We have seen a number of initiatives by companies that further strengthen our belief that the convergence in the industrial automation space will accelerate in 2017. The industrial automation space is quite complex; and to understand how and why it might evolve in the coming year, it’s critical to look at its three main levels of automation. The automation industry has been centered on a three-layer hierarchical architecture and includes the device, plant and enterprise levels.
The first level of the industrial automation architecture, and the foundation of automation, is a manufacturer’s plant floor equipment with devices like pumps, conveyors, valves, drivers, bottling lines, packaging lines, robots, etc. The primary purpose of this device level is to replace the human being.
The second plant level is equipped with process control systems. These process control systems reduce the amount of hands-on time required to operate a manufacturer’s processes. Moving to this level requires the use of programmed PLCs or DCSs. Created in the 1960s to replace relay-based systems, they have now become a commodity.
The third enterprise level encompasses the planning and information-sharing technologies that allow a company to ensure its business objectives govern the operation of its plant-level control. The enterprise level is all about software and includes MES, PLM (CAD) and ERP.
Automation vendors have typically focused on one type of control product, or one type of device, in either discrete or process automation.
From a vertical convergence, we expect more traditional automation companies to expand into more software / technology-rich automation product offerings. In particular, PLC / DCS companies will focus more on the software and include enterprise-level controls like MES, PLM and ERP in the solution. As a result of commoditized hardware driven by Chinese companies and as a differentiator to compete against them, PLC/DCS vendors will develop more and more dedicated industry-specific libraries to span across textile, food processing, oil and gas, pharma, etc.
As for enterprise-level control, expect more consolidation here with MES vendors to come integrated with ERP and PLM either via partnerships or acquisitions. The increased adoption of cloud-based ERP, SCADA, PLM and MES in industrial manufacturing and the need to have an integrated solution from one vendor definitely will speed up the mergers and acquisitions both on the plant and enterprise levels.
Looking deeper, automation vendors expand their offerings from the device level (robots, drives) to include plant-level controls (DCS, PLC). This is often driven by a rising threat coming from the Chinese manufacturers that are increasingly moving into the low and mid end of automation devices. Unlike the industrial automation controls market that heavily relies on software, Chinese companies have found it relatively easy to penetrate the device level and increase their market share.
This shift toward commoditized hardware is causing traditional automation companies to base more of their business on software. To differentiate themselves and compete against Chinese manufacturers, established automation vendors will acquire device-level vendors and will expand into more software vertical-integrated product offerings.
Having the hardware as the main selling point is becoming obsolete, and the transition from hardware to software will accelerate in 2017. Traditional industrial automation companies are looking for innovative ways to increase their revenues, and focusing on software and its monetization will add more value to their product offerings.
Yana Persky is strategic analysis manager at Gemalto. She has over 15 years of experience in the hi-tech and software industry. Prior to Gemalto, she served as the business intelligence manager for Credorax, VeriFone, IXI Mobile and Magic Software Enterprises. She is an expert in leading in-depth strategic market analysis, evaluating worldwide technology trends and understanding the competitive market to support new strategic leads and business opportunities. Yana can be contacted at yana.persky@gemalto.com.