Consolidation continues to rock the industrial software market. I recorded a podcast ruminating on the changes and where the market might be heading. Just last week, I added a blog post about a new CTO at NI. Previously, NI had reported strategy shifts to emphasize software as a key supplement and extension to its strong data acquisition and analytics portfolio. Independent software developers and longtime stalwarts in the market PAS and OSIsoft sold to Hexagon and AVEVA respectively. Iconics is now part of Mitsubishi. Infor went to Koch Industries. One wonders where AWS, Azure, Google Cloud might fit into this mix.
Perhaps you have seen speculation about the financial moves of Emerson and AspenTech. Some people extolled this as a sign of Emerson expanding into software. They missed the point. Emerson tried software making an acquisition followed by a divestiture. Remember Emerson made a big play that became public for Rockwell Automation. It’s obviously hungry for growth of some kind through acquisition.
Meanwhile, AspenTech has resided on shaky financial foundations for quite a while. New management has constructed a firmer structure, but the company still needed a capital infusion.
And again, Emerson had completed a couple of software acquisitions, but I think the financial managers figured out that mixing a software business into a hardware business is tricky. I don’t mean illegal tricky. I mean keeping track of the differing financial models tricky.
I find this financial transaction of Emerson and AspenTech intriguing. It seems to follow the path forged by Schneider Electric when it was trying to figure out what to do with the software portfolio it inherited with a number of acquisitions followed by swallowing Invensys. It took two software acquisitions plus AspenTech, mixed the pot with a wisk, and came away with 55% ownership of a new company dubbed New AspenTech.
Expect to see further consolidation.
Emerson to Receive 55% Stake of New AspenTech
- AspenTech Shareholders to Receive Approximately $87 Per Share in Cash and 0.42 Shares of New AspenTech for each AspenTech Share, Providing Upside through 45% Stake
- New AspenTech Expected to Drive Double-Digit Annual Spend Growth, Best-in-Class Profitability, Strong Free Cash Flow and Be Positioned to Pursue and Complete Strategic Transactions
- Emerson Reaffirms Fiscal Year 2021 Underlying Sales Guidance of 5% to 6% and Adjusted EPS Guidance of $4.06 to $4.08
Emerson and AspenTech announced that the companies have entered into a definitive agreement to contribute Emerson’s industrial software businesses – OSI Inc. and the Geological Simulation Software business – to AspenTech to create a diversified, high-performance industrial software leader with greater scale, capabilities and technologies (“new AspenTech”). Emerson will also contribute $6.0 billion in cash to new AspenTech, which will be received by AspenTech shareholders, in exchange for a 55% stake in new AspenTech. New AspenTech will offer a highly differentiated industrial software portfolio with the capabilities to support the entire lifecycle of complex operations across a wide range of industry verticals, including design and engineering, operations, maintenance and asset optimization.
The new company, which will retain the name AspenTech, enables Emerson to realize significant synergies and accelerate its software strategy to drive meaningful value creation. Majority ownership position in a highly valued, pure-play industrial software leader will give Emerson the platform and flexibility to strategically deploy capital for growth through continued investment and M&A. The transaction continues Emerson’s long history of delivering shareholder value. New AspenTech will be fully consolidated into Emerson financials and is expected to be accretive to adjusted EPS after year one.
Time Sensitive Networking (TSN) holds promise as a real-time and deterministic extension of Ethernet. Principle backers come from the audio-visual industry looking for a standard solution for improving streaming audio/video synchronization. Another obvious benefactor would be industrial manufacturing and production applications.
Standards have little use without testing and certification. The Avnu Alliance moves the standard another step closer to realization with the release of globally scaled testing capabilities. Details from the press release follow.
Avnu Alliance®, the industry consortium driving open, standards-based deterministic networking, announced globally scaled testing capabilities and a comprehensive update of its certification testing procedures at newly authorized, commercial test houses around the world. This advanced global certification program will streamline certification testing of devices with Time Sensitive Networking (TSN) capabilities, including devices implementing the Milan network protocol (using TSN) for professional media, making testing easier and more convenient for Avnu members around the world.
Avnu announces expanded testing at new Registered Test Facilities (RTF) around the world: Allion in Taipei City, Taiwan; Excelfore in Tokyo, Japan; and Granite River Labs in both Santa Clara, CA, USA and Karlsruhe, Germany. These well-recognized, globally dispersed test labs will lower shipping times, offer competitive pricing models, and streamline the process for members seeking to certify products and make communications between testing sites and vendors seamless. These additional test sites and locations give Avnu Alliance greater ability to scale testing capacity to meet demand, while also allowing device manufacturers to enter products into testing with less lead time prior to release.
“As a part of standard networking technology, TSN is built and deployed around the world,” says Greg Schlechter, president of the Avnu Alliance. “Avnu recognized that, for device certification to keep pace with innovation, we needed to expand our testing capabilities and global footprint to increase accessibilty, enable the growth of both test programs and manufacturers, and in general support the diversity of the growing TSN ecosystem.”
Avnu’s goal is to enable an ecosystem of interoperable, secure, low-latency, and highly reliable networked devices using TSN as part of the open IEEE 802.1 Ethernet standards. Avnu has a variety of test plans and programs to help manufacturers implementing TSN ensure interoperability and demonstrate that to their markets through certification programs.
Avnu’s membership brings together experts in automotive, industrial, and networked media as well as all perspectives from across the value chain, including infrastructure providers, silicon and component vendors, and end-device manufacturers. These members collaborate on the current and future requirements for an interoperable TSN ecosystem and define and create conformance test procedures, plans, scripts, and tools for devices and products that leverage Milan and TSN. Those test scripts and procedures are licensed to designated, third-party testing laboratories, where the tests are independently conducted to validate compliance with the specifications.
Certification Management System and Product Registry
To streamline the new program, Avnu has launched a new testing portal and comprehensive Certification Management System (CMS) with simplified and intelligent certification workflows for seamless, transparent communication. Designed and maintained by experienced certification management professionals, the new CMS provides members with real-time visibility into the testing process and the ability to track device progress and timelines.
In this web-based portal, Avnu members can submit products for testing, view results, respond to nonconformance issues, and manage the public listing of newly Certified products. All certification and testing documents are easily managed in a single, centralized location. Intelligent workflows feed data and visibility back to Avnu’s Certification Work Group to track the number of products in certification at each lab, enabling Avnu to scale the capabilities as needed to support testing demand.
In addition, Avnu’s certification website will launch a new product registry with a robust database showing all products currently Certified by Avnu. Advanced filtering capabilities make it easy for members’ customers and end-users to search for products to specify and design into systems.
“With this new certification platform, Avnu continues to innovate in making pre-certification and certification testing easier, faster, and more convenient for member companies, test equipment manufacturers, and test facilities around the world,” added Ed Agis, Certification Work Group co-chair. “Interoperability ultimately accelerates a broader ecosystem of devices, which is the long-term advantage of this advanced global certification platform.”
The certification program will first support testing and certification for Milan devices at new locations. Testing services will continue to be offered at the University of New Hampshire InterOperability Lab. The testing program will continue to evolve; additional certification test plans will become available through these global facilities as the TSN ecosystem grows.
This is the longest I have gone without posting in many years. It has been a busy week around the Manufacturing Connection office, though. I have been assigning soccer officials to games for 33 years. There were more schedule changes, injuries, and dropped games than any previous year. Not to mention several cases of Covid taking referees out for up to three weeks. Today is the last day of my season, so it’s back to normal. Further sign of back to normal comes from using my United and Marriott apps to book a trip to Houston for Rockwell Automation’s Automation Fair. I will be down there November 9-11. If you’re there, ping me. Perhaps we can meet for a coffee or something and some conversation.
Naturally, much news accumulated. Following are some snippets of information. I will follow up with more detailed essays next week.
Schneider Electric Innovation Summit
Schneider Electric held a world-wide Innovation Summit in October. The company’s overall focus seems to be electrical power. But it has a significant automation portfolio. The Summit theme was Powering The Digital Economy and CEO Jean-Pascal Tricoire discussed the many benefits of digitalization. Spokespeople discussed four new offers.
Under the broad theme of Efficiency Chief Marketing Officer Chris Leong discussed Automation Expert. This universal automation solution actually launched last year. It “breaks dependency of hardware and software” with its virtualized controller. Leong noted that the IT world has recognized this architecture for years; it is time for the operations world to adopt.
Under the broad theme of Resiliency, she introduced SmartUPS the Ultra 5Kw. It comes in a 2u form factor with a lighter weight than previous models.
With the broad theme of Sustainability, Leong introduced RM Air Set Medium voltage switches. These gas insulated switches are insulated with pure air and include a small footprint. Also introduced were solutions for electric vehicles. EcoStruxure for emobility includes electric vehicle charger system called pro charger. Also included are Charging Expert that varies charging depending upon time and energy usage, EV Advisor, a cloud based monitor and control of a fleet of chargers.
Emerson Acquires AspenTech, Sort Of
Emerson and AspenTech announced that the companies have entered into a definitive agreement to contribute Emerson’s industrial software businesses – OSI Inc. and the Geological Simulation Software business – to AspenTech creating a new company called New AspenTech.
The transaction accelerates Emerson’s software investment strategy as the company continues to build a higher growth, more diversified and sustainable portfolio, by creating an industrial software company with immediate scale and relevancy. Emerson expects the usual synergies (which realistically never materialize) and flexibility to strategically deploy capital for growth. Software businesses have different financials than hardware ones, and this financial structure may help Emerson in the way a similar financial structure has helped Schneider Electric with AVEVA. New AspenTech will be fully consolidated into Emerson financials and is expected to be accretive to adjusted EPS after year one.
Time Sensitive Networking
Things have been quiet in the Time Sensitive Networking (TSN) area for some time. So, it is refreshing to see the results of some activity. Avnu Alliance announced globally-scaled testing capabilities and a comprehensive update of its certification testing procedures at newly authorized, commercial test houses around the world. This advanced global certification program will streamline certification testing of devices with Time Sensitive Networking (TSN) capabilities, including devices implementing the Milan network protocol (using TSN) for professional media, making testing easier and more convenient for Avnu members around the world.
Blockchain–A New Look
Blockchain has been highly touted as a useful technology for tracking transactions, supply chain, and even IoT. It failed to live up to expectations. In October, I talked with David Iseminger Founder and CEO, Upheaval LLC and developer of Ironweave blockchain. This new technology holds promise for fulfilling blockchain application in manufacturing. This new blockchain technology was built to scale ensuring business continuity, efficient collaboration, and meeting regulatory compliance with automated data creation. Its strength lies in technology that its data is immutable, locked by multiple hashes in each block. It allows millions of interactions per second, and it requires no risky or volatile coins. Finally, each block is independently encrypted with unique keys, it is immune to ransomware, its multiple backups are immediate and automatic, and it allows blocks of any size, any data from small IoT updates to medical images.
Dell Technologies at the Edge
And a few bullet points from Dell Technologies I have lifted from a press release. I once talked with Dell people when they developed the Edge Gateway and had an IoT group. That group has long since dispersed. Everyone I knew is gone except for two who moved into other groups. But, the company still provide some products at the edge.
- Dell EMC VxRail satellite nodes extend automation and lifecycle management capabilities to smallest configuration to date for edge workloads
- Dell Technologies Validated Design for Manufacturing Edge with Litmus helps manufacturers make quick decisions to improve quality and reduce costs
- Dell EMC Edge Gateway connects multiple edge devices across operational technology and IT environments to deliver real-time data insights
- Dell EMC Streaming Data Platform optimizes GPUs to ingest streaming video and supports real-time analytics on Dell EMC VxRail and PowerEdge systems
- Dell Latitude Rugged laptops can withstand harsh edge environments while maintaining high levels of performance and connectivity
NI (formerly National Instruments) has been making some intriguing moves in the last year or so under CEO Eric Starkloff. I wrote recently about Software as a Service and other “as-a-Service” business models. And more recently how HPE is continuing to pivot from primarily a hardware supplier to serious software and as-a-Service model. And a recent post discussed some radical moves at Rockwell Automation in these same software lines. So, NI is rapidly building out a new business model. Which is good. I wondered how they’d grow a business out of (admittedly excellent) hardware. Pay attention to what is happening here.
NI’s release points out that this news, “Underscores company vision to connect test data through software to optimize product development lifecycle.”
NI announced October 6 the appointment of Thomas Benjamin as Executive Vice President, Chief Technology Officer (CTO) and Head of Product Analytics. Thomas will lead NI’s development of software-driven business models essential to the test and measurement market, while driving disruptive technology innovation. The CTO role will be pivotal in driving new and long-term growth opportunities for the company, including new areas tied to data, product analytics, and enterprise software.
Additionally, the company announced the promotion of Scott Rust, an experienced NI leader, to the role of Executive Vice President, Platform & Products. In this role, he will lead NI’s global development teams responsible for building the products required to meet customer needs and the platform capabilities to create differentiation and leverage across NI’s business.
“Thomas joins a strong team of NI leaders and will accelerate our ability to use software, data, and new business models to drive growth across our business,” said Eric Starkloff, NI CEO. “The combination of Thomas’ external experience and software knowledge with Scott’s deep understanding of NI’s platform and customers will enable us to reach an even higher degree of customer and business success.”
Thomas comes to NI with extensive experience building software-as-a-service (SaaS) and cloud native solutions powered by APIs, data, and insights. Most recently he was the CTO and SVP of Technology at SAP Ariba. His career has also included CTO and VP roles at General Electric and Emirates Group, and technology leadership roles at Visa, Walmart, and Oracle.
“NI’s position as a leader in automated test and measurement software and hardware is an excellent match for my track record of implementing robust business models based on a strong technology foundation,” said Thomas Benjamin, NI CTO. “I’m passionate about providing value to customers through the right blend of people, process, innovation and products, and I’m confident that the talent at NI enables limitless possibilities to change how we engineer the future.”
At NI, we bring together the people, ideas and technology so forward thinkers and creative problem solvers can take on humanity’s biggest challenges. From data and automation to research and validation, we provide the tailored, software-connected systems engineers and enterprises need to Engineer Ambitiously™ every day.
Now that I’ve attended one in-person trade show and conference, I’m ready for a few more. I met Terrence O’Hanlon almost 20 years ago at a conference he assembled in Chicago at Rosemont. It was impressive for a small-ish magazine called Maintenance Technology. I didn’t know that I had met the real Terry, though. That came later after my brush with trying to revitalize that magazine and conference.
Since that time, O’Hanlon has brought together an association, website, magazine, and some awesome conferences. His annual large one is coming up in December at Marco Island in Florida. I keep threatening him with coming down and attending. This may be the year. My interests intersect with his in a Venn Diagram sort of way. I’m interested in exploring how IT technologies intersect with industrial technologies in order to improve operations and profitability solving tough problems in production and manufacturing.
If you are coming down, and you should, ping me and let’s meet for a coffee or other adult beverage while discussing the changes impacting us and how we’ll solve tomorrow’s problems.
Following is information about the two conferences held concurrently.
35th International Maintenance Conference
The 35th International Maintenance Conference (IMC) provides a fresh, positive community-based curated experience to gain knowledge and perspective for advancing reliability and asset management through people, their managers, the processes, the data and the technology.
Using examples from the world’s best-run companies and leaders who provide a new view of maintenance, reliability and asset management that results in attendees discovering new ways to advance their organizations that had not occurred to them in the past.
It is about learning how to knock on the door of the “don’t know what we don’t know” knowledge domain and being open to important ideas from others with a mindset of inquiry and discovery.
Mission: Providing opportunities for attendees to discover ways to advance safety, sustainability and success in the workplace aligned to organization objects and aims.
Vision: Connect the people, the knowledge, the technology and the experience of the International Maintenance Conference community and nurture that learning opportunity 365 days per year.
Much of the context, structure and ideas for the International Maintenance Conference is based on the Uptime Elements Reliability Framework and Asset Management System which is in use at over 6,000 organizations with more than 3,700 active Certified Reliability Leaders and practitioners.
WHO PARTICIPATES IN IMC?
Asset Managers, Reliability Leaders, Maintenance Professionals and Operational Managers from the world’s best-run companies.
Attendees are invited to set a goal to create an activated asset management strategy and plan to be executed in an engaged, cross-functional, culture of reliability [leadership] based on what you learn and who you meet at IMC.
The RELIABILITY 4.0 Digital Transformation Conference
The world’s best run companies are connecting the workforce, management, assets and data to automate asset knowledge that can be leveraged for huge and beneficial decisions.
According to a 2021 Reliabilityweb.com Digitalization Study for Asset Management and Reliability, less than 40 percent of organizations have a formal policy, strategy or plan for digital transformation in the context of reliability and asset management. When combined with data that shows that 70 percent of digitalization projects fail to generate sustainable business success when missing a formal policy, strategy and plan, the RELIABILITY 4.0 Digital Transformation Conference exists to amply digitalization success.
Using examples from the world’s best-run companies and leaders who provide a new view for leveraging technology to connect asset data, information and knowledge with the workforce and their managers to make better maintenance, reliability and asset management decisions for a better operation tomorrow.
It is about being open to new ideas with a mindset of inquiry and discovery.
Mission: Providing opportunities for attendees to discover ways to enhance reliability and asset management opportunities by creating new digital business models built on elastic, evergreen connected data environments, digital twins and metaverses in new ways that had not occurred to them in the past.
Vision: Connect the people, the knowledge, the technology, and the experience of the RELIABILITY 4.0 Digital Transformation Conference and nurture that competency development opportunity 365 days per year.
Much of the context, structure, and ideas for the RELIABILITY 4.0 Digital Transformation Conference is based on Uptime Elements IT/OT Knowledge Domain and Digitalization Framework, originally created through a virtual Special Interest Group (vSIG). There is a revised body of knowledge currently being created by the Reliability Leadership Foundation (RLF) Digitalization Consortium, who will be actively involved in contributing to the RELIABILITY 4.0 Digital Transformation Conference.
WHO PARTICIPATES IN THE RELIABILITY 4.0 DIGITAL TRANSFORMATION CONFERENCE?
Professionals who collaborate across operational technology [OT], information technology [IT] and engineering technology [ET] from the world’s best-run companies to advance reliability and asset management.
RELIABILITY 4.0 Digital Transformation Conference attendees are invited to set a target to create the foundation of an activated asset management strategy and plan executed in an engaged, cross-functional, culture of reliability [leadership] enabled by digitalization business models based on what you learn and who you meet at RELIABILITY 4.0 Digital Transformation Conference.
It’s the end of a quarter, and I’m flooded with manufacturing market reports. One set of reports I look forward originates from England and Interact Analysis. Below I’ve summarized three recent reports—a market report and two insights from CEO Adrian Lloyd. I have talked with Lloyd about methodology—something I’m sort of anal about. I don’t detect the usual sloppy thinking in the way they go about compiling data.
Global Manufacturing Industry Output Tracker
- Manufacturing output set for slow 2021 recovery, after unexpectedly small 2020 contraction
- Freight shipping costs increased 5-fold over the past year
- Semiconductor and electronics machinery market grew 8% during 2020
The research shows that recovery in 2021 will be muted, following a far smaller contraction in 2020 than had initially been predicted. Meanwhile, the ongoing semiconductor shortage, coupled with the continued spread of the delta variant, rising freight costs, and growing worker shortages; will create ongoing problems for all manufacturers.
The semiconductor shortage can be attributed to several factors, but the biggest impact comes from the automotive industry. As automotive manufacturers scaled back production in preparation for an expected collapse in demand for vehicles, they reduced their orders for microchips. But the automotive slow-down was not as severe as had been feared, leaving vehicle factories unable to meet demand because their stocks of semiconductors were depleted. Demand for semiconductors then boomed as car factories suddenly ramped up orders, and now Interact Analysis predicts that the semiconductor market will suffer a steep dip in 2023 as the supply situation normalizes.
Rising freight rates have also significantly impacted the manufacturing sector. And the cost of shipping a 40-foot container from China to the US east coast in July 2021 increased by 5 times compared to July 2020, reaching a high of $20,000. There are multiple reasons for this, including staff shortages, saturated ports, soaring demand in certain sectors such as electronics, and delta variant outbreaks. With no end in sight to inflated freight rates, manufacturers are likely to look for solutions that are closer to home in the long run.
The global machinery market took a damaging hit during the pandemic as factories cut back on investment, with the hardest hit sector being machine tools, which slumped by 18% in 2020. However, many machinery sectors fared better, with the market for semiconductor and electronics machinery growing by 8% in 2020. By 2025, all manufacturing sectors will have recovered to 2019 levels, and some segments, such as the metallurgy machinery market, will reach the 2019 mark this year.
One of the market insight reports
Labor Shortages A Major Barrier To Recovery For Manufacturers
The struggle to recruit into manufacturing is unexpectedly hitting some big players
According to the latest available data we have at our disposal, specific regions have been hit hard by labor shortages. The USA heads the list, with the US Bureau of Labor Statistics reporting over 800,000 vacancies in manufacturing alone. Meanwhile, it has been reported in Germany that there are close to 150,000 job vacancies in the manufacturing sector, and 68,000 in the UK. France, on the other hand, reported a mere 5,995 vacancies. So what is going on? The answer is a perfect storm of factors, which vary for each country, but the common denominator is always the pandemic.
The temptation is to look at the USA first, where vacancies have sky-rocketed, but Germany is perhaps more interesting. Traditionally the manufacturing powerhouse of Europe, Germany is currently struggling to reboot its manufacturing sector following the COVID shock. A recent report describes Germany (population – 83 million) as a country with an ageing population, low birth rates, and in desperate need of skilled immigrant labor, much as it was at the time of the Gastarbeiter (guest worker) program in the 1960s, though then the reach-out was for cheap labor.
The pandemic had a major part to play here, slowing migration and significantly reducing the numbers of skilled immigrants entering the workforce. The coalition government has taken some measures to reform the process of recognition of foreign professional qualifications, but they have been described in some quarters as being paltry and nowhere near sufficient to satisfy demand.
Across the pond from Europe, in the US, those 800,000+ job vacancies reported in May and June 2021 constitute double the number of vacancies for a similar period going right back to 2011. This problem has been exacerbated by the high use of unemployment insurance benefits rather than job retention schemes (see here). But pandemic unemployment benefits are scheduled to stop in Q4 of 2021, so we expect many vacancies to be filled. However, as in Germany, there has been a historical shortage of skilled manufacturing labor owing to an ageing workforce. That’s because the US has historically experienced difficulties in attracting younger people into this sector. [Note: I take issue with Lloyd here. Studies I’ve seen point to several additional constraints, and states that ended the payments early have seen no great influx of new workers.]
Finally, we turn to the UK as the third major economy where job vacancies are high. The twin shocks of COVID and Brexit have taken their toll here. For either or both reasons, many EU workers have left the UK and do not intend to return, or indeed cannot return owing to new post-Brexit immigration policies. There has been a resultant serious shortage of haulage drivers – 100,000 being an oft-quoted figure, including 25,000 EU drivers – and a shortage of factory workers. The result has been a disruption of supply chains, particularly in the food and beverage sector. The CBI has reported that general stock levels are at the lowest they have been for 40 years.
Recovery Is Slow, But Global Manufacturing Industry Is Limping In The Right Direction
A perfect storm for semiconductor supply
The long running semiconductor shortage saw strains on supplies caused by booming sales in electronic devices at the height of the pandemic. Additionally, the automotive sector has been a major contributor to the shortage because, as vehicle manufacturers anticipated a slow-down in demand for new vehicles, so they put the brakes on production and reduced orders for microchips. But when the slow-down in demand didn’t happen, car companies couldn’t get chips fast enough, leaving factories full of chip-less cars.
The slowness of supply chains for semiconductor chips – it can be 7 to 8 months between order and delivery – means that this isn’t a problem which is going to go away anytime soon. Not good news for industries that have already taken a battering. The approval of COVID-19 vaccines – a cause for celebration for most of us – has further exacerbated the chip shortage because vaccine vial production caused huge demand for the same raw silicon that is used in microchips. All-in-all, it’s been a perfect storm. The current boom in demand for semiconductors means we are predicting that the market will see a downturn in late 2023 or early 2024, because the glut of orders from manufacturers will inevitably diminish as their chip inventory builds up once more.
Over the long term, one impact of this has been big conversations at government level in the USA and the EU about the need for onshoring of some semiconductor production. If it happens, this will be a long-term trend, and so will do nothing to solve immediate problems. But, for example, Intel has announced that it will invest $20bn in two new chip plants in Arizona, and TSMC is also investing $12bn in a chip production facility in the same state.