The inevitable conclusion
Immediate prospects for business applications, automation markets revealed at recent media events
By Kevin Parker, editorial director -- Manufacturing Business Technology, 1/1/2003 7:00:00 AM
Like the weary man seated at the bar in The New Yorker cartoon who stares into space and says, "I want my bubble back," participants at two industry events—AMR Research's Fall executive conference and Rockwell Automation's media day—seemed to sometimes stop and say, "When will it end?"
No one knows when the current economic slowdown will end—bringing with it, it is hoped, reinstated phenomenal growth in computer and software use. Some say it's already happening, and others that it'll never happen again.
As reported in Business Week, Commerce Dept. reports indicate "third-quarter capital outlays on equipment and software—which account for roughly 80 percent of capital spending—increased 6.5 percent over the second quarter. That's double the 3.3-percent increase the second quarter turned in over the first."
Yet while acknowledging uncertainties and conflicting signs that warn the economy may have entered the second dip of a classic double-dip recession, Tony Friscia, president of Boston-based AMR is at least cautiously optimistic.
"Following five quarters of negative growth for software sales, we are seeing some recovery. While information technology [IT] budgets are projected flat [for 2003], we will see a recovery in technology spending in the second quarter of 2003. Structural changes continue, and the best companies are investing."
One example of optimism Friscia pointed to was the $1-billion increase in research and development recently budgeted at Microsoft, and the vendor's targeting of the enterprise software market for small- to medium-size businesses as a potential $10 billion market.
The AMR conference keynote speaker Richard Lester, professor of nuclear engineering at MIT, while supporting the general theory that the tech sector still had a lot of life in it, threw some cold water on a notion often used to justify technology investment—that companies are outsourcing and focusing on core competencies like their lives depended on it.
"The theory is that value chains will unbundle and that vertically integrated companies will break up because interaction costs have dropped so much," says Lester. "But is this really the case?"
Certainly, says Lester, this "componentization" is seen a lot in technology markets. "There are, however, large, integrated electronics makers. And in automotive, too, the picture is mixed."
At Milwaukee-based Rockwell Automation's media day, a back-to-basics approach was in evidence as the automation vendor pointed to its solutions for reducing wiring costs, limiting unplanned production downtime, initiating top-floor to plant-floor integration, and maximizing safety.
While downgrading of plant-floor integration to third on the list of priorities may be indicative of a new "get real" attitude, there is general recognition that plants need to do a better job of organizing and managing information. Yet the reasons for doing this aren't the ones that were frequently heard during the bubble times.
"To be lean and have high quality, you need plant data, and you need tools for analyzing that data," says Joe Diodati, director of market development/field marketing, commercial segment, Cisco Systems, San Jose, Calif.
Rockwell Automation Chairman and CEO Don Davis believes companies increasingly see investments in plant floors as a competitive advantage based on better use of information, and while new capacity investment is not driving markets today, there are plenty of reasons to use IT and automation to get the most out of existing capacity.
Davis' views were seconded by Thomas Duesterberg, Ph.D., president, and CEO of Manufacturers Alliance/MAPI Inc., Arlington, Va., in his presentation on the continuing power of the U.S. economy.
"There is no shortage of demand for basic goods from developing countries," says Duesterberg, "or for more sophisticated goods from developed countries. U.S. manufacturing's share of world exports has risen from 58 percent to 63 percent. The U.S. is the fastest-growing developed country."
The key to continuing productivity growth, Duesterberg adds, is continuing research and development, flexibility in business processes, and exposure to global markets—all areas in which U.S. manufacturing excels.
Thus, given demand for goods, and the immediate prospect of more productive means for making those goods, the same conclusion must be drawn as was by many of the attendees at these two events: "We don't know when the downturn is going to end, but it's got to end sometime."
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