Value Resellers and Systems Integrators Market in North America -a Competitive Perspective

Siva Kali Prasad, Industry Analyst

Industrial Automation and Process Control (IPC)

North American Practice, August 20, 2008

2

Value Resellers and Systems Integrators Market in North America –A Competitive Perspective

� Automation Industry- A Service Perspective

� Global Systems Integrators Market for Automation Services

� System Integrators- Where do they Stand?

� Frost & Sullivan’s – Integration Services Model

� Demands of the Automation Vendors and Customers

� Bridging the Divide – Automation Vendors and Customers

� Systems Integrators Market – Trends

� Strategy

� CAMP - A Patented Tool for Evaluating Growth Opportunities

� Introduction to CAMP

� CAMP Index

� CAMP for Industry Vertical – Food & Beverage

� Planned Content

� Existing Content

� Contact Info

Table of Contents

3

Automation Industry – A Services Perspective

Compile

time

Installation time Run time

Service Adaptability

Dynamic/Ad hoc

1st G

eneratio

n

Threshold

Level 1

Quality &

reliability Service m

anagement

Security &

Trust Interoperability

2st G

eneratio

n

Threshold

Level 2

Quality &

reliability Service m

anagement

Security &

Trust Interoperability

3rd G

eneratio

n

Independent

Vertical

integration

Cross vertical

integration

Context

dependent

Serv

ice C

om

positio

n

Source: The software and service challenge, European Union commission

� Generations of services

with different levels of

quality, reliability,

interoperability

4

Global Systems Integrator Market for Automation Services

Market Size: Globally approx. 3800 system integrators are present, with around

2100 in North America (1800 in USA alone), 900 in Europe, 800 in rest of the world.

Total revenue generate is approx- 25 billion USD in 2007

Market: North America

Target Market Size: 15 billion USD in 2007

CAGR : 9.46%, 2008-2014 (North America)

Total Systems Integrator Market: Revenue & Forecast,

(World), 2004-2014

0

10

20

30

40

50

60

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Year

Reven

ue (

billio

ns o

f

US

D)

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

Gro

wth

Rate

(%

)

World revenue Grow th Rate

Total Systems Integrator Market: Revenue & Forecast,

(North America), 2004-2014

0

5

10

15

20

25

30

35

40

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Year

Rev

en

ue (

billio

ns

of

US

D)

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

Gro

wth

Rate

(%

)

NA revenue Grow th RateSource: Frost & SullivanSource: Frost & Sullivan

5

Systems Integrators (SIs)- Where do they stand?

� Act as bridge between automation vendors and end-

user

� Automation manufacturers are partnering with

systems integrators to adhere to customer needs across

the globe.

� Automation manufacturers want to leverage the

proximity and close relationship the SIs have with the

customers

Products &

Services

Automation Manufacturers

Distributors/

OEMs

Customers

Products

Products

� Emerson acquires Damcos Holdings & The

Automation Group

� Schneider executes project for Reliance

Infocomm with aid of SIs

� Yokogawa and Maverick together win a bid -

Chevron project

Systems

Integrators

Past

Products &

Services

Automation Manufacturers

Distributors/

OEMs

Customers

Products

Products

Present

Systems

Integrators

Source: Frost & Sullivan

6

Frost & Sullivan’s Integration Services Model

� Systems Integrator complement the internal resources of the company.

� OEM are more plant centric

� Customer need to tactically decide whom to employ depending upon the task

PLANT FLOOR-TO-TOP FLOOR INTEGRATION –IMPLEMENTATION STRATEGY SNAPSHOT MODEL

Source: Frost & Sullivan

7

Bridging the Divide – Automation Vendors and Customers

Why automation vendors pursue SIs

� Increase adoption for new product

� Understand customer needs

� Serve customers in better way

� Regulatory/Policy hurdles

� Find new customers

� Geographic reach

What automation vendors require from SIs

� Exclusivity

� Project management skills

� Product know-how

� Proximity to lower end segment of customers

� Geographic presence

� Industry know-how

Why customers pursue SIs

� Ability to handle diverse requirements of customers

� Customized solutions

� Independent evaluator for technology and solutions

� “Beta” solutions

� Cost competitiveness

What customers require from SIs

� Product know-how

� Vertical industry experience

� Closely located- geographically near

� Long-term business stability

� References in the industry

� Pre and post implementation capabilities

� Previous business relationship

8

North American Systems Integrators Market –General Trends

� Lot of systems integrators are present in Food & Beverage, Pharmaceutical, Automotive, Packaging

verticals

� Barriers to enter into the systems integrator market remain rather low.

� There is large fragmentation, and competition from small players

� Very small systems integrators (below 5mUSD in revenue) survive because of close contacts with the

customers.

� Many companies have an alliance among themselves to cater to geographically distributed customer

� Systems integrators partner with OEM to serve customers. The concept of main automation contractor

is getting predominant with systems integrators.

� Rockwell, Schneider, and National Instruments are all requiring their integration partners to be

approved by Control System Integrators Association (CSIA).

� Packaging, Mining, and general manufacturing are hugely served by systems integrators

� Market for maintenance contracts and service for retrofits would increase.

� The concept of Main Automation Contractor (MAC) is being accepted in brown field projects.

9

Growth CAMP: M&A Model(Competitive Advantage and Market Positioning Matrix)

A Tool to Drive Growth Strategy

10

Growth CAMP: A Tool to Drive Growth Strategy

� Frost & Sullivan has integrated several services to create the Growth CAMP tool, assisting

market participants in the effective evaluation of growth opportunities.

� The Growth CAMP model gives a snapshot of how companies perform vis-à-vis their

competitors by comparing their strengths and capabilities.

� The model provides a visual correlation with four quadrants that can be customized to

clients’ unique requirements.

� The goal of this tool is to help clients to make better informed decisions about companies

that are evaluated. The important take-away is that the fact that the Growth CAMP toolset

can help create a robust portfolio of growth initiatives, creating a pipeline for constant

evaluation by the CEO’s Growth Team.

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Growth CAMP: Driving a Portfolio of Growth Initiatives

� Growth opportunities are global. CEO’s could have different agendas on the shopping list:

low-cost manufacturing advantage, local market distribution strength, technology

innovation, enhanced portfolio, or services growth.

� The CAMP model encompasses various research attributes, such as market drivers and

restraints, market trends, competitive analysis, as well as opportunity in the marketplace.

� The various ratings are based on both primary and secondary research.

� The empirical evidence for CAMP is not only based on current market scenarios, but could

also include “what-if ” financial analysis.

� Thus, the CAMP model identifies and qualifies the growth opportunity in any industry by

leveraging Frost & Sullivan’s global intelligence on attributes, such as market, technology,

econometrics, and demographic factors. This translates into significant results and

enhanced competitiveness for clients.

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The CAMP – A Patented Toolfor Evaluating Growth Opportunities

© Frost & Sullivan 2008 – All rights reserved

Positioning on the quadrants is achieved through assigned ratings for each company

and each selected factor.

A

B

E

D

C

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CAMP Index

The CAMP Index is a rating given to each participant based on its performance

against five key parameters for the base year. The index allows a bias to be

designed for the evaluation.

CAMP INDEX

The three parameters included are:

� Low Engineering Cost – The average engineering cost of the company.

Higher the cost of engineering lower is the rating.

� Scalability – The ability of the organization to increase its personal strength at

a quick pace, recruit persons or acquire a company, train the same with internal

methodologies. Greater is the scalability greater is the rating.

� Integration capability – The knowledge of the organization, industrial vertical

experience, previous experience in execution of similar projects. Greater the

knowledge and experience, greater is the rating.

14

CAMP for Systems Integrator Market: North America

10>30 locations

915-30 locations

810-15 locations

78-10 locations

65-7 locations

55 locations

44 locations

33 locations

22 location

11 location

Value Geographic Presence

10>150m

9100m-150m

880m-100m

760m-80m

640m-60m

530m-40m

420m-30m

310m-20m

25m-10m

1<5m

Value Revenue, 2007(USD)

10>40m

935m-40m

830m-35m

725m-30m

620m-25m

515m-20m

410m-15m

35m-10m

22m-5m

1<2m

Value Revenue, from industry

vertical (USD)

10>35m>30yrs>500<25$/hr

925m-35m25-30yrs300-50025-40$/hr

820m-25m20-25yrs200-30040-50$/hr

715m-20m15-20yrs100-20050-60$/hr

612m-15m12-15yrs70-10060-70$/hr

510m-12m9-12yrs50-7070-80$/hr

48m-10m7-9yrs40-5080-100$/hr

34m-8m5-7yrs25-40100-145$/hr

21m-4m3-5yrs15-25145-170$/hr

1<1m<3yrs10-15>170$/hr

Max project size (P)

Experience (E)

Camp Index (CI = 0.5 *

L+0.25*S+0.25*C)

Integration Capability (C = 0.5*E+0.5*P)

Scalability -Technicians

(S)

Low Eng Cost (L)

Source: Frost & Sullivan

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CAMP for Food and Beverages Market

Systems Integrator Market in Food & Beverage Industry: CAMP Chart, (NA) 2008

AAA Inc

AAG

Hallam ICS

PGI

GAP

ACE

ACT

Bachelor Cntrl

Baytec Eng

Concept sys

Conerstone Cntrl

Control Associates

Control Masters Inc

DCR eng

ESE

Factory IQ

Flexware Innovation

IAC

JMP eng

Kredit

Matrix Tech

Maverick Tech

Patti Eng

Premier SI

Rovisys

Rutter Hinz

Stone Tech

Tegron

0

1

2

3

4

5

6

7

8

9

10

0 1 2 3 4 5 6 7 8 9 10

Geographic Presence

Overall Company Revenues

0

1

2

3

4

5

6

7

8

9

10

0 1 2 3 4 5 6 7 8 9 10

Camp Index

Revenue in the Vertical Industry

Quadrant 1 Quadrant 4

Quadrant 3

Quadrant 2

Source: Frost & Sullivan

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