Good afternoon, everyone. Good afternoon. Can you hear me now? Okay. Welcome again to the afternoon part of our Annual Investor Day.
My name is Patrick Gorris. I'm the IR Lead for Rockwell Automation. Welcome again to those of you here in the room in Atlanta. I hope you had a great tour, not I hope, I'm confident you had a great tour. As always, we like to showcase our latest technology and innovations, that of our partners.
So I'm sure that was quite visible there. Thank you also to those of you that are following us through the webcast. We appreciate you taking the time and follow us for our Investor Day. I do need to remind you that our presentation will include forward looking statements that are subject to our disclosed risks and uncertainties. So please go through this safe harbor statement.
And then before we get going, I'd like to remind you here in the room to switch off or mute your mobile phones. And with that, we will move for and start with a video, after which Blake will come on stage. Thank you.
Good afternoon. If I could ask Sujeet and Ted Frank to join me on the stage. I hope you enjoyed the early morning conversations as much as I did. And then, sounds like the tours were interesting as well. With me for the next few minutes are Suji Chand, our CTO Ed Crandall, our CFO and Frank Kulisiewicz, who runs our market meeting those needs, how we're going to win and what that means to you.
So not all of you know this, but Atlanta is my hometown. This site was picked many years ago, so it was a pure coincidence, but it's a nice homecoming for me. And I have to tell you that in 1993, I was a young salesman when we had the company's 2nd automation fair and it was held here in Atlanta. And at that time, I was interested in showing my big customers at the time what Rockwell could do for them. So Coca Cola, Southwire in Carrollton, Georgia, Clicklock Woodman, which I had cold called on a year or 2 before, which is now a part of Bosch that Eberhard talked about this morning and one of our big systems integrators, Factory Automation Systems that was down by the airport.
And almost 25 years later, they're still big customers of ours and they're still depending on us to help them be more competitive. And we do that as we have earned the ability to be seen as their trusted partner. And we do that every day. We earn that right at thousands of other customers as well. And we do it with technology innovation, with domain expertise and with what we think is the best partner network in the business.
And that partner network enables us to meet customer specific needs. And it also gives them a choice. And that's an important part, I think, of our value proposition. And that value that we provide for those customers, it enables high margins, a high return on invested capital, and we do that as an intellectual capital company
focused exclusively
on industrial productivity through automation and information. So let's talk a little bit about what we see out there. 1 of the trends that Everhart and Jim talked about this morning is the build out of capacity in emerging markets for consumer industries. And so you saw all that white space that Eberhard showed on his slide for midrange in emerging markets that's untapped, untapped for Bosch, untapped for Rockwell Automation in many ways. And so that's going to imply that we're going to have to be very good at supporting our customers as they move into those markets with high quality, good support and price pressures that may be even more intensive than what we've seen in some of our home markets.
So that's one of the macro conditions that we see. The skills gap is real. It's estimated that as many as 800,000 jobs in the U. S. Alone are unfilled, job positions that are unfilled because people don't have the right STEM skills to be able to fill those roles.
And that's an important concept for us because raising the overall competency of the workforce is something that we can help with. And we can do it in 1 or more of 3 key areas. 1, through the traditional training and support of STEM skills, we can increase the capabilities of those individual workers. And some of you may have heard yesterday that we made our largest ever gift to First Robotics to support early education in STEM skills, because that is absolutely critically important. It's important for us, for our customers and for industry in general.
The second way is augmenting the skills of those workers with the remote projection of that expertise. And so when you look at one of the main reasons that remote monitoring is becoming so popular, you can't have somebody who is an expert on all the technologies locally all the time. You just can't afford to have that many people on-site. And so being able to have remote support and a broad spectrum of available options from just basic self help through 20 fourseven monitoring, that helps augment the skills of those workers. And so that's part of what's driving the digitization and the concepts behind the connected enterprise.
And then finally, it has to do with changing the work itself, changing those workflows so that workers can accomplish more with less. Another trend is globalization. And we and our customers are competing every day against the best companies from around the world. And that's going to continue. And it's going to force us to be aware of what the best ideas are and to understand what our gaps are and to understand what our strengths are that we have to do more of.
And that globalization of that competitive environment is here to stay. And then finally, from a technology standpoint, it's the digitization of the workplace and it's the rapid introduction of innovative new technology that we have to pay attention to. And that new technology is enabling a lower cost of connectivity than we've ever seen before. It's flattening the networks. It's bringing the information technology and the operational technology together.
But with that, security concerns are going to are with us today and they're going to be an even bigger concern in the future. Also importantly, with the technology innovation gives us additional opportunities to harness management, data analytics. Obviously, we're all talking a lot about what can that actually bring to us. And countries recognizing that these changes in technology coupled with the secular trends are giving those countries and the companies that drive their success an opportunity for differentiation. And so you see initiatives around the world, China Manufacturing 2025, Make in India, Industry 4.0.
And you heard this morning, it's not really worth it to try to tease out the differences from 1 or the other. It's about increased productivity at the end of the day. Our response to that is the connected enterprise and the connected enterprise fits very well with those other concepts. In August, I was in China talking about the connected enterprise along with somebody from China talking about China Manufacturing 2025 and they really dovetailed together quite well. And we see that around the world.
What we're going to do for the next few minutes is describe how we bring the connected enterprise to life, what impact that will have in the market and what that means to you. I can't do nearly as eloquent a job as the speakers this morning did to describe the benefits of integrating control and information and the promise of the connected enterprise. I'll give my example that is compelling to me about how it takes the opportunity for productivity up a notch. So think of a cookie maker who uses programmable controllers and variable speed drives and sensors to control the speed of the conveyor and to regulate the temperature of the baking ovens. And that certainly gives a certain level of productivity as opposed to manual labor or hardwired electromechanical relays.
But if you think about that same cookie maker who might have 100 lines around the world, the ability to look at what the uptime is in each of those lines and to be able to capture what the sources of downtime were and what the mean time to repair was in individual facilities and bring them together And then to be able to look at that overall equipment effectiveness, to be able to see who the outliers are and to be able to look at the gaps and the best practices and bring the overall system up to a higher level, that's an example of the promise of the connected enterprise. We've got home field advantage for delivering the benefits of these concepts. To start with, we live on the plant floor. So a lot of IT providers and a lot of our IT partners, they know how to sift through large amounts of data, but we know where to look. We also have some natural simplification in that.
We have a common control platform for a whole variety of applications. So if you think of a plant where at the front end, there's blending of a liquid and then there's packaging of that as it goes into the boxes or the bottles, Using the same control platform gives a whole lot of benefits in terms of simplification because you can have the same maintenance workers work on both. We also use Ethernet and we were ahead of the game in talking about open Ethernet as our common control network, which also is what the folks on the carpeted part of the plant and the information side were using. And that gives a huge simplification, not having all sorts of bridges and gateways to go from one proprietary network to another. And then finally, the domain expertise is really important to apply this technology in the way that's most important for a particular application.
And that domain expertise may take the form of our Connected Services offering, and I'll talk a little bit about what I mean by Connected Services. Or when we are called upon to provide a complete integrated system, it's absolutely essential to have that expertise. We're not in a plug and play world in automation yet and that expertise is absolutely essential to identify and deliver on the best opportunities for productivity. And so these are the elements that are required to deliver that connected enterprise. And we and our partners cover these.
And it begins with where the data is born in those smart connected assets, the sensors, the actuators that are sitting on the plant floor. We started putting networks and creating a richer amount of data on those devices when the market was still largely on devices that were fit for purpose, but didn't provide that infrastructure for sending the data north into the information side. We have a great Logix controller, which provides the control, but is also information enabled to be able to send that information cleanly and contextualized into the information side. We're launching some really exciting products that combine both on the same platform to be able to do the parallel processing of the control and the information on the same appliance, if you will. And then we're rapidly expanding our offering of information solutions.
We've had a factory talk portfolio of software offerings for quite some time. And this week, we made some important new introductions that add to that line and we'll talk a little bit more about that as time goes on. Again, the domain expertise to direct us in the way that those things are brought together is really important, because when we talk about scalable control and scalable computing, different applications require different places for the information, the data to be aggregated, different places in terms of where you need to share the information to the right person at the right time. And we recognize that. And so having that scalable approach that makes use of the cloud, but not being able to bring all that together for the specific application, that's what brings the Connected Enterprise to life.
And software in one form or another is behind all of this. We are an industrial software company. And I'll tell you a story about the time that that automation fair was held in Atlanta in 1993. I was working a lot with coordinated drive systems for customers for in the metals industry, paper, things like that. And in fact, that's where Frank and I started working together.
He started in the Drive Systems business. And I think we both recognized that even at that time, a lot of our customers were looking for information to sit up on top of those coordinated systems. And we didn't have a great offering at that time. We could work together with partners, but it was a little bit more on an ad hoc basis. But today, the technology, our own internal capabilities, our partners make that much more realizable.
And it was interesting, 'ninety three is also when Jim Wetzel talked about General Mills beginning their journey to do many of these same things. Over the last 8 or 9 years, our investment in R and D, primarily in software related disciplines, has grown at a CAGR of over 6%. So it's outpaced our own growth and that's a trend that we're going to see continue. But with a couple of additional examples of how pervasive software has become to everything that we do, I'd ask for Frank and Sujit to say a couple of words.
Sure. Thanks, Blake. So maybe just to build on that and give you some context. Software is our biggest development spend. It's the majority of the money that we spend today.
And a lot of the increase that Blake talked about has been very focused at software applications, software skills and technologies. But that's only a piece of the story. That's kind of the quantity. The important part of that is how we've changed how we do business inside the organization. We've changed resources and have new competencies in the team.
We use new tools and we use very different processes now. And that's important because we see ourselves producing high quality products in a faster time to market area. And so if you run your tour and you saw things like the Team 1 application, you saw the FactoryTalk appliance and analytics, Those are all examples of rapid time to value product developments that are a result of those increases as well as those changes. And so I think it's a big deal and we're running the business differently.
Maybe if I could add, one of the shifts we're seeing in software is, in the past, when we walk into a customer site, we had to deal with what the customer has installed in terms of MES software. So if you look at MES or Manufacturing Execution System software, roughly half of the installations are homegrown MES systems. So the first pushback was, well, if you're not compatible with my homegrown MES system or a third party MES system, I can't really run a Rockwell software application. But I think we've shifted now to building vertically integrated applications, much like Uber on our smartphones. You just don't care what's behind it as long as you're getting the functionality, as long as you're getting the VAN.
So when Rockwall offers serialization as a package solution, it's really fully integrated. You really don't care what exists in the background in terms of software. So, this is kind of the shift towards more of the app economy as opposed to creating those layers that used to exist before. So that's in the shift in
the software that we're seeing. Right. Well, that modularity and that integration to an app environment also allows you to iterate over time as new technologies happen. Exactly. And you can do it more rapidly.
And it's not as heavy and as expensive as fully integrated single solutions.
And obviously, it has some implications for our culture as well, because it requires a very dynamic organization. And Frank is implementing some of those new concepts within his organization. We're just going to see more of that as time goes on. Bringing the connected enterprise to life also involves a different approach to customers. And I think there's 3 main concepts that are important to talk a little bit about here.
The first is understanding our customers' best opportunities for productivity. And a lot of times our customers don't even know where to start. There's not a specification ready made for applying these concepts to a particular application. And so a few years ago, we formalized our consulting practice. And you're going to see more of that as time goes on.
It also includes a segmented sales force so that our salespeople can continue to add value to those processes by understanding those customers. That understanding fosters loyalty. That's why it's important. Customers are looking for somebody who understands them and understands what they're trying to get done. The second area is the combined technology innovation and domain expertise and those coming together.
And that has a lot of implications. That combination is particularly important in a period of low capacity expansion because it increases customer share. We've got thousands of customers out there that are using our technology platforms, but are really using our services. And by adding the services, 1st of all, it lowers their risk by getting experts into the game. But it also increases our share and our revenue growth with customers that we already have those relationships with.
And then if we do this really well and we've got some early examples of this, you create service opportunities through the technology that you offer. We have an industrial data center. Today, the center sits on a plant floor. It organizes and protects all the applications that previously were scattered all over the plant running on old operating systems. And that in itself is valuable.
But the fact that we sell that with a service contract and remote monitoring capabilities brings those together. And by the way, we'll sell that basically as a lease option as well. So it doesn't have to be a one time purchase. So the influence of IT is not just in the technology. Some of their buying practices are also migrating down into the plant floor as well.
The FactoryTalk Team 1 concept that Frank talked about, which is a mobile collaboration platform, That's a great example of technology that requires people. It runs on smartphones, so you got to have people in the loop. But it changes their workflow. It changes the work to make them more productive. Factory talk analytics for devices, for machines, We're showing that today on the plant floor, and there's going to be more of those tools in the toolkit every year.
That combination also over time reduces the cyclicality of our business. So it's no secret that ours is a pretty volatile business. But if you can create that base of annuity services, then you have that offset and that becomes meaningful. Something interesting we found in 2009 is that while the top line was decreasing pretty rapidly during the recession, our service contracts actually grew a little bit because it was a relatively inexpensive way to ensure that expertise remained available to those plants. And then finally, and maybe most importantly of all, is simplification.
Simplification from the technology, it's why we have a single high performance architecture technically. It's why we're driving to make it as easy as possible for customers to interact with us because that simplification drives productivity. It drives productivity for our customers, not having to know a lot of different ways to navigate through a complex organization. And it drives our own internal productivity, so that we're not doing communications networks 20 different ways. We have toolkits and they're used consistently throughout all of our businesses.
And that's one of the tangible benefits of being a single integrated business. And that's what we're going to continue to be. So we take those versatile products. We typically don't make products that are custom made for any particular industry. But by looking at the specific value that's required in that industry, we can describe that value and then apply it to bring the connected enterprise to life.
And so we don't just talk about the Internet of Things when we're talking to a consumer customer. We talk about the ability to increase their overall equipment effectiveness across multiple lines. When we talk to a pharmaceutical customer, we talk about serialization or track and trace. Automobile manufacturers want to know about vehicle scheduling. If you're upstream, onshore oil and gas, then you want to know about wellhead optimization.
If you're a mining customer, you want to know about ore yield. And so it's by describing those benefits in the specific language of the customer that we bring this to light and we differentiate. And what we're going to do is go through a few examples here of how we've already done that for customers.
Thanks, Blake. So we're going to start with consumer packaged goods. Consumer packaged goods remains our largest industry segment from a revenue perspective. And it's probably the one that everybody in this room is most familiar with, because these are the products we use every day. That's the first thing you use in the morning and probably the last thing you use before you go to bed at night.
From a market trend standpoint, the increase in consumer spending, especially in emerging markets, really makes this an attractive business opportunity that we think is going to continue for an extended period of time. And so from a Rockwell perspective, we have great alignment. Our portfolio aligns here, The types of domain expertise we have aligns well here. And quite frankly, based on the size of the business for us, we have a lot of great customer relationships in this space. And so these are all key to be successful.
In fact, we had Bosch and General Mills here this morning. And I don't think we could have done any better job articulating why those customer relationships are important. And so that would be real in this segment. A lot of the investments we've made in our mid range portfolio align here. I think Bosch mentioned that directly this morning, they have mid range machines and we've scaled our architecture to work well with those machines.
And so there's a synergy there and a lot of things you saw on the floor and going after new opportunities in this business. We also have the opportunity to differentiate through acquisitions and domain expertise, acquisitions like Jacobs Engineering, the iTrak product we have, Magna Motion is another good one, and just most recently ACP. And so a lot of the things that Blake talked about with aggregating applications on the plant floor, ACP does for customers and makes it easy for them. And so consumer packaged goods is also a great opportunity for integrated control and information or digitization. And a lot of the larger customers in this space are very proactive about fulfilling those strategies.
Blake gave an example. And one of the characteristics they have is they have many plants in many places. And so improvements in one space multiply themselves if they do it across their enterprise. And so that's driving a behavior. I'm going to give you an example.
This company is a Canadian dairy and they're a dairy products producer as well. And so they've got many different sites. And so the challenge they had was trying to drive productivity. They were experiencing more downtime, higher maintenance costs and kind of inefficiencies with their workforce. And so the problem they had is they didn't have visibility.
They couldn't see into the environment and understand what was happening. And so we work with the customer with both our asset management tools and our information management tools to give them that visibility and allow them to understand truly how their production was operating. And so, whether that happened at a line level, at a machine level or with an operator, they now had the visibility to understand what was going on. And that's what we find the first step before a customer can drive process improvement. And so as a result of that and the actions they took, they were able to drive the effectiveness of their operations up.
And that was good news for them because they were trying to avoid some capital expenditures. And at least in the short term, that allowed them to extend their operations. They also increased their workforce productivity. In fact, they eliminated a significant amount of man hours of work, I believe it was 2 manures in 1 plant, by driving better workflow and better efficiencies. We see that as often as an output of a digital exercise is an increase in efficiencies.
And finally, all that results in reduced maintenance costs and improved production. And so it's a good example in a unique industry of how digital can help and how we can help them be successful.
So I'm going to cover Life Sciences. Life Sciences typically is lumped under CPG, but today we separated it out for a couple of reasons. One is, as most of you know, Life Sciences is a highly regulated industry. And the products that Rockwell has developed over the last, I would say, 4, 5 years are very well suited now to life sciences. Let me talk a little bit about those products.
Life Sciences obviously is a big growth opportunity, both in terms of legacy. I work with a lot of life sciences companies. So when we look at life sciences, I'll highlight a couple of products that Rockwell has really innovated in the past few years. First is Pharma Suite. We've had Pharma Suite for a few years, but if you look
at the
latest version of Pharma Suite, it has incorporated not just electronic batch records, which are required for MDA certification, but also some vertical applications, as Blake mentioned, serialization, track and trace. We've got the capability now in Pharma Suite to connect with other systems in Life Sciences. For example, most Life Sciences companies have Laboratory Information Management Systems or LIMS. The LIMS system is typically an isolated separate system. Now we can integrate that with Pharma Suite.
Pharma Suite also ties in with the ERP system. So you can grab the orders from the ERP system, bring them down in Pharma Suite, which then kind of runs your processes, whether it's WAN dispense, filtration, whatever, Pharma Suite kind of oversees all of those processes. So the capabilities in Pharma Suite are pretty unique and are very well suited now for the life sciences market. The second product that we've invested quite a bit in is FactoryTalk Batch. The batch processing, which really runs the recipes for the life sciences manufacturing, is part of our integrated architecture.
So, as Frank spoke about earlier, the enhancements we made to the integrated architecture around safety, around scale and the enhancements to the batch software, which ties very closely with Pharma Suite, creates an offering that's pretty unique and compelling for the life sciences market. So when you combine these offerings with our domain expertise, we have a pretty powerful set of offerings and domain expertise to go after life sciences market. So not only are life sciences markets interested in compliance, but they're also interested in realizing the connected enterprise. One of the examples that we shared with you, I think was in 2014 was that of GCON. GCON is a company that builds modular systems for pharmaceuticals.
These are designed to be smaller modular systems, which can be kind of put together as in a sequence to create larger pharmaceutical manufacturing facilities. The reason we wanted to highlight G Con is because compared to the more traditional DCS systems, Rockwell's architecture is very modular. It's scalable and modular. It allows you to create modular systems and then scale up. The example I wanted to share with you today is that of a Chinese company called ZMC.
ZMC is a very large pharmaceutical company in China. Recently, they decided to create a subsidiary of ZMC called Movers Pharmaceuticals. They did this to make a specific antibiotic, which is a short supply today. And this antibiotic is aimed at Western markets, U. S.
And Europe. The issue that GMC had was obviously certification. To get FDA certification, they had to eliminate all of their paper processes, which there were quite a few paper processes that they utilized. So, they had to digitize their plant, eliminate all the paper processes, implement electronic batch records. But we didn't stop there.
We also integrated their LIM system. We connected to the ERP. So, we basically created the digital connected enterprise for ZMC. And you can see here the significant benefits that ZMC derived. Just to kind of highlight this particular application, I would like to share a brief video with you.
So can we play the ZMC video?
Joy Zhang Medicine Company is an innovative company, excelling in sterile product manufacturing and packing company. The sterile powder for injection project is ZMC's first MES implementation. In order to meet the strict cGMP regulatory requirements in Europe and America, ZMC chose Rockwell Automation as its strategic partner, using Pharma Suite to establish batch management as the core of the MES system to ensure compliance and efficient production. Replacing traditional paper records and documents management, Pharma Suite helped achieve the goal of 100% paperless production. After the Pharma Suite production order is issued, the operator picks material from the staging room.
By using digital labels, Pharma Suite will help to achieve traceability and prevent mistakes or cross contamination. The digitizing of the manufacturing process, coupling with the integration of the warehouse management system and laboratory information management system enables EMC to produce electronic batch records and achieve review by exception. Through integration of process automation systems, Farah Suite captures key parameters and generates real time reports, which are integrated into EBR. Application of Rockwell Automation's mobile solutions facilitates the operation of scanning digital label of equipment and material and uploading related report to MES by using mobile tablets. PharmaSuite manages the production equipment and intermediate bulk container status.
By scanning the digital labels on equipment or IBC, Pharma Suite confirms the correct equipment to be used and ensures the production process is under control. Real time alarm monitoring of the production process ensures that abnormal situations can be attended to in a timely manner. The pharma suite recipe design function is compliant with the ISA S88 standard, providing a modular, graphical and configurable solution. Using the latest virtualization technology, the MES and SCADA systems are 3 physical servers, greatly reduced hardware and maintenance costs while improving the IT management efficiency. PharmaSuite accurately and completely stores the real time data and production process information in the database and creates a backup.
Access management and audit trail capabilities ensure all data creation, entry and modifications are controlled and traceable. MES enabled ZMC to thrive in a highly competitive global pharmaceutical industry, while remaining compliant in an ever tightening regulatory environment.
Okay. So this has been kind of the week of the unexpected. First, we had the election results. Then we had the equity market reaction to the election results. And now we've got me talking about something other than the financials.
So as we were preparing for this event, Blake said something about an old dog learning new tricks, which I thought was accurate, if not politically correct. But after this election, maybe political correctness isn't what it used to be. So, anyhow, I'm going to talk about our transportation industry. And for Rockwell, basically transportation is automotive and tire. And for those of you who know the history of the company, automotive used to be a very large part of our business.
That is no longer the case. But it is still a vertical that accounts for about 10% of our business. So it's still very important. And maybe more relevant to this conversation, it has been a good and steady source of growth for us over the past several years. And we think we've got an ability to continue to grow into this market, both in our traditional space, but also in some expanded served market opportunities.
And what I want to do today is talk to you about 3 of those opportunities. And you can see them here on the bottom of the slide. And I'm going to start on the left hand side. The first is about powertrain. So historically, we've had a very high share in automotive market share in automotive.
But our share has been almost exclusively on the body and assembly side of the industry. Based on our partnership with Fanuc, and I think many of you probably saw Fanuc in their booth out on the Automation Fair show floor, and some internal developments, we are now much better positioned to grow on the powertrain side of the industry. And we think it's good timing, because we believe in the next 5 to 10 years, automotive manufacturers will be investing significantly in new engines and new transmissions that will be required to hit fuel economy and emission standards. And we think there's also an emerging opportunity in electric vehicle drivetrain. So we expect powertrain to be about a $20,000,000 incremental growth opportunity for us per year for at least the next several years.
The second opportunity I want to talk about is related to one of our recent acquisitions, Magnamotion. And with that acquisition, we acquired a technology called independent cart technology. And I think it was Eberhard who talked about that this morning in his presentation. Basically, the technology is to the I TRAC technology that we have shown at previous automation fairs, but geared more toward conveying applications and particularly those involving heavier payloads and hence the connection to automotive. Basically, the technology allows a machine builder to use linear motors in place of mechanical systems and consequently improve machine flexibility, improve throughput and save energy.
And we're going to show you a video in a moment with an example of the MAG motion capabilities. But before I get to the video, the 3rd area I want to talk about is related to software. And I think you will notice as we have gone through these industry examples, pretty much everyone has had a software component to it. If you look at the far right side, Sujeet talked about pharma suite in life sciences. We have an MES offering in automotive called Auto Suite.
And we believe that there is an above market growth potential in Automotive Information Solutions and we're a leader in that space today. Since 2,009, we have been helping Ford Motor Company implement a common vehicle build and tracking system across their global assembly facilities. Ford calls this their next generation automated vehicle scheduling system, which I think translates to like NGAPS. And I'm thinking they could use a little bit of help on acronyms. But basically, in a body and assembly plant, it is a very complicated assembly process.
You can imagine, as you move down the stations of the assembly operation, there are many different options and configurations available at each station. And so this system ensures that every vehicle coming down the line gets the right set of options unique to that vehicle order with the appropriate parts available and delivered and with an error proofing and a track and trace capability as well. So the track and trace capability is something else I think Eberhard referred to this morning. And it basically is something that if there is a problem or a defect, it allows you kind of an ability to go back and more easily troubleshoot. We've completed implementation of these systems in 29 of Ford's 40 assembly facilities, and that's globally.
We will complete the remaining facilities over the next few years. And we're currently working with Ford on other software applications related to mobility and remote monitoring. So basically, what we're finding is in the same way that our hardware installed base creates additional opportunities to grow and expand, the software installed base is creating those same kinds of opportunities. And now coming back to Magna Motion, We've got a video that demonstrates the technology and shows how KUKA, who is a very well known automotive OEM and robotics supplier, use this technology to improve their automotive transfer line offering. And the video is showing a portion of an auto body assembly line.
So could we roll the video, please?
From concept to reality, KUKA brings you the future today. With an initial investment substantially lower than that of other systems, the technical advantages stand out. It's 45% faster, allowing other equipment to be better utilized. There are 0 moving parts to generate thrust, thus eliminating hundreds of perishable items in factories. Downtime to repair has been greatly reduced, while mean time between failures has increased exponentially.
With advantages of speed, reliability, maintainability and flexibility. It also uses less power, which equates to even greater year over year savings. 2nd, 3rd and 4th models are seamlessly integrated with minimal downtime and lower costs in similar systems. Coupa Pulse, because the future starts today.
Hopefully, you had a chance to see some of that technology on the show floor. It's creating a lot of excitement among our customers and our sales force as well because it's a chance to completely change the conversation. So I'll talk for a minute about the oil and gas and chemical industries. There are no industries in which the combination of the technology innovation and the domain expertise are more important. These are often very large end users who know what they want.
They can demand that their suppliers understand their business. They run 20 fourseven because and so the need for maximizing uptime is especially important. And particularly in a time of low cost oil, squeezing every bit of productivity out of their processes is absolutely essential. And that's good news for us in some ways because we have always been more about increasing productivity as opposed to just raw capacity expansion. So we've taken some additional steps to bolster both our domain expertise and our technical innovation.
When we look at some of the concepts that we've introduced, connected production for the digital oilfield, some of the capabilities we got with the vMonitor acquisition, the domain expertise, especially in the chemical industry, but also in Consumer and Life Sciences for Maverick Technologies. Even when we're not providing the complete solution, We need that domain expertise to help guide the development of our products and to be the best possible partner to the systems integrators who remain a really important part of our overall value proposition. Our exposure is primarily in oil and gas in upstream and midstream, but even in downstream, we play a role through our intelligent motor control offering as well as our process safety, largely through the technologies made available to us through the ICST acquisition some years ago. And this is going to be an ongoing journey for us. We're addressing more applications today than we ever did before.
And we are actively working with the largest oil and gas customers in the world as they guide us on our technology road map and the need to address new applications. The connected enterprise value proposition is an absolutely integral part of our overall success in Process Industries. And in fact, one of the interesting things we found when we started talking with Paul Goleski of Maverick Technologies, who's in the room today, by the way, is that a surprising number of their applications really incorporated a lot of the new connected enterprise kind of concepts, connectivity to ERP systems, high value services, remote monitoring. They're actively involved with a high percentage of their projects in those types of technologies and services with their customers. So it's very constructive both to our efforts to take share in process as well as to grow rapidly into information solutions, connected services and other aspects of the new value from the connected enterprise.
But we also have a lot of activity organically. The plant PAX process control system continues to gain in functionality. In our premium drives, we just launched a major platform of high performance control drives for controlling the speed of motor, lots of motors, lots of pumps and fans and oil and gas and chemical industries, compressors. And so all those working together really allows us to take our value to the next level. One of the more interesting examples that I've seen in this industry is the role that we're playing in remote monitoring and actually the actual control of LNG filling stations for commercial vehicles.
So we're working with Shell and today we're enabling them to continuously monitor 11 of over 1300 of these stations around the world. And it allows them to more efficiently maintain these stations and also to optimize their supply chain. And Jim Wetzel talked this morning about the connected enterprise has to include the supply chain as well. And this is an example where we're providing the tools to help a big user work with their supply chain to optimize that because these are often unmanned stations and nobody wants to drive a truck up to it and find out that the lights aren't on. So this is an area that's exciting for us and it's example of the new value that we're providing by bringing the connected enterprise to life.
Okay. I'm going to talk to you a little bit about Mining and Cement and I promise I won't go too deep here. I know it's after lunch, but figure if Ted can make political jokes, I can make mining jokes. So by the way, you did great. Mining and cement remains an attractive market.
And that might be not intuitive, although some of the commodity prices in iron ore and coal have come up recently. But we have a really strong installed base and there's a legacy installed base. And there's a really big desire by these customers to modernize and drive productivity. And so that presents growth opportunities for us. And so our automation and intelligent motor control offering also allows us to do all the applications in this space.
And so there's very little risk and there's a great opportunity for us to enhance these options for this customer. We also had an opportunity to differentiate a little bit with some of the acquisitions we've had, specifically in this space, software acquisitions, some of the domain expertise we brought into the company and also with application content, because we have folks who really understand mining. And we have some examples up here. We actually have a mining library that came with the Highproma acquisition that uses ASM mining standards, modular programming and a lot of other customers that are it's very attractive to customers and it speeds kind of those modernizations. So, the desire to modernize and drive productivity is also a good digital or integrated control and information opportunity.
And so, these customers understand the market drivers and where they are from an installed base and the work they need to do. In fact, many mining companies are implementing what they're calling connected mine solutions, which are basically the digitization of the mines, remote operations, remote monitoring. So the example I'm going to give you is BHP Dilton. In fact, Blake and I met with BHP right before lunch to get an update on where they stand. It was a few years ago they came to us and they had started on their digital journey.
The first thing they did is centralize their operations into their headquarters, they called their IIROC in Perth. And what they're doing is they're actually running all the mines in Australia from that central location. And it's quite the sight to see all these pods of operators controlling these mines remotely and digitally through video and voice and other indication. The reason they're doing that is mines have some unique characteristics. First, they're really expensive to open, because you're basically creating infrastructure, you're putting in railroads, you're putting in power stations, you're putting in housing and places for the workers to stay.
They're expensive to operate, if you think of the type of equipment they have and well as maintain. But it's important that they run continuously to get the output and the tonnage out of the mine. And so there's another characteristic that is logistically transporting resources to the mine is tremendously expensive. The first time I went to BHP a few years ago, they told me that every Monday morning there's over 100 flights that leave out of Perth with people to run the mines and then return back 2 weeks later. And so you can imagine the logistics operations that they have.
So they put a plan together to digitize their operations. The first thing they did is they moved operations. And the next thing they did is put plans in place to have remote services. We got an update on that today and it sounds like they're pretty well along the path of that. And then the third part of that was optimization to drive productivity.
And so that was about digitizing the operations, getting all that information out and then using analytics to decide why the machines or the systems are failing. And so the first step we took with them is basically to historize about 2,000,000 tags of information across plants and bring all that back in and then start running basic analytics on it to understand why the machines weren't running. And so that's kind of a work in process right now, and they continue to drive to that optimization. And so in part, sometimes that means they have to upgrade systems, sometimes it means they need to increase connectivity, sometimes it means they need to put infrastructure in up to the mine. So that's a process that's underway right now and they're going to go facility to facility, mine to mine, port to port, railroad to railroad and upgrade their systems.
So, BHP was one of the first customers that we worked with that had the long term plan of digitizing their operations. We thought it was a great example to bring here in a different industry.
Thanks, Frank. So these were some of the examples of how we're bringing the connected enterprise to life. At these customers and at the pilots that we're running as we're working with customers to define their best opportunities, look at tangible benefits on a small scale and then roll it out to multiple lines in a larger scale. Now I want to talk about how that translates to the impact on the market. What are the primary ways in which we're going to grow.
The first is taking share in our core platforms. And we think of the connected enterprise as our strategy for customers delivering value and for growth in its entirety. So it's not just the new stuff of information and high value services at the top. It's putting the foundation in place to create the data that's then turned into the information. And so we look at growth in our core platforms, Logix, Stratix Communication Products, Kinetics Motion Control, Vue operator interface, PowerFlex drives and we look closely at the share gains in each of those areas as a measure of success for the Connected Enterprise.
The second area is double digit growth in Information Solutions and Connected Services. These businesses account for over $200,000,000 worth of revenue today. They include our existing MES software offerings, the modular software, so the VantagePoint that was talked about this morning for dashboards, the data analytics offerings that we're beginning to introduce, as well as on the Connected Services side, remote support. What we're creating is a continuum of remote support options that leverage our own technology to provide the ability to project expertise to customers that may be in remote parts of the world or may just not be able to staff with their own expertise in their plants. And that's everything from self help to remote 20 fourseven monitoring and we're doing more of that every month.
It's also the consulting services that I talked about this morning, network design to be able to create the plumbing, if you will, the infrastructure to support the increased data, that's been an extremely fast growing for business for us. The consulting, the design services, the ongoing maintenance. And as you can imagine, those things kind of blend together because you can do remote monitoring on the network. The IT providers have been doing that for a long time, but we understand some of the specific requirements when you start moving on to the plant floor. And then safety services, safety consulting, ongoing safety services, storing lock out, tag out procedures in the cloud, so that customers can access those with an iPad on the plant floor.
That's all part of our Connected Services offering. And then acquisitions, a point of more growth in acquisitions. We look at 1 or more of 3 main ways that an acquisition can serve as a catalyst to our strategy, catalyst speeding up the execution of that strategy. It's bringing us new technology innovation. It's adding domain expertise.
The ACP acquisition with the Atlanta based software company that we did recently is a good example of the former. Maverick is a good example of the latter in terms of domain expertise. And then market access, getting us access maybe to new geographies or new customers. Example of that would be the Hi Prom acquisition that we did in South Africa years ago. Actually, that was a great one because it addressed multiple of those areas.
But we look at strategic fit first in terms of the acquisitions that we're interested in. And we probably will do a few more of those as time goes on because of the increasing pace of technology. We're having to step up our own internal game in terms of development. We're going to have to be able to partner really effectively. We're also going to have to do acquisitions to be able to tap into that innovation in those areas.
In terms of the financial performance, we expect to grow earnings per share at a faster rate than our revenue growth. We expect to continue to demonstrate a high return on invested capital as an intellectual capital company. And we continue to prioritize acquisitions, then dividends and then share repurchases as our capital deployment strategy. Ted is going to talk a little bit more about this in a minute. And so keeping score based on the things that I just said and looking a little bit at how we did in fiscal year 2016, We're proud of the share gains that we think we're on track to realize in our core platforms.
As you know, share gains in a product line are a lagging indicator, but we can watch our growth in those areas and make estimates about what we think the overall market is doing. In terms of growth, double digit growth in the new value for the connected enterprise and the value that's unlocked by increased interest in the connected enterprise, Double digit growth is what we're seeing there and it's big enough to be meaningful. And then when we talk about successful acquisition strategy, that includes the revenue side, a point of more of growth, as well as successful integration. And importantly, so that it's sustainable over a period of time, a healthy pipeline. And then finally, all these combine to give us growth in vertical industries that are particularly important to us.
And when we think about the verticals that are important to us, we look at obviously the size of that vertical, the growth rate of the vertical itself and then the readiness to serve that we have across our technology and our expertise and our market access. Heavy Industries down, Oil and Gas, Mining, Metals, Consumer, Automotive up. We get a mixed score on that one for 2016. So with that, I'm going to hand it to Ted. He's going to talk a little bit more to recap the financials.
Okay. Thank you, Mike. This feels a little more familiar. So, I know you didn't think we were going to get out of here without having some financial slides, but I promise I'll keep this relatively short. Let's start with just a quick refresh on our guidance that we provided on at the earnings release on Monday.
Look, we expect about 2% organic growth in fiscal year 'seventeen and you can think of that as a range of 0% to 4%. I described on the call, maybe the way to think about that is, if you looked at our performance in 2016, we saw reasonably good growth in the consumer and automotive industries, but large declines in heavy industry, particularly mining and oil and gas. The declines we had in mining and oil and gas taken together were more than the overall 4% decline we had in the business. So in 2017, what we're expecting is another year of growth in consumer and automotive. We don't think oil and gas or mining necessarily get better, but we don't expect to have that same drag that we had in fiscal year 'sixteen.
I mean, I think that's a simple way to think about how we're thinking about growth in the coming year. We're expecting a modest headwind from currency, about 50 basis points and basically that's based on rates from within the last week. It'll be interesting to see how the dollar settles out now post election. We expect acquisitions to add about 1.5 points of growth in our fiscal 2017, and that's more of a contribution than we have typically had from acquisitions. And that's a consequence of the 3 that we've talked about earlier.
We think operating margin is going to be about 20%, maybe a little bit lower than that and a little bit lower than it was in fiscal 'sixteen. And that's really a consequence of the headwinds that we talked about on Monday, the largest of those being the restoration of incentive compensation after a year of basically 0 incentive compensation in the company. And incentive compensation is kind of a big deal at Rockwell Automation because virtually 100% of our employees are on some form of incentive compensation. So this is not largely about management incentive compensation. This is overall variable compensation for the company.
We talked about tax rate on Monday, and we expect a favorable discrete item in the Q1 that's been reflected in the full year rate. So you should think of that as we're going to have a lower rate in Q1 and a higher rate in the balance of the year. The EPS guidance you can see here is $5.85 to $6.25 That would compare to our $5.93 in 2016. And we expect This slide kind of addresses capital deployment. I think we have been very consistent in our strategy and our practice for the last several years.
We've been deploying basically about 100% of our excess free cash flow after acquisitions, either dividend or share repurchase. Since 2007, we've returned $5,400,000,000 to share owners either in the form of dividend or share repurchase. And we expect to continue that 100% excess free cash flow deployment as we move into 'seventeen. Assuming that we spend about $100,000,000 on acquisitions in 'seventeen and $100,000,000 is typically our placeholder at the beginning of the year. Assuming that we spend that $100,000,000 on acquisitions and given the latest dividend increase, we would expect repurchases to be about $400,000,000 in 2017 and that would exhaust our best estimate at this point of free cash flow.
That will be less than we spent on repurchases in 2016, but we basically over deployed excess free cash flow in 2016 and we did that in part to make up for an under deployment in 2015. This slide shows our track record since 2008 across some different dimensions of financial performance. I think it's fair to characterize this as a track record of pretty good performance. Certainly top tier operating and investment returns. Since 2008, we've added about $1,000,000,000 of organic sales and a large portion of that has been offset by currency translation.
It is also less organic growth that we're happy with and certainly less than we expected at the beginning of this upcycle. But it has come in the face of very difficult market conditions, Blake talked about what we have faced in heavy industry. I would add emerging market as another piece of that and in what has been a very anemic recovery from a pretty deep recession. That said, I think we've had very good EPS conversion on the modest organic growth that we've seen over that period. And that's despite the fact that we've increased R and D spending.
And I think throughout this presentation, you have heard about the importance we attach to technology and being able to differentiate on technology. We have deliberately increased our R and D spend spending to make sure that we're appropriately investing. And it's gone from about 3.5% of sales in 2,008 to over 5% of sales in 2016. It was also a very good period for us in terms of the dividend and related to our capital deployment strategy, we've increased the dividend over this time frame by 150%. And this is a slide I always like to finish on.
Since 2,008, in terms of total shareowner return, we have consistently outperformed the S and P. And on average, over that period, we've outperformed on an annualized return basis by almost 4 points. So we think both in terms of our capital deployment philosophy and in terms of the operating performance, we have done a good job generating return for our shareholders. And with that, I'm going to turn it back over to Blake.
Thank you. So I'm going to make a few closing remarks and then we'll take questions. We talked earlier about as an industrial software company that requires continued evolution of our culture. We have a strong culture and we have a rich heritage. We receive a lot of recognition in terms of innovation, in terms of integrity, in terms of corporate social responsibility.
And I can tell you on the latter, really all of those, those are important when we're seeking to attract the best new talent because they obviously care about us being an innovative company, but they also care about being a part of something that's not just a paycheck to them. And so when we talk about our integrity and when we talk about our involvement in the community, that makes a difference. We hire some people that we would not be able to attract if we didn't have that as a part of our fabric. As we look at evolving our culture going forward, here's a few of the things that I think are particularly important. First of all, it's an externally biased culture.
It's willing to compare ourselves against care ourselves against the very best that's out there, that's available. And that and to be able to look at those things both in terms of our competitors, new competitors, traditional competitors, companies that aren't even in our space but have good ideas and to think about what our customers have to choose from and what they're thinking about in their own businesses. And then really importantly, the will to change the things that need to be changed, to be able to embrace that change. So that's an important aspect of it. The next is speed.
And somebody asked what they'd like to see Rockwell improve and speed was mentioned. And I absolutely agree, we're going to have to, as a big company, continue to improve the velocity with which we can make decisions and act on them. And I think highly distributed decision making and empowerment of our employees at different levels of the organization is an important part of that. Giving employees an opportunity to make important decisions at all points in their career. Because employees want to know and at all levels, they want to know that what they do is important.
They want to know that they have the tools to be able to be successful and they want to have a chance to advance through their career. And so the intern thinks about those things. I think about those things. And I think if we continue to remember those threads, then we're going to be able to increase the speed and the accountability of what we do. The next is the steady stream of new ideas And that's growing the innovation within our company and doing the things to encourage that organic innovation.
It's partnering. And as I mentioned before, it's also acquisitions. And then finally, it is continuing that culture of integrity and inclusion that we talked about before. Hopefully, you saw the best kept secret booth that talked a little bit about some of those things that was on the show floor. And it's a commitment and a rock solid belief that diverse teams make better decisions.
And so those are some aspects of our culture that we'll be paying a lot of attention to. And then finally, what's most exciting and hopefully you saw it this week is that every day customers are pulling us into their plans for increasing their competitiveness. They want to talk to us about what a connected enterprise can do for them and how we can help. And that value is going to continue to drive high returns from an intellectual capital company that's focused exclusively on industrial productivity and making our customers more competitive. So thank you very much for your time And I'll hand it over to Patrick to get us set up for Q and A.
Okay. We have, according to the clock, 12 minutes left, but we are going over for Q and A. So we have Anna and Isaac with microphones. If you have a question, please raise your hand and wait till the mic is close to you to ask the question, so the webcast folks can hear as well. Thank you.
Thank you. You talked about software a lot today. Everyone wants to extract value from their customers and manage that data, particularly GE with their Predix platform. Can you talk about the competitive advantage that you guys have to maintain that the value from that data? Thank you.
So when we talk about being able to capitalize on software based productivity, it's going to be an ecosystem with a lot of players. So when I talked earlier about the different elements of the connected enterprise, then we think that we and our partners cover a very broad swath of that space. And the fact that we live on the plant floor and have that domain expertise, I think, is an important part of it. But what customers have given us a lot of credit for is that we don't come in and say that we have to do it all. And so if we're able at it in the most basic form to be able to provide the infrastructure, the products and the controllers and the communications to enable that data flow, but they decide that they're going to do it themselves or in some cases, there's somebody else who's going to be able to provide some of that higher level value.
And that's not the worst thing. But we also have seen customers who, particularly really with some of the offerings that Frank talked about earlier, things like factory talk analytics, because of our knowledge of what they're trying to get done, they are willing to entrust us with that data. And I'll go back to my hypothetical cookie maker, and one of the reasons that we're seeing in multiple cases, those users look to us to take a leadership role. We're already working with the individual machinery suppliers. And so we understand the users business as well as the machinery builders business, but rather than allow each of the machinery builders to have their own remote monitoring strategy, for instance, they'd like for us to help with an overall framework with which to do that.
And again, there are going to be times where we're able to provide that, we're able to do the historization and the collection of the data and the analysis on it. And other times, users who are concerned about those data rights, they're going to do it themselves, but we're going to be with them every step of the way as a partner. And I guess I'd also ask Sujit and Frank if they have some additional comments.
Just to add to what Blake said, predicts as you know is a cloud based industrial analytics platform. What we are seeing right now is a lot of analytics that are being implemented are resulting in real time actions. And if you want to drive real time actions, those analytics have to be implemented within the controller or in a server within the plant floor environment. So, a lot of analytics are being implemented that way. We're open to working with Predix if there's an application that demands cloud based analytics.
So we don't see that as a competitive offering. As Blake said, we're open to partnering in that area.
Okay. Yes, I had two questions for you. 1, Blake, you talked quickly about in your closing remarks about talent. As you continue to push more into software and more and more innovative there, do you find yourselves competing more against traditional tech type Silicon Valley type companies? And how has that impacted you?
And then second, just a super detailed transportation question for Ted. Now, what predicts, people talk about this a lot. Do you view this as more of like a complementary offering that could be layered on top of a Rockwell? Or is it something that you think will be put at like the device or machine level and then kind of rolled within? I think there's just a lot of confusion about is this a real competitor or is it something different altogether or how does this kind of play into the whole competitive environment?
Yes.
Let me take the last question about Predix first and then I'll go to Talen. We really don't see advanced discussions with Predix at a lot of our customers. I think as Suji said, there may be times where we find ourselves coexisting, but we haven't seen the impact across a broad base of our applications. I think they're going to be effective first in terms of their captive iron, if you will. So it's going to be on medical equipment.
It's going to be on some of their, for now, oilfield assets and things like that, aircraft engines. But we haven't seen the broad and deep discussions at a lot of our customers yet with respect to with respect to Predix. It's a little bit more about infrastructure. On the talent side, we are going to have an increasingly competitive environment for talent. I think we've got a lot of really strong calling cards as we talk to the best and brightest in the software world.
First of all, I mentioned before that they are interested in the type of company that they're going to work for and a stable company that produces solid financial results that gets involved in interesting applications. That's one of the things that attracted me is that our find that interesting. The opportunity to have a variety of find that interesting. The opportunity to have a variety of different jobs, multiple careers within one company. And certainly Frank and I experienced that in our own careers and I think a lot of our software developers find that interesting as well.
In terms of locations, we've got traditional locations in the American Midwest, but we also have campuses in San Jose and Austin, Texas and in India and in China and Poland, around the world. And so there's an opportunity to attract the best and brightest from around the world and give the best and brightest a chance to move around as well. So I think we're more than holding our own as we look to attract talent. The other point I'll say is that we have an absolute commitment to lifelong learning. And I think a lot of employees have the interest in working for a company where they know that we're going to invest in their upfront continuing education and through the course of their career so that they can continue to keep their skills sharp.
Two questions, back of the room. Two questions. One, you laid out kind of your financial goals. But have you thought about the underlying cyclicality of the business and how the business has changed? Because obviously over the past 15 or 20 years, you've become a lot less capital intensive, a lot more diversified.
But is there a way to address kind of the implicit quality of the business going forward from a fixed and variable cost basis as you go as you ride the cycles? And then as a follow-up more to Ted perhaps, I think it's Blake, with the prospect of a Trump presidency and the levers of power with the Republicans, there seems to be increasing odds of some form of tax repatriation under a favorable basis. Does that change if that were to occur, does that change your strategic appetite for maybe accelerating M and A, given it probably increases your optionality?
Yes. Maybe, Ted, you start with the first and we'll both take a swing at the second.
Okay. Could you repeat the first?
I know, Ted, I'm very boring. The first question was just basically what have you done
to Cyclicality. Cyclicality. I'm sorry, cyclicality, yes. Yes, so look, I mean, we remain a company whose revenue is still largely, not strictly, but largely dependent on industrial customer capital spending, okay? I think there is always, at least into the near looking out into the near future, there's going to be a component of cyclicality in our business that's related to that.
If you look over time, what we have done is put in place a much more balanced industry footprint. So, over a long period of time, we're not as dependent on automotive as we used to be. We have a much larger footprint now in heavy industry. That was great for a while. We have much more geographic diversity in our revenue base than we previously did.
And our hope in putting that together has always been that that diversity will create some countercyclicality and help dampen, it won't eliminate, but dampen the cyclicality you're referring to. The problem in the last downturn in 2,009 was pretty much everything was down at the same time. So it did not have the effect that we were hoping. Hopefully, it will have that effect going forward. In terms of fixed cost variable cost, honestly, when you have high incremental margins, you pretty much have to have high decremental margins, right?
I mean, it's a 2 edged sword. There are things we have tried to do since 2,009 to mitigate the impact on the decremental side. And we have variabilized the cost structure everywhere that we can, some of that through outsourcing, some of that through increasing the percentage of contract labor that we use, particularly in our more labor intensive solutions and services businesses. And I think that will have a favorable impact on the margin, but I don't think it will fundamentally change the decrementals. When we added employment back after 2,009, we were also careful about where we added it back.
So when we have to take it out, I am hoping and I believe it will be the case, it will be a little less expensive for us to take it out. So there are things we've done that I think will have a positive effect on the margin, but not necessarily change it fundamentally.
Maybe a couple of additional comments. I did mention before, as software becomes a larger part of our revenue, the associated services on that are often sold in terms of subscriptions of dampening further dampening those curves. And then one last comment in terms of our footprint, we do our best model is where we have multifunction plans. So if you think of our facility in Poland, there's a lot of different activities that are going on there, including engineering, software development, engineer to order assembly and component production. And so the ability to have these plants that you can do a lot of different things in and that aren't dependent just on building, for instance, big drives for the oil industry, that also helps having to open and close capacity as quickly.
So I think those things help us as well.
So to the second question about and I think what you're asking about is really the potential for tax some form of corporate tax reform. I think people view the election results as maybe making that a little bit more likely. I hope that's the case. I think that would be a good thing generally for the U. S.
Economy, a good thing for our manufacturing customers in the U. S. And a good thing for U. S. Multinationals generally.
No. Yes. Yes. And so assuming well, if there were some form of repatriation available for that, I mean, the one thing it would do for us in terms of M and A is make cash more easily available in the U. S.
For U. S. Acquisitions. Whether that would cause us to be more aggressive or not, I don't think we have passed up what we thought were any strategically important U. S.
Acquisitions because we didn't want to spend the cash in the U. S.
Yes. We're going to look first at the strategic fit and then we're going to look at the financial impact after we assure ourselves that it's a great strategic fit and is a catalyst to the overall growth strategy. And so we're going to keep that priority
Blake, Ted, just two questions around revenue growth over the next few years. So a few years ago, the target was 6% to 8% through the cycle and that's been dampened largely. A lot of it's related to macro. But assuming that the macro would have to get better to get back near those targets, how do we think about the outgrowth for the company relative to the market going forward based on some of what you've announced today and what you have potentially in the pipeline over the next 3, 5, 7 years? Is there an inflection we should think about?
And then the second question would be, so I think you kind of talked alluded to recurring revenue stream. Is there a stretch goal in terms of trying to make it a certain percentage of the revenue base to mitigate cyclicality so that something that could be advertised to investors where it's ultimately 10% of the revenue base. Is that a potential or is that just 20 years out
sort of thing?
Well,
on the first question in terms of the impact on the market, the 3 main elements of growth that we've talked about all imply faster growth than the market. So when we look at taking share in terms of our core platforms, which is the biggest portion of the market that obviously has us growing on balance faster than our competitors on average. The double digit growth in that new value, we think gives us a significant opportunity to outgrow the market. And then acquisitions are obviously a rapid increase in share. We're not setting specific numerical targets to replace the previous ones with an understanding that the macro is still going
the
And And within that, we do pull levers on certain pieces of that, having more of our services business be recurring service contracts as opposed to one time break fix, we think that that will grow faster. And we've placed a lot of our investments and the things that we chose to be a part of Connected Services, all lend themselves more to that recurring multi year type of contract than some of the other more basic transactional type services.
Does that grow faster within that double digit growth rate where you had a few different things in there? Does that grow faster or no?
I think the growth of the contractual services, whether it's directly connected to information solutions or networks or something else, is really included in that double digit growth.
Blake, thanks very much. So you've emphasized the opportunity to grow Rockwell content at your existing customers with your initiatives around Connected Enterprise. I want to ask about market reach and maybe some particular areas that you think Rockwell is underrepresented in? It could be regions or specific vertical industries. And second question is around acquisitions.
So today, you're essentially committing to 1% of incremental growth in revenue from acquisitions every year. Can you highlight the area where you want to acquire, particularly interested in your appetite for system integrators? Obviously, you've acquired a sizable one this year. Should we expect more of that?
Thank you. So looking at the acquisition focus areas, in the Information Solutions and Connected Services area, I think that's where a lot of the pipeline activity is going on. So it might be certain types of software. It might be tools that enhance our ability to perform data analytics, network services, design capabilities. Those would be some of the areas that would be near the top of the list.
But as Frank demonstrated with a couple of recent acquisitions from ANS, when you have potentially disruptive technology, like independent car technologies, we saw with Jacobs Engineering and Magnum Ocean, it was too good not to be a part of that. And so bringing those in and then integrating them as a part of our architecture is also a very attractive area for us. On the specific question about whether the acquisition of Maverick Technologies is signaling a roll up of systems integrators, the answer is no. They had a particular set of very attractive characteristics that made them somewhat unique. The combination of a focus on process applications, the domain expertise there, their market reach, some of the customers where we were already present, it just made them very interesting.
But we continue to be absolutely committed to a dual approach to the market that includes independent systems integrators and solution providers, as well as our own internal capability. And we're going to do things to strengthen, not weaken our relationship and the ability to provide value to those systems integrators going forward. There's plenty of room for both. And many times they're working on a different set of applications and customers. And we think we have opportunities to grow significantly in both areas.
Now the other question the innovation and the expertise, this is an area where I think our market access is generally good. It's no secret that our share is less in certain parts of Asia, In certain product areas where it's newer or rapidly growing, like the information solution space, it's not as mature. These give us big opportunities to move forward. And then there are some segments within a larger vertical like powertrain that we're moving into as well. And so we do look at what are our traditional verticals, but also what are the areas that our technology road map and our domain expertise is putting us in a place to be able to reenter or address more completely than we were before.
And so we do look at those and again emerging markets like China is an area where we're going to continue to invest in. Powertrain is something we're already seeing success in, and we're going to build on that with a lot of additional investment and so on.
When you talk about kind of underrepresentation, you can cut it in different dimensions. It could be geographic, it could be vertical industry, it could be product. Focusing on the product dimension for a moment and maybe trying to relate it to some of the stuff you guys saw when you arrived on the show floor today, there are several areas where we believe we have share gain opportunity. And it's because we're somewhat underrepresented compared to our leading position, say, in large controllers. And so and the things we've generally talked about before, I mean, we think there's an opportunity to improve our market share in visualization software.
And we think it's very much related to things we're trying to do in information software generally in the connected enterprise. We think we've got an opportunity to improve our position in mid range control. And I think very much related to our ambitions to grow, continue to grow in consumer industries. And then we also think we have a share gain opportunity in high horsepower, high performance drive applications. And you guys, I think, all had a chance to see the new 755 offering that was introduced at SHO.
You talked about making some gains in midrange control with some of the machine builders. But how large of an opportunity is that still in front of you?
How do
you size that?
Frank? Yes, sure. So if we look at the positions we hold in automation in the markets, the large control space and large systems is our strength. In fact, we're the market share leader. We are number 2 in this space, we refer to mid range, but it's of equal size, market size.
And so it's a significant opportunity for us. And so the investments we've made over the past several years have really put our portfolio in a place where we can be very competitive and go after that space and try to push share gains. And so it's a very attractive market opportunity. From an automation perspective, it is the most attractive opportunity.
Yes. I think if we look at what we've talked about as some of the elements of our growth in Europe over the last year. Gains in midrange with the boost from some of the recent new product introductions have been a key part of that.
I just had a question going back to another possible implication of the new policies from Trump. So he has referred to an idea to basically renegotiate NAFTA and put up tariffs and so on. And so I'm just wondering how your own supply chain would be affected if it became more expensive to move product across the U. S. Border in either direction?
Yes. Well, we
do have plants around the world, as do most of our customers, most of our big customers, including Mexico. And that is an important part of our general strategy to have manufacturing close to customers. We also have plants that we continue to customers and to our customers and to see how the rhetoric that was so prevalent during the campaign season, how that settles down in terms of actual policy?
I mean, I guess, on the plants in Mexico and North America, the other side, even if you have plant on both sides versus you make the whole product on
your side? Most of the time, it's a single flow process where substantially all of the product is made in one plant. But as part of our regular enterprise risk mitigation process for key products, we typically have multiple locations that we can produce that product. And either we have the plants ourselves or we have partners that we've enabled for being able to bring that additional capacity on, should there be a disaster
Keith, our largest manufacturing facility by employment is in Mexico. And our Mexican facilities are an important part of our supply chain. If there were if the border were closed, it would be a significant disruption. I don't think I certainly don't believe, we don't believe, I'm not sure anyone believes that, that is any reasonable possibility. And I think what we just have to do is let the dust settle a little around the election and see, as Blake said, what translates from campaign rhetoric into actual policy.
Good. We'll take one more question.
Thank you. I noticed that the return slide talked about EPS growth greater than revenue growth. Are you also planning to grow EBIT greater than revenue? Or are you only committing at this time to grow EPS greater than revenue?
Well, I guess we're only committing to grow EPS greater than revenue because it was the only thing on the slide. But look, I mean, our we have always said that it's not a stated goal or objective to try and establish a new peak margin in every cycle. We think our margins are already very high. We are more concerned in ensuring that we are investing appropriately. And for us, the investment is all P and L side.
We're not capital intensive as it relates to growth that we're investing sufficiently to ensure that we maximize organic growth through the cycle. So, we have high incremental margins. If we can get back to some reasonable levels of organic growth, I think it will translate well. But it isn't necessarily a stated objective to try and ever increase margins.
Okay. Well, that concludes today's event. Thanks again for your time and coming over. We'll talk soon.