Sensor Makers Recognize Services-Model Appeal
Sensor makers should be looking to boost their software capabilities in a bid to raise the amount of recurring sales as a percentage of the total. Hexagon’s strategy serves as a good example of acquiring software companies to move up the IoT value chain and boost margin, having transformed itself from a hardware provider less than 10 years ago. With 65% of the revenue acquired from pure-play software companies, Hexagon has improved its operating margin by more than 500 bps and doubled recurring revenue to 40%.
Hexagon is unique among IoT players — with its Xalt platform competing with those of GE, Siemens and Schneider, and with software capabilities that rival those of companies such as Aveva and Autodesk. Moreover, it acts as an incubator for innovative startups.
Sensor R&D Spending Tops That of Electrical Peers
Sensor companies outspend their electrical counterparts in terms of R&D as a percentage of sales by 200 bps, which will likely continue as digitalization become ubiquitous. Leveraging product designs across several sensor applications adds to companies’ market potential, helping to justify the higher R&D investment vs. their electrical equipment peers. The need for electrified machinery and autonomy to improve process and energy efficiency will sustain the development of complex sensing and measurement technologies.
Hexagon spends 10.8% of sales on R&D, which compares with Spectris (6.9%), Sensata (4.2%) and 4.1% on average across North American and European electrical peers. Though Ametek (2.9%) lags rivals, it has expanded its technological reach via acquisitions.
Merging Various Dimensions Expands Sensor Market
The global market for sensors is expected to grow at a double-digit compound rate and exceed $240 billion by 2022, according to industry sources. As artificial intelligence and augmented reality boost IoT applications, it should rise even further.
New uses and developments in sensor technology — in health-care imaging, for example — should be prime drivers. Capturing and converting physical-dimension information into digital data that can be analyzed to improve productivity via software analytics is a vital role performed by sensors in the IoT value chain.
A turnkey sensor-as-a-service offering from Nokia aims to help mobile-network operators to monetize existing infrastructure such as towers and cell-site equipment, by selling live environmental sensor data to city governments, corporations and the media
