Functional Safety Solutions: Protecting Assets and Preventing Disasters

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During this webcast, Chris Rezendes, Executive Vice President of VDC Research, discussed: how the importance of Functional Safety has changed recently; the awareness of/demand for safety drivers; type of growth in demand; the latest, most powerful drivers of investment in Functional Safety Solutions across the largest, fastest growing and recently emerging applications; the traditional and emerging key success requirements functional safety suppliers should consider core to the 2010-2014 market development playbook.

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Functional Safety Solutions: Protecting Assets and Preventing Disasters

  1. 1. VDC Research Webcasts Functional Safety Solutions: Protecting Assets & Preventing Disasters Market Development Update August 2010 Industrial Automation & Control Practice Chris Rezendes, Executive Vice President
  2. 2. Recording Available These slides are from a webcast presented on 05/5/10 A f ll audio recording is available for download at: full di di i il bl f d l d t http://www.vdcresearch.com/market_research/industrial_automation/freeresearch.aspx 1 –  2010 VDC Research Group, Inc.
  3. 3. VDC Research Group Complimentary marketing data on the Industrial Automation & Control Markets is available on our website at: www.vdcresearch.com 2 –  2010 VDC Research Group, Inc. Industrial Automation & Control Practice
  4. 4. Today’s Speaker • VDC Research Group  Founded in 1971, continuous, profitable operation for nearly 40 years  Focus on a number of embedded and niche network market segments  1,000 clients annually …90% technology suppliers, tech investors • Ch i Rezendes – E Chris R d Executive Vice President ti Vi P id t  19 years experience in embedded, industrial, defense and other mission critical and high available technology industries  14 years experience in senior management and leadership positions at a number of technology solutions and professional services organizations  2 years DARPA contracting  Chris has advised many of the largest and most respected technology companies in a number of technology segments worldwide  Chris is a graduate of Harvard University 3 –  2010 VDC Research Group, Inc. Industrial Automation & Control Practice
  5. 5. Agenda Introduction Functional Safety Outlook & Factors Driving Demand Product & Technology Preferences & Requirements Networking & Impact of Wireless Brief Recommendations VDC Functional Safety Coverage y g Q&A 4 –  2010 VDC Research Group, Inc. Industrial Automation & Control Practice
  6. 6. Functional Safety Demand is Strong • Penetration rates are moderate, but the market is expected to grow rapidly – through new account penetration and new application deployments • Key factors driving this growth include external as well as operational  External: regulatory and compliance requirements  Internal: worker safety, liability mitigation • Current users are fairly satisfied with their solutions and their suppliers, but challenges remain in a number of areas ranging from awareness to up front implementation requirements to cost basis • The industry infrastructure is evolving with new solution definitions and channels to market emerging in parallel; creating new opportunities and new challenges • VDC Research expects that the market will grow fairly rapidly, with margin opportunities for suppliers that can manage competing growth opportunities and emerging indirect channels 5 –  2010 VDC Research Group, Inc. Industrial Automation & Control Practice
  7. 7. Many Factors Drive Strong Gains in Deployment Firm Position on Functional Safety • Rate of deployment is 20X the rate of Deployment evaluation with no d l l ti ith deploymentt % of respondents 2.8% • With nearly 40% evaluating or planning to, deployment rate could nearly double in the next few years • Five factors were cited by at least 12.8% 50% of survey respondents:  Employee protection 41.3%  Risk reduction plan component  Industry standards 19.3% 19 3%  Equipment protection  Government regulations • Employee protection was cited by nearly 80% of respondents 23.9% • Regulations matter, but functional safety is matter also seen as a strategic tool:  Cost reduction, Currently using safety solutions  Productivity enhancement Currently evaluating safety solutions  More No current plans to evaluate or deploy a safety solution within 24 months Planning to evaluate and/or deploy a safety solution within 24 months Evaluated safety solution, but did not deploy 6 –  2010 VDC Research Group, Inc. Industrial Automation & Control Practice
  8. 8. Growing Budgets Will Outpace Falling by Nearly 3-1 Functional Safety Future Spending Plans • Functional safety appears to be a uniquely % of respondents strong segment in the automation market t t i th t ti k t  58% of respondents cited the recession had no impact on functional safety budgets  56% stating that their budgets will remain Decreased constant / unchanged in the forward 2 years expected spend • During the past two years, budget delays, D i th tt b d td l 13% or contractions were modest • Going forward, we expect to see material gains in functional safety budgets Expected Increased  Existing users expanding coverage g p g g spend is expected  Delayed or crimped budgets returning unchanged spend  New users going from zero / near-zero 56% 31% to funding projects • Net result is a survey sample where growing budgets outpaced shrinking by nearly 3 1 3-1 7 –  2010 VDC Research Group, Inc. Industrial Automation & Control Practice
  9. 9. Users are Looking for Robust Front-end Support Key Services Requirements for • A number of factors are combining to drive Successful Functional Safety Deployment significant demand for a number of high i ifi td df b f hi h (Select all that apply) value-added services  Developing standards Consulting 47%  Growing liabilities for poor implementations • In a market that is often shy about p y g y paying Training T i i 38% third-party technical consultants – these services dominate the requirements list Site Survey/Risk Assessment/Risk Reduction 31%  Consulting Commissioning 30%  Training  Site survey No change expected 29%  Commissioning  Integration Integration 29% • While these citation rates are relatively low Configuration Development 26% on an absolute basis  Current penetration of the sample at 50% Testing 21%  Current / planned evaluation at 45% Custom Engineering 21% • Competition may turn on supplier – and their channels – ability to communicate and deliver Configuration Management 13% against these requirements 0% 10% 20% 30% 40% 50% 8 –  2010 VDC Research Group, Inc. Industrial Automation & Control Practice
  10. 10. This Brings Them to Direct, Value-adding Sources Current Sources of Supply for • Survey respondents have concentrated their Functional Safety Solutions sourcing in direct channels i i di t h l (Select all that apply)  Functional safety solution providers  Equipment OEMs with safety solutions embedded in Direct from product supplier 63% • Low citation rates for lower value-adding channels, and third-party higher-value-adding channels, are indicative of an emerging market OEM 38% • A likely critical benefit of this factor is efficient, accurate solution deployment Systems integrator 29% • A likely critical liability is the limited range of f solution sources, including local, and expert in fringe applications Construction/Consulting engineering firm 28% • A fair amount of tension is likely to develop as these solutions are fairly narrowly defined, the th l ti f il l d fi d th applications expand, and the channels play a growing role in this services-intense period of Value-Added Distributor 21% time 0% 25% 50% 75% 9 –  2010 VDC Research Group, Inc. Industrial Automation & Control Practice
  11. 11. How Do Suppliers Fare? What More Needs Done? Firms’ Primary Recommendations • High satisfaction rate at 73%, makes sense given To Improve Supplier Performance the th concentration of business in direct channels t ti fb i i di t h l (Select all that apply) • When given the option to rate ‘very’ only 1 in 8 chose that option – there is room for Competitive pricing 55% improvement in supplier performance – Improved technical support: 52% integrator and OEM also Applications knowledge/support 51% • The paradox of factors that exist between Training/education 31% ‘satisfied’ and ‘very satisfied’ are a reflection of the breadth of the application requirements Risk assessment/risk reduction 30% that make up the market Installation I t ll ti support t 24%  Application expertise Maintenance support 23%  Time to deploy On-site service/support 20%  Local sources of supply and support Integration services 20% • Yet, respondent citation of areas for improvement Faster delivery/product availability 18% for their suppliers focused on  Price – and this exists in the vast majority of markets Site audits/surveys 14%  Support in all phases of the project lifecycle Warranty terms 9% 0% 20% 40% 60% 10 –  2010 VDC Research Group, Inc. Industrial Automation & Control Practice
  12. 12. Migration to Standards Still a Dominant Theme Which network(s) is your firm using as part • More than 55% of respondents cited that their of your wireline safety solution? safety solutions would be based on standards f t l ti ld b b d t d d (if applicable) in network protocols and architectures Ethernet/Ethernet/IP 73% • Compared to only 8% who cited an increased reliance on proprietary networks to support Modbus 25% their safety requirements DeviceNet 25% • Clearly, installed base, depth to which the functional safety solution is embedded, and PROFIsafe/PROFInet safety 22% the technical performance requirements of Profibus/PROFInet 22% the solution can drive demand for proprietary solutions HART 21% • But, when standards – Ethernet at 73% for safeEthernet 18% example – are cited, it raises questions:  Which ones? Foundation Fieldbus 13%  Are the implementations proprietary? • One of the most important challenges, even Guard PLC Ethernet 10% before standards migration, is persistent support SafetyBUS p 8% for deeply penetrated and widely deployed standards such as Modbus, Devicenet , Profibus, AS-I 8% HART and others 0% 20% 40% 60% 80% 11 –  2010 VDC Research Group, Inc. Industrial Automation & Control Practice
  13. 13. Wireless is a Factor in 2 / 3 of the Market What type of communications network • Standard deployment sequence with wireless does / will your safety solution utilize? is i an overlay on top of installed base(s) of l t f i t ll d b ( ) f wireline networks  This is true even in greenfield facilities Wireless  Not expected to change materially in the next decade Networks 9% • Wireless network support for safety solutions pp y is a little different than the broader automation markets  802.11 cited more often – by nearly 50% of respondents Wireline  Proprietary cited less often – by approx 35% Both Networks of respondents 34% 58%  802.15.4 cited much less often – by only 5% • This data supports the idea that functional safety is considered and deployed in one of two primary models  Deeply embedded in equipment, process, solution design, or  An overlay to existing systems 12 –  2010 VDC Research Group, Inc. Industrial Automation & Control Practice
  14. 14. Moving Forward: Knowledge is the Key to Growth What concerns / issues may hinder • Nearly half of survey respondents cited your organization s evaluation or organization’s no perceived need for safety solutions, but i d df f t l ti b t deployment of safety solutions? this could change (Select all that apply)  Standards are evolving  Regulations being codified No perceived need 46% • Internal resources issue is two-fold:  Recent RIFs have left many engineering, operations and safety teams short-handed Lack of internal resources to deploy  Safety is not typically a core discipline on or implement solutions 44% Internal teams • Despite the importance of the issue, and growth p p , g in the compliance requirements, cost is an Cost of installation 42% important barrier that needs to be addressed Cost of maintenance/upgrades 28% Lack of industry standard 16% 0% 10% 20% 30% 40% 50% 13 –  2010 VDC Research Group, Inc. Industrial Automation & Control Practice
  15. 15. What is to be Done? • Crisp definition of served markets, installation environments, application and technical contexts – the market is exhibiting characteristics of an emerging opportunity, and that means fragmentation. • The depth to which these solutions need to be integrated accentuates this complexity, and elevates the integration requirement and opportunity • Codify education and training programs as they are a material barrier to growth • Current solutions have limited sources of supply – vendors will need to sort out how to expand their coverage with an evolving population of safety integrators, consultants and other third-parties third parties • Active participation in process and technical standards efforts will yield results quickly, even if only from a market perception and brand support perspective 14 –  2010 VDC Research Group, Inc. Industrial Automation & Control Practice
  16. 16. VDC Coverage of Functional Safety Solutions • Three Volumes  Volume 1: Intrinsically Safe Devices – Wireless and Wireline  Volume 2: Machine Automatic Safety  Volume 3: Process Safety Systems • V l Volume Coverage C  Market definition and segmentation  Market estimate and forecast  User requirements, preferences and plans  Supplier position, share and direction  Marketing channels  Key success requirements 15 –  2010 VDC Research Group, Inc. Industrial Automation & Control Practice
  17. 17. Primary Research & Market Model Highlights Approximate A i t Target Communities Sample Size Phone Interviews Functional Safety Solution Providers N = 100 Web Surveys & End Users, Equipment OEMs, Integrators, N = 500 Phone Interviews Other Intermediaries Actual Market Size / Study Publication Date Forecast Market Size Supplier Share Service Year 2010 2009 Actual / 2010 Estimate 2011 – 2014 16 –  2010 VDC Research Group, Inc. Industrial Automation & Control Practice
  18. 18. Founding Sponsor Benefits & Schedule • Service Schedule:  Founding Sponsor enrollment: through September 10, 2010  Deliverables begin: December 2010 through February 2011  Planning discussions with early subscribers: through September 2010  Monthly status reports: begin October 2010  Interim findings by volume one month prior to publication of each final report volume • Founding sponsors receive the following benefits:  Opportunity to provide input on the study architecture, scope, direction  Monthly updates and real-time qualitative findings of interest at each major milestone throughout the execution phase of the study  Discounts from standard post-publication p p p prices  Executive presentation that walks your team through the research sponsored 17 –  2010 VDC Research Group, Inc. Industrial Automation & Control Practice
  19. 19. Q&A Session Thank You for Attending this VDC Webcast For more information about VDC Research coverage of the Global Markets for Functional Safety Solutions – including the 2010 Functional Safety Market Intelligence Service – please contact: David Laing Senior Analyst / Program Manager, Industrial Automation & Control Practice dlaing@vdcresearch.com | 508.653.9000 x146 Tim Shea Senior Analyst/ Program Manager, Industrial Automation & Control Practice tims@vdcresearch.com | 508.653.9000 x132 Bob Perugini Account Executive rperugini@vdcresearch.com | 508.653.9000 x144 Chris Rezendes Executive Vice President cjr@vdcresearch.com | 508.653.9000 x120 18 –  2010 VDC Research Group, Inc. Industrial Automation & Control Practice

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