Will Channel Partners Rise to the Challenge?
Data collection devices, such as the ubiquitous barcode Mobile Computer, continue to evolve. However, the next generation of AIDC smart device networking is here.
Specifically, the AIDC industry is witnessing many of the largest OEMs drive transformation through high-tech mergers and acquisitions and IIoT (Industrial IOT) investments in digital connectivity. These new OEM solutions help companies track and manage assets, gain network visibility and automate processes and operations.
This new wave of AIDC is forcing traditional channel partners who still focus on hardware sales and service to adapt to the new standard.
Several years ago, I left the connected world of IoT to work in the Automatic Identification and Data Capture (AIDC) industry. Within weeks, I realized I had made a big step backward in time (and perhaps my career). While I had been deeply involved in large-scale network device deployment, monitoring, systems integration, and process automation, the AIDC industry had yet to embrace smart device technologies. Despite the demand from customers for online visibility and control of their AIDC devices, the hardware-focused products could not enable businesses to centrally monitor and track AIDC network devices. The infrastructure just wasn’t there.
Then things started to change. The industry began to see significant changes:
- Fast global expansion in the supply chain
- High demand for AIDC network devices in many different industries, including manufacturing, transportation, healthcare, and retail
- High IT demands to track, monitor and secure AIDC devices
These changes forced manufacturers to rethink their product strategies, transforming from hardware-focused to software-driven products. Intelligent network devices offered by companies such as Cisco, HP, and Juniper added additional pressure on AIDC manufacturers to adopt new product strategies.
The pace of change increased in response to new requirements from forward-thinking retailers and supply chain leaders. Retailers began to demand to want more automated checkout systems. Supply chain leaders wanted more control over tower visibility and actionable intelligence. In response, more AIDC manufacturers began to realign to software-first strategies in order to meet these new demands for device remote management, security compliance, and asset visibility. Machine learning facilitated the transition, allowing manufacturers to drive optimal production and predictive maintenance.
A new awareness has developed that we will not achieve data-driven transformations by smarter hardware alone; we need digitized, wireless, secure networks to deliver all that intellectual power.
Leading US OEMs such as Zebra Technologies and Honeywell have quickly pivoted to capture the potential offered by smarter, connected AIDC devices. In the past five years, Zebra Technologies has gained momentum in the market as a result of its increasing market shares in data capturing, mobile computing, printing, and software services. That adaptation to the new reality has helped Zebra capture over 20% of the AIDC market share. For example, Zebra experienced a positive development in the mobile computing segment between 2017 and 2020. This growth is attributable to Zebra’s superior Android system migration management from Windows CE and Windows Mobile.
In addition to providing new offerings, OEMs have prioritized strategic acquisitions to widen their scopes of operations. Zebra Technologies was one of the first OEMs to embrace strategic investments to meet market demands and thrive despite stiff competition from other companies. For instance, Zebra acquired Motorola in 2014 at the cost of $3.5 billion to supplement its businesses. Prior to this acquisition, Zebra had already acquired Symbol Technologies and Psion, brands that had a significant mark on the global AIDC market. Through these acquisitions, Zebra inherited additional skilled AIDC talent, which enabled Zebra to remain innovative in the AIDC market. In the past three years, Zebra Technologies has executed more acquisitions, helping it to enhance and broaden its portfolio and maintain its AIDC leadership position. For instance, it acquired Temptime, a company that provides temperature monitoring solutions in vaccine distribution and other functions, at the start of the Covid-19 pandemic. This helped Zebra and enabled it to stamp its authority on the AIDC market. In 2018, The acquisition of Xplore Technologies, ruggedized tablets and hard-wearing hardware.
Acquisitions Continue to Change the Landscape
Over the past two years, Zebra Technologies has focused on acquiring companies specializing in software and robotics to enhance their capabilities in machine learning, prescriptive analytics, and autonomous systems. They made a significant investment in Adaptive Vision, Fetch Robotics, Matrox Imaging, and Intuit.ai.
In an article from The Robot Report, Anders Gustafsson, CEO of Zebra Technologies, is quoted as saying, “Customers are increasingly deploying automated solutions to augment their front-line workers, enabling them to focus on more complex, higher-value workflows, and machine vision is a key technology to help them get there. This acquisition (of Matrox Imaging) enables us to meet our customers’ evolving needs, regardless of where they are on their automation journey — from capturing and analyzing data to facilitate decision-making to deploying physical automation solutions to accelerate the production and movement of goods and materials.”
Honeywell Safety and Productivity Solutions (Honeywell SPS is a Business Unit of Honeywell International) has also made significant shifts to thrive in the AIDC industry. Their products improve workplace productivity, safety, and asset performance. Honeywell SPS has also embraced acquisitions to enhance the quality and market presence of its AIDC devices. For instance, Honeywell SPS acquired Sparta Systems, a leading quality management software provider, at the cost of $1.3 billion to improve the quality of its SaaS offering. Honeywell SPS has also acquired companies such as Transnorm, Conveyors and Sortation Systems, and Rebellion Phonics to improve the quality of its intelligent, automated, and Visual Gas Monitoring solutions.
Another leading OEM, Datalogic, headquartered in Italy, considers acquisition a key strategy critical for broadening its market presence. In July 2017, Datalogic acquired SOREDI Touch Systems GMbH, a German company that offers technology in forklift terminals. It recently acquired M.D Group in February 2021 to broaden its presence in the automation and sensing market. It also acquired Pekat Vision, a start-up specializing in machine learning and deep learning for automating processes in manufacturing, logistics, and other sectors.
Modern OEMs are aggressively transforming the AIDC industry in order to stay competitive in the global market with the likes of Cisco, HP, and Juniper. A large number of acquisitions and accelerated technology growth in the AIDC market is fueling industry growth. It’s estimated the AIDC market will reach $43.7 Billion USD in 2021. Looking forward, IMARC Group expects the market to reach $95.8 Billion USD by 2027.
Acquisitions and accelerated technology advancements have also led to the growth of companies that complement the AIDC space. For instance, Loftware Inc, a company that provides an end-to-end digital platform for enterprise labelling and artwork management, has been able to increase its revenues after recent acquisitions among AIDC-OEMs. Loftware acquired PRISYM ID, a leading provider of regulated content and label management solutions. In addition, Impinj Inc, a company specializing in radio-frequency identification, exceeded revenue projections in large part due to embracing RAIN RFID. The company realized $59.8 million USD with a GAAP gross margin of 52.7%.
Success Stories among channel partners
There has also been steady growth in the digital transformation for channel partners, but not as fast as the OEMs. In the past few years, there has been an increased volume of acquisitions.
AbeTech and Peak Technologies both illustrate this channel partner trend. AbeTech that has experienced significant growth following its promotion of Chris Heim as the new CEO in Feb 2021. Under his leadership, he launched a new managed service platform, Abe360, and an Enterprise Label Management Solution, PowerPrint. In addition to the digital transformation he’s spearheading, he also acquired Workspace Mobility. This enabled AbeTech to increase its regional footprint and acquire additional resources to support its expansion.
Peak Technologies is another very well-known name in the AIDC industry. They have been themselves through several mergers and acquisitions. Source Capital LLC, an industrial-focused private equity firm, acquired Peak back in 2021; in fact, in the same year, Peak made several acquisitions, the latest being Siena Analytics. the acquisition aimed to boost its supply chain and logistics analytics software solutions. Prior to Siena Analytics, Peak had made several acquisitions including Optical Phusion, Inovity, Bar Code Direct, DBK Concepts, Avalon Integration, Graphic Label, VisionID and Dalosy of Optical Phusion. In August of 2022, Peak Technologies and Supply Chain Services Announced a Merger Agreement.
The Time is Ripe for Channel Partners to Take Advantage of OEM Innovation
OEMs are providing exciting new software-first products, representing a significant opportunity for channel partners. In order to take advantage of the latest OEM offerings, however, many AIDC channel partners may need to align to pivot to become system integrators, managed service providers, or solutions providers.
Today’s market expects channel partners to provide holistic offerings such as warehouse automation, asset management, and track and trace solutions. To stay in the lead, channel partners must invest in revamping their own ERP, CRM, and contract management software and embrace newer technologies. This is the time to integrate, streamline, and automate manual processes such as helpdesk, asset and contract management, and contract renewals. In addition, channel partners should start thinking of upskilling their workforce to develop a technology-focused, software-first culture.
The AIDC industry is undergoing a major transformation from a focus on hardware to engineered software-driven smart devices. To date, the drivers of this data-rich connected world have been large OEMs, such as Zebra, through their acquisitions and digital transformation investment. These market leaders and their strategic acquisitions are offering new solutions to help companies track, manage assets, and automate many back-office processes and operations.
To embrace and profit from this exciting IIoT transformation, channel partners must enhance their system integrator capabilities and begin providing true end-to-end capabilities to meet evolving customer needs.