Global supply chain

• Proposals & quotes
  • Multiple locations for large jobs
• System design & documentation
  • Anywhere
• Manufacture panels and parts
  • Almost anywhere
• Installation - Customer site
• Services - Customer site

Products vs systems - Traditional split

• Materials
• Widgets
• Products
• OEM equipment
• Systems
• Services
• Installation
• Maintenance & upgrade
• Training

US Automation Systems Integrators - Summary of US SI analysis

• 1000 companies
• 80% major suppliers’ SI services
• 20% "independent"
• 50% $ 1-5 million annual revenue
• Only 15 “independents” $10-25 million
• Only 7 over $25 million
• Only 3 of the 7 >$25 million located in US

Suppliers seek growth through internal/captive SI services
Advantages

• "Total solutions" providers for end-user
• Proprietary product knowledge
• Capture revenue growth
• Push higher-margin products
• Keep integration margins in-house
• Develop in-house SI expertise

Internal/captive SI Services - strategic error for product suppliers
Disadvantages

• Cannot compete with small, local independents
• Local territorial focus is vital
• Cannot scale up on a broad front
• SI margins are much lower
• Independent SIs will compete – migrate to other "commodity" products

Independent SI assets

• Knowledge & Experience
  • Relationship with specific end-users
  • Applications knowledge & experience
  • Local availability – the key asset
  • Provide all required systems services

Key SI services

• Primary customer values
• Design to suit needs
  • Early partnership to maximize ROI
• Build to meet budget & schedule
• Internet-based support
• Installation & commissioning
• Service availability
• Repairs, maintenance & upgrade
• Training of customer personnel

Major suppliers – competitors or allies?

• How long is "long term" contract?
  • Preferential pricing
  • Relationship between sales channels – Internet, Distributors, Sales Reps, SIs
  • Consistent policies across territories
  • Mutual exclusivity
  • Referrals
  • Mutual dependency

Consulting/Engineering firms - Partners? Or competitors?

• Will they "automatically" choose the major suppliers (Siemens, Rockwell, etc.?)
  • Small SI has "credibility gap"
• Multi-national design, configuration, services
• Vendor-selection power
• Shared between Engineer & end-user
• Approved list – tool to favor "friends"

Traditional Disintermediation

• Manufacturer "upstream"
• End-user is the "customer"
• All sales channels are the "intermediaries"
  • Sales Reps
  • Distributors - stocking & what else?
  • Systems integrators
  • Internal sales people

Disintermediation today

• Products have become "commodities"
• Manufacturer is in the "distribution" chain – no "upstream profits" anymore
• Distributors & Systems integrators can migrate to competition
• Good SI has territorial supremacy – the key link to the Customer

Growth through SI partnerships

• Partnering basis
  • Territorial bias
  • Global linkage
  • Specialized market bias
  • Shared knowledge (software)
  • Access to services
  • Example: Automation Alliance

Pinto's Pointers

• Focus on key markets, customers
• Develop alliances
• Other US territories
• Other local markets/applications
  • Global
• Never, never be the lowest bidder

Suggested Reading (Click on weblink)

• Automation: Products Vs. Services
  
• Never, never be the lowest bidder
  
• Automation Systems Integrators – growth ceiling
  

• Disintermediation Stirs up Industrial Automation
  
• Disintermediation II - The Customer perspective
  
• Disintermediation – III – Product Manufacturers get disintermediated
  

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