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Is Manufacturing Technology Spending Set to Surge?

Investments in cloud computing are expected to play a significant role in increased spending on technology expected over the next several months. And it looks like manufacturing could be along for the ride in a big way.

ARC Group's most recent forecast for automation sector spending.
ARC Group's most recent forecast for automation sector spending.

Spending on technology, largely driven by investments in technologies that leverage cloud computing, is expected to hit $3.6 trillion in 2012, according to Gartner industry analysts, an increase of 3 percent over 2011. A significant chunk of this spending will be on public cloud services, which increased 20 percent in 2011 — from $91 billion to $109 billion. Gartner expects cloud computing expenditures to nearly double to $207 billion by 2016.

This level of investment on cloud computing is important to technology spending in manufacturing for three reasons:

• Manufacturers of all sizes are increasingly moving toward use of Ethernet as the network of choice for both production operations and connection to front-office systems. Many in the manufacturing industry view Ethernet as the most innovative technology to impact automation technology in the past decade.

• The task of managing and accessing the vast amount of data collected by the plethora of intelligent devices and software deployed throughout one manufacturing facility — much less the multiple facilities that make up an increasing number of global manufacturing and supply chain operations — is changing the minds of many manufacturers about maintaining data in a distributed fashion by facility. The appeal of an aggregated storage site for all relevant data that can be accessed anytime/anywhere is quickly becoming reality for more manufacturers.

• The spread of mobile computing.  Manufacturers both large and small are adopting the use of mobile computing to improve both maintenance and operations. You can see evidence of this in GE Intelligent Platforms’ recent release of its ProficySCADA software for the iPad and in Bayer CropScience’s plans to extend use of mobile computing and social networking in its operations. 

In its reporting on the release of the Gartner technology investment numbers, The New York Times said that this 3 percent increase expected in 2012 “while modest, is notable because it is happening in the face of a financial crisis in Europe, slow growth in the United States, and a slowdown in China’s economic growth.”

Though growth in the U.S. overall is slow, activity in U.S. manufacturing is continues to move in a positive direction. This should translate into continued strength in spending on automation technologies here in the U.S. to update existing facilities and in the building of new ones.

In its most recent Automation Index report (May 2012), ARC Advisory Group indicates that only two factors have the potential to stifle continued spending in the U.S.: increasing energy prices, especially gas, and the U.S. presidential election.

Gas prices have remained very stable this year — and have even decreased this summer compared to late spring/early summer prices. Plus, several energy stock portfolios are down 15-18 percent from levels reached a year ago.

As far as the election goes, the sentiment I’m hearing more of is that this election will likely have little impact on planned spending. Despite the dire predictions of economic catastrophe associated with many of the discussions surrounding the Affordable Care Act (ACA), most businesses appear to be realizing that the impacts will be negligible — or at worst, manageable — and not detrimental to planned technology or employee spending. Therefore, the consensus from a business point of view seems to be that stocks and business spending will increase substantially following the election, regardless of who wins. Here’s one such article I’ve seen recently that articulates this point-of-view in an interesting fashion.

Couple these factors with the continued push for revitalizing manufacturing here in the U.S. and, barring disastrous news form Europe, the path ahead for technology spending in manufacturing clearly points up.

I would love to hear about what’s going on at your facility. Is more technology spending planned or not? If so, on what? If not, why not? Weigh in with your comments below.

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