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BY ARC ADVISORY GROUP                                                          NOVEMBER 2001




                     ARC User Survey:
                  PLC Supplier Preferences

Executive Overview ................................................................................ 3

Primary and Secondary PLC Suppliers – How Important Is Brand? ............ 4

How Do Users Select PLCs?.................................................................... 9

Why Do Users Switch PLC Suppliers? .................................................... 10

Which PLC? The User/OEM Struggle ................................................... 12

Converting Controls: Who Pays the Bill? .............................................. 15

Recommendations ............................................................................... 17




Enterprise & Automation Strategies for Industry Executives
ARC Strategies • November 2001




                                       20
                                       18
                                       16                                                                                                                                                   OEMs                          End-users
                  No. of Respondents


                                       14
                                       12
                                       10
                                       8
                                       6
                                       4
                                       2
                                       0
                                                                                                      better local




                                                                                                                                                                                          faster PLC




                                                                                                                                                                                                                                                           larger PLC
                                                                                                                                                              better tech support
                                                                                  price/performance




                                                                                                                                                programming




                                                                                                                                                                                                                               reduced # of
                                                                                                                                better/easier




                                                                                                                                                                                                       smaller/cheaper




                                                                                                                                                                                                                                                                        (capacity)
                                            more innovative




                                                                                                                     presence




                                                                                                                                                                                                                                              suppli ers
                                                              products




                                                                                                                                                                                                                         PLC
                                                                         better




                 Top Reasons Why End Users and OEMs Switched PLC Suppliers




           Commercial Issues                                                                                                                                     Technical Issues

            1. Quality of products                                                                                                                                                  1. Quality of tech support

            2. Quality of pre-sales service                                                                                                                                         2. Reusable programming code

            3. Local presence                                                                                                                                                       3. Integration with 3rd party devices

            4. Wide range of products                                                                                                                                               4. Uses IEC 61131-3 languages

            5. Supplier’s reputation                                                                                                                                                5. Supplier’s reputation

            6. Discount price                                                                                                                                                       6. Supports open networking standards

            7. Willingness to customize products                                                                                                                                    7. CPU scan time

            8. List price                                                                                                                                                           8. Wide range of related products


          Criteria for Selecting a New PLC Supplier from a Recent ARC User Survey




2 • ARCweb.com • Copyright © ARC Advisory Group
ARC Strategies • November 2001




Executive Overview

ARC’s recent PLC brand preference survey posed questions about PLC selec-
tion behavior to nearly one hundred users of PLCs worldwide.                The
responses were split nearly 50/50 between OEMs and end users. The results
provide some new insight as to how and why users choose their brand of
PLCs, why users switch suppliers, and how end users and OEMs react when
forced to consider using a different PLC.

On the demand side of the automation market equation, concepts like brand
awareness and brand loyalty take on new dimensions. Controls supplier se-
lection is closely tied to the huge investments necessary for everything from
spare parts inventories to the training of engineering, maintenance and op-
erations personnel. The lack of industrial standards forces users to commit to
suppliers’ proprietary technologies and programming languages, making
switching costs high. As a result, end users make multi-year commitments -
ideally to one or two suppliers - to minimize costs. Despite this, over a third
of users surveyed have switched suppliers in the past five years for reasons
ranging from better price/performance to local presence in target markets.

                             Other
                             11%


                                                               North
         Europe
                                                              America
          31%
                                                               58%



         Major Geographic Regions Represented in ARC's User Survey


How do end users and OEMs choose their PLC suppliers? The survey results
indicate that performance is still the most important selection criterion for
users. For complex applications like packaging machines, OEMs are migrat-
ing to specific solutions, such as combined PLC and motion controllers, and
limiting the number of alternate solutions they offer. Other OEMs, especially
those that serve the automotive industry, still bow to the wishes of their cus-
tomers and implement whatever PLC is specified.         OEMs tell ARC that
customers today are less willing to disrupt a complex, carefully tuned auto-
mation solution by specifying their own PLC.




                                                                 Copyright © ARC Advisory Group • ARCweb.com •   3
ARC Strategies • November 2001




                                 Two-thirds of end users surveyed stated that they dictate the type and brand
                                 of PLC to be used on OEM machines. If an OEM didn’t offer the desired PLC
                                 brand, most end users would insist on a controls conversion to their brand –
                                 or look for another OEM. Half of those would share at least some of the con-
                                 version costs. Most OEMs would implement a different PLC if required, but
                                 would expect the customer to share the extra costs. In general, the balance of
                                 power between customer and OEM hasn’t changed – it’s just been stirred up
                                 in light of the increased complexity of some PLC applications.



                                               Other                         Food & Beverage
                                               35%                                16%


                                                                                                       Pharmaceutical
                                                                                                           11%



                                                                                                       Petrochemical
                                                                                                            7%
                             Fine Chemical                                                      Automotive
                                  5%           Electronics/                        Consumer         6%
                                                              Pulp &   Packaging
                                             Semiconductors   Paper       5%        Products
                                                   5%          5%                  (non-food)
                                                                                       5%



                                    Respondents to ARC's User Survey Represent a Wide Variety of Industries




                                 Primary and Secondary PLC Suppliers –
                                 How Important Is Brand?

                                 Consolidation in the industrial controls industry has reduced the number of
                                 suppliers in the market to a handful of vendors offering increasingly broader
                                 and more complete solutions. While this trend gives users less choice, the
                                 remaining suppliers now offer extensive product lines of well-integrated
                                 components extending far beyond just PLC hardware and software. The first
                                 part of ARC’s survey takes a look at the importance of PLC brand, why
                                 automation users buy PLCs from certain suppliers, and what pressures they
                                 face in making supplier selection decisions.

                                 Geography is by far the most influential factor in deciding which PLC to use
                                 among end users and OEMs. Each of the top three PLC suppliers in the



4 • ARCweb.com • Copyright © ARC Advisory Group
ARC Strategies • November 2001




world – Siemens, Rockwell and Mitsubishi – dominates its own respective
home market – Europe, North America and Asia. For this reason, discussion
of the results is broken down by region.


North America
Of 48 North American users surveyed, 63 percent use Rockwell Automation
(Allen-Bradley) as their primary supplier (68 percent of OEMs, 58 percent of
end users) and 13 percent named Rockwell as their secondary supplier. Sie-
mens is the primary supplier for 13 percent of the surveyed North American
users (5 percent of OEMs, 19 percent of end users), while a full 23 percent
listed Siemens as their secondary supplier.                                While these results confirm
Rockwell’s dominance in its home market, they also confirm that Siemens is
making inroads as a viable alternative in this coveted market.


                                           Primary PLC Supplier - North America
                                              Primary PLC Supplier – North America
                                            68%
                                  70%
                                                                             58%
   % of N. American respondents




                                  60%

                                  50%

                                  40%

                                  30%                          23%
                                                                                   19%          19%
                                  20%

                                  10%              5%     5%                              4%

                                  0%
                                                     OEMs                          End-users
                                        Rockw ell Automation     Siemens      Schneider        Other




          Respondents from North America Clearly Favor Rockwell
Meanwhile, Siemens’ High Growth Is Threatening Schneider's Number Two Position


Only two North American respondents listed Schneider Electric, fourth in
market share worldwide and second in North America, as primary supplier
(5 percent), while a full 13 percent named Schneider as their number two
supplier. However, ARC’s North American market share data shows that
Siemens, Schneider, and GE Fanuc have all gained market share over recent
years while Rockwell’s share has declined steadily. The real threat is coming
from Siemens’ massive push to gain market share at the cost of local suppli-
ers which has driven their double-digit growth in the North American



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ARC Strategies • November 2001




                                 market. In fact, last year Siemens nearly caught up to Schneider and GE
                                 Fanuc in the North American market with the three suppliers each owning
                                 about 13 percent share.

                                                  Machine OEMs in North America have a stronger preference
       While the survey results confirm           for locally made automation products than end users.      In
     Rockwell’s dominance in its home             ARC’s survey, 68 percent of OEM respondents listed Rockwell
        market, they also confirm that
                                                  as primary supplier while only 5 percent named Siemens.
  Siemens is making rapid inroads as a
                                                  OEMs tend to use local products like Schneider or Rockwell
      viable alternative in the coveted
               North American region.             and are as reluctant as their European counterparts to imple-
                                                  ment controls of another brand unless pushed by their
                                                  customer. However, nearly 23 percent of North American
                                 OEMs named Siemens as their secondary supplier, versus just 13 percent for
                                 Schneider. This is a strong confirmation of Siemens’ number one position
                                 worldwide and of the trend for OEMs to cover the majority of customers’
                                 wishes by reducing the number of PLC suppliers supported to just a few so-
                                 lutions.

                                 Of the North American end users surveyed, 58 percent identified Rockwell as
                                 primary suppler versus 19 percent for Siemens. This gap in the preferences
                                 of OEMs and end users is explained by end users’ taste for machinery im-
                                 ported from Europe and other parts of the world. The United States, for
                                 example, typically imports twice as many textile machines as it exports. If an
                                 end user does not specify the specific brand of controls to be used on ma-
                                 chines, most European OEMs will simply use their own house brand – which
                                 is most often Siemens.

                                 As secondary supplier, North American end users named Siemens and
                                 Rockwell equally (14 and 16 percent) while 9 percent indicated Schneider,
                                 and 17 percent said they didn’t have a secondary supplier. While these are
                                 “snapshot” data and do not reflect historical trends, they do suggest a trend
                                 towards end users supporting fewer PLC types.


                                 Europe
                                 European automation users accounted for 31 percent of the responses. Of
                                 these users, an average of 46 percent named Siemens (31 percent of OEMs, 70
                                 percent of end users) while Rockwell Automation averaged 27 percent as
                                 their primary supplier (31 percent of OEMs, 20 percent of end users). Sie-
                                 mens was identified by 19 percent of all users as secondary supplier while 23
                                 percent named Rockwell.




6 • ARCweb.com • Copyright © ARC Advisory Group
ARC Strategies • November 2001




                                                    Primary PLC Supplier - – Europe
                                                     Primary PLC Supplier Europe
                                                                                             70%
                                     70%
   % of total European respondents




                                     60%

                                     50%
                                                                   38%
                                     40%
                                                  31%     31%
                                     30%
                                                                                     20%
                                     20%
                                                                                                       10%
                                     10%

                                     0%
                                                          OEMs                             End-users

                                                        Rockw ell Automation   Siemens      Other




                                           Siemens' Dominance in Europe Faces Only Minor Threats
                                                         from Other Competitors


Siemens, with a European market share of 47 percent according to ARC’s
PLC Worldwide Outlook 2000, clearly dominates its home market.                                                 The
seemingly inflated result for Rockwell is due to at least two reasons. Firstly,
large American-based producers and several large European global accounts
- especially those in the food & beverage and consumer packaged goods in-
dustries – have plants all over Europe. These global manufacturers often
have a worldwide controls strategy employing a single architecture from a
single supplier, regardless of location, and often use Rockwell products. Sec-
ondly, many European OEMs, eager to sell machines in the North American
market, offer Rockwell controls as a second standard.

Schneider Electric fared worse in ARC’s survey, despite a pan-Atlantic pres-
ence with both the Modicon and Telemecanique brands. Of 85 respondents,
only two reported Schneider as their primary supplier, and both were in
North America. However, ARC received no survey responses from users in
France - Schneider’s home market. In Europe, Schneider is the second largest
supplier behind Siemens and is particularly strong in the auto industry.
Schneider scored high marks as a secondary supplier, where results averaged
13 percent in the North American and European markets.




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ARC Strategies • November 2001




                                                          Secondary PLC Supplier - NA and Europe

                                                    70%
                                                             Secondary PLC Supplier – NA and Europe
                                                    60%
                                                                                   52%
                                                                                                                        46%


                                 % of respondents
                                                    50%

                                                    40%

                                                    30%           23%                              23%
                                                                                                          19%
                                                    20%     13%          13%                                    12%
                                                    10%

                                                    0%
                                                                  North America                             Europe

                                                            Rockw ell Automation         Siemens         Schneider        Other



                                             As a Secondary Supplier, Siemens Enjoys a Comfortable Position Among All
                                                  Users While Rockwell Still Dominates the North American Market


                                 European OEMs were split equally between Siemens and Rockwell, but the
                                 sample size of this group (16) is inadequate for a fair statistical comparison.
                                 Interesting in the results from these machine builders is presence of many
                                 second tier suppliers not belonging to the Top Three, such as GE Fanuc, Ber-
                                 necker & Rainer, Robert Bosch, Moeller and Indramat.                                However, more
                                 significant is Siemens’ high overall ranking (31 percent average) as secondary
                                 supplier to OEMs. Even in markets where Siemens doesn’t dominate, OEMs
                                 still see the need to offer the products of the world’s market leader to meet
                                 the needs of demanding global customers.


                                 Asia/Pacific
                                 While the results from users in the Asia/Pacific region were too few to be
                                 statistically interesting, it is important to acknowledge Mitsubishi’s 51 per-
                                 cent market share in Japan and its advancement to the global Number Three
                                 position, according to ARC’s latest PLC Worldwide Outlook study. In fact,
                                 Mitsubishi’s dominance in its home market is much great than that of its ri-
                                 vals Siemens and Rockwell in their respective markets. Also noteworthy is
                                 Mitsubishi’s global Number Two position in the smallest sized (nano) PLC
                                 category and Number Three position in the large categories.




8 • ARCweb.com • Copyright © ARC Advisory Group
ARC Strategies • November 2001




How Do Users Select PLCs?


Brand Loyalty – A Question of Investment
Brand awareness in industrial automation is quite different from brand
awareness in other industries. Consumers may switch soft drink brands
weekly or drive a different make of car every few years. But industrial
automation requires huge secondary investments in everything from spare
parts inventories to the training of maintenance and operations personnel.
Furthermore, a lack of industrial standards forces users to commit to certain
proprietary technologies such as controller programming environments and
network protocols. As a result, end users must make a multi-year commit-
ment - ideally to a single supplier - to minimize costs.

Good documentation                              Ease of configuring/using HMI

Ease of coding                                  Integration with plant network

32 bit processing, integration of servo mo-     Reliability and support
tion into PLC (real closed loop)

Development software pricing                    Local presence at OEM site

Training availability for our end users         Safety related products, certifications

Pre-sales support with servo application        Speed of delivery
knowledge & sizing

Industry standards                              New versions compatible with old ones

Small product range to cover most applica-      Good service
tions

The availability of integrators and engineers   Long product lifecycles
with experience with the PLC

End user acceptance                             Temporary loan of equipment

Personnel at supplier                           Software! Software! Software!
     Secondary Reasons Given by Respondents for Selecting a PLC Supplier


But the reality of automation is not that simple. Despite supplier consolida-
tion and the trend towards more comprehensive product offerings, many
manufacturers still rely on a variety of suppliers for everything from sensors
and contactors to middleware for application integration. Often, special ap-
plication needs can only be met by specific solutions from smaller, innovative
companies, especially in areas like motion control or machine vision. Most
automation users address this problem by specifying a “house brand” to be
used wherever possible, and third party products for specific tasks. The au-



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ARC Strategies • November 2001




                                 thorization of third party products is often dependent upon connectivity and
                                 compatibility with the house brand.


                                 How Important Is Brand Loyalty?
                                 To better understand how and why users make their PLC supplier selection,
                                 the survey asked users to rank the importance of using a certain brand of
                                 PLC on their machines. Eighty-seven percent of all respondents ranked PLC
                                 brand as either “very important” or “important”.

                                                                        Less important
                                                  Somew hat important         2%
                                                        11%



                                                                                                         Very important
                                      Important                                                              45%
                                        42%




                                           How Important Is the Brand of PLC Used on Your Machines?




                                 Why Do Users Switch PLC Suppliers?

                                 Switching PLC brands is expensive. Besides the software that has to be re-
                                 written, employees in departments from engineering to maintenance to
                                 purchasing have to be retrained. PLC suppliers like to build in switching
                                 costs.   For decades, suppliers have only paid lip service to industrial stan-
                                 dards affecting programming languages and field bus protocols – all in the
                                 interest of keeping switching costs high to protect their customer base.

                                 However, in the survey, 35 percent of all automation users have switched
                                 their brand of PLC in the past five years. If the costs of switching are so high,
                                 then why have over one third of all users switched?


                                 Innovation and Price/Performance Are Most Important
                                 Users who have switched brands were asked to give their reasons for switch-
                                 ing (multiple answers were allowed).                    The responses were surprisingly
                                 similar between OEMs and end users. The most popular reason for switch-




10 • ARCweb.com • Copyright © ARC Advisory Group
ARC Strategies • November 2001




ing was because the new supplier offered more innovative products (21 per-
cent) or better price/performance (18 percent). This confirms that despite the
high cost of switching, customers still place high value on both performance
and price and are willing to change suppliers if they find a better deal.

                                              45%
 % of responses (multiple answers possible)




                                              40%

                                              35%                                                                                                                            OEMs                                           End-users

                                              30%

                                              25%

                                              20%

                                              15%

                                              10%

                                              5%

                                              0%
                                                                                                              better local




                                                                                                                                                                                            faster PLC




                                                                                                                                                                                                                                                                larger PLC
                                                                                                                                                                      better tech support
                                                                                          price/performance




                                                                                                                                                        programming




                                                                                                                                                                                                                                  reduced # of
                                                                                                                                        better/easier




                                                                                                                                                                                                          smaller/cheaper
                                                    more innovative




                                                                                                                                                                                                                                                                             (capacity)
                                                                                                                             presence




                                                                                                                                                                                                                                                 suppliers
                                                                      products




                                                                                                                                                                                                                            PLC
                                                                                 better




                                                Top Reasons Why End Users and OEMs Switched PLC Suppliers


“Better local presence in our markets” was the third most named reason for
switching suppliers. This is good news for the top three suppliers – and bad
news for the rest of the pack. The effects of globalization are forcing many
OEMs to look beyond their own borders to increase sales and smooth out the
dips due to economic fluctuation in some markets. As OEMs sell more ma-
chines abroad, local service and support become more important. Local
presence is also important for global conglomerates in the food & beverage
and consumer goods industries, many of whom have unified controls archi-
tectures around the world and only use the products of suppliers with a true
global presence.

Other significant reasons given for switching PLC suppliers were better or
easier programming (12 percent), faster PLC execution time (11 percent), and
better technical support (9 percent).




                                                                                                                                                                                                         Copyright © ARC Advisory Group • ARCweb.com •                                    11
ARC Strategies • November 2001




                                 Which PLC? The User/OEM Struggle


                                 Who Determines Which PLC — The End User or the OEM?
                                 Both OEMs and end users were asked who they feel has the greater relative
                                 power in deciding which brand of PLC is used. Sixty-eight percent of re-
                                 spondents from all industries feel the power lies with end users to decide,
                                 while only 12 percent say that OEMs have this power. Finally, 16 percent
                                 think that balance of power is about equal.



                                                    It 's about the   N ot s ure
                                                          s am e         4%
                                                           16%




                                            OEM
                                            12%


                                                                                    E nd-us er
                                                                                       68%




                                   Who Has the Greater Relative Power in Determining Which Brand of PLC Is
                                                     Used – The End User or the OEM?


                                 End users were asked which criteria determine the brand of PLC to be im-
                                 plemented in newly purchased machinery. Sixty-seven percent of end users
                                 indicated that they specify the brand of PLC to the OEM. Twenty-six percent
                                 stated that they use the most suitable PLC for the job, suggesting an empha-
                                 sis on the task at hand as well as some flexibility regarding brand. Finally,
                                 just 3 percent allow the OEM to specify the PLC.

                                 Machine OEMs are constantly faced with the following situation: What hap-
                                 pens when an OEM’s controls solution doesn’t match the customer’s house
                                 brand? How willing are end users and OEMs to accept or implement a dif-
                                 ferent PLC brand and accept the related consequences? What exactly are the
                                 consequences and costs of switching PLC brands?

                                 ARC asked both end users and OEMs how they would react in this situation.
                                 The results are interesting. A full 58 percent of end users would insist that
                                 the OEM implement the user’s specified PLC system. Just under half of these
                                 would strong-arm the OEM into converting the controls for free – the other




12 • ARCweb.com • Copyright © ARC Advisory Group
ARC Strategies • November 2001




half would be willing to share some of the costs. Twenty-two percent are
indifferent enough that they would accept the machine with whichever PLC
the OEM normally uses. The remaining 13 percent would look for another
OEM with a similar machine that uses the desired PLC.


                            5% [4]    5% [5]
               10% [3]




        14% [2]

                                                                           66% [1]




   Implement a different PLC but charge extra for the conversion [1]
   Not implement any other PLC regardless of the future business potential [2]
   Implement a different PLC for no extra cost, but ONLY if the business potential is high [3]
   Implement a different PLC at no extra cost even for one machine [4]
   Other [5]


               How OEMs React When an End User Prefers a PLC
                     Different from the OEM’s Solution


OEMs are more flexible when it comes to implementing a different PLC to
satisfy a customer’s wish. A whopping 81 percent of OEMs surveyed would
implement another PLC. However, 83 percent of those willing to convert
controls would expect the customer to share at least some of the conversion
costs. Ten percent would convert at no charge, but only if the future business
potential were high enough. The remaining 6 percent would implement a
different PLC regardless of how many machines they might sell. Finally, 14
percent of all OEMs queried would stick to their guns and refuse an order
specifying a different controls brand.




                                                                       Copyright © ARC Advisory Group • ARCweb.com •   13
ARC Strategies • November 2001




                                                                4% [5]
                                               13% [4]
                                                                                                   32% [1]




                                    24% [3]

                                                                                  27% [2]


                                   Insist that the OEM convert to my brand of PLC at some cost [1]
                                   Insist that the OEM convert the controls to my brand of PLC at no extra cost [2]
                                   Accept the machine with a different PLC [3]
                                   Buy the machine from another OEM that uses my preferred PLC supplier [4]
                                   Other [5]


                                               How End Users React When an OEM Does Not Offer
                                                         Their Preferred PLC Solution



                                 How Many Different PLCs Should a User Support?
                                 Surveyed users were asked to indicate how many different brands of PLC
                                 they support. While the average is 3.3 brands, 23 percent of end users and a
                                 full 34 percent of OEMs support five or more different PLCs. However, users
                                 in some industries see this number diminishing.

                                 Pester Pac Automation, a packaging machine OEM, used to offer as many as
                                 32 different PLC types to accommodate customer wishes. However, that
                                 number has diminished greatly in recent years.             According to Stephan
                                 Remer, Technical Manager at Pester, “Specialized solutions combining mo-
                                 tion control with soft PLC logic, like PacDrive from Elau, have become the
                                 standard in the packaging industry. Even if it’s not their usual PLC, most
                                 customers accept this solution because they know it gives us the control we
                                 need to handle service problems in the future. If the customer requests, we
                                 can also install a PLC from Siemens or Allen-Bradley, but by using our spe-
                                 cialized solution, we’ve greatly reduced the number of PLCs we have to
                                 support.”




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ARC Strategies • November 2001




The situation is different in other industries, however. Automakers tend to
be loyal PLC customers, often working together with suppliers on new
product development. Transfer machines, presses and other machines in this
industry put fewer demands on PLC performance than the technology of the
packaging industry.


       five brands or                        one brand
            more                                8%
            29%                                                   two brands
                                                                     23%




      four brands
         15%                                       three brands
                                                       25%

   How Many Different Brands of PLCs Does Your Company Use or Support?
                          (End-Users and OEMs)


Automotive OEMs are used to implementing whichever PLC is prescribed
by the end user. “We’ve never had a customer ask us to recommend a con-
trols solution,” commented Franz Melder, Manager of Controls Engineering
at Grob, a German machine tools OEM. “We implement whichever PLC the
customer uses in his factory and charge extra for any additional development
work necessary”.




Converting Controls: Who Pays the Bill?


How Much Does a Controls Conversion Cost?
OEMs with whom ARC spoke estimate that a controls conversion typically
costs an extra 20 to 80 percent of the total controls labor budget, depending
on the extent of necessary hardware changes and software reprogramming.
Many OEMs minimize their hardware changes in a conversion by using uni-
versal remote I/O devices capable of communicating over different field
                                                         rd
busses with nearly any PLC. Interbus-S was a popular 3 party system in the
1990s, but many OEMs have now standardized on DeviceNet or Profibus.




                                                              Copyright © ARC Advisory Group • ARCweb.com •   15
ARC Strategies • November 2001




                                 And as Ethernet-based field busses become more popular, many are looking
                                 at Industrial Ethernet or Profinet as future standards.

                                 While IEC 61131-3 compliance suggests that programs can be ported from
                                 the PLC of one supplier to another, OEMs tell ARC that this is still a dream
                                 and that software normally has to be completely rewritten. According to
                                 Hans Beckhoff, President of Beckhoff Industrie Elektronik, “Control software
                                 written on one platform has been optimized to work with that particular con-
                                 troller.                                           Adapting software for another controller may compromise the
                                 quality and stability of that software. OEMs often lose money on such pro-
                                 jects because they underestimate the effort to convert, tune and optimize
                                 software”.


                                                                                  35%
                                                                                        32%
                                     % of responses (multiple answers possible)




                                                                                  30%


                                                                                  25%         23%                               Relay ladder logic
                                                                                                                                Function block diagram
                                                                                  20%                                           Sequential function chart
                                                                                                                                Instruction list
                                                                                  15%               11%                         Structured text
                                                                                                          10%
                                                                                                                10%             C or C++
                                                                                  10%                                 7%        Visual Basic
                                                                                                                           6%
                                                                                  5%


                                                                                  0%




                                  IEC 61131-3 Programming Languages Are Used by 87% of Respondents, But
                                   Users Complain that Program Portability Between Vendors Is Still a Dream


                                 Converting a complete controls system from the products of one supplier to
                                 another is expensive. PLC code must be rewritten and often in a different
                                 language. In addition, tag databases have to be either imported or newly
                                 created. For the most part, tag names have not yet been “extracted” from the
                                 hardware level, so hardware knowledge and careful coordination with ma-
                                 chine designers is still necessary. Inter-PLC communication is unique to the
                                 protocols of each supplier and must be completely reprogrammed when
                                 switching suppliers.




16 • ARCweb.com • Copyright © ARC Advisory Group
ARC Strategies • November 2001




In engineering, new CAD drawings have to be created for the new supplier’s
components. Technical personnel need to be trained in the specifics of every-
thing from allowable cable lengths to heat dissipation requirements. Even
people in the purchasing department need to be made aware of the specifics
of the new vendor. Finally, commissioning engineers need technical training
to start up and troubleshoot the new automation systems.

                                                25%
    Expected "fair share" of conversion costs




                                                20%
                                                                        22%
                                                           20%
                                                15%
                                                                                 17%

                                                10%



                                                5%



                                                0%
                                                      All respondents   OEMs   End-users



                        How Much of the Conversion Costs Should Be Shared by the Customer?
                           Not Surprisingly, OEMs and End-Users Don’t Completely Agree


When conversion costs are to be shared, end users and OEMs differ slightly
in the fair share of costs to be assumed by the customer. The average from
both end user and OEM respondents is 20 percent of the total conversion
costs. Not surprisingly, OEMs expect the customer to pay more (22 percent),
while end users only expect to contribute 17 percent.




Recommendations

•             For end users, standardizing on one supplier can cut costs, but careful
              consideration must be given to supplier selection. Users must consider
              the trade-offs between using the most technically suitable product for the
              application, minimizing the costs of supporting multiple suppliers, and
              the importance of local support and service.




                                                                                     Copyright © ARC Advisory Group • ARCweb.com •   17
ARC Strategies • November 2001




                                 •   Despite industry consolidation, OEMs are faced with the problem of hav-
                                     ing to support multiple PLCs to fulfill customers’ requirements. As a
                                     rule, the more complex the machine, the more likely a customer will ac-
                                     cept the OEM’s own controls solution. OEMs can ease their dilemma by
                                                                   rd
                                     using as many universal or 3 party components and limiting the cus-
                                     tomer’s choice to PLC hardware.




18 • ARCweb.com • Copyright © ARC Advisory Group
ARC Strategies • November 2001




Analyst: David Humphrey
Editors:    Dick Hill, Chantal Polsonetti
Distribution: All MAS Clients


Acronym Reference: For a complete list of industry acronyms, refer to our web
          Reference:
page at www.arcweb.com/arcweb/Community/terms/indterms.htm
AI   Artificial Intelligence                 EPM  Enterprise Production Management
ANSI American National Standards Institute   ERP  Enterprise Resource Planning
API  Application Program Interface           HMI  Human Machine Interface
APS  Advanced Planning & Scheduling          IEC  International Electrotechnical
B2B  Business-to-Business                         Commission
B2C  Business-to-Consumer                    IT   Information Technology
BPR  Business Process Reengineering          LAN Local Area Network
CAD  Computer Aided Design                   MRP Materials Resource Planning
CAGR Compound Annual Growth Rate             OEM Original Equipment Manufacturer
CAN  Controller Area Network                 OLE Object Linking & Embedding
CEMS Continuous Emissions Monitoring         OPC OLE for Process Control
     System                                  PAS Process Automation System
CMMS Computerized Maintenance                PID  Proportional Integral Derivative
     Management System                       PIMS Process Information Management
CNC Computer Numeric Control                      System
CPG Consumer Packaged Goods                  PLC Programmable Logic Controller
CPU Central Processing Unit                  ROI Return on Investment
CRM Customer Relationship Management         SCE Supply Chain Execution
EAI  Enterprise Application Integration      SPC Statistical Process Control
EAM Enterprise Asset Management              TMS Transportation Management System
EC   Electronic Commerce                     WMS Warehouse Management System




Founded in 1986, ARC Advisory Group is the leader in providing strategic plan-
ning and technology assessment services to leading manufacturing companies,
utilities, and global logistics providers, as well as to software and solution suppli-
ers worldwide. From Global 1000 companies to small start-up firms, ARC
provides the strategic knowledge needed to succeed in today’s technology driven
economy.
ARC Strategies is published monthly by ARC. All information in this report is pro-
prietary to and copyrighted by ARC. No part of it may be reproduced without
prior permission from ARC.
You can take advantage of ARC's extensive ongoing research plus experience of
our staff members through our Advisory Services. ARC’s Advisory Services are
specifically designed for executives responsible for developing strategies and di-
rections for their organizations. For subscription information, please call, fax, or
write to:
       ARC Advisory Group, Three Allied Drive, Dedham, MA 02026 USA
       Tel: 781-471-1000, Fax: 781-471-1100, Email: info@ARCweb.com
                      Visit our web page at ARCweb.com




                                                                     Copyright © ARC Advisory Group • ARCweb.com •   19
Cambridge, U.K.


                                                       Düsseldorf, Germany


                                                          Munich, Germany


                                                        Hamburg, Germany


                                                              Tokyo, Japan


                                                           Bangalore, India


                                                                Boston, MA


                                                             Pittsburgh, PA


                                                          San Francisco, CA



                                                     Visit ARCweb.com for
                                               complete contact information




Three Allied Drive • Dedham, MA 02026 USA • 781-471-1000 • Fax 781-471-1100

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Arc user survey plc supplier preferences

  • 1. BY ARC ADVISORY GROUP NOVEMBER 2001 ARC User Survey: PLC Supplier Preferences Executive Overview ................................................................................ 3 Primary and Secondary PLC Suppliers – How Important Is Brand? ............ 4 How Do Users Select PLCs?.................................................................... 9 Why Do Users Switch PLC Suppliers? .................................................... 10 Which PLC? The User/OEM Struggle ................................................... 12 Converting Controls: Who Pays the Bill? .............................................. 15 Recommendations ............................................................................... 17 Enterprise & Automation Strategies for Industry Executives
  • 2. ARC Strategies • November 2001 20 18 16 OEMs End-users No. of Respondents 14 12 10 8 6 4 2 0 better local faster PLC larger PLC better tech support price/performance programming reduced # of better/easier smaller/cheaper (capacity) more innovative presence suppli ers products PLC better Top Reasons Why End Users and OEMs Switched PLC Suppliers Commercial Issues Technical Issues 1. Quality of products 1. Quality of tech support 2. Quality of pre-sales service 2. Reusable programming code 3. Local presence 3. Integration with 3rd party devices 4. Wide range of products 4. Uses IEC 61131-3 languages 5. Supplier’s reputation 5. Supplier’s reputation 6. Discount price 6. Supports open networking standards 7. Willingness to customize products 7. CPU scan time 8. List price 8. Wide range of related products Criteria for Selecting a New PLC Supplier from a Recent ARC User Survey 2 • ARCweb.com • Copyright © ARC Advisory Group
  • 3. ARC Strategies • November 2001 Executive Overview ARC’s recent PLC brand preference survey posed questions about PLC selec- tion behavior to nearly one hundred users of PLCs worldwide. The responses were split nearly 50/50 between OEMs and end users. The results provide some new insight as to how and why users choose their brand of PLCs, why users switch suppliers, and how end users and OEMs react when forced to consider using a different PLC. On the demand side of the automation market equation, concepts like brand awareness and brand loyalty take on new dimensions. Controls supplier se- lection is closely tied to the huge investments necessary for everything from spare parts inventories to the training of engineering, maintenance and op- erations personnel. The lack of industrial standards forces users to commit to suppliers’ proprietary technologies and programming languages, making switching costs high. As a result, end users make multi-year commitments - ideally to one or two suppliers - to minimize costs. Despite this, over a third of users surveyed have switched suppliers in the past five years for reasons ranging from better price/performance to local presence in target markets. Other 11% North Europe America 31% 58% Major Geographic Regions Represented in ARC's User Survey How do end users and OEMs choose their PLC suppliers? The survey results indicate that performance is still the most important selection criterion for users. For complex applications like packaging machines, OEMs are migrat- ing to specific solutions, such as combined PLC and motion controllers, and limiting the number of alternate solutions they offer. Other OEMs, especially those that serve the automotive industry, still bow to the wishes of their cus- tomers and implement whatever PLC is specified. OEMs tell ARC that customers today are less willing to disrupt a complex, carefully tuned auto- mation solution by specifying their own PLC. Copyright © ARC Advisory Group • ARCweb.com • 3
  • 4. ARC Strategies • November 2001 Two-thirds of end users surveyed stated that they dictate the type and brand of PLC to be used on OEM machines. If an OEM didn’t offer the desired PLC brand, most end users would insist on a controls conversion to their brand – or look for another OEM. Half of those would share at least some of the con- version costs. Most OEMs would implement a different PLC if required, but would expect the customer to share the extra costs. In general, the balance of power between customer and OEM hasn’t changed – it’s just been stirred up in light of the increased complexity of some PLC applications. Other Food & Beverage 35% 16% Pharmaceutical 11% Petrochemical 7% Fine Chemical Automotive 5% Electronics/ Consumer 6% Pulp & Packaging Semiconductors Paper 5% Products 5% 5% (non-food) 5% Respondents to ARC's User Survey Represent a Wide Variety of Industries Primary and Secondary PLC Suppliers – How Important Is Brand? Consolidation in the industrial controls industry has reduced the number of suppliers in the market to a handful of vendors offering increasingly broader and more complete solutions. While this trend gives users less choice, the remaining suppliers now offer extensive product lines of well-integrated components extending far beyond just PLC hardware and software. The first part of ARC’s survey takes a look at the importance of PLC brand, why automation users buy PLCs from certain suppliers, and what pressures they face in making supplier selection decisions. Geography is by far the most influential factor in deciding which PLC to use among end users and OEMs. Each of the top three PLC suppliers in the 4 • ARCweb.com • Copyright © ARC Advisory Group
  • 5. ARC Strategies • November 2001 world – Siemens, Rockwell and Mitsubishi – dominates its own respective home market – Europe, North America and Asia. For this reason, discussion of the results is broken down by region. North America Of 48 North American users surveyed, 63 percent use Rockwell Automation (Allen-Bradley) as their primary supplier (68 percent of OEMs, 58 percent of end users) and 13 percent named Rockwell as their secondary supplier. Sie- mens is the primary supplier for 13 percent of the surveyed North American users (5 percent of OEMs, 19 percent of end users), while a full 23 percent listed Siemens as their secondary supplier. While these results confirm Rockwell’s dominance in its home market, they also confirm that Siemens is making inroads as a viable alternative in this coveted market. Primary PLC Supplier - North America Primary PLC Supplier – North America 68% 70% 58% % of N. American respondents 60% 50% 40% 30% 23% 19% 19% 20% 10% 5% 5% 4% 0% OEMs End-users Rockw ell Automation Siemens Schneider Other Respondents from North America Clearly Favor Rockwell Meanwhile, Siemens’ High Growth Is Threatening Schneider's Number Two Position Only two North American respondents listed Schneider Electric, fourth in market share worldwide and second in North America, as primary supplier (5 percent), while a full 13 percent named Schneider as their number two supplier. However, ARC’s North American market share data shows that Siemens, Schneider, and GE Fanuc have all gained market share over recent years while Rockwell’s share has declined steadily. The real threat is coming from Siemens’ massive push to gain market share at the cost of local suppli- ers which has driven their double-digit growth in the North American Copyright © ARC Advisory Group • ARCweb.com • 5
  • 6. ARC Strategies • November 2001 market. In fact, last year Siemens nearly caught up to Schneider and GE Fanuc in the North American market with the three suppliers each owning about 13 percent share. Machine OEMs in North America have a stronger preference While the survey results confirm for locally made automation products than end users. In Rockwell’s dominance in its home ARC’s survey, 68 percent of OEM respondents listed Rockwell market, they also confirm that as primary supplier while only 5 percent named Siemens. Siemens is making rapid inroads as a OEMs tend to use local products like Schneider or Rockwell viable alternative in the coveted North American region. and are as reluctant as their European counterparts to imple- ment controls of another brand unless pushed by their customer. However, nearly 23 percent of North American OEMs named Siemens as their secondary supplier, versus just 13 percent for Schneider. This is a strong confirmation of Siemens’ number one position worldwide and of the trend for OEMs to cover the majority of customers’ wishes by reducing the number of PLC suppliers supported to just a few so- lutions. Of the North American end users surveyed, 58 percent identified Rockwell as primary suppler versus 19 percent for Siemens. This gap in the preferences of OEMs and end users is explained by end users’ taste for machinery im- ported from Europe and other parts of the world. The United States, for example, typically imports twice as many textile machines as it exports. If an end user does not specify the specific brand of controls to be used on ma- chines, most European OEMs will simply use their own house brand – which is most often Siemens. As secondary supplier, North American end users named Siemens and Rockwell equally (14 and 16 percent) while 9 percent indicated Schneider, and 17 percent said they didn’t have a secondary supplier. While these are “snapshot” data and do not reflect historical trends, they do suggest a trend towards end users supporting fewer PLC types. Europe European automation users accounted for 31 percent of the responses. Of these users, an average of 46 percent named Siemens (31 percent of OEMs, 70 percent of end users) while Rockwell Automation averaged 27 percent as their primary supplier (31 percent of OEMs, 20 percent of end users). Sie- mens was identified by 19 percent of all users as secondary supplier while 23 percent named Rockwell. 6 • ARCweb.com • Copyright © ARC Advisory Group
  • 7. ARC Strategies • November 2001 Primary PLC Supplier - – Europe Primary PLC Supplier Europe 70% 70% % of total European respondents 60% 50% 38% 40% 31% 31% 30% 20% 20% 10% 10% 0% OEMs End-users Rockw ell Automation Siemens Other Siemens' Dominance in Europe Faces Only Minor Threats from Other Competitors Siemens, with a European market share of 47 percent according to ARC’s PLC Worldwide Outlook 2000, clearly dominates its home market. The seemingly inflated result for Rockwell is due to at least two reasons. Firstly, large American-based producers and several large European global accounts - especially those in the food & beverage and consumer packaged goods in- dustries – have plants all over Europe. These global manufacturers often have a worldwide controls strategy employing a single architecture from a single supplier, regardless of location, and often use Rockwell products. Sec- ondly, many European OEMs, eager to sell machines in the North American market, offer Rockwell controls as a second standard. Schneider Electric fared worse in ARC’s survey, despite a pan-Atlantic pres- ence with both the Modicon and Telemecanique brands. Of 85 respondents, only two reported Schneider as their primary supplier, and both were in North America. However, ARC received no survey responses from users in France - Schneider’s home market. In Europe, Schneider is the second largest supplier behind Siemens and is particularly strong in the auto industry. Schneider scored high marks as a secondary supplier, where results averaged 13 percent in the North American and European markets. Copyright © ARC Advisory Group • ARCweb.com • 7
  • 8. ARC Strategies • November 2001 Secondary PLC Supplier - NA and Europe 70% Secondary PLC Supplier – NA and Europe 60% 52% 46% % of respondents 50% 40% 30% 23% 23% 19% 20% 13% 13% 12% 10% 0% North America Europe Rockw ell Automation Siemens Schneider Other As a Secondary Supplier, Siemens Enjoys a Comfortable Position Among All Users While Rockwell Still Dominates the North American Market European OEMs were split equally between Siemens and Rockwell, but the sample size of this group (16) is inadequate for a fair statistical comparison. Interesting in the results from these machine builders is presence of many second tier suppliers not belonging to the Top Three, such as GE Fanuc, Ber- necker & Rainer, Robert Bosch, Moeller and Indramat. However, more significant is Siemens’ high overall ranking (31 percent average) as secondary supplier to OEMs. Even in markets where Siemens doesn’t dominate, OEMs still see the need to offer the products of the world’s market leader to meet the needs of demanding global customers. Asia/Pacific While the results from users in the Asia/Pacific region were too few to be statistically interesting, it is important to acknowledge Mitsubishi’s 51 per- cent market share in Japan and its advancement to the global Number Three position, according to ARC’s latest PLC Worldwide Outlook study. In fact, Mitsubishi’s dominance in its home market is much great than that of its ri- vals Siemens and Rockwell in their respective markets. Also noteworthy is Mitsubishi’s global Number Two position in the smallest sized (nano) PLC category and Number Three position in the large categories. 8 • ARCweb.com • Copyright © ARC Advisory Group
  • 9. ARC Strategies • November 2001 How Do Users Select PLCs? Brand Loyalty – A Question of Investment Brand awareness in industrial automation is quite different from brand awareness in other industries. Consumers may switch soft drink brands weekly or drive a different make of car every few years. But industrial automation requires huge secondary investments in everything from spare parts inventories to the training of maintenance and operations personnel. Furthermore, a lack of industrial standards forces users to commit to certain proprietary technologies such as controller programming environments and network protocols. As a result, end users must make a multi-year commit- ment - ideally to a single supplier - to minimize costs. Good documentation Ease of configuring/using HMI Ease of coding Integration with plant network 32 bit processing, integration of servo mo- Reliability and support tion into PLC (real closed loop) Development software pricing Local presence at OEM site Training availability for our end users Safety related products, certifications Pre-sales support with servo application Speed of delivery knowledge & sizing Industry standards New versions compatible with old ones Small product range to cover most applica- Good service tions The availability of integrators and engineers Long product lifecycles with experience with the PLC End user acceptance Temporary loan of equipment Personnel at supplier Software! Software! Software! Secondary Reasons Given by Respondents for Selecting a PLC Supplier But the reality of automation is not that simple. Despite supplier consolida- tion and the trend towards more comprehensive product offerings, many manufacturers still rely on a variety of suppliers for everything from sensors and contactors to middleware for application integration. Often, special ap- plication needs can only be met by specific solutions from smaller, innovative companies, especially in areas like motion control or machine vision. Most automation users address this problem by specifying a “house brand” to be used wherever possible, and third party products for specific tasks. The au- Copyright © ARC Advisory Group • ARCweb.com • 9
  • 10. ARC Strategies • November 2001 thorization of third party products is often dependent upon connectivity and compatibility with the house brand. How Important Is Brand Loyalty? To better understand how and why users make their PLC supplier selection, the survey asked users to rank the importance of using a certain brand of PLC on their machines. Eighty-seven percent of all respondents ranked PLC brand as either “very important” or “important”. Less important Somew hat important 2% 11% Very important Important 45% 42% How Important Is the Brand of PLC Used on Your Machines? Why Do Users Switch PLC Suppliers? Switching PLC brands is expensive. Besides the software that has to be re- written, employees in departments from engineering to maintenance to purchasing have to be retrained. PLC suppliers like to build in switching costs. For decades, suppliers have only paid lip service to industrial stan- dards affecting programming languages and field bus protocols – all in the interest of keeping switching costs high to protect their customer base. However, in the survey, 35 percent of all automation users have switched their brand of PLC in the past five years. If the costs of switching are so high, then why have over one third of all users switched? Innovation and Price/Performance Are Most Important Users who have switched brands were asked to give their reasons for switch- ing (multiple answers were allowed). The responses were surprisingly similar between OEMs and end users. The most popular reason for switch- 10 • ARCweb.com • Copyright © ARC Advisory Group
  • 11. ARC Strategies • November 2001 ing was because the new supplier offered more innovative products (21 per- cent) or better price/performance (18 percent). This confirms that despite the high cost of switching, customers still place high value on both performance and price and are willing to change suppliers if they find a better deal. 45% % of responses (multiple answers possible) 40% 35% OEMs End-users 30% 25% 20% 15% 10% 5% 0% better local faster PLC larger PLC better tech support price/performance programming reduced # of better/easier smaller/cheaper more innovative (capacity) presence suppliers products PLC better Top Reasons Why End Users and OEMs Switched PLC Suppliers “Better local presence in our markets” was the third most named reason for switching suppliers. This is good news for the top three suppliers – and bad news for the rest of the pack. The effects of globalization are forcing many OEMs to look beyond their own borders to increase sales and smooth out the dips due to economic fluctuation in some markets. As OEMs sell more ma- chines abroad, local service and support become more important. Local presence is also important for global conglomerates in the food & beverage and consumer goods industries, many of whom have unified controls archi- tectures around the world and only use the products of suppliers with a true global presence. Other significant reasons given for switching PLC suppliers were better or easier programming (12 percent), faster PLC execution time (11 percent), and better technical support (9 percent). Copyright © ARC Advisory Group • ARCweb.com • 11
  • 12. ARC Strategies • November 2001 Which PLC? The User/OEM Struggle Who Determines Which PLC — The End User or the OEM? Both OEMs and end users were asked who they feel has the greater relative power in deciding which brand of PLC is used. Sixty-eight percent of re- spondents from all industries feel the power lies with end users to decide, while only 12 percent say that OEMs have this power. Finally, 16 percent think that balance of power is about equal. It 's about the N ot s ure s am e 4% 16% OEM 12% E nd-us er 68% Who Has the Greater Relative Power in Determining Which Brand of PLC Is Used – The End User or the OEM? End users were asked which criteria determine the brand of PLC to be im- plemented in newly purchased machinery. Sixty-seven percent of end users indicated that they specify the brand of PLC to the OEM. Twenty-six percent stated that they use the most suitable PLC for the job, suggesting an empha- sis on the task at hand as well as some flexibility regarding brand. Finally, just 3 percent allow the OEM to specify the PLC. Machine OEMs are constantly faced with the following situation: What hap- pens when an OEM’s controls solution doesn’t match the customer’s house brand? How willing are end users and OEMs to accept or implement a dif- ferent PLC brand and accept the related consequences? What exactly are the consequences and costs of switching PLC brands? ARC asked both end users and OEMs how they would react in this situation. The results are interesting. A full 58 percent of end users would insist that the OEM implement the user’s specified PLC system. Just under half of these would strong-arm the OEM into converting the controls for free – the other 12 • ARCweb.com • Copyright © ARC Advisory Group
  • 13. ARC Strategies • November 2001 half would be willing to share some of the costs. Twenty-two percent are indifferent enough that they would accept the machine with whichever PLC the OEM normally uses. The remaining 13 percent would look for another OEM with a similar machine that uses the desired PLC. 5% [4] 5% [5] 10% [3] 14% [2] 66% [1] Implement a different PLC but charge extra for the conversion [1] Not implement any other PLC regardless of the future business potential [2] Implement a different PLC for no extra cost, but ONLY if the business potential is high [3] Implement a different PLC at no extra cost even for one machine [4] Other [5] How OEMs React When an End User Prefers a PLC Different from the OEM’s Solution OEMs are more flexible when it comes to implementing a different PLC to satisfy a customer’s wish. A whopping 81 percent of OEMs surveyed would implement another PLC. However, 83 percent of those willing to convert controls would expect the customer to share at least some of the conversion costs. Ten percent would convert at no charge, but only if the future business potential were high enough. The remaining 6 percent would implement a different PLC regardless of how many machines they might sell. Finally, 14 percent of all OEMs queried would stick to their guns and refuse an order specifying a different controls brand. Copyright © ARC Advisory Group • ARCweb.com • 13
  • 14. ARC Strategies • November 2001 4% [5] 13% [4] 32% [1] 24% [3] 27% [2] Insist that the OEM convert to my brand of PLC at some cost [1] Insist that the OEM convert the controls to my brand of PLC at no extra cost [2] Accept the machine with a different PLC [3] Buy the machine from another OEM that uses my preferred PLC supplier [4] Other [5] How End Users React When an OEM Does Not Offer Their Preferred PLC Solution How Many Different PLCs Should a User Support? Surveyed users were asked to indicate how many different brands of PLC they support. While the average is 3.3 brands, 23 percent of end users and a full 34 percent of OEMs support five or more different PLCs. However, users in some industries see this number diminishing. Pester Pac Automation, a packaging machine OEM, used to offer as many as 32 different PLC types to accommodate customer wishes. However, that number has diminished greatly in recent years. According to Stephan Remer, Technical Manager at Pester, “Specialized solutions combining mo- tion control with soft PLC logic, like PacDrive from Elau, have become the standard in the packaging industry. Even if it’s not their usual PLC, most customers accept this solution because they know it gives us the control we need to handle service problems in the future. If the customer requests, we can also install a PLC from Siemens or Allen-Bradley, but by using our spe- cialized solution, we’ve greatly reduced the number of PLCs we have to support.” 14 • ARCweb.com • Copyright © ARC Advisory Group
  • 15. ARC Strategies • November 2001 The situation is different in other industries, however. Automakers tend to be loyal PLC customers, often working together with suppliers on new product development. Transfer machines, presses and other machines in this industry put fewer demands on PLC performance than the technology of the packaging industry. five brands or one brand more 8% 29% two brands 23% four brands 15% three brands 25% How Many Different Brands of PLCs Does Your Company Use or Support? (End-Users and OEMs) Automotive OEMs are used to implementing whichever PLC is prescribed by the end user. “We’ve never had a customer ask us to recommend a con- trols solution,” commented Franz Melder, Manager of Controls Engineering at Grob, a German machine tools OEM. “We implement whichever PLC the customer uses in his factory and charge extra for any additional development work necessary”. Converting Controls: Who Pays the Bill? How Much Does a Controls Conversion Cost? OEMs with whom ARC spoke estimate that a controls conversion typically costs an extra 20 to 80 percent of the total controls labor budget, depending on the extent of necessary hardware changes and software reprogramming. Many OEMs minimize their hardware changes in a conversion by using uni- versal remote I/O devices capable of communicating over different field rd busses with nearly any PLC. Interbus-S was a popular 3 party system in the 1990s, but many OEMs have now standardized on DeviceNet or Profibus. Copyright © ARC Advisory Group • ARCweb.com • 15
  • 16. ARC Strategies • November 2001 And as Ethernet-based field busses become more popular, many are looking at Industrial Ethernet or Profinet as future standards. While IEC 61131-3 compliance suggests that programs can be ported from the PLC of one supplier to another, OEMs tell ARC that this is still a dream and that software normally has to be completely rewritten. According to Hans Beckhoff, President of Beckhoff Industrie Elektronik, “Control software written on one platform has been optimized to work with that particular con- troller. Adapting software for another controller may compromise the quality and stability of that software. OEMs often lose money on such pro- jects because they underestimate the effort to convert, tune and optimize software”. 35% 32% % of responses (multiple answers possible) 30% 25% 23% Relay ladder logic Function block diagram 20% Sequential function chart Instruction list 15% 11% Structured text 10% 10% C or C++ 10% 7% Visual Basic 6% 5% 0% IEC 61131-3 Programming Languages Are Used by 87% of Respondents, But Users Complain that Program Portability Between Vendors Is Still a Dream Converting a complete controls system from the products of one supplier to another is expensive. PLC code must be rewritten and often in a different language. In addition, tag databases have to be either imported or newly created. For the most part, tag names have not yet been “extracted” from the hardware level, so hardware knowledge and careful coordination with ma- chine designers is still necessary. Inter-PLC communication is unique to the protocols of each supplier and must be completely reprogrammed when switching suppliers. 16 • ARCweb.com • Copyright © ARC Advisory Group
  • 17. ARC Strategies • November 2001 In engineering, new CAD drawings have to be created for the new supplier’s components. Technical personnel need to be trained in the specifics of every- thing from allowable cable lengths to heat dissipation requirements. Even people in the purchasing department need to be made aware of the specifics of the new vendor. Finally, commissioning engineers need technical training to start up and troubleshoot the new automation systems. 25% Expected "fair share" of conversion costs 20% 22% 20% 15% 17% 10% 5% 0% All respondents OEMs End-users How Much of the Conversion Costs Should Be Shared by the Customer? Not Surprisingly, OEMs and End-Users Don’t Completely Agree When conversion costs are to be shared, end users and OEMs differ slightly in the fair share of costs to be assumed by the customer. The average from both end user and OEM respondents is 20 percent of the total conversion costs. Not surprisingly, OEMs expect the customer to pay more (22 percent), while end users only expect to contribute 17 percent. Recommendations • For end users, standardizing on one supplier can cut costs, but careful consideration must be given to supplier selection. Users must consider the trade-offs between using the most technically suitable product for the application, minimizing the costs of supporting multiple suppliers, and the importance of local support and service. Copyright © ARC Advisory Group • ARCweb.com • 17
  • 18. ARC Strategies • November 2001 • Despite industry consolidation, OEMs are faced with the problem of hav- ing to support multiple PLCs to fulfill customers’ requirements. As a rule, the more complex the machine, the more likely a customer will ac- cept the OEM’s own controls solution. OEMs can ease their dilemma by rd using as many universal or 3 party components and limiting the cus- tomer’s choice to PLC hardware. 18 • ARCweb.com • Copyright © ARC Advisory Group
  • 19. ARC Strategies • November 2001 Analyst: David Humphrey Editors: Dick Hill, Chantal Polsonetti Distribution: All MAS Clients Acronym Reference: For a complete list of industry acronyms, refer to our web Reference: page at www.arcweb.com/arcweb/Community/terms/indterms.htm AI Artificial Intelligence EPM Enterprise Production Management ANSI American National Standards Institute ERP Enterprise Resource Planning API Application Program Interface HMI Human Machine Interface APS Advanced Planning & Scheduling IEC International Electrotechnical B2B Business-to-Business Commission B2C Business-to-Consumer IT Information Technology BPR Business Process Reengineering LAN Local Area Network CAD Computer Aided Design MRP Materials Resource Planning CAGR Compound Annual Growth Rate OEM Original Equipment Manufacturer CAN Controller Area Network OLE Object Linking & Embedding CEMS Continuous Emissions Monitoring OPC OLE for Process Control System PAS Process Automation System CMMS Computerized Maintenance PID Proportional Integral Derivative Management System PIMS Process Information Management CNC Computer Numeric Control System CPG Consumer Packaged Goods PLC Programmable Logic Controller CPU Central Processing Unit ROI Return on Investment CRM Customer Relationship Management SCE Supply Chain Execution EAI Enterprise Application Integration SPC Statistical Process Control EAM Enterprise Asset Management TMS Transportation Management System EC Electronic Commerce WMS Warehouse Management System Founded in 1986, ARC Advisory Group is the leader in providing strategic plan- ning and technology assessment services to leading manufacturing companies, utilities, and global logistics providers, as well as to software and solution suppli- ers worldwide. From Global 1000 companies to small start-up firms, ARC provides the strategic knowledge needed to succeed in today’s technology driven economy. ARC Strategies is published monthly by ARC. All information in this report is pro- prietary to and copyrighted by ARC. No part of it may be reproduced without prior permission from ARC. You can take advantage of ARC's extensive ongoing research plus experience of our staff members through our Advisory Services. ARC’s Advisory Services are specifically designed for executives responsible for developing strategies and di- rections for their organizations. For subscription information, please call, fax, or write to: ARC Advisory Group, Three Allied Drive, Dedham, MA 02026 USA Tel: 781-471-1000, Fax: 781-471-1100, Email: info@ARCweb.com Visit our web page at ARCweb.com Copyright © ARC Advisory Group • ARCweb.com • 19
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