Industrial Automation Readies for Software Decoupling
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Industrial Automation Readies for Software Decoupling

The decoupling of control software from hardware is taking place.

We found clear evidence of this trend gathering pace across meetings with three corporates (two major listed, one private) launching offers that essentially separate PLC (Programmable Logic Controller) functionality from PLC hardware, highlighted by one industry expert ("for machine tool builders, every customer conversation now is around software-based system") and dedicated private start-up players (Software Defined Automation – digital twins of PLCs permitting IT-like deployment of fleets of controllers). Determinism requirements (latency) and industry conservatism remain restrictive.

PLC contribution margins are cited at c80-90%, and therefore a shift from selling controllers with integrated software (i.e., the PLC) to selling control software that can be implemented on independent hardware present a changing dynamic for incumbent players.

At this stage, we do not view this development as disruptive because (1) customers' push so far appears to be instead toward higher functionality and flexibility of solutions rather than specifically to lower the cost; (2) incumbent players are actively developing 'virtual' offers, (3) a meaningful portion of the market is protected by the above, and (4) PLC industry cancellation rate is minimal.

There are few drivers to IT deployments in the Industrial OT space. Digitalisation is recognised as being of high importance by 75% of respondents in a recent VDMA survey of 100 industrial C-Suites (machine tool builders, robotics, power transmission). Further, signs of increasing digital adoption in manufacturing are emerging for Industrial Software and Automation Hardware players across Europe, the US, and Asia. Over the past 12 months, supply chain challenges have increased conversations around manufacturing repatriation.

@Andre Kukhnin