The Future of Automation

Sept. 1, 2008
Jim Pinto has finally written the column that he’s been aching to write since I asked him to contribute five years ago.
He cares passionately about the automation business, but he is fixated on business growth. He seems to believe that there cannot be a viable company in the revenue range of around $5 billion. He believes that it is simply too difficult to continue to grow at the pace demanded by stock markets—in the automation market. He proposes the idea that automation businesses need to be part of bigger, more diversified, businesses.Let me tackle a few holes that I see in his argument, then I’ll sit back and await what I hope to be a bunch of e-mails that I can expand upon next month. I think this argument points to the future of automation, whether you’re an optimist like me or a pessimist like Jim.Jim thinks that independent automation companies face severe constraints to grow within this market. I ask, what is the difference between similarly sized automation companies—Invensys, Rockwell Automation or Yokogawa (independents), for example, and Emerson Process Management (part of Emerson Electric Co.), Honeywell Process Solutions (part of Honeywell International Inc.) or Siemens automation (part of Siemens AG). All face the same pressures to grow and the same pressures of how to grow organically. On the other hand, they can also make appropriate acquisitions.Implicit in Pinto’s argument is the idea that automation is not a growing market. In his draft, he called it “stable-to-declining.” At a time when the lowest growth percentages reported year over year is about 6 percent, I’d hardly call the market declining. Most of the majors are growing at close to or greater than 10 percent annually. That’s in the face of an economy that’s been declining for a year or so.Organized for growth
One company that’s rapidly approaching Jim’s benchmark for growth problems is National Instruments, the Austin, Texas, supplier of automation and data acquisition hardware and software. I’m writing this column shortly after attending my eleventh NI Week. NI’s growth and diversification of markets is mind boggling. In a down economy with travel costs at an all time high, 2,800 people attended the keynotes and conference sessions. This number is about 23 percent higher than last year’s record attendance.NI takes its basic platform—LabView—and grows it to take advantage of new computing technologies and new applications driven by its system integrator core customer base. It also grows through its organizational DNA. The leaders of the company are not gray-suited management types. They are idea generators and team leaders. James Truchard, “Dr. T,” the co-founder, president and chief executive officer, is famous for going 17 or more levels down in a Google search looking for serendipity. He reads voraciously. He also wanders the halls, bouncing ideas off people. The other co-founder, and NI Fellow, Jeff Kodosky, works in a similar fashion. These actions transfer throughout the entire organization.I think that as long as that attitude and leadership permeates NI, it will continue to be a growing company, no matter what the revenues are. To tie this back to another of Jim’s points, he is concerned about whether leadership in automation companies is bold enough to grow aggressively. I’ve interviewed all of the automation company leaders except Ulf Henriksson at Invensys and Joe Hogan, of ABB (who is new), and I take the optimist view. I think they are. And, I think there’s room for growth in the automation business.Whose side are you on? Click here to read Jim's story. Write Jim at [email protected] and me at [email protected] and let us know.

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