Rockwell Automation’s recent huge investment in PTC for only 8% of the company has sparked a number of thoughts on strategies not only of Rockwell Automation, but also other companies in the market. We’re looking not only at Rockwell Automation in this brief analysis, but also Siemens, Schneider Electric, and ABB.
I’ve left out Emerson, Honeywell, and Yokogawa. The only interesting thing in that part of the market is Emerson’s abortive run at acquiring Rockwell. That was strange. I don’t think that Emerson could have digested such a meal.
The analysis is not to knock anyone but to look for trends and strategies of some of our major suppliers.
I think it begins with Siemens. An executive explained the company’s digital factory strategy and vision many years ago. Then the company acquired UGS and added PLM, CAD, and other digital technologies. There followed other similar acquisitions. I’m thinking mainly of the COMOS product, here.
If you are looking for an articulation of the strategy, I suggest looking no further than Industrie 4.0 and cyber-physical systems.
Sticking with Europe and the competition over there, let’s consider Schneider Electric. This company has been building the “electrification” side of the business which also brought industrial control products and some automation–think Modicon. While it lost considerable market share in PLCs, it did remain in the market. Then it acquired Invensys adding a lot of software (something it never really was good at) but especially process control (Foxboro, etc.). This latter helps it in the power market segment and positions it well against ABB. Siemens of course is the main competitive target. Then is a strange move, Schneider used its software businesses (Wonderware, etc.) as an investment in AVEVA grabbing 51% of the company. Now it, too, has a digital factory strategy in place.
ABB, a strong competitor in the power side of the business and also in process control, acquired B+R Automation. That company was a strong second-tier machine automation supplier fleshing out ABB’s portfolio in the discrete, or machine, automation market. Then it acquired GE’s industrial business strengthening ABB in the “electrification” market. Sounding familiar.
Now look at Rockwell’s investment. That company has flirted with Dassault Systemes over many years for a PLM-to-Control strategy. But nothing ever came of it.
A couple of years ago it acquired thin-client manufacturer ACP and systems integrator Maverick Technologies and MagneMotion a supplier of motion control and conveyor technologies. Then came a large investment in PTC for a small percentage of the company. I speculated that this could be a Digital Factory play along with the respected analyst Joe Barkai, but my friend Keith Larson writing for Putman Publishing (and someone I trust to accurately report on what suppliers are saying) reported that the sought-after prize was a closer integration with ThingWorx. This would be a piece of the Rockwell strategy of “Connected Enterprise” and Larson reported that the target RA product is its MES offering.
In other words, Rockwell Automation seems focused not on the current buzz of Industry 4.0/Industrial Internet of Things/Cyberphysical systems/Digital Factory, but on “making our customers more productive.” Its roots are plant floor and it remains a plant floor supplier.
I am NOT predicting any acquisition of Rockwell Automation, but I do believe that the market needs some continued consolidation. The next five years will be interesting in this market.
This article appeared in TechCrunch. It’s pretty IT oriented, but the thoughts are relevant for the OT world, too.
The author, Ron Miller, reported that Amazon’s AWS move to join an industry standard on a technology known as containers signals the importance of standards.
Get Smart: Standards develop in a number of ways. Not all of them are ISA or ISO or IEC, although these definitely have a place. An industry leader once told me, “Gary, the best industry standards are de facto standards.” These are the ones that build a critical mass among users and developers and that solve real problems.
When AWS today became a full-fledged member of the container standards body, the Cloud Native Computing Foundation, it represented a significant milestone. By joining Google, IBM, Microsoft, Red Hat and just about every company that matters in the space, AWS has acknowledged that when it comes to container management, standards matter.
Does this sound familiar to the industrial automation market? AWS has been known to go the proprietary route, after all. When you’re that big and powerful, and control vast swaths of market share as AWS does, you can afford to go your own way from time to time. Containers is an area it hasn’t controlled, though. That belongs to Kubernetes, the open source container management tool originally developed inside Google.
What does it take for standards to win? Once it recognized Google’s dominance in container management, the next logical step was to join the CNCF and adhere to the same container standards the entire industry is using. Sometimes it’s better to switch than fight, and this was clearly one of those times.
The reason for standards. Standards provide a common basis for managing containers. Everyone can build their own tools on top of them. Google already has when it built Kubernetes, Red Hat has OpenShift, Microsoft makes Azure Container Service — and so forth and so on.
As for end users: Companies like standards because they know the technology is going to work a certain way, regardless of who built it. Each vendor provides a similar set of basic services, then differentiates itself based on what it builds on top.
Benefits for all: Technology tends to take off once a standard is agreed upon by the majority of the industry. Look at the World Wide Web. It has taken off because there is a standard way of building web sites. When companies agree to the building blocks, everything else seems to fall into place.
Wow, this one surprised me, although I’ve been pondering the automation landscape for a long time. There are two things. One is that you never know when the owners of a “mittlestand” type of company are ready to sell. The other is that ABB has been aggressively divesting rather than acquiring.
The telling comment in the press release, though, goes to the heart of what I’ve been saying about fellow European electrical and automation giant, Schneider Electric. Both have their sites set on Siemens.
Now the problem is the typical one–and a huge one. How do they integrate the companies? All three of the large European companies have had problems integrating acquisitions. We’ll look for things such as executive flight and sales growth. Will customers flock to rival Beckhoff Automation for a pure automation play. The larger pure automation play–Rockwell Automation–seems to have conceded Europe–at least for the time being.
I don’t like just republishing press releases, but in this case (since I woke up three hours after the live press conference was held), you have my analysis. Here is what ABB says:
ABB to acquire B&R
Shaping leadership in industrial automation
- Acquisition of B&R (Bernecker + Rainer Industrie-Elektronik GmbH) will close ABB’s historic gap in machine and factory automation
- Creating a uniquely comprehensive automation portfolio for customers globally
- B&R is a proven innovation leader in Programmable Logic Controllers (PLC), Industrial PCs (IPC) and servo motion-based machine and factory automation
- B&R delivered a revenue CAGR of 11% over last two decades and annual sales of >$600 million in the highly attractive $20 billion machine and factory automation market segment
- B&R’s software and Internet of Things (IoT) solutions further strengthen ABB’s digital offering, ABB Ability™
- Clear commitment to B&R’s growth strategy, mid-term sales ambition of >$1 billion
- Continuity of B&R’s management, founders support integration phase as advisors
- B&R’s headquarters in Eggelsberg, Austria, to become ABB’s global center for machine and factory automation
- Transaction funded in cash, operational EPS accretive in year one, closing expected in summer 2017
- Purchase price not disclosed, multiple in line with peer valuations
ABB announced on April 4, 2017 the acquisition of B&R, the largest independent provider focused on product- and software-based, open-architecture solutions for machine and factory automation worldwide. B&R, founded in 1979 by Erwin Bernecker and Josef Rainer is headquartered in Eggelsberg, Austria, employs more than 3,000 people, including about 1,000 R&D and application engineers. It operates across 70 countries, generating sales of more than $600 million (2015/16) in the $20 billion machine and factory automation market segment. The combination will result in an unmatched, comprehensive offering for customers of industrial automation, by pairing B&R’s innovative products, software and solutions for modern machine and factory automation with ABB’s world-leading offering in robotics, process automation, digitalization and electrification.
Through the acquisition, ABB expands its leadership in industrial automation and will be uniquely positioned to seize growth opportunities resulting from the Fourth Industrial Revolution. In addition, ABB takes a major step in expanding its digital offering by combining its industry-leading portfolio of digital solutions, ABB Ability, with B&R’s strong application and software platforms, its large installed base, customer access and tailored automation solutions.
“B&R is a gem in the world of machine and factory automation and this combination is a once-in-a-lifetime opportunity. This transaction marks a true milestone for ABB, as B&R will close the historic gap within ABB’s automation offering. This is a perfect fit and will make us the only industrial automation provider offering customers the entire spectrum of technology and software solutions around measurement, control, actuation, robotics, digitalization and electrification,” said ABB CEO Ulrich Spiesshofer. “This acquisition perfectly delivers on our Next Level strategy. With our unique digital offering and our installed base of more than 70 million connected devices, 70,000 control systems and now more than 3 million automated machines and 27,000 factory installations around the world, we enable our combined global customer base to seize the huge opportunities of the Fourth Industrial Revolution.”
“This combination offers fantastic opportunities for B&R, its customers and employees. We are convinced that ABB offers the best platform for the next chapter of our growth story. ABB’s global presence, digital offering and complementary portfolio will be key for us to further accelerate our pace of innovation and growth,” said Josef Rainer, co-founder of B&R.
“This is a strong signal for our employees as our operations in Eggelsberg will become ABB’s global center for machine and factory automation,” said Erwin Bernecker, co-founder of B&R. “The most important thing to me is that the companies and their people fit so well together and that our founding location will play such a key role.”
With the acquisition, ABB will expand its industrial automation offering by integrating B&R’s innovative products in PLC, Industrial PCs and servo motion as well as its software and solution suite. ABB will offer its customers a uniquely comprehensive, open-architecture automation portfolio.
B&R has grown successfully with a revenue CAGR of 11 % over the last two decades. Revenues more than quintupled since 2000 to more than $600 million (2015/16). The company has a rapidly growing global customer base of more than 4,000 machine manufacturers, a proven track record in automation software and solutions and unrivaled application expertise for customers in the machine and factory automation market segment.
Both companies have complementary portfolios. ABB is a leading provider of solutions serving customers in utilities, industry and transport & infrastructure. B&R is a leading solution provider in the automation of machines and factories for industries such as plastics, packaging, food and beverage. The joint commitment to open architecture increases customer choice and flexibility facilitating connectivity in increasingly digitalized industries.
Substantial investments in innovation
Innovation is at the heart of both companies. B&R invests more than 10 percent of its sales in R&D and employs more than 1,000 people in R&D and application engineering. ABB spends $1.5 billion annually on R&D and employs some 30,000 technologists and engineering specialists. Going forward, ABB and B&R will continue to invest considerably in R&D.
Automation of machines and factories is a key driver of the Fourth Industrial Revolution and the IoT. ABB will continue B&R’s strong solution-based business model and build on its deep domain expertise to develop new software-based services and solutions for end-to-end digitalization. ABB’s industry-leading digital offering, ABB Ability, will now capitalize on the large installed base, application and solution know-how, simulation software expertise and advanced engineering tools of B&R.
Proven integration approach
On closing of the transaction, B&R will become part of ABB’s Industrial Automation division as a new global business unit – Machine & Factory Automation – headed by the current Managing Director, Hans Wimmer. Both companies consider B&R’s management and employees as a key driver of future growth and the business integration together with their counterparts from ABB. The co-founders of B&R, Erwin Bernecker and Josef Rainer, will act as advisors during the integration phase to ensure continuity.
The integration will be growth-focused and live by the “best-of-both-worlds” principle, with ABB adding its own PLC and servo drive activities to the offering of the new business unit in a phased approach. ABB underlines its clear commitment to continuing the B&R growth story by articulating a mid-term sales ambition to exceed $1 billion.
ABB is committed to further investing in the expansion of B&R’s operations and to building on the company’s successful business model and brand. B&R’s headquarters in Eggelsberg will become ABB’s global center for machine and factory automation.
Austria benefits as technology and business hub
With this acquisition, ABB becomes the largest industrial automation player in Austria. ABB has operated in Austria for more than 100 years. With the strong future role, B&R and its headquarters in Austria will play as part of ABB, Austria, particularly Upper Austria, will benefit. The planned expansion of the R&D and production activities in Eggelsberg and Gilgenberg will strengthen Austria’s high-tech industrial landscape.
The transaction multiple is in line with peer valuations. The parties agreed not to disclose the purchase price. ABB will finance the acquisition in cash. The transaction is expected to be operationally EPS accretive in the first year, and is expected to add significant synergies of about 8% of B&R’s stand-alone revenue in year four. The transaction is expected to close in summer 2017, subject to customary regulatory clearances.
I have business related to an angel investment and too much other travel to attend this week’s Honeywell User Group in San Antonio and Siemens Summit in Las Vegas. Trying to get to both events was both expensive and too exhausting to attempt. I had one friend, at least, who was going to both. More power to Greg.
I’ll analyze from reports I see from those there and from press releases. I know that Honeywell Process Solutions anticipated one major security announcement at HUG, but I would have been gone had I decided to attend anyway.
Meanwhile, I’ve been writing about the Internet of Things, fieldbuses, and networks for some time. The ODVA reached out asking if I’d like an update on its process industry work with EtherNet/IP. Of course, was the reply. It has a stand at ACHEMA in Frankfurt (another place I could have gone…) and sent me this update that would be the centerpiece of its press conference there.
Along with Rockwell Automation’s entry into the process industry automation market, EtherNet/IP usage now must incorporate process industry standards to go along with factory automation (discrete industry) usage. Partner Endress + Hauser has been building out devices that are EtherNet/IP enabled. This is an interesting addition to process industry “fieldbus” market (I know, perhaps EtherNet/IP is not a “real” fieldbus, but it will be used like one).
This was ODVA’s first appearance at ACHEMA, where ODVA members and EtherNet/IP suppliers Endress+Hauser, Hirschmann, Krone, Rockwell Automation, Rosemount, Schneider Electric and Yokogawa have assembled a demonstration of EtherNet/IP to explain to visitors ODVA’s approach to the optimization of process integration. Illustrating typical process applications, such as clean-in-place, highlights of the demonstration include:
- Use of EtherNet/IP to connect best-in-class solutions and devices for process applications;
- Integration of traditional process networks, such as HART, Profibus PA and Fieldbus Foundation, into an EtherNet/IP network; and
- Movement of data between field devices, such as pressure sensors and flow meter, and plant asset management systems.
ODVA’s process initiative, launched in 2013, is intended to proliferate the adoption of EtherNet/IP in the process industries. Initial focus has been on the integration of field devices with industrial control systems and related diagnostic services, leading to a road map for adapting the technology to the full spectrum of process automation needs, including safety, explosion protection, long distances and comprehensive device management.
“EtherNet/IP is at the forefront of trends in convergence of information and communication technologies used in industrial automation. Although industrial Ethernet was first adopted in the discrete industries, today EtherNet/IP is widely adopted in hybrid industries and is spreading into process industries, said Katherine Voss, president and executive director of ODVA. “Because ACHEMA is an international forum for users in chemical engineering and the process industries as a whole, ODVA felt it would be helpful to the ACHEMA’s audience to broadly showcase to process users the opportunities for integration improvements, optimized network architecture and increased ROI that EtherNet/IP can afford.”
I saw on the Automation World and Packaging World Websites that the company, Summit Media LLC, has sold to the Packaging Machinery Manufacturers Institute (PMMI). I figured that there had to be a sale endgame for the owners. They have had a long relationship with PMMI, and this makes sense for it–at least as far as Packaging World goes. It’ll be interesting to see what becomes of Automation World. Maybe they’ll leave it alone. It should be profitable.
All I can say is congratulations to the principal owners Lloyd Ferguson and Joe Angel. The took a chance starting a magazine (first Packaging World, then with Dave Harvey, Automation World), worked hard, invested shrewdly. They deserve the payout.
Things changed a lot when Dave Harvey passed away four years ago that led to new ownership situation. It was time for me to move on. Not that it wasn’t somewhat traumatic. Now things will change a lot again. I’ve been through numerous buyouts as an employee. There are always many assurances at the beginning, and then reality sets in.
When I was contemplating a change in 2013, Dr. Henry Cloud released “Necessary Endings.” It seemed to speak directly to my situation. Now, I’m refocusing again. And Cloud has released a new book, “Never Go Back.” Again he seems to be talking directly to me. I recommend both books as a means to help you open your eyes to your situation and help you move on and grow.
In 10 days or so, I’ll be at a Schneider Electric software user group. This is the old Wonderware/Invensys event. I’m betting that it will be totally different from the old Wonderware gatherings. Even different from the ones Invensys held. It is looking like marketing is moving to the old APC group. Its message is energy management and power. Sometimes they don’t even pay lip service to automation.
<sigh> Many changes in the industrial control and automation market over the past 11 years. What I’m trying to do now is figure out the new directions and hot technologies and go there. I’m not tied to advertisers or tradition. So, let’s dive into what’s new. All thoughts welcome. Drop me a line at [email protected] ManufacturingConnection.com with your thoughts of what I need to cover to keep all of you at the forefront ot technology and stratagies.