Global Shifts in Automation

Complaining about offshore outsourcing is like complaining that the tide has gone out, maintained author, industry analyst and Automation World columnist Jim Pinto during a keynote address at ISA Expo 2004, Oct.

5-7, in Houston.

When the tide is out, ships can’t come to the pier, Pinto said, but just like outsourcing, it’s a fact of life that we must learn to live with. “Do you know what you can do when the tide is out?” he added. “You can dig for clams!”

Pinto urged the ISA audience to do the equivalent of clam digging to make the best of today’s outsourcing reality. “Find a way to compete,” he admonished. “Outsource the things that are cheaper in India and China and use your brains and your skills and your innovation to develop new stuff.”

The outsourcing advice was among numerous tips, insights, warnings and prognostications provided by Pinto during an impassioned and wide-ranging second-day keynote presentation titled “Automation Unplugged—Global Shifts in a New Age.” The address—designated this year’s annual Rimbach Lecture, honoring ISA founder Richard Rimbach—was part of the three-day ISA Expo 2004 conference program sponsored by the Instrumentation, Systems and Automation Society (www.isa.org).

Are you with it?

Pinto focused on challenges facing American manufacturers and automation suppliers. “Productivity, especially in automation, is key. It’s now a global race between regions and nations, and America doesn’t have the birthright to be the leader,” Pinto reminded the ISA audience, adding that those who make things cheaper, faster and better will win. As a result, he said, “you have to reinvent yourself every day, and say, ‘Am I with it?’, because if you’re not, you’re on your way out.”

Major automation suppliers have lost their advantage with products such as programmable logic controllers and distributed control systems, which have now become commodities, available from multiple sources with similar features and price points, Pinto said. Software such as human machine interfaces and manufacturing execution systems are also easily copied.

A technology shift is underway, toward new technologies such as nanotech, microelectromechanical systems (MEMS), wireless sensors and complex adaptive systems, which is helping to drive consolidation among traditional automation vendors, Pinto said. The number of automation suppliers with more than $1 billion in revenues will be reduced from a dozen today to five by decade’s end, he predicted. “The old dinosaurs will die and new leaders will emerge.”

On the global front, the United States and Europe today are losing their technology advantage, according to Pinto. China graduates 700,000 engineers per year, or 37 percent of all its college graduates, he said, and other regions and countries including India, Central and Eastern Europe, Ireland, Russia, Brazil and Mexico are all competing strongly in technology.

Knowledge is power, Pinto said, and the Internet has made physical location irrelevant. He pointed out that low-cost, satellite-link telephone lines enable U.S-based companies such as Dell and Hewlett-Packard to set up personal computer help lines in India more cost-effectively than they can do it here, where wages are higher. There’s a big business in India today teaching Indian workers how to speak with American accents, he said. But the point is that these workers have the knowledge necessary for the job.

Pinto told the ISA audience that the keys to success in today’s global environment include a focus on proprietary and high value-added products that are tailored to the specific needs of customers. “Go global and think local,” he said. Special needs and requirements of customers can often best be handled locally through partnerships and plants in close proximity to markets served.

Inflection points

Put some innovation into your products, Pinto advised, and look for “inflection points” in new technologies. A commodity automation product from a small company that is somewhat lower-priced or improved, when compared to competitive products from the major automation suppliers, may be of little interest to many customers. But many emerging technologies are nearing the inflection point at which they are so much better that “you cannot afford not to have my product,” Pinto said, “Look for things that are 20 times better.

“The good old days are gone and will not return,” Pinto said. But for those with the right attitude, the new days are better than the old days. “Change is good,” he concluded. “Ride the waves.”

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