Rueil-Malmaison is a quiet suburb of Paris with tree-lined streets and the feel of an upscale residential neighborhood. It is not the place where you would expect to find the corporate headquarters of one of the world's largest and most successful industrial automation and control companies. But on a street called Boulevard Franklin Roosevelt sits the unassuming but elegant offices of Schneider Electric SA, the parent of well-known brands Square D, Telemecanique, and, of course, the Modicon programmable logic controller line.
Upon entering Schneider's corporate offices, one is immediately struck by a sense of calm that permeates a modern, sleek environment. One feels at ease and excited at the same time. This is, perhaps, also an apt description of the state of Schneider's business today.
By all accounts, a business transformation the company undertook several years ago is proceeding with great success, as measured not only by all-important financial results -- the company had a record year in 2006, and in the first half of 2007 grew sales by 25% to £8.2 billion and net income by 21% -- but also by the calm and steady confidence of its key executives.
That transformation, which has driven Schneider to become more global, efficient, and customer-centric, has resulted, in the case of its Automation & Control business unit, in embracing the concept of collaborative manufacturing, investing in what Schneider calls "Simply Smart" products for the industrial market, and providing "solutions" for specific vertical markets, such as mining, metals, and oil and gas.
The automation business, which represents about 32% of Schneider's overall business, grew 8% organically from 2005 to 2006. Associated service businesses grew at an even higher rate -- 15% -- resulting in overall double-digital growth, says Michel Crochon, executive vice president in charge of the Automation business. In an interview with Managing Automation, Crochon was confident of similar growth in 2008. (Schneider's official company-wide guidance for full-year 2007 is organic sales growth of more than 10%.)
Looking at the market's growth drivers, Crochon says a variety of factors are cause for optimism.
"There are massive electrification needs worldwide, which are being driven by rising demands for energy," he says. "In addition, companies more and more are outsourcing non-core competencies. And automation is everywhere."
Twelve-hundred miles to the east, in Nuremberg, Germany, sits the headquarters of another of the world's larger automation providers, the £13 billion Automation & Drives group of giant Siemens AG.
A&D, as it is called, is one of Siemens' six major businesses. They are: Information and Communications, Automation and Control, Power, Transportation, Medical, and Lighting. In its fiscal year ended Sept. 30, 2006, Siemens had sales from continuing operations of £87.3 billion.
In its recent third-quarter financial report, A&D's revenue grew 19% to £3.8 billion. Anton S. Huber, a group vice president, said in an interview that he expects the full year to show double-digit growth. Huber, who is also on the board of design software maker UGS, which Siemens acquired in May for $3.5 billion, says his plan is to grow the factory automation business at twice the market rate. ARC Advisory Group, in a report to be published by November, estimates that the combined discrete and process automation markets totaled $95 billion in 2006, and will grow 6.5% to 7% for the next couple of years.
A&D, like Schneider and other automation suppliers, has been emphasizing so-called "solutions" for customers for some time. But now, with the inclusion of UGS, Siemens' product portfolio -- extending from CAD through the manufacturing execution system layer of technology -- is broader than that of most suppliers.
"The long-term trend is that customers are getting rid of do-it-yourself competencies," Huber says. "Lots of customers are reducing this internal investment in automation. Solutions are needed. We are now supporting the business processes of customers."
An important part of the move to solutions for an automation company is dealing with heterogeneous control environments. Both Schneider and Siemens advocate open architectures. "We have to have open interfaces," Huber says. "Complexity in technology is driving this."
For its part, Schneider in April said that it has become a principal member of ODVA, an association of control and automation companies that support network technologies using the Common Industrial Protocol.
In talking with western industrial customers, Huber says, the single biggest business issue that comes up is how they will deal with competition from China and India. When talking with Chinese manufacturers, the issue, he says, is how they can get their products to western markets.
Huber believes the answer to both of these questions -- and a key rationale for the acquisition of UGS -- is speed, in all its many manifestations. "Our business is about time," he says. "You have to be fast. You have to innovate. You have to believe in automation."
This article originally appeared in the September 2007 issue of Managing Automation.