From the February, 2012 Issue of Cabling Installation & Maintenance Magazine
Two research and analyst firms take different looks at the markets for industrial networking and automation, and both see the potential for growth.
By Patrick McLaughlin
A pair of research and analyst organizations that study the markets for automation and industrial networking, among several other verticals, have delivered overall optimistic views for the technology set’s future. This optimism harbingers potential growth for the business of designing and installing the cabling infrastructure that supports industrial and automation networks.
In late 2011, ARC Advisory Group (www.arcweb.com) projected that global automation markets were on track to return to their pre-recession levels for the full 2011 year. David Clayton, senior analyst for automation with ARC, summed up the results of 2010 and characterized what he expected as final results for 2011. He included some cautions in his analysis.
“High oil prices due to growing demand from emerging nations and continuing political turmoil in the Middle East could upset growth,” he said. “U.S. unemployment rates continue to be a deterring factor, as does the European debt crisis. Due to the numerous risks still present and the lag between orders and final shipment for new project business, short-term prospects for the market range widely by region and industry. While most sectors are expected to experience positive growth over the forecast period, growth in the oil and gas and electric power markets will drive the overall market growth positively in 2011 and beyond.”
Examining data acquisition
Meanwhile, research firm VDC Research (www.vdcresearch.com) published an executive brief analyzing opportunities for data acquisition solutions technology. It focuses primarily on the market for external chassis and modules, as well as the market for plug-in data acquisition analog I/O boards. It also considers standalone data acquisition software. Led by VDC senior analyst Tim Shea, the brief covered the Americas region and is an overview of the more in-depth research and analysis contained in a larger research report.
The brief summarized the market overall by stating, “Despite fragmentation present in the data acquisition market, the overall trend is mainly positive.” But similarly to ARC referencing political turmoil in the Middle East, the VDC brief cites politics and government as influencers of this market’s future. “Political decisions and legislative mandates made by governments operating in the respective countries which comprise the markets in the Americas may have overarching influences, which would impact the future outlook,” it says. “Any political action that will lead to either increased economic expansion (or contraction), greater or lesser political stability, and/or greater or lesser regulations which may impact a company’s ability to compete are issues which could impact the future outlook.
“For example, in the United States the growing concerns over the fiscal deficit, health care mandates, emissions regulations, etc. may positively (or adversely) impact the future growth rates of many industries, thereby impacting the investment in data acquisition solutions as a means of increasing automation, improving productivity and/or quality, and/or complying with regulations.”
What else should we expect heading into an election year? After dealing with politics, VDC described some business dynamics inherent in today’s global economic climate, and how those dynamics can fuel the data acquisition market: “The increasing pressure on companies and organizations to compete more effectively in general and, in particular with suppliers from other, low-cost countries, is creating a growing need to collect, gather and analyze data in greater volumes and to do so with faster response times and also with increasing accuracy. This overall trend is helping to drive an expected increase in most of the data acquisition products and solutions shipments under study.”
In addition to that reality, VDC identified other general drivers of the data-acquisition market, as follows.
Increasing reliance on computer functionality to manage more applications, which creates opportunity for interfaces such as USB, Ethernet and others.
Customers’ need to maximize return-on-investment, which fuels modular data acquisition systems that enable customization.
New and developing applications that require data acquisition.
Like most markets, data acquisition is complex. That is evident in VDC’s analysis that two of the potential drivers may also represent inhibitors to market growth. Specifically, the company says, “The increasing reliance on computing functionality may also be serving as a means of cannibalizing certain data acquisition solutions if the customer can invest in less expensive software and make modifications to the PC that would enable data acquisition functionality without the additional cost of a separate data acquisition product.”
And, “The increasing need of companies to reduce their costs or increase their ROI may force them to delay ... data acquisition solutions.”
Citing trends
Earlier in 2011, VDC highlighted five key trends that the company expected to shape the industrial networking solutions market for that year and beyond. In a statement, VDC described the five trends in some detail, as follows.
1) Real-time Ethernet capabilities will dominate. For a majority of discrete industrial automation applications, Ethernet/IP and PROFInet will serve as primary connectivity solutions for a majority of discrete industrial automation applications. Modbus TCP, ISA SP-100.11a and Wireless HART [Highway Addressable Remote Transducer], on the other hand, will serve as primary connectivity solutions for a majority of process automation applications.
2) “Real” growth for wireless networking solutions. After years of unfulfilled hype and hope, the market for wireless networking solutions will experience a material increase in purchase orders, shipments and revenues. The development of standards, improved technology and security are removing some of the major barriers to adoption and relieving security and reliability concerns. The family of 802.11 networks will play an increasingly dominant role as the technology improves and acceptance of the networks continues to edge out legacy narrowband proprietary networks.
3) Mergers and acquisitions will shape industry structure for the decade to come. VDC expects the impact of a number of technical and commercial market convergences will lead to more merger-and-acquisition activity, with an increasing likelihood that a large IT player will make a “large bet” in acquiring an industrial networking solutions provider.
4) Convergence will rationalize product offerings. To drive costs down, provide space savings and reduce wire interface, automation suppliers are embedding switch port capabilities into products such as network I/O adapters, PLCs and drives. Several major automation control houses indicated as much as 10 percent of their overall product portfolios will comprise products incorporating switch capability to capture growing demand for Ethernet capability, and expect to offer all their products with embedded switch capability.
5) Internalization of engineering and research-and-development. Leading automation suppliers are seeking to reduce cost by taking advantage of lower cost overseas talent with similar, or stronger, education and skill sets. Suppliers, intent on staying close to their customer base, are moving their manufacturing operations overseas and tapping an educated and skilled talent pool at material cost savings.
With global forces pushing and pulling this market, its final chapter certainly has not yet been written.
Patrick McLaughlin is our chief editor.
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