Valve companies are designing valve performance software that is tailored to specific valve challenges. Automation suppliers also have generic valve performance software which has the advantage of being easily integrated into automation systems. It boils down to whether it is better to have a superior valve performance monitor and integrate it into the automation system or have a generic valve performance monitor that is more easily integrated.
By Robert McIlvaine, Founder and CEO – The McIlvaine Company
How good is an automation system if it must accommodate performance software from multiple vendors? Ideally, the valve and automation supplier work together and design a hybrid system. But does this mean that Rockwell or Siemens must work with Velan, Bray, Emerson, and other valve companies to develop hybrid valve monitors from each?
Does this mean that Bray must work with Yokogawa, Rockwell, Schneider, and others to develop hybrid systems for each? Most importantly who has access to the historians with all the performance data? With the Industrial Internet of Things (IIOT), remote operations and maintenance (O&M), and the acceleration of Artificial Intelligence (AI), valve purchases will be made on accumulated wisdom. However, the playing field will be slated with those companies controlling the valve performance history having the advantage.
When aggregating the revenues of valve companies, the conclusion is that the market is valued at USD $100 billion. But dig a little deeper and find that only USD $50 billion is valves. The rest is service, parts, and automation including remote O&M. There is another USD $70 billion market held by service centers, automating suppliers, and those involved in remote monitoring and O&M.
Valve owners are spending USD $90 billion per year to operate and service the valves. This creates a total available market of USD $260 billion. With AI and IIOT plus remote O&M, the amount plants spend directly on O&M will drop substantially and the revenues will be gained by the valve, system, and automation suppliers.
Valve company revenues could range from as low as USD $115 billion to as high as USD $275 billion. So, the valve industry will no longer be a low-risk return investment. It will have some of the same specs as the AI and the automation markets with which it will both cooperate and compete.
Valve companies need to be viewed as valve champions looking to interpret AI and remote O&M into their revenues. They compete with automation and system companies looking to integrate valve technologies into their programs.
Valve companies need to develop very specific valve performance software that is so superior to the generic brand that it will be incorporated by the automation suppliers. They need to keep ownership or at least access to the performance of historical data. They also need to modify their valves based on what the performance data indicates.
They have the opportunity to leverage its data for higher sales, but also higher EBIDTA if they incorporate modifications that will lower the cost of operation for owners. Market research must improve along with the industry. Product forecasts use a checker strategy. One report is on valves, and another is on automation. The CEO or investor wants to know how much of the automation market will be captured by valve companies. So, he needs a chess-like strategy that analyzes the future for both valve and automation companies as well as those who provide systems. Some of the chess pieces involve service. Service centers would like to expand their valve-related revenues with the customers they serve.
Flowserve is a valve and pump champion and has been buying service centers. Emerson has been buying service centers as well. They have automation and remote O&M capabilities. Will these service centers emphasize providing complex control systems and automation of all the equipment or are there valve champions who will be allowed to contribute to more of this service market?
Market research is now a chess game that not only predicts what will happen but who will benefit.
ABOUT THE AUTHOR
Robert McIlvaine founded the McIlvaine Company in 1974 and oversees the work of 30 analysts and researchers. He has a BA degree from Princeton University.