There are big changes at HP and I wonder if they in any way reflect what may be happening in much of the automation space. This article in Business Insider by Pascal-Emmanuel Gobry takes a more in-depth look at the recent changes than most of the reaction I’ve see so far.
HP’s Dilemma
To recap, Hewlett-Packard (what’s left after spinning off some of the original parts) forced out Mark Hurd for expense account hanky-panky and perhaps hanky-panky of another sort after much public bickering among its Board. The board settled on Leo Apotheker from SAP as the new CEO.
HP at that time had a number of businesses: enterprise software and services; PCs (a combination of its own PCs, the long-ago acquisition of DEC and the more recent acquisition of Compaq—which led to the demise of former CEO Carly Fiorina) and printers; and mobile (acquisition of Palm and its WebOS).
Let’s see, which of those areas would be Apotheker’s strength? Enterprise software and services, of course. But many technology analysts were shocked when word leaked (really poor corporate communications) that HP was going to spin off its PC and mobile businesses. The outcry was intense.
But Gobry argues that HP would have been bled dry trying to fund WebOS to the point that it could begin to compete with Apple’s iOS, Google’s Android and Microsoft’s Windows Mobile. Plus, the PC business is quickly becoming a commodity market. Expect lower gross margins there. HP may not be organized to profit from that type of business as well as the Chinese and Taiwanese competitors.
Relate to Automation
Several years ago, four automation companies rushed to acquire MES companies and move into that enterprise software and services space. PLCs and even SCADA software could be moving into commodity territory. Certainly Rockwell Automation and Siemens kept boosting the high end of their PLC offerings in order to push technology and maintain higher margins. But attacks from lower-cost products had to be eating away at the base. Same with plant-level software.
The vision at the time for these large MES players was to hire sales teams skilled at working with CIO-level customers. The payoff would be huge (as in 7 figure) sales with long term commitments–a la SAP. These sales would be high margin into the foreseeable future.
The only one of the group that had existing high-level relationships was Wonderware—and not really it, but (at the time) Invensys Process Systems. As the two groups merged into Invensys Operations Management, they could take advantage of Peter Martin’s work with CEOs plus the relationships that come more naturally in the process system space where sales for systems for huge projects draw high visibility.
IOM has been working very hard with its InFusion solution at the higher level. Rockwell has worked very hard at cultivating relationships at the CIO and higher level among its customer base. Siemens has taken a decidedly lower profile with its software, at least in dealing with the press. Its focus now seems to be PLM and the digital factory concept. GE Intelligent Platforms seems to be focusing mostly on sales internal to GE, but it still gets out into the open at times. But…most MES sales seem to be done at the plant manager level right now. Most multi-million dollar projects seem to be still in the future.
I’m really just thinking out loud. But many PLC systems are already designed and manufactured in Thailand, China and South Korea. Industrial automation always lags the technology sector by several years. So, what is the future in automation? Will the big players begin to emulate HP? At what point will PLCs (by whatever name) become commoditized? What will happen if a huge Chinese company decides to buy an automation company? China has a lot of national pride (the US has no monopoly on that sentiment!). It could seek to be a player. That would be interesting.
Or was there something funny that baked in with the pizza I had for lunch?
Let me know your thoughts.
