With the cost of oil hovering at $100 per barrel, it's no wonder oil and gas companies are clamoring for ways to expand capacity, reduce cost, and eliminate waste. Finding the time to do that, however, is difficult when there's a business to run.
Hearing its customers' cries, Emerson Process Management acquired The Automation Group (TAG), a Houston-based engineering services firm that designs custom process automation systems.
TAG, which builds automation systems for the refining, petrochemical, and oil and gas industries, is vendor-agnostic when it comes to control platforms. And the company will remain true to its multi-vendor roots even after it is under the Emerson umbrella, Emerson officials maintain.
"It's a matter of meeting customer needs," said David Imming, Emerson Process Management's vice president of solutions marketing, in an interview with Managing Automation. The TAG acquisition — the terms of which were not disclosed — is a "solutions play, not a product play," he said, explaining the company's commitment to build out its service arm.
According to ARC Advisory Group, services are the fastest growing segment for automation vendors, ranging from front-end engineering and design to outsourced maintenance and performance improvement. In 2006, the total services market served by automation suppliers approached $14 billion, and it will continue to grow at an average annual rate of 12% through 2011, according to ARC.
"The services market is the biggest growth opportunity for suppliers today, and it makes sense that Emerson would continue to build its strength in services," says ARC analyst Larry O'Brien. "We expect that automation suppliers will continue to make more acquisitions like this going forward."
Emerson and other automation vendors are in a sweet spot for the foreseeable future, as manufacturers continue their technology buying spree. In another ARC report, for example, the worldwide market for process automation systems is predicted to grow at a compounded annual growth rate of 9.6% over the next five years. The market, which was nearly $30 billion in 2006, will rise to $47 billion by 2011, ARC says.
Not surprisingly, Emerson is feeling the effects of all of the investment activity. "We have customers pounding at the door because they want projects done now," Imming said. "We are growing rapidly and, as part of that, we need to expand our people base. TAG was a logical fit. They have a lot of experience and contacts ... [and] acquiring them expands our ability to execute."
TAG's expertise covers a wide range of process automation technologies, including distributed control systems (DCSs), safety shutdown systems, programmable logic controllers (PLCs), human machine interfaces (HMIs), and supervisory control and data acquisition (SCADA).
This article originally appeared in the February 2008 issue of Managing Automation.