Functional Safety Solutions: Protecting Assets and Preventing Disasters

VDC Research Webcasts
Functional Safety Solutions:
Protecting Assets & Preventing Disasters
Market Development Update
August 2010

Industrial Automation & Control Practice
Chris Rezendes, Executive Vice President

Recording Available

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

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

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


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 Rezendes – E
Chris R d Executive Vice President
ti Vi P id t
 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 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


Agenda

Introduction
Functional Safety Outlook & Factors Driving Demand
Product & Technology Preferences & Requirements
Networking & Impact of Wireless
Brief Recommendations
VDC Functional Safety Coverage
y 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 indirect
channels


Many Factors Drive Strong Gains in Deployment

Firm Position on Functional Safety • Rate of deployment is 20X the rate of
Deployment evaluation with no d l
l ti ith deploymentt
% of respondents
2.8%
• With nearly 40% evaluating or planning to,
deployment rate could nearly double in the
next few years
• Five factors were cited by at least
12.8%
50% of survey respondents:
 Employee protection

41.3%  Risk reduction plan component
 Industry standards
19.3%
19 3%  Equipment protection
 Government regulations

• Employee protection was cited by
nearly 80% of respondents
23.9% • Regulations matter, but functional safety is
matter
also seen as a strategic tool:
 Cost reduction,
Currently using safety solutions  Productivity enhancement
Currently evaluating safety solutions  More
No 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 • Functional safety appears to be a uniquely
% of respondents strong segment in the automation market
t t i th t ti k t
 58% of respondents cited the recession had
no impact on functional safety budgets
 56% stating that their budgets will remain
Decreased constant / unchanged in the forward 2 years
expected
spend • During the past two years, budget delays,
D i th tt b d td l
13% or contractions were modest
• Going forward, we expect to see material
gains in functional safety budgets
Expected
Increased  Existing users expanding coverage
g p g g
spend is
expected  Delayed or crimped budgets returning
unchanged
spend  New users going from zero / near-zero
56%
31% to funding projects

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


Users are Looking for Robust Front-end Support

Key Services Requirements for • A number of factors are combining to drive
Successful Functional Safety Deployment significant demand for a number of high
i ifi td df b f hi h
(Select all that apply)
value-added services
 Developing standards
Consulting 47%  Growing liabilities for poor implementations

• In a market that is often shy about p y g
y paying
Training
T i i 38%
third-party technical consultants – these
services dominate the requirements list
Site Survey/Risk Assessment/Risk Reduction 31%
 Consulting
Commissioning 30%  Training
 Site survey
No change expected 29%  Commissioning
 Integration
Integration 29%
• While these citation rates are relatively low
Configuration Development 26% on an absolute basis
 Current penetration of the sample at 50%
Testing 21%  Current / planned evaluation at 45%

Custom Engineering 21% • Competition may turn on supplier – and their
channels – ability to communicate and deliver
Configuration Management 13% against these requirements

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


This Brings Them to Direct, Value-adding Sources

Current Sources of Supply for • Survey respondents have concentrated their
Functional Safety Solutions sourcing in direct channels
i i di t h l
 Functional safety solution providers
 Equipment OEMs with safety solutions
embedded in
Direct from product supplier 63%
• Low citation rates for lower value-adding
channels, and third-party higher-value-adding
channels, are indicative of an emerging market
OEM 38%
• A likely critical benefit of this factor is efficient,
accurate solution deployment

Systems integrator 29% • A likely critical liability is the limited range of
f
solution sources, including local, and expert
in fringe applications

Construction/Consulting engineering firm 28% • A fair amount of tension is likely to develop as
these solutions are fairly narrowly defined, the
th l ti f il l d fi d th
applications expand, and the channels play a
growing role in this services-intense period of
Value-Added Distributor 21%
time

0% 25% 50% 75%


How Do Suppliers Fare? What More Needs Done?

Firms’ Primary Recommendations • High satisfaction rate at 73%, makes sense given
To Improve Supplier Performance the
th concentration of business in direct channels
t ti fb i i di t h l
• When given the option to rate ‘very’ only
1 in 8 chose that option – there is room for
Competitive pricing 55%
improvement in supplier performance –
Improved technical support: 52% integrator and OEM also
Applications knowledge/support 51% • The paradox of factors that exist between
Training/education 31%
‘satisfied’ and ‘very satisfied’ are a reflection
of the breadth of the application requirements
Risk assessment/risk reduction 30% that make up the market
Installation
I t ll ti support
t 24%  Application expertise
Maintenance support 23%  Time to deploy

On-site service/support 20%  Local sources of supply and support

Integration services 20% • Yet, respondent citation of areas for improvement
Faster delivery/product availability 18%
for their suppliers focused on
 Price – and this exists in the vast majority of markets
Site audits/surveys 14%  Support in all phases of the project lifecycle
Warranty terms 9%

0% 20% 40% 60%


Migration to Standards Still a Dominant Theme

Which network(s) is your firm using as part • More than 55% of respondents cited that their
of your wireline safety solution? safety solutions would be based on standards
f t l ti ld b b d t d d
(if applicable)
in network protocols and architectures
Ethernet/Ethernet/IP 73% • Compared to only 8% who cited an increased
reliance on proprietary networks to support
Modbus 25%
their safety requirements
DeviceNet 25% • Clearly, installed base, depth to which the
functional safety solution is embedded, and
PROFIsafe/PROFInet safety 22%
the technical performance requirements of
Profibus/PROFInet 22% the solution can drive demand for proprietary
solutions
HART 21%
• But, when standards – Ethernet at 73% for
safeEthernet 18% example – are cited, it raises questions:
 Which ones?
Foundation Fieldbus 13%  Are the implementations proprietary?
• One of the most important challenges, even
Guard PLC Ethernet 10%
before standards migration, is persistent support
SafetyBUS p 8%
for deeply penetrated and widely deployed
standards such as Modbus, Devicenet , Profibus,
AS-I 8% HART and others

0% 20% 40% 60% 80%


Wireless is a Factor in 2 / 3 of the Market

What type of communications network • Standard deployment sequence with wireless
does / will your safety solution utilize? is
i an overlay on top of installed base(s) of
l t f i t ll d b ( ) f
wireline networks
 This is true even in greenfield facilities
Wireless  Not expected to change materially in the next decade
Networks
9% • Wireless network support for safety solutions
pp y
is a little different than the broader automation
markets
 802.11 cited more often – by nearly 50% of
respondents
Wireline  Proprietary cited less often – by approx 35%
Both
Networks of respondents
34%
58%  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 • Nearly half of survey respondents cited
your organization s evaluation or
organization’s no perceived need for safety solutions, but
i d df f t l ti b t
deployment of safety solutions? this could change
 Standards are evolving
 Regulations being codified

No perceived need 46% • Internal resources issue is two-fold:
 Recent RIFs have left many engineering,
operations and safety teams short-handed
Lack of internal resources to deploy
 Safety is not typically a core discipline on
or implement solutions
44% Internal teams

• Despite the importance of the issue, and growth
p p , g
in the compliance requirements, cost is an
Cost of installation 42% important barrier that needs to be addressed

Cost of maintenance/upgrades 28%

Lack of industry standard 16%

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-parties
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
Volume Coverage
C
 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

Approximate
A i t
Target Communities
Sample Size

Phone Interviews Functional Safety Solution Providers N = 100

Web Surveys & End Users, Equipment OEMs, Integrators,
N = 500
Phone Interviews Other Intermediaries

Actual Market Size /
Study Publication Date Forecast Market Size
Supplier 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 p
p p prices
 Executive presentation that walks your team through the research sponsored


Q&A Session

Thank You for Attending this VDC Webcast
For 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 Laing
Senior Analyst / Program Manager, Industrial Automation & Control Practice
dlaing@vdcresearch.com | 508.653.9000 x146

Tim Shea
Senior Analyst/ Program Manager, Industrial Automation & Control Practice
tims@vdcresearch.com | 508.653.9000 x132

Bob Perugini
Account Executive
rperugini@vdcresearch.com | 508.653.9000 x144

Chris Rezendes
Executive Vice President
cjr@vdcresearch.com | 508.653.9000 x120


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