The importance of automation has increased significantly in the last two years. The topics of how to simplify existing processes, replace human resources, make production and operations more stable and reliable were already gaining the attention of top decision-makers, but the pandemic has given the necessary impetus to make this business sector a top priority. As in all other sectors, the crisis clearly favours automation companies with a premium service and product portfolio. But what does this mean for automation? We talked to György Biró, the face of international expansion at IAG (Independent Automation Group).
Many business sectors complain about the negative impact of COVID, but the average businessperson would think that there might not be any negative impacts on automation. Is this true?
Generally speaking, no. For most traditional automation and process control companies, 2020 and 2021 brought very bad results as an unpleasant surprise. It’s enough to mention the shutdown of large automotive companies for several months, but there were also serious disruptions in other sectors, which hit suppliers and developers hard. Some companies, for example, could see at the end of each year 80-90% of their total revenue for the following calendar year already contracted, but by the end of 2020, this figure had not even reached 10%. Although, on the one hand, more businesses are realising that automating processes could be a key to recovering from the pandemic-induced crisis. So I would say that the market has become very two-sided. There are big losses on one side and huge potential on the other.
Is there any reason why a company ends up on one of those sides? Was there any control over that at all, or did everyone drift with the price?
That would be a big problem if, as a strategic director, I wanted to go with the flow. The owners would not be very happy about it and, based on my expectations, I would not accept the situation myself. As in all crises, the winner is the one who can react first. In our field, this does not mean ad-hoc brainstorming, but serious, thoughtful, but quickly implementable strategic moves. Moreover, the best companies work to develop a unique service and portfolio at international level, not only in a crisis but also in a calm situation. This is what we do all the time, so when the crisis hit we “just” had to speed up the processes that were already in moving along.
How does a company excel in automation? I assume price is a key factor here, too?
Yes and no. Price is always an important factor, of course, but in automation it is not an absolute value in itself. Because even if one buys and installs the same range of machines at a cheaper price, there are also more efficient versions of those machines. In the case of automation, the amount of investment and the guaranteed cost savings and production increase must be considered in relation to the entire process. However, the real advantage for the customer is not in this but in the development of a brand-independent strategy and its operational implementation.
What exactly does this mean?
Around the world, it has been a fundamental strategy for automation companies to specialise in a particular manufacturer’s portfolio. In other words, they have formed a quasi-partnership with the manufacturers, tailoring their automation processes and design solutions to the capabilities of the brand. Of course, this also means that the best machines and the most cost-effective solutions were not always offered, designed, and implemented, as one brand cannot be the best in all areas. Real efficiency and safety lie in the combined use of several manufacturers, as the best machines and units are used for each sub-area, and more expensive equipment is not unnecessarily introduced into the process just because the manufacturer in question has it in its portfolio.
If this is so important, why do almost all players in the market operate on a brand-specific basis?
On the one hand, there is more revenue growth in the short term, as good relationships with manufacturers provide brand-specific automation companies with additional orders, and on the other hand, it is professionally easier to focus on one manufacturer and train specialists than to continuously monitor the development solutions of several manufacturers.
Why have you developed brand independence?
It was the basic ideology of our owner when he founded the company almost 30 years ago. He is an automation specialist who is perhaps a little obsessed with technical issues. Increasing professional knowledge was always more important to him than increasing profits. This approach gives our company a very strong advantage today, because our engineers and strategic planners have been trained this way, and it gives us a unique position in the market.
Is there an exact way to show the extent to which a company is losing money by applying brand-specific solutions?
Absolutely. There is an exact test for this, the Automation Independence Screening. You can see some surprising results in this area. That is why the market is increasingly demanding these reviews.
What do you think the future holds for automation in an economy recovering from a pandemic?
I think premium service providers can expect to see significant growth. Those with unique knowledge are increasingly in demand in the market. The role of advice is becoming more valuable and is being separated from execution. More and more businesses will review their existing automation solutions from a brand-independent perspective, as the cost savings at this level can be substantial. There will be fewer players in the market, but I think this is a healthy selection that happens after every crisis.
Thank you for the discussion and I wish you all the best for IAG’s international progress!
Thank you very much!