Siemens' Franke sizes up global automation market

At Hannover Fair in April 2005, Control Engineering spoke with Ralf-Michael Franke, who was recently named president of Siemens Industrial Automation Systems division of the Siemens Automation and Drives Group, headquartered in Nuremberg, Germany. Before assuming his new role, Franke was responsible for Siemens' "Innovation" program as part of the company's management sy...


At Hannover Fair in April 2005, Control Engineering spoke with Ralf-Michael Franke, who was recently named president of Siemens Industrial Automation Systems division of the Siemens Automation and Drives Group, headquartered in Nuremberg, Germany. Before assuming his new role, Franke was responsible for Siemens' "Innovation" program as part of the company's management system.

Franke shared his views on the current automation marketplace, where he sees things headed, and how he is working to position Siemens Industrial Automation.

What's your interpretation of the global automation sector at present? What global factors do you think are currently influencing the market most and how do you see this playing out over the next few years?

The Asian market is heading up the most with a lot of projects in process and factory automation—China in particular is big. The growth in Asia will be the biggest market factor for us over the next three years at least. Nevertheless, we aren't overlooking the other markets, like Eastern Europe, Russia, and the Czech Republic, where a lot is happening. We're also keeping a close eye on the markets where we are well established with certain products, such as with Simatic IT (manufacturing execution system) in Europe and America.

Which automation product types are currently most in demand?

PLCs still sell most and are the basis for most of our revenue. HMI is also big. But we're also focusing on new products resulting from our $200-million-a-year investment in research and development. Our R&D budget represents about 10% of revenues. It's a big investment area for us. The newest products to come out of R&D that we are promoting heavily now are PLC7 and Simatic IT. Because these new products are more complex, we are engaging more in a consultative sales approach with the market to communicate the productivity increases possible with products like Simatic IT. Therefore, we're targeting these products more toward mature markets, like Europe and America.

What countries are experiencing the most automation activity? What are they mostly buying?

China is unbeatable in terms of automation buying—both in factory and process automation. Even with Chinese automation spending so much larger than that occurring anywhere else in the world in business ratios, it is important for us to invest in up-and-coming areas like eastern Europe to establish an installed base there now for a good position in the future.

Poland and Russia are very important to us right now. We already have 28 partners and eight distributors in Poland and are getting distributors and solution providers set up in Russia.

As a business, when you're looking to set up pure PLC and HMI business in an area, you need good distributors, but when you're looking to establish more complex products, you're heavily dependent on system integrators. We support the system integrators that work directly with us—only doing a small number of projects directly to build competence in the market across our own organization.

In the U.S., Siemens is most known for products and brand recognition, but not necessarily service. How do you plan to address this perception?

Less than 10% of our business is currently based in service and system integration, but we are targeting double-digit growth in this area by changing how we present ourselves, to more prominently show our service offering. But changing market perception will take time. Showcasing the Exider train worldwide last year was the start of this process, to show the market how we're changing—to show new products and competence.

Part of our positioning now is to highlight the need for links to IT systems. Customers are now wanting greater production-oriented payback from their IT systems, and that's why we developed Simatic IT using the S95 standard.

What sort of adjustments is Siemens making to address specific marketplace demands?

We're now adapting a process to the rest of the world that was first explored by Klaus Kleinfeld (Siemens president and CEO) in the U.S. to synchronize business by orienting toward a horizontal approach with products across vertical industries.

Siemens IndustrySuite approach is based on finding out what customers need in different verticals and delivering solutions addressing that. This is a difficult approach because you have to have specific industry knowledge in each sector. We have been building up competence centers to address this and have brought in people from those specific industries. We also have a sector development board composed of Siemens management specific to those industries that approve development of products for those industries and position the company to potential clients in the verticals.

IndustrySuite was a major change in how we work with customers. Now we can address any questions customers may have. By merging process and factory automation on a single platform, we have a unique selling position.

How much of a role is safety playing in purchases by industry, and how is Siemens addressing this market issue?

We've been dealing heavily with safety more and more in the past 10 years. Our focus is on having safety integrated into all products so that you don't have to buy another product to achieve safety.

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