April and lasting into early May have been extremely busy times for this editor. First a trip to Minneapolis to attend a conference discussing regulatory problems facing manufacturing firms as they compete in a world-wide economy. You can see this report at http://www.automationworld.com/articles/Departments/664.html. Then on to Atlanta for the Indus World user conference of maintenance and asset management software supplier Indus International and across the street (literally) to the user conference of ABB. See the text of an interview I had with ABB's U.S. President, Dinesh Paliwal, at http://www.automationworld.com/articles/Departments/668.html. Last week it was Boston and the Vision East trade show.
The Minneapolis forum was highly political, but speakers recognized and addressed a number of structural problems U.S. manufacturers face when competing with international trading partners. These include health care costs, tort [base "]reform[per thou] to reduce what is seen as exorbitant liability awards, revisions in the tax code to encourage innovation, raising the skill level of the workforce and [base "]leveling the playing field[per thou] for America relative to its trading partners. Trouble is, waiting for favorable political action can be like Waiting for Godot.
The economic news at my other stops was considerably more optimistic. Indus International had reported a profitable quarter for the first time in years and the atmosphere at ABB was almost giddy. That company has a reputation for good management overall, but it has been struggling to rein in costs to match the reduced sales over the last slowdown. Most vendor companies at the Vision show reported signs of optimism. Evidently manufacturing activity is stepping up and companies are beginning to look at ways to improve processes again.
Paliwal's comments were insightful as well as thought provoking. He is upbeat on the current state of the economy for his customers--who are primarily in the pulp and paper, metals, and chemicals sectors. The first two area have undergone a period of consolidation which often leads to a time of over capacity. Paliwal thinks that the capacity issue is stabilizing while the economies of China, India and eastern Europe are providing huge opportunities for growth.
When I asked him what it would take for automation suppliers to survive in the coming years, he pointed to two things: size and industry expertise. "Those that have skill and process competence will have a lot to gain," he stated. "What is more important for customers putting up new plants now is size. They want to know if you will be around, if you will continue to invest in research and development. And the maintenance aspect is very important, something that was not always that important for decision making. I see the state of the industry as the customers looking at the Siemens and ABBs of the world for bigger scope and process competence."
These are interesting points. Does this imply that soon the automation vendor landscape will be more specialized than even today? Certainly Honeywell is seen as strong in areas where perhaps other suppliers are not as strong. Then Invensys/Foxboro has its stronger areas, as does Emerson. ABB's have just been discussed. Would the result of this specialization be fewer choices for manufacturers? Perhaps the market in certain industry segments is just not large enough right now to support thriving competition.
Some process markets must be large enough, though. Rockwell Automation and GE Fanuc Automation have been adding process expertise over the past few years, and Siemens just picked up Moore Products to get deeper into that industry as well. I see a lot of competition in what is the called batch processing, and more to come. These industries include food and beverage, pharmaceutical and certain other consumer goods like liquid detergent.
The size issue is also interesting. It is true that most customers prefer to deal with someone with staying power and the size to offer technical support. The industry has seen a rash of service-oriented initiatives. But smaller companies can have service capabilities, as well. For instance, AutomationDirect built in customer support via phone, then Web, to support its direct sales model. The current incipient trend toward supplier companies taking over entire support and maintenance organizations of their customers, may well require size as price of entre.
One other benefit to size that Paliwal noted regarded innovation. "It's not just percent of sales devoted to research and development," he noted, "but often the absolute dollar amount. Larger companies can devote larger budgets in absolute terms that can yield larger returns." Paliwal then links this issue to platform interoperability. The industry slogan of the 1990s around "open systems" has morphed into a trend toward interoperability.
The nuances are difficult to get into here, but the short description is that there are many different control platforms and trying to reach a point where there is just one standard platform that will accept anyone's control and input/output modules plus software is just not going to happen. What must happen, though, is a way for all the systems to operate in a coordinated manner. This is essential for manufacturers who have added processes over the years with different platforms. It is also essential for a supplier like ABB that has absorbed a large number of control companies with different platforms as it has grown.
Paliwal is justifiably proud of the integration the company has done with its recently released System 800xA platform (see http://www.automationworld.com/articles/Departments/481.html).
I would reccomend that you look at smaller comanies, as well as the large ones, for industry innovation. Look at Opto 22, for instance, that consistently looks at the latest trends from commercial technology and leverages them for industrial applications. Its latest initiative in the machine-to-machine (M2M) sphere, for instance, has even caught the eye of ABB who has announced that it will have M2M products in the future.
I appreciate Paliwal's comments and congratulate him and his team for getting ABB on track. I also have a good feeling about the state of business and innovation in the automation industry today.
7:40:37 AM 
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