Can Small Vendors Play Big?

Many Smaller Vendors Make Good Products. Does It Make Sense to Switch?

By Dan Hebert, PE, Senior Technical Editor

It's the age-old question: Stick with the big-name automation supplier or switch to a smaller vendor promising more performance for less money?

Blindly sticking with the big guys can seem safe in the short term, but could turn out to be risky in the long term if the big vendor doesn’t change with the market. Specifiers who bet on OS/2 because it was an IBM product made a big mistake by ignoring the Windows solution from Microsoft, which was a relatively small vendor at the time.

However, switching to a smaller, more innovative, newer supplier often seems to save money in the short run, but risks can increase if the vendor isn’t properly vetted. Buying cheap plane tickets from a small airline for travel nine months from now can save big bucks, but only if the airline is still in business when your travel day arrives.

There are good and bad reasons to buy from both small and large vendors. The trick is to know when and where to go small. Your customers sometimes have some say in this, but in the end it’s your machine and your decision.

For the purposes of this article, we define big vendors as those with annual automation revenue of more than $1 billion. Rockwell Automation and Siemens immediately come to mind. Smaller vendors have annual revenue of less than $1 billion and, for the most part much, much less.

When Small Makes Sense
Bigger vendors are preferred by many; that’s why they’re big. So why do some machine builders and system integrators prefer smaller firms? “Most of our performance requirements are best met by smaller vendors that target our industry,” says Brad Froemke, mechanical engineer at Cascade Microtech in Beaverton, Ore.

Cascade makes probes and probing systems for the semiconductor industry. Its systems have many specialized requirements that often are not well addressed by larger vendors.

“We use components from smaller vendors for motion control, I/O and vision,” adds Froemke. “We’ve found smaller vendors to be more responsive to our needs since we represent a larger portion of their sales. Having us as a customer is a feather in the cap. We represent more than half of the worldwide sales in our niche and are performance leaders.”

Like Cascade, Speedline Technologies is a machine builder with high performance requirements. Speedline makes very accurate, high-throughput machines with many axes of motion for surface-mount PCB assembly.

“The only components from big-name vendors that we use are common electrical control items such as circuit breakers, contactors and stepper and servo axis motors,” relates John Klauser, principal electrical engineer at Speedline Technologies in Franklin, Mass. “We use components from small vendors because they best meet our needs, not simply because they are less expensive.”

A food-processing machine builder favors smaller vendors, too. “We don’t have any performance requirements that prevent us from using more cost-effective solutions from smaller companies,” explains Tom Wolcott, electrical engineering manager at Formax in Mokena, Ill. Formax makes industrial high-speed forming and slicing food processing equipment. “We prefer PC-based automation over PLCs mainly for cost, flexibility and control. We find that smaller suppliers will work with us on our custom PC systems. We use Windows CE for our operating system, which is not well-supported by many of the larger industrial suppliers.” More than just about any other machine automation component, PC-based controls adhere to open system standards, and this gives smaller suppliers a leg up in this area.

Smaller Vendors Can Be Specialists
Many machine builders prefer small suppliers, and some of the system integrators that serve the machine automation market feel the same way.

Big vendors tend to make high volumes of relatively standard products that work well with most applications. However, machine builders with unusual needs can find that smaller suppliers are more responsive. “Special requirements often drive the OEM away from large suppliers to specialty niche players that are flexible enough to accommodate unique needs,” observes Bob Zeigenfuse, president of system integrator Avanceon in Exton, Pa.

Big vendors have many built-in advantages over smaller suppliers in terms of market share, customer preference and installed base. The only way for a small supplier to overcome these advantages is to offer markedly superior products and services.

Manit Systems in Tustin, Calif., designs, develops and supports control systems for a variety of customers in different industries. They often favor smaller suppliers for cost/performance reasons. “Hardware from the largest automation suppliers often is less capable and up to four times the cost of more advanced solutions from smaller and mid-sized automation suppliers,” says John DeVries, president of Manit.

Just as important, and maybe more so, is the ease of integrating third-party devices and implementing standard communication protocols with components from smaller vendors. “It seems that smaller vendors often pioneer and promote connectivity standards, as opposed to the larger vendors, who seem to merely tolerate them,” adds DeVries.

Semicore Equipment in Livermore, Calif., is another semiconductor machine builder with good things to say about small vendors. Semicore makes vacuum sputtering and thin-film evaporation systems that provide coatings on a variety of materials including plastic films, glass, ceramics, metals and hybrid substrates (Figure 1).

Sputter Service
SERVICE WITH A SPUTTER
Figure 1: Semicore buys PCs and PLCs for machines, like this high-performance vacuum sputtering system for material coatings, from smaller vendors and believes they’re just as good if not better than large suppliers, so service is a differentiating factor.
Source: SEMICORE

“We purchase our PCs and PLCs from Beckhoff Automation, and we occasionally buy PCs from Advantech, depending on application,” reports Matthew Hughes, president of Semicore.

Beckhoff service has been outstanding, says Hughes. “On a number of occasions they sent an engineer to our facility to help with motion controls or software-code-related issues,” he states. “You can say that they have earned our business. In terms of price and performance, we think smaller suppliers are just as good if not better than large vendors, so service is the differentiating factor.”

Smaller vendors have a built-in bias for open systems because openness lets machine builders choose the best component for each function. This is ideal for small and specialized suppliers without a wide range of products.

On the other hand, larger vendors often want to keep their customers on the ranch and can charge exorbitant prices to those who venture outside the corral. “When working with vendors such as Allen-Bradley, you buy the PLC, but added functionality and connectivity cost extra in the form of expensive add-on cards,” explains DeVries. “The add-on cards can cost a couple of thousand dollars each—more than an entire controller/HMI system from the smaller vendors that we typically use.”

What about the last refuge of many large vendors, the customer spec? “We formerly used large automation vendors only when a big customer threw down the gauntlet,” concludes DeVries. “Now, we’ve gotten to the point where we’re refusing most of these requests for the good of the application. We’ve also seen more of the large global manufacturers with sophisticated engineering departments become more accepting of and even pushing for solutions from smaller to mid-sized automation vendors.”

Bigger Can Be Better
Clearly, lots of users prefer smaller suppliers, but larger vendors also have recognized strengths. Many of the big guys got big by consistently offering attractive support and solutions to their customers over a number of years.

“We generally use larger control suppliers such as Rockwell Automation to eliminate issues in component longevity and product support,” explains Paul Perry, president of AutoGuide Systems in Georgetown, Ky. AutoGuide designs, manufacturers and integrates automatic-guided vehicle control kits that automate standard industrial trucks.

“I’m approached on a regular basis by suppliers having a new and cheaper product that directly replaces my more-expensive, name-brand components,” relates Perry. “When it comes to controls parts, there’s always a better deal. However, it’s been our experience that any savings gained is lost many times over when the smaller manufacturer drops the ball on availability and/or support of these cheaper components.”

Perry also finds larger vendors to be better in terms of long-term service, support and documentation. “Big-name automation suppliers easily can support our every supply need, large or small,” he continues. “Using name-brand components from big-name suppliers with well-established worldwide distribution and aftermarket support networks eliminates availability concerns, regardless of our customer’s location. Our business depends heavily on our customer’s confidence in the product we build and the support we provide. This starts with their confidence in our name-brand components and in our sub-suppliers supporting these components. We find the value far exceeds the extra cost involved.”

Missouri Tooling & Automation (MTA) in Lebanon, Mo., is a packaging machine builder that also sees value in big vendors. “Our global customers need components that can be procured easily throughout the world,” notes Don Buttram, director of project management at MTA. “This directive leads MTA to integrate automation components with a global network of distributors, and these are typically large automation component manufacturers.” A portion of his customer base has nationwide and worldwide component standards that have to be met, “and those are typically best addressed by the large automation component manufacturers,” believes Buttram (Figure 2).

Big Machine
BIG MACHINE, BIG PLANET
Figure 2: Global customers for machines like this one from Missouri Tooling & Automation can be anywhere, and MTA believes bigger vendors allow them to procure components more easily throughout the world.
Source: MTA

Although CamSoft is a relatively small supplier, it sees legitimate reasons why some machine builders prefer larger vendors. “We have to give large companies credit where credit is due,” says Gary Corey, president of CamSoft. “Plain and simple, they have the advantage of their brand name, and rightly so. They’ve earned it. They also offer their customers security for future availability of components, and they have many offerings and resources to keep parts for legacy equipment flowing.”

Bigger Can Be Riskier
Just using big name suppliers might seem risk-free, but that’s not always the case. When big vendors are selected solely on name recognition and other specious reasons, cost and risk can rise. “Sometimes our customers prefer the big name vendors depending on how visible the component is, but the added cost usually is not warranted.” says Dan Stirpe, controls engineer at newspaper printing press manufacturer Manugraph DGM in Millersburg, Pa. “In many cases, the lesser-known brands’ products are of equal or better quality with more features than the big name vendors. It is strictly brand recognition that steers the decision for many.”

Stirpe says most of Manugraph’s vendor decisions are based on quality, ease of use, availability and required features. “We try to do a very apples-to-apples comparison, and most of the time we wind up with a smaller vendor,” he says. “However, we are very careful to check the past performance of these smaller suppliers because we can’t use vendors that don’t support past products. We still use bigger names for our primary drive-control systems, which are DC, AC and servo systems in the 50-200 hp range. But most of our controls are provided by lesser-known vendors, especially HMI products, PLCs and I/O. We also switched to smaller companies for power supplies, relays and sensors.”

Smaller suppliers know all the reasons why prospective machine builder customers often won’t even compare their products to the big guys. “Corporate mandates are a big issue because many machine builders receive a list of preferred vendors from their customers,” relates James Davis, senior application engineer at Opto 22. “Personal bias also comes into play, and this is, of course, not unique to the automation and control industry. How often do we have personal preferences, right or wrong, whereby we just assume a product must be better because it was made by one of the big guys? Often those biases are unjustified and can lead to poor choices.”

Davis argues some builders are petrified to go against the grain and try the smaller automation vendors. “The thinking goes like this,” he says. “‘If I choose someone other than the big guys and if something goes wrong, questions will be raised, fingers will be pointed, and people will second-guess my decision-making.’ On the other hand, they’ll think, ‘No one ever got fired for using Allen-Bradley.’”

Another smaller vendor offers more reasons why some machine builders blindly stick with big vendors. “Do the world’s largest restaurant chains make the best or healthiest food in the world?” asks Graham Harris, president of Beckhoff Automation. “The same often holds true for automation suppliers—bigger doesn’t translate automatically to mean better or less-expensive. In too many cases, end-user perception and brand loyalty are the dominant drivers to use large automation suppliers, with performance a secondary consideration.”

Some machine builders have a “if it ain’t broke, don’t fix it” mentality, believes Harris. “Sure, you can get from A to B that way for a while, but there’s not much to keep you from being passed, over and over again, by higher-performance systems on the global machine automation highway,” he warns.

Harris says perhaps the biggest risk of blindly staying with an existing supplier—big or small—comes to those machine builders who don’t regularly evaluate the automation marketplace. They risk getting left behind by more innovative competitors.

Another integrator offers more bad reasons to stick with big vendors. “Many machine builders select large vendors just because that’s the way they have always done things,” says Bob Tenney, president of ERS Automation in Columbia City, Ind.

Tenney mirrors Davis’ observation that many customers choose large vendors to protect themselves from second-guessing should things go wrong. Even if the larger vendor’s product is inferior to the smaller vendor’s, blame will be muted because the market leader was chosen. “Unfortunately, the end-user often dictates the use of a larger vendor just due to name recognition or because the distributor is more familiar to them,” adds Tenney.

Still, despite traditional inertia, the machine automation market is changing. Machine customers are specifying price, performance and delivery instead of specific brands. This gives machine builders freedom to use the best vendor for the job, regardless of size.

“Good reasons to change are improvements to performance or quality, lower costs, easier use, maintenance or troubleshooting,” says Avanceon’s Zeigenfuse. “Just be sure that any perceived improvements offer real benefits to your clients and aren’t just a monument to your company’s engineering prowess.” 

MBFChoice, My Foot

Some automation specifiers tell us they have no choice. They have to buy from the big boys. For a variety of reasons, others just won’t consider smaller companies. Is everyone this headstrong? Tell us at www.ControlDesign.com/bigsmall.

Good Reasons to Buy from Small Suppliers

  1. Usually Offer Lower Price and/or Better Performance
  2. More Willing to Customize
  3. Often Better at Addressing Niche Applications
  4. More Personalized Service
  5. More Supportive of Open Systems

Good Reasons to Buy from Big Suppliers

  1. Worldwide Support
  2. Long-Term Stability
  3. Satisfy Customer Preference
  4. Wide Range of Products
  5. Tighter Integration Among Their Own Components

Bad Reasons to Blindly Buy from Big Suppliers

  1. We’ve Always Done It That Way
  2. We’re Afraid to Try Something New
  3. We Can’t Get Blamed for Buying Big
  4. We Have a Personal and Unfounded Bias Toward Brand Names
  5. We’re Too Busy to Look at Other Solutions

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