Introduction: Modern Day PLCs

PLCs have traditionally been the cornerstone of both process and discrete factory automation. While some industry experts predict the likely obsolescence of PLCs due to the advent of Industrial Internet of Things (IIoT), PLCs continue to dominate automation with categorical changes in the form-factor. This evolution has been brought by the availability of powerful processors, enhanced memory, enhanced input/output (I/O) communication capabilities, and other improved features that complement the existing features, thereby facilitating the PLCs to compete with distributed control system (DCS), computer numerical control (CNC), motion controllers, and other advanced robotic controllers and vision systems. Interestingly, with the advancements in features, the cost of a modern PLC has also significantly dropped, to the point where a unit costs not more than a few hundred dollars. The lower pricing is further aided by the stiff competition among the major PLC manufacturers, who want to offer best-in-class solution at competitive pricing.

Though PLCs are getting efficient, faster, and smarter, the hardware cost remains fairly constant. However, the need for break-even in revenue has pushed the PLC vendors to impose high costs on licensing software for the functioning of a PLC. Most often, customers end up spending 7 to 9 times as much on PLC software as on the hardware.

Essential Software for PLCs

A regular PLC system requires the following licensable software packages:

  • Controller programming software; example: ladder logic programming
  • Human machine interface (HMI) development software
  • Database license
  • I/O server software

Each of the software is sold under separate licenses. After purchase, the customers have to use their resources, skills, and experience to customize the software to meet their specific controller requirements.

Software Licensing — Understanding the Underlying Business Model

Vendors that sell PLC software licenses have full control over the use and redistribution of the licenses. Through the licensing model, a vendor can decide on how many PLC hardware or personal computers (PCs) can use the specific software. In general, in the industrial automation space, a customer pays for a new software license for every new machine or PLC hardware that is purchased. In certain cases, vendors have additional restrictions on the software licenses, such as fixing a cap on the number of data points, or functions that could help in capturing data for controlling the machine. Supplementary offerings, such as maintenance contracts, technical support, or software upgrades might not be covered in the licensing packages and may require additional purchases. PLC vendors have seemingly recognized that the users of PLC hardware are captive customers of the software packages, and these customers have little or no option to use licenses from a third-party software provider. Thus, developing more intuitive software solutions has become a lucrative approach for the PLC vendors. PLC vendors adopt several methods to avoid the piracy of software packages, such as selling software in a dongle that needs to be plugged into the PC/ PLC hardware for it to be operational or providing a product activation program to the customers during the time of purchase of the PLC. It is quite complicated to determine and generalize the cost of a license as it depends vastly on the customer and the end-user industry. Furthermore, the cost is determined by certain parameters such as type of software features, data points, customer-loyalty discounts, and other proprietary PLC features that are the vendor’s competitive advantage. This is the reason open price lists of PLC software are never available in the market. Another revenue generating strategy of the PLC software vendors is to levy a run-time license fee, wherein charges are implied for using software tools to create control applications and distributing the same to the end users. In layman’s term, this is comparable to selling the license for an email program and charging a royalty for each email that the customer sends.

A Smartphone Approach — New Growth Opportunities for PLC Software Market

Advancements in digital technologies will enable customers to adopt low-cost and efficient PLC software without relying on the licensing-based product of the traditional PLC vendors. PLCs, like any other electronic consumer goods, are transforming into digital equipment. For instance, a modern-day PLC hardware comprises a micro-controller, such as Arduino, Raspberry Pi, etc., and a system on a chip (SoC) such as Qualcomm’s Snapdragon, MediaTek’s X30, Intel’s Atom, Nvidia’s Tegra, etc. This gives the users the power to build and run super-fast controller applications for any industry vertical. Concisely, PLCs are transforming to adopt the smartphone model, wherein the device has built-in applications (apps) that enables the users to execute a specific task. PLC vendors can create their own app store, wherein apps can be created for a specific control function, and sell the respective app to the customers for a price. Furthermore, the app store can be an open platform for third-party software developers that could create and sell PLC apps, thereby also paying a share of the app revenue to the PLC vendors. A case in point is Bosch Rexroth AG, which, in 2016, launched IndraControl XM22 PLC, which is equipped with an Intel Atom processor and works on Ubuntu Core operating system (OS). The uniqueness of Ubuntu Core is that it is an open source OS that can be connected to an open source coders repository, such as the GitHub, Inc. Thus, the customers of Bosch’s IndraControl can either use a free software application from GitHub or build its own application based on the requirement. Furthermore, Bosch can create its own app store to sell apps directly to the customers and allow other software developers to determine new growth opportunities through the app store.

When the smartphone market disrupted the feature phone market in 2007, it created a broad spectrum of new growth opportunities for the software developers that could sell apps through the app store. On the flipside, the disruption made by the smartphones overturned the established players in the mobile phone market, leading them to bankruptcy. The PLC market is about to undergo a similar kind of disruption, wherein the traditional market players will witness a drastic reduction in their revenues if they do not adapt to the rapidly evolving technologies and align themselves to the customer needs.

About Frost & Sullivan

For six decades, Frost & Sullivan has been world-renowned for its role in helping investors, corporate leaders and governments navigate economic changes and identify disruptive technologies, Mega Trends, new business models and companies to action, resulting in a continuous flow of growth opportunities to drive future success.

Frost & Sullivan

For six decades, Frost & Sullivan has been world-renowned for its role in helping investors, corporate leaders and governments navigate economic changes and identify disruptive technologies, Mega Trends, new business models and companies to action, resulting in a continuous flow of growth opportunities to drive future success.

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