Global Software-defined Automation Growth Opportunities, 2024

The Impact of the Top 3 Strategic Imperatives on the Software-defined Automation SDA Industry

Innovative Business Models

Why

• Traditional industrial automation vendors are developing their own ecosystem of solutions for automation and process control, but SDA may prove this strategy to be counterproductive.

Frost Perspective

• SDA will commoditize industrial control hardware and enable the use of best-in-class point solutions in manufacturing.
• Industrial automation vendors will opt to specialize in certain solutions to gain an edge as hardware revenues diminish and software becomes more open for integration.

Competitive Intensity

Why

• Productivity in manufacturing facilities has been stuck at around 80% for the last 10 years, and manufacturers are seeking a way not only to improve their efficiencies but to make their systems open and interoperable as well.

Frost Perspective

• Manufacturers who adopt SDA solutions early will gain a competitive advantage in productivity.
• This, in turn, will create an incentive for vendors to develop these solutions.

Internal Challenges

Why

• The manufacturing world is experiencing labor shortages worldwide as older generations retire and younger generations bring skillsets that do not match legacy technology’s requirements.

Frost Perspective

• SDA will allow manufacturers to leverage the information technology (IT)-like skills of the younger generations in operational technology (OT)-related jobs as well as make those jobs more attractive to them.

SDA, SDN, and SDM

• Software-defined Manufacturing (SDM) involves a layer of software overseeing all manufacturing processes, from raw material handling to the testing of final products.
• Software-defined Networking (SDN) abstracts the control logic from network devices such as routers and switches and centrally manages it from a single instance. It uses APIs to communicate with the network's hardware infrastructure to manage data flows.

Growth Drivers

• Manufacturers are facing labor shortages driven by an aging workforce with increasingly rare skills such as programming PLCs in ladder logic that the younger generations are not interested in acquiring. SDA solutions will allow manufacturing to leverage the IT-like skills of the younger generations and make those OT jobs more attractive.
• The manufacturing world is seeking to lower the impact of capital expenditures, as seen with the increased adoption of "as-a-service" solutions. SDA solutions such as vPLCs will help them achieve that by, for example, allowing companies to purchase a standard low-cost hardware device and pay a fee that depends on the input/output capacity in use.
• The semiconductor shortages driven by pandemic-related policies, diminished trust in proprietary control and automation solutions. This is because of the mass delays in orders for vertically integrated control systems, which rely on hardware built with specific integrated circuits rather than with standard CPUs.
• The increasing use of data for optimizing manufacturing operations as seen with the widespread adoption of digital twins and manufacturing execution systems is making SDA solutions more appealing.
• Innovations in networking, connectivity, and edge computing technologies in combination with standardization efforts regarding industrial data communication protocols are building the infrastructure required for the proper implementation of SDA solutions.
• The push by manufacturers seeking to improve their productivities to make their process control and automation solutions open and interoperable, as seen with the developments of OPC UA and MQTT, will inevitably evolve into making those systems software defined.

Growth Restraints

• Reluctance to Change Industrial automation vendors and manufacturing companies largely display a reluctance to change. The vendor side is driven by an incentive to maintain the competitive advantage gained from locking in manufacturers with proprietary solutions. The manufacturing side is driven by a lack of awareness of the benefits of SDA and a generalized conservative attitude towards change.
• Reliability and Performance in SDA solutions, such as vPLCs, are not as high as in traditional solutions for process control and automation.
• Cybersecurity Concerns rise as OT systems become exposed to threats with more access points being created, as is the case with SDA solutions. Manufacturers must adopt proper measures, such as implementing zero-trust security protocols, placing firewalls and gateways, and carefully designing the possible routes and directions for data flows.
• Integrations with Legacy Systems and Equipment may require long and costly customizations.