by Gary Mintchell | Aug 20, 2015 | Commentary, News
Today’s news stream brought to my iPad an item about disappointing results from an auction for Gulf of Mexico oil leases. The oil industry is in the doldrums with $50 per barrel oil. That affects technology companies who supply to the industry. We’ve seen that result in stock prices of those companies.
While considering that economic fact, this survey from PwC US came my way. Optimism regarding the direction of the domestic economy softened in the second quarter of 2015 compared to the previous nine-year high recorded in the first quarter among U.S. industrial manufacturers, according to the Q2 2015 Manufacturing Barometer, released by PwC US.
Respondents also trimmed overall growth forecasts and spending plans, reflecting caution around the strengthening of the U.S. dollar and potential rise in domestic interest rates, as well as continued uncertainty regarding the direction of global economy.
Optimism regarding the prospects of the U.S. economy during the next 12 months decreased to a still healthy 69 percent among manufacturers in the second quarter of 2015, compared to 76 percent in the first quarter, but up from 65 percent in the second quarter of 2014. Optimism about the world economy declined to 38 percent, compared to 42 percent in the previous quarter. Reflecting the reduced sentiment, projected company revenue growth for the next 12 months slowed to 4.9 percent in the second quarter, compared to 5.1 percent in the previous quarter.
“As a result of several macro-economic factors taking shape, U.S. industrial manufacturers seem to be taking a more measured view of business conditions in the year ahead,” said Bobby Bono, U.S. industrial manufacturing leader, for PwC. “Slower GDP growth, the impact of the strong dollar, issues in China and uncertainty in Europe are among the developments that are likely causing industrial manufacturers to reassess the broader economic picture, as well as spending plans across a range of categories. Still, the overall outlook for U.S. industrial manufacturers appears to be positive, marked by relatively high levels of optimism regarding both the domestic economy and company revenue growth forecasts.”
Operational Spending
Reflecting the more cautious outlook, operational spending plans dropped to 75 percent, down from a two year high of 83 percent in the first quarter. Looking at sequential changes among the top spending categories, plans for new products or service introductions dropped to 44 percent from 55 percent, while research and development decreased to 34 percent from 40 percent and information technology decreased to 22 percent from 33 percent during the first quarter. “While these spending decreases are notable, we believe they reflect more of a pause in sentiment, as management teams evaluate strategies to adjust to evolving market conditions, including the possibility of Federal Reserve action later this year” Bono added.
Capital Spending
According to the survey, sentiment regarding capital spending also trailed off with only 34 percent of respondents indicating plans for major new investments of capital in the year ahead, down from 52 percent in the first quarter. Following the recent trend, plans for M&A moderated during the second quarter as well, with 29 percent of respondents indicating an interest, compared to 43 percent in the first quarter and 38 percent in the second quarter of last year.
Headwinds to Growth
Looking at perceived headwinds, survey respondents identified lack of demand, legislative/regulatory pressures and monetary exchange rate as the top perceived barriers to growth in the year ahead. Concern about monetary exchange rate showed the biggest gain, rising to 37 percent of respondents, up from 21 percent in the first quarter. In addition, lack of demand rose to 39 percent, up ten points sequentially, while legislative/regulatory pressure jumped to 39 percent as well, up from 33 percent in the first quarter.
Of interest, the perceived barrier of lack of qualified workers dropped to 24 percent in the second quarter from 35 percent in the first quarter, representing the lowest level in six quarters. The reduced anxiety regarding identifying qualified workers dovetailed with a flat (52 percent) indication sequentially regarding plans to hire more workers in the year ahead. “It’s too early to tell,” Bono added. “But, the softer outlook might be reducing some of the near-term pressure on management teams to add more workers, though the shortage in skilled workers, or the talent gap, remains a long-term challenge across the sector.”
Global Expansion
With regard to global expansion, only 12 percent of manufacturers plan to expand to new markets abroad, and nine percent plan for new facilities abroad, both continuing a trend of reduced overseas expansion seen in recent quarters. Along similar lines, among respondents with international operations, the projected contribution from international sales to total revenue over the next 12 months remained in line with the first quarter at 27 percent, the lowest level since the fourth quarter of 2006.
Impact of Strong Dollar
PwC’s survey also included a section on the stronger U.S. dollar, which found that 82 percent of respondents expect an impact on revenues, average 3.5 percent, in the year ahead. In view of the stronger dollar, panelists believe reform of U.S. corporate taxes might be helpful (53 percent very/extremely helpful) to their own companies’ bottom line over the next 12-18 months. Three other U.S. government actions were also cited as potentially helpful: more sensible U.S. regulations, including financial regulations (49 percent); repatriation of U.S. companies’ international profits at low tax rates, less than 10% (39 percent); and international trade treaties with Asia: China, India, Japan (33 percent). In addition, a majority of panelists believe the stronger dollar may lead to new or strengthened strategic alliances (47 percent) or new or strengthened joint ventures (31 percent) over the next 12-18 months.
by Gary Mintchell | Aug 10, 2015 | Automation, Internet of Things, Interoperability, News, Technology
During NI Week last week in Austin, Texas, IBM representatives discussed some news with me about a new engineering software tool the company has released – called Product Line Engineering (PLE) — designed to help manufacturers deal with the complexity of building smart, connected devices. Users of Internet of Things (IoT) products worldwide have geographic-specific needs, leading to slight variations in design across different markets. The IBM software is designed to help engineers manage the cost and effort of customizing product designs.
You may think, as I did, about IBM as an enterprise software company specializing in large, complex databases along with the Watson analytic engine. IBM is also home to Rational Software—an engineering tool used by many developers in the embedded software space. I had forgotten about the many engineering tools existing under the IBM umbrella.
They described the reason for the new release. Manufacturers traditionally manage customization needs by grouping similar designs into product lines. Products within a specific line may have up to 85% of their design in common, with the rest being variable, depending on market requirements and consumer demand and expectation. For example, a car might have a common body and suspension system, while consumers have the option of choosing interior, engine and transmission.
Product Line Engineering from IBM helps engineers specify what’s common and what’s variable within a product line, reducing data duplication and the potential for design errors. The technology supports critical engineering tasks including software development, model-based design, systems engineering, and test and quality management—helping them design complex IoT products faster, and with fewer defects. Additional highlights include:
- Helps manufacturers manage market-specific requirements: Delivered as a web-based product or managed service, the IBM software can help manufacturers become more competitive across worldwide markets by helping them manage versions of requirements across multiple domains including mechanical, electronics and software;
- Leverages the Open Services for Lifecycle Collaboration (OSLC) specification: this helps define configuration management capabilities that span tools and disciplines, including requirements management, systems engineering, modeling, and test and quality.
Organizations including Bosch, Datamato Technologies and Project CRYSTAL are leveraging new IBM PLE capabilities to transform business processes. Project CRYSTAL aims to specify product configurations that include data from multiple engineering disciplines, eliminating the need to search multiple places for the right data, and reducing the risk associated with developing complex products.
Dr. Christian El Salloum, AVL List GmbH Graz Austria, the global project coordinator for the ARTEMIS CRYSTAL project, said, “Project CRYSTAL aims to drive tool interoperability widely across four industry segments for advanced systems engineering. Version handling, configuration management and product line engineering are all extremely important capabilities for development of smart, connected products. Working with IBM and others, we are investigating the OSLC Configuration Management draft specification for addressing interoperability needs associated with mission-critical design across multi-disciplinary teams and partners.”
Rob Ekkel, manager at Philips Healthcare R&D and project leader in the EU Crystal project, noted, “Together with IBM and other partners, we are looking in the Crystal project for innovation of our high tech, safety critical medical systems. Given the pace of the market and the technology, we have to manage multiple concurrent versions and configurations of our engineering work products, not just software, but also specifications, and e.g. simulation, test and field data. Interoperability of software and systems engineering tools is essential for us, and we consider IBM as a valuable partner when it comes to OSLC based integrations of engineering tools. We are interested to explore in Crystal the Product Engineering capabilities that IBM is working on, and to extend our current Crystal experiments with e.g. Safety Risk Management with OSLC based product engineering.”
Nico Maldener, Senior Project Manager, Bosch, added, “Tool-based product line engineering helps Bosch to faster tailor its products to meet the needs of world-wide markets.”
Sachin Londhe, Managing Director, Datamato Technologies, said, “To meet its objective of delivering high-quality products and services, Datamato depends on leading tools. We expect that product line engineering and software development capabilities from IBM will help us provide our clients with a competitive advantage.”
by Gary Mintchell | Aug 4, 2015 | Automation, Motion Control, News
I’m digesting information to write on from the conference I’m at now. But first, an interlude.
News of an interesting acquisition further consolidating the motion control industry comes from a perhaps unlikely source. Omron Corp. has entered into a stock purchase agreement to acquire a 100% stake in Delta Tau Data Systems, Inc. of California. Delta Tau will become a member of the Omron Group. The acquisition is subject to customary conditions to closing. Omron expects the acquisition to close in early September, 2015.
The reason I categorize this as perhaps surprising is that there has been little news coming from Omron automation for a long time. Occasionally there will be some opportunities to meet and learn something. The last time for me was about two years ago.
Omron states the reason for the acquisition as part of a strategy to promote its development of factory automation technology and strengthen its sales capability in the control device business. Through the acquisition Omron aims to reinforce its technology development and engineering capabilities in the field of motion control designed to drive manufacturing equipment. Merging products and technologies of both companies will also enable delivery of optimized motion control solutions globally through combined distribution networks.
by Gary Mintchell | Jul 30, 2015 | Commentary, Manufacturing IT, News, Operations Management, Software
OK, so I was wrong. Well, I was right and wrong.
My analysis of the Schneider acquisition of Invensys (Foxboro, Wonderware, et. al.) centered on European competition. Namely that as Schneider assembled a large industrial technology powerhouse it was looking at Siemens and ABB—its next-door rivals.
Schneider was already a competitor in the electrical power industry. Acquiring the process automation technologies business with Invensys brought it into more complete competition with ABB.
Software
On the other hand, I thought that Schneider might divest the software business partly because it never really had very much in the way of software.
OK, I was wrong.
Schneider announced last week that “it has reached a preliminary, non-binding agreement with AVEVA Group PLC (“AVEVA”) on the key terms and conditions of a combination of selected Schneider Electric industrial software assets and AVEVA (forming the “Enlarged AVEVA Group”).
On the surface this appears to be a strange marriage. In fact, my friend Walt Boyes did an anti-Schneider rant on his blog this morning. Amongst the rumors he alluded to about Schneider management and how Clayton Christensen’s analysis of acquisitions predicted that the acquisition would go south, he also misunderstood, I think, the implications of this move.
AVEVA is a construction engineering software company. It provides the front-end engineering for plants that Foxboro, Triconix, Avantis, and other ex-Invensys brands operate and maintain.
Design to operate
The upshot is that Schneider should be able to provide an end-to-end solution for process industries similar to what Siemens has done for discrete manufacturing with the integration of UGS and the Siemens PLM division.
By the way, this latter is an example of how a large company can beneficially absorb an acquisition. The merger has worked very well. Other European companies have closely watched this acquisition model. I believe that Schneider will have learned from it.
I wonder what implications for the OpenO&M Initiative and the OGI Pilot program—an ongoing effort to use standards to move data from the engineering design database to the operations & maintenance database. AVEVA was a key player.
Transaction details
It is expected that the proposed transaction would:
1. create a global leader in industrial software, with a unique portfolio of asset management solutions from design & build to operations, with both scale and a distinct market position to address critical customer requirements along the full asset life cycle in key industrial and infrastructure markets;
2. unlock additional value at enlarged AVEVA and Schneider Electric through the potential for material revenue and costs synergies, leveraging on complementary end-markets exposures, customer bases and product portfolios;
3. establish a ‘best in class’ management team and increased brand profile for attracting further talent; and
4. realize the full value of the contributed industrial software assets.
The enlarged AVEVA would have combined revenues and Adjusted EBITA of c. £534 million and c. £130 million, respectively. It is expected that the Enlarged AVEVA Group will continue to be admitted to listing on the Official List of the UK Listing Authority and to trade on the London Stock Exchange plc’s main market for listed securities. Schneider Electric intends to comply with the Listing Rules of the UKLA. As part of the transaction, Schneider Electric would contribute a selection of its industrial software assets to AVEVA and make a cash payment of £550m to AVEVA, (which would subsequently be distributed to AVEVA shareholders excluding Schneider Electric) in exchange for the issuance of new AVEVA shares, giving Schneider Electric a majority stake of 53.5% in the Enlarged AVEVA Group on a fully-diluted basis. Schneider Electric would fully consolidate the business in its Group financials.
In addition to any consultation procedures involving the personnel’s representative bodies that may be required, the transaction remains subject to, amongst other things, the completion of mutual due diligence to the satisfaction of both parties, agreement on the terms of legal documentation, the approval of the respective Boards of Schneider Electric and AVEVA, AVEVA shareholder approval and relevant anti-trust and regulatory approvals (if required). In accordance with the applicable law and regulation of the United Kingdom, a more detailed public announcement has been released today and is available on the AVEVA and Schneider Electric websites as well as on the AMF (French regulatory authority) website.
A further announcement will be made as and when appropriate.
by Gary Mintchell | Jul 29, 2015 | Automation, Industrial Computers, Internet of Things, Manufacturing IT, News, Operations Management, Security, Technology
Personal interlude
After leaving the “magazine editor business” a year ago, probably for good as a full-time editor anyway, I turned to just keeping this blog active. Readership has increased slowly but steadily over the past eight months. About as many people will see an article here as on a magazine Website (not as many total as a magazine Website, but they have much more content).
I decided not to pursue advertising as a revenue source. That seems to be the old way. It’ll hang on for a long time, but growth is not there.
Most of my business is consultation of various kinds including messaging and marketing, research, analysis, Web and digital development, and leadership.
It is more fun and insightful than trying to keep sales people and advertisers happy while forging a new message in a crowded field.
However, Manufacturing Connection will continue to bring the latest relevant news along with analysis about why you should care.
OT coming together with IT
I have been fascinated with what we now call the IT/OT divide (information technology professionals versus operations technology professionals) since about 1986. About that time my company was designing, building, and selling automated assembly machines to industry. Our largest customer was General Motors.
General Motors, in a gigantic brain fart, acquired EDS. And, predictably, it succeeded in totally destroying the EDS culture and making it like GM. That is to say, cumbersome, lethargic, bureaucratic.
But one day a senior manager went through the controls engineering department of one of my best customers and said, “You’re EDS,” “You’re GM.” Then they told us, “GM has the wire from the controller to this terminal block, and EDS has the wire from that terminal block to computers.”
Thus began our difficulties with GM and controls on our machines.
Rockwell and Cisco
These days, noted GM (and many others) OT supplier Rockwell Automation and noted IT supplier Cisco have joined forces to provide architectures, technology, and training designed to bring these forces together.
After 30 years, it’s about time.
Previously the two companies tackled training. With this news, they have tackled security for the Industrial Internet of Things. Most of the following is taken from their joint press release (meaning I didn’t delete some of the superlatives).
The two additions to their Converged Plantwide Ethernet (CPwE) architectures are designed to help operations technology (OT) and information technology (IT) professionals address constantly changing security practices. The latest CPwE security expansions, featuring technology from both companies, include design guidance and validated architectures to help build a more secure network across the plant and enterprise.
The Industrial IoT is elevating the need for highly flexible, secure connectivity between things, machines, workflows, databases and people, enabling new models of policy-based plant-floor access. Through these new connections, machine data on the plant floor can be analyzed and applied to determine optimal operation and supply-chain work flows for improved efficiencies and cost savings. A securely connected environment also enables organizations to mitigate risk with policy compliance, and protects intellectual property with secure sharing between global stakeholders.
Core to the new validated architectures is a focus on enabling OT and IT professionals to utilize security policies and procedures by forming multiple layers of defense. A defense-in-depth approach helps manufacturers by establishing processes and policies that identify and contain evolving threats in industrial automation and control systems. The new CPwE architectures leverage open industry standards, such as IEC 62443, and provide recommendations for more securely sharing data across an industrial demilitarized zone, as well as enforcing policies that control access to the plantwide wired or wireless network.
“The key to industrial network security is in how you design and implement your infrastructure and holistically address security for internal and external threats,” said Lee Lane, business director, Rockwell Automation. “The new guidance considers security factors for the industrial zone of the CPwE architectures, leveraging the combined experience of Rockwell Automation and Cisco.”
Rockwell Automation and Cisco have created resources to help manufacturers efficiently deploy security solutions. Each new guide is accompanied by a white paper summarizing the key design principles, as follows:
The Industrial Demilitarized Zone Design and Implementation Guide and white paper provide guidance to users on securely sharing data from the plant floor through the enterprise.
The Identity Services Design and Implementation Guide and white paper introduce an approach to security policy enforcement that tightly controls access by anyone inside the plant, whether they’re trying to connect via wired or wireless access.
“Security can’t be an afterthought in today’s plant environment. As we connect more devices and create more efficient ways of operating, we also create certain vulnerabilities,” said Bryan Tantzen, senior director, Cisco. “Cisco and Rockwell Automation have been teaming for nearly a decade on joint solutions, serving as the standards-based resource for security in industrial environments. These new architectures and guides build on our collaboration by helping organizations recognize and proactively address today’s security concerns.”
Companies can now take advantage of industry-leading solutions from Rockwell Automation and Cisco to address security from a holistic perspective. Together, the two companies provide a common, scalable architecture for ruggedized industrial Ethernet and enterprise networks, along with unique services, such as security assessments and managed security, to help manufacturers define and meet performance metrics and scale in-house resources.
This announcement further extends the commitment by Rockwell Automation and Cisco to be one of the most valuable resources in the industry for helping manufacturers improve business performance by bridging the gap between plant-floor industrial automation and higher-level information systems.
