# Growth in Industrial Automation

J

#### Jim Pinto

Ralph Mackiewicz brought up some excellent points :

>Measuring the health of the IA market *solely* by the sales (or
>valuations) of traditional suppliers to that market might actually be
>analogous to making the claim in the 1920s that the transportation
>industry was declining because sales of horse drawn wagons was
>declining.

Jim Pinto responded :

>I would welcome suggestions, pointers, indicators, references from
>anyone on this list who can give specific numbers of companies who
>have grown beyond $10m in the past 5 years, or who are growing >consistently at 30-50% per year over the past 5 years. Jim continues : It is interesting that *nobody* has responded, with a list of their favorite companies that are growing fast! Or, that at least a couple of Automation companies would have volunteered (boasted) about their growth and success. Perhaps they are too busy to boast? Let me start out with one : OSI Software (information from Dr. Pat Kennedy, President & Founder) Sales :$50m, looking for $63m in 2001 - consistent growth rate 20-30% Profit : 20% To back it up, Pat sent me a detailed spread-sheet - showing pride in his performance! Well done! I asked Pat - who is growing? why? His response : "Oracle, MS, SAP - the people that stay focused and address customer problems (like the proliferation of proprietary systems) instead of using their API's as competitive weapons." C'mon, Automation Listers - give us some examples of *positive* growth & profit numbers! Cheers: jim ----------/ Jim Pinto email : [email protected] web: www.JimPinto.com San Diego, CA., USA ----------/ W #### Walt Boyes Testmart:$0-$1.6 Million/month in 10 months. Secret: focus on providing value added services, not on being a "dotcom." Real business, with real people who know about test and measurement systems. When we open our "sensors store" in 2001, we expect the same level of growth, for the same reasons. The point is, that growth _can_ exist in the automation industry. It requires a combination of factors. First, it almost demands a smaller company size, with lower overhead than the "big six" or is it the "big four"? Second, it demands a clear vision of what the company is for. Third, it demands 100% congruence with the customers' impression of what the company is for. Fourth, it requires an almost religious sense of the necessity to satisfy the customer. Fifth, it requires a ruthless tightwad's hand on the spending spigot. If you know where you are going, and what to do when you get there, you will grow and prosper. If not, then not. Walt Boyes --------------------------------------------- Walt Boyes -- MarketingPractice Consultants [email protected] 21118 SE 278th Place - Maple Valley, WA 98038 253-709-5046 cell 425-432-8262 home office fax:801-749-7142 --------------------------------------------- F #### Fred A. Putnam Jim Pinto wrote: > Ralph Mackiewicz brought up some excellent points : > > >Measuring the health of the IA market *solely* by the sales (or > >valuations) of traditional suppliers to that market might actually be > >analogous to making the claim in the 1920s that the transportation > >industry was declining because sales of horse drawn wagons was > >declining. > > Jim Pinto responded, asking for financial evidence of growth. > Pat Kennedy and Walt Boyes responded... I like Jim's points. I like Ralph's point, and Pat's numbers. Another analogy is the decline and fall of most of the seven mainframe companies that controlled 80% of the computer business in 1975 -- IBM, Burroughs, Univac/Sperry, NCR, Control Data, Honeywell (!), and Xerox. An excellent reference on this is "The Coming Computer Industry Shakeout", by S. T. McClellan (1984). My favorite case, though, is the decline and fall of DEC right in my own back yard. What all these companies had in common with the "big iron" IA companies of today are business models and corporate cultures tied to vertical integration (translate this as the opposite of embracing standards) and account control. They all locked their customers in, and they all prospered, for a while. Another problem they all had was Moore's Law (translate this as the ever-imploding price of computer hardware) and standards. When you have these problems, you are truly between a rock and a hard place. Does the problems of the Big Iron companies mean this is a sucky industry? NO! The very reason they are having their problems is the same as the reason productivity is soaring in our economy -- low cost, open intelligence distributed everywhere. What I would like to see from you and other industry analysts, Jim, is some data on the number of PC and PLC based systems on the factory floor today, and what that has already caused in the way of lost revenue to the Big Iron companies -- it must be staggering. And that data will bring out the big impact of the small cap companies in this industry. Our company alone has shipped ~100,000 PC based control systems since we were founded at the dawn of the PC revolution in 1981. McClellan, concludes his book with a chapter on the future of the industry. This has a half-page writeup on a little upstart called .... Microsoft. Cheers, Fred 10/25 -- Fred A. Putnam LABTECH, Suite B09, 2 Dundee Park, Andover, MA, 01810 tel:978-470-0099 x231 cell phone:978-375-3115 FAX:978-470-3338 pager: e-mail page message to [email protected] e-mail: [email protected] web: labtech.com J #### Jim Pinto Fred A. Putnam, LabTech <[email protected]> wrote : >What I would like to see from you and other industry analysts, Jim, >is some data on the number of PC and PLC based systems on the >factory floor today, and what that has already caused in the way of >lost revenue to the Big Iron companies -- it must be staggering. >And that data will bring out the big impact of the small cap companies >in this industry. Our company alone has shipped ~100,000 PC based >control systems since we were founded at the dawn of the PC >revolution in 1981. Jim Pinto responds : Yes, the rise of the PC era saw the decline of the "big iron" DCS - distributed control systems (distributed in name only - they were large clumps) - and shortly thereafter PLCs. You've got to remember that DCS and PLCs were developed in the early 70's, and that's a loooong timeframe for any technical equipment. Wonderware and Intellution and others provided PC-based HMI at a price that made DCS obsolete. And, PLCs were lumps of hardware, with no HMI (human/machine interface). So, early PC-based systems were primarily HMI - and then developed other DCS like controls and other functionality. DCS disappeared (like a dinosaur) and PC-based systems (Fisher/Rosemount Delta V and others) arrived. But "control" is still a front-end real-time function, that is supervised (but not performed) by the PC - still done by front-end controllers and PLCs. I don't have specific numbers and couldn't provide them in any case - it would be a "book of charts and dissertations" published by someone like Automation Research. Perhaps someone from ARC can give us summary-numbers here on the List. It is important for us Engineers to discuss these changes, to track where the old dinosaurs are dying, and where the new growth is occurring. Cheers: jim ----------/ Jim Pinto email : [email protected] web: www.JimPinto.com San Diego, CA., USA ----------/ W #### Walt Boyes It has been many years since I have seen a DCS on a factory floor. The last time I saw one was at a Monsanto plant in the late '80's. Discrete manufacturing is almost entirely PC/PLC based and has been so since it was PLC-only. They simply migrated from PLCs with local indication and control to integrating these control loops via data highways (some proprietary some not) to PCs running HMI interfaces. As Jim points out, the step from indicator-only HMI to adding control components was a short one. In the process manufacturing sector, the picture is muddier. DCS systems still exist (Honeywell TDCs, Fisher ProVoxes, Bailey Net90s, etc.) as legacy control systems. New systems are being put in PC-based, with some sort of Fieldbus flavor for sensor-and-loop-to-central-control data highways and ethernet to the MIS/ERP system. Ethernet advocates like Eric Byrnes believe that HSE with suitable add-ons for IS and power, will be the data pathway of the future. I happen to agree with him, but what do I know? It could all be different next Tuesday. Several companies (Siemens Moore and Fisher-Rosemount, for example) are betting the farm on PC/PLC/Ethernet/Web enablement. In the water&wastewater sector, PC-based SCADA and PC/PLC based plant control systems have taken complete control from the proprietary systems like Autocon and the older systems. Datalogging and autodialing systems are becoming web-enabled faster than any other sector...Antx in Austin, LogicBeach in San Diego are two examples of systems that are at the cutting edge of web-enablement of HMIs for these products. In the small manufacturing sector, shrink-wrap MMI and components like complete MMI panels from Red Lion and others have replaced custom HMI programming for the PLCs on the factory floor. They are cheap, modular, and easy to use. In the laboratory, HMI systems compete with proprietary systems for control. In pharmaceuticals, they are having the devils' own time because all of the pharmarobotics manufacturers insist on proprietary control systems, so there is a limited functionality data pathway system that connects robots together. In the semiconductor industry, manufacturing is PC/PLC based primarily, while T&M is HMI-to-testbed (usually with NI's Labview or sometimes with Labtech). Labview/Lookout's migration to the process and factory automation sectors has been slow-to-glacial, even with AutomationDirect pushing it hard. Walt Boyes --------------------------------------------- Walt Boyes -- MarketingPractice Consultants [email protected] 21118 SE 278th Place - Maple Valley, WA 98038 253-709-5046 cell 425-432-8262 home office fax:801-749-7142 --------------------------------------------- M #### Mark Blunier > Jim Pinto responds : > Yes, the rise of the PC era saw the decline of the "big iron" DCS - > distributed control systems (distributed in name only - they were > large clumps) - and shortly thereafter PLCs. You've got to remember > that DCS and PLCs were developed in the early 70's, and that's a > loooong timeframe for any technical equipment. Distributed did not necessarily refer to where the parts were located, but rather system function were distributed to components of the system. > Wonderware and Intellution and others provided PC-based HMI at a > price that made DCS obsolete. And, PLCs were lumps of hardware, > with no HMI (human/machine interface). So, early PC-based systems > were primarily HMI - and then developed other DCS like controls and > other functionality. The DCS is not obsolete. > DCS disappeared (like a dinosaur) and PC-based systems > (Fisher/Rosemount Delta V and others) arrived. But "control" is still > a front-end real-time function, that is supervised (but not performed) > by the PC - still done by front-end controllers and PLCs. The DCS has not disappeared. Many plants still have them. Many plants are installing new ones. > I don't have specific numbers and couldn't provide them in any case > - it would be a "book of charts and dissertations" published by > someone > like Automation Research. Perhaps someone from ARC can give us > summary-numbers here on the List. > > It is important for us Engineers to discuss these changes, to track > where > the old dinosaurs are dying, and where the new growth is occurring. Todays PC-based MMIs using PLC for control with remote I/O, make up the functional components of a DCS. PC-based MMI folks would require the customer to purchase the hardware (PCs, PLC with the Modicon/AB stickers replaced with a there own lable) from them when they licensed the software, they could call it a DCS. The difference in how well the MMI and control configuration are integrated, abilities to make on-line changes with the plant running, system reliability, and cost are reasons why many people are buying the pieces themselves, and why some are still buying the 'big iron'. Mark Blunier "Any opinions expressed in this message are not necessarily those of the company." W #### Walt Boyes Okay, here's another. National Instruments announced its 10th quarter of record breaking profitability, on its way to an unbroken string of 24 years of double-digit growth (33% in 1999) National's new product Labview 6i, is an internet-enabled product that is selling well. I quote from National's investor relations statement and mission statement: "About National Instruments NI (NASDAQ: NATI) leverages commercial technologies, such as industry-standard computers and the Internet, to deliver customer-defined measurement and automation solutions. With more than 2,400 employees and direct sales offices in more than 30 countries, NI is increasing the productivity of engineers and scientists worldwide by delivering easy-to-integrate modular software and hardware. In fiscal year 1999, NI recorded its 23rd consecutive year of double-digit growth with net revenue totaling$330 million."

So, here are some interesting things. National thinks that what they do is to integrate and leverage commercial technologies to provide solutions to their customers. Wait! Doesn't this sound like the things Eric Byrnes and the Fast Factory Ethernet people are saying???

Walt Boyes

---------------------------------------------
Walt Boyes -- MarketingPractice Consultants
[email protected]
21118 SE 278th Place - Maple Valley, WA 98038
253-709-5046 cell 425-432-8262 home office
fax:801-749-7142
---------------------------------------------

D

#### Dave Ferguson

Why are all of the DCS vendors out with NT based systems.......they were losing market share to the Wonderwares and Rockwells of the world because
they were cheaper and still had the functionality.......

I built a full blown DCS actual "distributed control" with many PLC's and HMI's and even won some accolades from Rockwell and Microsoft with them in their time and did it for very close to 1/4th the cost of a DCS systems quote.

Bottom line.....where were the DCS vendors 3 years ago when I asked for similar cost savings and secondly now that they are on board will they fall overboard again when I need the "next thing" and they tell me the only solution is theirs again.....I say "Where were when I needed you last and why should I go with you today....."

Dave Ferguson

Blandin Paper Company
UPM-Kymmene
DAVCO Automation

W

#### Walt Boyes

To continue Jim Pinto's interesting thread:

National Instruments' P/E ratio is 44. Emerson is 22, Rockwell is 11, Honeywell's is 30 (after the GE merger announcement). Most of the "big
iron" companies are lower than these. Rockwell is pretty typical.

So, growth is going on in the Automation Industry. The important questions are how, and where, and why...

Walt Boyes

---------------------------------------------
Walt Boyes -- MarketingPractice Consultants
[email protected]
21118 SE 278th Place - Maple Valley, WA 98038
253-709-5046 cell 425-432-8262 home office
fax:801-749-7142
---------------------------------------------

J

#### Johan Bengtsson

Hmm, sorry for the late reply, but I would like to be one boasting

We have grown quite fast.
What we do is educate in the automation area (both
"traditional" teacher - student and computer based
with simulation.

I guess the need for education have never been bigger than it is now, that is probably part of the reason.

Too busy to boast, well I have been at least.

/Johan Bengtsson

----------------------------------------
P&L, Innovation in training
Box 252, S-281 23 H{ssleholm SWEDEN
Tel: +46 451 49 460, Fax: +46 451 89 833
E-mail: [email protected]
Internet: http://www.pol.se/
----------------------------------------