The beginning of the end of Freedom of choice in industrial automation

Hereinafter, we are talking about the industrial automation market. But if you project all of the following to other markets and industries, then the analogy will be obvious.

Photo by Vaclav on Unsplash
Photo by Vaclav on Unsplash

Large Vendors create Ecosystems for Clients, from which it is impossible to get out. The ecosystem requires such an amount of investment that any attempt to switch to another vendor leads to a colossal waste of resources. More precisely: the entrance for the Client is very simple – this is a solution out of the box, but if the client wants to reuse and develop his solutions, then this is the development of solutions, and then the solutions cannot be transferred to another Ecosystem.

To ensure such dependence, Vendors get deeply into the business processes of companies: they create a vertically integrated set of tools (systems), the key task of which is to get into the Customer’s value chains (CSCC). The closer to the beginning of the chain and the deeper in interaction, the more you can earn on the Client, the more difficult it will be for the Client to abandon the Vendor in the future.

Here I would like to share my opinion on why this is happening and hear considerations of how to be those who cannot create such ecosystems.

In general, most of the value chains of companies are the same: Design – Development – Production / Manufacturing – Implementation – Operation. The differences lie in the tools and resources at each stage. Parallel to this, there are sales stages. Sales are usually provided by other systems.

The delivery of goods to the end consumer (a buyer like all of us) looks like this: Goods (which we use) <- Manufacturer of goods <- Integrator <- Manufacturer of machine tools / complex installations <- Manufacturers of controllers, sensors and other components for creating automated systems <- deeper I will not go down. And I also removed from consideration distribution networks, design institutes, government agencies, etc., these are all supporting entities :)

When it comes to the B2B industrial automation market, and in particular from the side of the manufacturer of instrumentation and controllers, 4 key roles are most often considered:

  • Product manufacturer (End user) – End user and user operating the automation system.

  • Integrator – Installs and configures automation systems at the End.

  • A manufacturer of complex equipment (OEM) – a manufacturer of equipment for a specific task of the technological process (machine, press, ventilation unit, etc.), uses instrumentation and controllers in its products.

  • Manufacturer of instrumentation, controllers and other systems that allow you to create automation systems (Vendors).

Vendors, in most cases, make money by selling equipment (components, controllers, sensors, etc.). Because it carries the greatest added value. They invest huge funds in development and production in order to constantly have competitive (functional and other advantages). But at the same time, in all these processes, equipment, despite its large share in the cost, is an additional component. Those. the designer / developer chooses the equipment that is more convenient for him (it is more convenient to buy, it is more convenient to assemble, it is more convenient to integrate). If he can earn extra money on it, then this is a significant advantage.

To make sure that the End User installs the Vendor’s equipment, he (Vendor) must get very close to the design stage and “help” the designer / developer to lay down convenient (Vendor) equipment. Plus, to provide convenience to the designer / developer / implementer in the future to increase loyalty.

The above is obvious in the current Vendor sales model:

  1. Put equipment into the technological process at the design stage;

  2. Provide easy acquisition and installation;

  3. Provide easy setup, programming;

  4. Give an opportunity to make money for a designer / developer / implementer.

Despite the proliferation of such sales methods, Vendors often exclude the operational phase from consideration. Due to the fact that it has little effect on the decision on the choice of equipment. Those. Operated, as a rule, by the End. But in its design stages there is no choice of equipment. And the development of the system is carried out by the integrator and / or OEM, who is an expert and chooses the right equipment.

The current paradigm works well for Vendors who have high prices and deep discounts. Hooking Integrators into their design tools, providing them with super profits when reselling equipment to End Users.

Despite the fact that the interaction scheme is working and makes it possible for all participants in the equipment supply chain to earn money, competition forces them to save. End-users choose those Integrators who, other things being equal, offer a more budget-friendly solution. And with the current development of the industry, it is becoming easier and simpler to replace a Vendor in a project. Field interfaces and protocols have been standardized, programming languages ​​have been standardized, and user interface has become very similar. As a result, the Integrator can offer the End-user a similar solution on low-cost equipment for a reasonable price.

As a consequence, Vendors fall into the trap of Integrators. Developing their brand, investing colossal resources in development and promotion, they are NOT sure that the equipment will be supplied by the Integrator at the End.

With all this, the system is created for the End. It brings benefits to the End at the operational stage. Therefore, he is maximally interested in the high-quality fulfillment by the system of its mission. And the Vendor is interested that the End-End speaks and controls what equipment the Integrator will supply to him.

The question arises: How can the Vendor make it so that the End User decides what equipment will be installed on him (the End)?

It can be shown that if you do not use a proven supply chain, the operating system will NOT be reliable. Those. inform that if equipment from another Vendor is installed, then the system will NOT be reliable, or if it is performed by a non-certified Integrator, the system will NOT be reliable.

We see such interactions everywhere. Vendors close or constantly try to create new communication interfaces, certify Integrators, etc. It should be noted that this approach is becoming obsolete.

It can be done so that the End user himself designs the systems and installs the equipment. And if we assume that this has become possible, then the Integrators will not decide what equipment needs to be installed and the Vendor can be sure that his efforts were not in vain.

Then the question can be formulated as follows: How can you make it so that the End user designs systems and installs equipment on his own?

It is necessary to transfer the development of a system that ensures the execution of the technological process to the Client. Those. create a tool that will allow the Client to create a model of his enterprise, to model his process of creating value and technological processes.

Then the Integrator at the start of the system development will have a full-fledged technical specification, with functionality, capabilities, equipment specification, etc.

How to make such a tool?

Just:

  1. Make digital models of equipment;

  2. Develop a tool for developing a process of equipment interaction, i.e. create programming languages ​​that can be used by any technologist / engineer who is well versed in the subject area, but does not know modern programming (No-Code, Low-Code).

  3. Learn to translate everything that a technologist / engineer has created into a language understandable for Integrators.

Doesn’t it look like anything?

  1. Digital models are created by Phoenix Contact (PC), Schneider Electric (SE), Siemens and other vendors.

  2. Low-code platforms. Siemens acquired Mendix, SE in partnership with Accenture.

  3. Artificial Intelligence (AI) and Robotics (digital models are well digested by AI and Robots). Siemens has already invested billions of euros in a vertically integrated PLM system, SE is investing in its Ecostruxure and so on.

Why it is good for Vendors.

Having their own design environment for business and technological processes, their digital models, they lay their equipment at the level of the Client’s idea. There is little left to do: the client must associate the opportunity to change his business process with the Vendor.

And this is already there 🙂

The vendor helps the Client to control and manage their technological and business processes. And if the Client is already using something, then in any case, he will first turn to someone he knows.

We already have: Ecostruxure from SE, SmartFactory from Mitsubishi, PLM from Siemens, ABB Ability from ABB, etc. They all talk about the management of technological and business processes at all levels of enterprise decision-making.

The future is already here

The client operates technical systems that ensure the implementation of technological processes in the CCCS. The systems allow him to monitor, control, manage technology, make decisions at any level through the analysis of big data. Design your desired workflow.

The projected desired workflows are easily interpreted by the Integrators into complete, complete system requirements that they can manufacture for the End-user.

Systems for Integrators make it easy to design, develop and manufacture technical systems for End Users, thanks to deep integration with the CSC of equipment suppliers (there can be both Vendors and OEM manufacturers).

Vendors, in turn, by developing tools and facilitating the integration of End-to-End – Integrator – OEM systems, ensure the uncontested presence of their equipment in all processes.


If the described picture is already a reality, then what should those equipment manufacturers who are unable to create such Ecosystems do?

One of the options is to collect crumbs in the industrial automation market and fight for the “stingy wallet” of small / medium-sized Endnikov at the lowest price. This approach will kill most of the Vendors.

It is interesting to know the opinions. Interaction models may already exist that provide new opportunities for small / medium Vendors.

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