functional safety solutions: protecting assets and preventing disasters

VDC Research Webcasts Functional Safety Solutions: Protecting Assets & Preventing DisastersMarket Development UpdateAugust 2010

Industrial Automation & Control PracticeChris Rezendes, Executive Vice President

August 2010

Recording Available

These slides are from a webcast presented on 05/5/10

A f ll di di i il bl f d l d tA full audio recording is available for download at:

http://www.vdcresearch.com/market_research/industrial_automation/freeresearch.aspx

1 – 2010 VDC Research Group, Inc.

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

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 R d E ti Vi P id t• Chris Rezendes – Executive Vice President 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 organizationsnumber 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 Chris is a graduate of Harvard University


Agenda

Introduction

Functional Safety Outlook & Factors Driving Demand

Product & Technology Preferences & Requirements

Networking & Impact of Wireless

Brief Recommendations

VDC Functional Safety Coveragey g

Q & A


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 indirectfor suppliers that can manage competing growth opportunities and emerging indirect channels


Many Factors Drive Strong Gains in Deployment

• Rate of deployment is 20X the rate of l ti ith d l t

Firm Position on Functional Safety Deployment evaluation with no deployment

• With nearly 40% evaluating or planning to, deployment rate could nearly double in the next few years

• Five factors were cited by at least

2.8%

Deployment% of respondents

• Five factors were cited by at least 50% of survey respondents: Employee protection Risk reduction plan component Industry standards Equipment protection

41.3%

19 3%

12.8%

Equipment protection Government regulations

• Employee protection was cited by nearly 80% of respondents

• Regulations matter but functional safety is23.9%

19.3%

Regulations matter, but functional safety is also seen as a strategic tool: Cost reduction, Productivity enhancement More

Currently using safety solutions

Currently evaluating safety solutions

No current plans to evaluate or deploy a safety solution within 24 monthsNo 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


Growing Budgets Will Outpace Falling by Nearly 3-1

Functional Safety Future Spending Plans% of respondents

• Functional safety appears to be a uniquely t t i th t ti k t

Decreased expected

% of respondents strong segment in the automation market 58% of respondents cited the recession had

no impact on functional safety budgets 56% stating that their budgets will remain

constant / unchanged in the forward 2 years

D i th t t b d t d l

Expected spend isIncreased

spend13%

• During the past two years, budget delays, or contractions were modest

• Going forward, we expect to see material gains in functional safety budgets Existing users expanding coveragespend is

unchanged56%

expected spend31%

g p g g Delayed or crimped budgets returning New users going from zero /near-zero

to funding projects

• Net result is a survey sample where growing budgets outpaced shrinking by nearly 3-1budgets outpaced shrinking by nearly 3 1


Users are Looking for Robust Front-end Support

• A number of factors are combining to drive i ifi t d d f b f hi h

Key Services Requirements forSuccessful Functional Safety Deployment significant demand for a number of high

value-added services Developing standards Growing liabilities for poor implementations

• In a market that is often shy about paying 38%

47%

T i i

Consulting

Successful Functional Safety Deployment(Select all that apply)

y p y gthird-party technical consultants – these services dominate the requirements list Consulting Training Site survey

30%

31%

38%

Commissioning

Site Survey/Risk Assessment/Risk Reduction

Training

Commissioning Integration

• While these citation rates are relatively low on an absolute basis Current penetration of the sample at 50%

26%

29%

29%

Configuration Development

Integration

No change expected

Current penetration of the sample at 50% Current / planned evaluation at 45%

• Competition may turn on supplier – and their channels – ability to communicate and deliver against these requirements13%

21%

21%

Configuration Management

Custom Engineering

Testing

0% 10% 20% 30% 40% 50%


This Brings Them to Direct, Value-adding Sources

Current Sources of Supply for Functional Safety Solutions

• Survey respondents have concentrated their i i di t h l

63%Direct from product supplier

Functional Safety Solutions(Select all that apply)

sourcing in direct channels Functional safety solution providers Equipment OEMs with safety solutions

embedded in

• Low citation rates for lower value-adding

38%OEM

channels, and third-party higher-value-adding channels, are indicative of an emerging market

• A likely critical benefit of this factor is efficient, accurate solution deployment

f

28%

29%

Construction/Consulting engineering firm

Systems integrator • A likely critical liability is the limited range of solution sources, including local, and expert in fringe applications

• A fair amount of tension is likely to develop as th l ti f i l l d fi d th

21%

0% 25% 50% 75%

Value-Added Distributor

these solutions are fairly narrowly defined, the applications expand, and the channels play a growing role in this services-intense period of time

0% 25% 50% 75%


How Do Suppliers Fare? What More Needs Done?

Firms’ Primary Recommendations To Improve Supplier Performance

• High satisfaction rate at 73%, makes sense given th t ti f b i i di t h l

52%

55%

Improved technical support:

Competitive pricing

To Improve Supplier Performance(Select all that apply)

the concentration of business in direct channels

• When given the option to rate ‘very’ only 1 in 8 chose that option – there is room for improvement in supplier performance –integrator and OEM also

24%

30%

31%

51%

I t ll ti t

Risk assessment/risk reduction

Training/education

Applications knowledge/support • The paradox of factors that exist between ‘satisfied’ and ‘very satisfied’ are a reflection of the breadth of the application requirements that make up the market

20%

20%

23%

24%

Integration services

On-site service/support

Maintenance support

Installation support Application expertise

Time to deploy

Local sources of supply and support

• Yet, respondent citation of areas for improvement

9%

14%

18%

0% 20% 40% 60%

Warranty terms

Site audits/surveys

Faster delivery/product availability for their suppliers focused on Price – and this exists in the vast majority of markets Support in all phases of the project lifecycle

0% 20% 40% 60%


Migration to Standards Still a Dominant Theme

Which network(s) is your firm using as part of your wireline safety solution?

• More than 55% of respondents cited that their f t l ti ld b b d t d d

25%

73%

Modbus

Ethernet/Ethernet/IP

of your wireline safety solution? (if applicable)

safety solutions would be based on standards in network protocols and architectures

• Compared to only 8% who cited an increased reliance on proprietary networks to support their safety requirements

22%

22%

25%

Profibus/PROFInet

PROFIsafe/PROFInet safety

DeviceNet • Clearly, installed base, depth to which the functional safety solution is embedded, and the technical performance requirements of the solution can drive demand for proprietary solutions

13%

18%

21%

Foundation Fieldbus

safeEthernet

HART

solutions

• But, when standards – Ethernet at 73% for example – are cited, it raises questions: Which ones? Are the implementations proprietary?

8%

8%

10%

AS-I

SafetyBUS p

Guard PLC Ethernet• One of the most important challenges, even

before standards migration, is persistent support for deeply penetrated and widely deployed standards such as Modbus, Devicenet , Profibus, HART and others

0% 20% 40% 60% 80%


Wireless is a Factor in 2 /3 of the Market

What type of communications network does /will your safety solution utilize?

• Standard deployment sequence with wireless i l t f i t ll d b ( ) f

Wireless Networks

9%

does /will your safety solution utilize? is an overlay on top of installed base(s) of wireline networks This is true even in greenfield facilities Not expected to change materially in the next decade

• Wireless network support for safety solutions

WirelineNetworksBoth

9% pp yis a little different than the broader automation markets 802.11 cited more often – by nearly 50% of

respondents Proprietary cited less often – by approx 35%

of respondentsNetworks58%34% of respondents

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


Moving Forward: Knowledge is the Key to Growth

What concerns / issues may hinder your organization’s evaluation or

• Nearly half of survey respondents cited i d d f f t l ti b t

46%No perceived need

your organization s evaluation or deployment of safety solutions?

(Select all that apply)

no perceived need for safety solutions, but this could change Standards are evolving Regulations being codified

• Internal resources issue is two-fold:

44%Lack of internal resources to deploy or implement solutions

Recent RIFs have left many engineering, operations and safety teams short-handed

Safety is not typically a core disciplineon Internal teams

• Despite the importance of the issue, and growth

28%

42%

Cost of maintenance/upgrades

Cost of installation

p p , gin the compliance requirements, cost is an important barrier that needs to be addressed

16%

28%

Lack of industry standard

Cost of maintenance/upgrades

0% 10% 20% 30% 40% 50%


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 partiesand other 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


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 C• Volume Coverage Market definition and segmentation

Market estimate and forecast

User requirements, preferences and plans

Supplier position, share and direction

Marketing channels

Key success requirements


Primary Research & Market Model Highlights

A i tTarget Communities Approximate Sample Size

Phone Interviews Functional Safety Solution Providers N = 100

Web Surveys & Phone Interviews

End Users, Equipment OEMs, Integrators, Other Intermediaries N = 500

Study Publication Date Actual Market Size / Supplier Share Forecast Market SizeSupplier Share

Service Year 2010 2009 Actual / 2010 Estimate 2011 – 2014


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 pricesp p p Executive presentation that walks your team through the research sponsored


Q&A Session

Thank You for Attending this VDC WebcastThank You for Attending this VDC WebcastFor 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 LaingSenior Analyst / Program Manager, Industrial Automation & Control [email protected] | 508.653.9000 x146

Tim SheaSenior Analyst/Program Manager, Industrial Automation & Control [email protected] | 508.653.9000 x132

Bob PeruginiBob PeruginiAccount [email protected] | 508.653.9000 x144

Chris RezendesExecutive Vice PresidentExecutive Vice [email protected] | 508.653.9000 x120


functional safety solutions: protecting assets and preventing disasters

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