysts galore.

VDC's touch screen displays research revealed Apple's reliance on projective capacitive technology and its unique multi-touch product designs and application development led to an explosion in demand for all types of electronic devices, typically mobile devices, that offered the intuitive benefits of a touch interface. Apple's development of multi-touch projective capacity design was truly a game changer and brought demand for touch interfaces to a new level.

Word has it that Steve Jobs decided to drop out of college, found a job and then went in search of his true purpose in life by climbing the Himalayas and meditating in search of truth and meaning. I am not sure if he found Nirvana but it certainly seems Steve Jobs found his true purpose in life and we are all better off for it. Steve Jobs may you rest in eternal peace.

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.