Good afternoon. My name is Patrick Gorse. I'm the Vice President, Investor Relations for Rockwell Automation. For those of you in the room here in Chicago, welcome again. I hope you had a good tour, informative.
And I'm sure that you were able to say that or to notice that we were very excited to show our new technologies and capabilities and those of our partners. Also welcome to those of you who are following us on the webcast, and thank you for taking some time and joining us here for our investor presentation. So with that, I will be introducing here Keith Nosbusch, our Chairman and CEO. Thank you.
Thanks, Patrick. And let me also extend my welcome to all of you for joining us today. For those of you who came to Chicago, I hope you've gotten a lot of input and a lot of new information about Rockwell Automation. And I hope you felt the same energy that all of us feel when we're on that floor with our customers, with our employees and with our partners who are absolutely providing the best automation and capabilities in the world. Certainly, we think it was a great opportunity for you to learn about our latest technology, the connected enterprise and how our partners can help them drive reminder of our Safe Harbor statement.
This presentation includes forward looking statements that are subject to our disclosed risks and uncertainties. Today, I'll start with an overview of the macro and automation market trends and how the next generation high performance architecture will capitalize on these trends to help deliver the connected enterprise to our customers. I'll also cover our market leadership and key growth opportunities. Then we'll have Frank Kulasewitz, the Head of our Architecture and Software segment and Blake Morette, the Head of our Control Products and Solutions segment, come up and discuss how innovation and domain expertise will sustain our market leadership. They'll share examples of how we're helping customers achieve their vision of the connected enterprise today.
After that, Ted will close with a short financial review, and then I'll have a couple of wrap up comments. At that time, we'll open it up to Q and A, and we expect that the webcast will last till around 3 pm Central Time. You can think of this as the elevator speech for Rockwell Automation. It captures the key aspects of the company and that are important for our investors to understand. Our sales in 2015 were $6,300,000,000 We're primarily an organic growth company.
We believe that we have attractive organic growth opportunities that will yield long term above market growth and great returns. Through our intellectual capital, both innovation and broad deep domain expertise, we've been helping customers for over 110 years. We are the largest pure play global automation and information company, a market leader in a great industry. We provide products, solutions and services across a wide spectrum of end markets from automotive to consumer packaged goods and to a broad range of heavy industries. Organic growth and intellectual capital enable us to earn best in class operating margins and return on invested capital.
Plus, just as we help our customers drive productivity, we challenge ourselves to productivity every year. Our business model is unique. We have market making channel partners, including the best distributors in the industry. We also have trusted partnerships with industry leaders such as Cisco, Endress plus Hauser and FANUC. Lastly, our culture and business practices are built on a strong foundation of FX and integrity.
So in a nutshell, we are an intellectual capital company with differentiation and diversification that enable us to deliver results. Our long term growth and performance strategy is fundamentally a value creation one. We intend to generate above market revenue growth by continuing to expand our served market, capturing market share and customer share and executing a disciplined acquisition strategy that will serve as a catalyst to faster organic growth. Driving productivity enables us to fund our best growth opportunities. For us, this spending is primarily a P and L investment rather than capital investment.
The result will be an expansion of our intellectual capital that sustains our differentiation and expands the value we provide to our customers. Being an asset light intellectual capital company enables us to have strong cash flow and deliver exceptional return on invested capital. And we have a great track record of returning that cash to shareowners. We're confident that we have this strategy and it will enable us to deliver sustainable value to our customers. And this is something that we've proven, our ability to execute this strategy and deliver superior returns to our shareowners.
We've been talking about important macro trends for a couple of years, and 4 of these are now being characterized as disruptions by McKinsey. Let me walk you through each one and what we expect the impact will be on our customers. The first is urbanization that will increase primarily related to growing middle class populations in emerging markets. This will be a tailwind for us for our customers and will drive growing demand for consumer goods and increased energy consumption. Our multidiscipline control platform is perfectly suited to consumer goods manufacturing and our intelligent motor control provides energy efficiency.
The second disruption is accelerating technology change. We are seeing an explosion in the number of network connections and the amount of bandwidth that's required as industrial assets become smarter and connected. 1 trillion objects are expected to be connected by 2025. For our customers, the security and reliability of those connections will be paramount and will increase their need for our network infrastructure products and services and the enhanced security features of our portfolio. Next, let me talk about the aging world and more specifically, the aging workforce.
While this skill gaps is a challenge for many of our customers, it will be an opportunity for us to provide our expertise to fill that gap. And lastly, what McKinsey calls greater global flows, we think of this as connecting plants and global supply networks. Our customers are looking for ways to optimize across the enterprise and we can help them achieve that goal with the connected enterprise. These trends reinforce the long term secular growth opportunities for industrial automation and information. For us to provide value to our customers, it is critical that we understand how automation can help them achieve their business goals.
We put these goals into 4 major categories: faster time to market, lower total cost of ownership, improved asset utilization and enterprise business risk management. For reducing time to market, we work with our customers in the design phase and the implementation phase of their automation investment, creating flexibility and agility so they can respond to their customers more quickly. We help our customers reduce the total life cycle of their automation investment and the costs associated with that life cycle. It includes the upfront investment, ongoing operating costs and long term support of their installed base. In the face of increasing global competition, our customers need to continually find ways to and improve asset utilization.
Our automation and information products, solutions and services enable customers to maximize throughput and minimize downtime. Since industrial processes touch many aspects of enterprise risk, we help our customers design, operate and maintain a safe and secure operating environment, including the intellectual property related to their machine and production processes. We meet regulatory or environmental compliance requirements. And at the end of the day, we protect their reputations as suppliers of quality products and good stewards of the environment. We continually find new and creative ways to expand the value that we can provide our customers.
With these business drivers in mind, contemporary technology advancements are now leading customers to seek new ways to achieve the next level of productivity and global competitiveness. The foundation is smart assets, smart industrial assets that are generating and utilizing more data than ever before. That data will be processed, aggregated and analyzed with scalable computing and delivered at the point of most value, whether that is directly within a controller or the edge or in the cloud. Further, contemporary mobility platforms bring information, visibility, collaboration and remote expertise where and when it is needed. And of course, all of this information must flow across secure networks.
The inrush of these contemporary technologies is changing the game for our customers. They now want more, more from isolated islands of automation to be integrated, responsive, productive operations for automating labor to leveraging information from products and pockets of expertise to global collaboration from open to both open and secure. In short, we're finding that our customers want the connected enterprise. Think of the connected enterprise as an environment where contemporary technologies blend with traditional control and information technologies found on the plant floor to magnify the power of contextualization data and create a much more capable and interconnected production environment. It involves industrial operations, which are integrated, optimized and collaborative and secure from the machine level through the enterprise level and across the supply chain, while connecting remote operations, assets and users.
It's about optimizing the enterprise by bringing people, processes and technologies together to drive productivity. We deliver the connected enterprise through integrated control and information. That allows us to create a smarter, more productive and more secure environment. And we do that through our 3 core platforms: the integrated architecture, intelligent motor control and our solutions and services organizations and all the offerings that they bring to the market. Simply said, it's about safe, secure, reliable information, real time information delivered in a consistent manner so customers can make better business decisions.
Integrating technology advancements into the core of our platforms enables us to build much more powerful solutions that deliver transformational business value to our customers. Frank and Blake will go deeper into how we're helping customers achieve their vision of the connected enterprise. So let me switch gears to talk more about market leadership. I've heard a number of you say that Rockwell is a great franchise, and we couldn't agree with you more. But what it is that enables us to remain a market leader, what is it that does that?
Well, let's start with our business model. We go to market as one company globally. That allows us to have coordinated product development roadmaps, one face to the customer and effective global collaboration. We have a broad set of market access partners, including distributors and system integrators, but they're more than just delivery arms. They create end market demand.
Many are exclusive to Rockwell, and we are dedicated to all of them. As I mentioned earlier, we have A plus strategic partners and we know how to build win win long term relationships with them. Being in business for more than 110 years in a technology based industries means that we know how to lead and navigate through technology disruptions from relays to PLCs to multidiscipline control and now the connected enterprise. Our customers look to us to be the visionaries for their automation and information needs. But while we're always looking forward, we are committed to protecting our customers' ongoing automation and information investments.
We call this future proofing, which means we have a road map, the reference architecture utilizing the core control platform logics and network infrastructure, standard unmodified Ethernet that will allow our customers to build their connected enterprise at a pace that is appropriate for their situation, protecting their investment as they evolve their journey to the connected enterprise, yet they're able to get business value every step of the way. This is what the benefits of contemporary technology allows them to do. Lastly, we don't rest on our laurels. We're constantly looking for ways to expand our served market, improve our capabilities and gain market share. We have the right strategy and with our focus, our intense focus on execution, we will extend our leadership position.
Most of you are very familiar with Rockwell Automation's world leading integrated architecture. Through recent significant investments in innovation, we have evolved our integrated architecture and our integrated control and information architecture into a high performance architecture. And that's what you were able to see on the floor during your tour. This high performance architecture based on the ongoing evolution of Logix is scalable, future proof and built upon contemporary technologies with next generation capabilities enabling the connected enterprise. It is incrementally deployable and ITOT ready with information management and end to end security capabilities.
And it is still the only architecture in the market with a complete set of real time controlled disciplines that are integrated with real time information such as diagnostics, prognostics, analytics and optimization. It is completely built upon one network, standard on modified Ethernet. There is an important change in the automation market today. Industrial automation customers that are on their journey to the connected enterprise need high performance architectures, not just a collection of products. Innovation and contemporary technology and open interfaces to 3rd party software applications, think of that as apps on a smartphone, our important foundations of our high performance architecture.
It is truly next generation, available today and quite frankly, is only going to get better in the future. And this is a prime example of our continued market leadership. There's a lot on this slide, so I'm just going to hit the highlights. We play in a large market that has grown to $90,000,000,000 The longer term secular drivers of industrial automation and information demand continue to be intact. Customers need productivity to remain globally competitive.
They need to continually update their systems to take advantage of the newest technologies in a secure manner. The growing middle class will fuel consumer demand in emerging markets and there is a skills gap that will grow through the next decade. But we also have opportunities to grow market share and increase our share of customer automation spend. We've demonstrated that well in process and safety, and we're confident we can continue to drive share gain. We will continue to find ways to grow our served market, and we've just listed a few of those areas here.
So to sum it up, looking past the near term challenging market conditions, we have great growth opportunities and we are well positioned to continue our track record of above market growth. I'll be back at the end with a few wrap up comments, but now let me introduce Frank and Blake to carry on with the conversation. Frank, Blake?
Thanks, Steve.
So good morning or good afternoon, I should say. It's a pleasure to be here again with you this year. I'm Frank Kolesiewicz. And I'm Blake Moret. We manage the operating segments for Rockwell Automation, and we're going to kind of tag team today the presentation.
I'm going to spend some time talking to you about innovation, our technology innovation and how we bring that to market in our products, our platforms and our architecture. Blake's going to spend some time talking about domain expertise, mostly in the forms of our solution and services business. And then we're going to change topic a little bit and talk specifically about customer value. And what we're going to try to do is relate how that technology innovation and the domain expertise helps our customers solve problems in their business, and we have case studies we'd like to show with you. So when we think about innovation, we really have a history of innovation.
You can see that in the offerings we have today and the things we've done in the past. We are recognized in the market as an innovative company. We're very proud of that, and we take that very seriously because we really try to focus our innovations on customer value. I mentioned earlier, we deliver those for our products, our services and our solutions. And so we have a great opportunity because of our broad portfolio to not only innovate within our platforms but across our platforms.
A number of those things are have been important to us for a long time. Jeff Kent this morning mentioned that we've kind of stuck with a number of the key tenants that we have, and we've listed some here, but scalability, multi discipline control, Keith mentioned that earlier. Premier integration or ease of use has been important and then allowing our customers to move forward or go backward with our new platforms and attach to their current investments. Those things are important to us because they provide our customers with flexibility, they simplify the deployments and the use of our equipment and they protect their investment life cycle. That came up a number of times this morning on one of the things that we do quite well compared to others in the market.
And so these tenants are taking us forward. If you had a chance to go out on the floor, and I think almost everybody here did, you saw the value of our partners. John McDermott talked about how many partner booths were out on the floor. And so you can see that we can't be everything to everybody and nor can our partners, but the power of us and our partner network really comes to life. Big partners like Cisco and AT and T and Microsoft certainly, but also many, many others who provide complementary products that our customers need to fill out their automation portfolio.
Yes. Those partners really allow us to focus on what we do best.
So when we talk about innovation and we talk about a history innovation, we thought it would be great to depict that in some way. And so here you can see that over the course of the last several decades, we continue to innovate. That innovation is also important because it goes through those market discontinuities that we see and it's allowed us to grow through those discontinuities. And so we talk about ourselves as an intellectual capital company. You can see that the value of that capital continues to increase.
Innovation is what's driving our vision of the Connected Enterprise. It's an enabler. Innovations from the recent past like multi discipline control, Keith mentioned that's still not something our competitors have in the marketplace. Current innovations like secure industrial Ethernet, very important for us information solutions and most recently mobility, you probably noticed the amount of mobility out on the floor, a current innovation in the industrial world. And finally, we look forward to innovations in the future, things like information management, analytics and other capabilities that will continue to drive more value to our customers and will continue the evolution of the Connected Enterprise into the future.
And so the Connected Enterprise is not a one step thing. It's a journey. And so we believe our opportunity is to innovate as customers take that journey. There's an opportunity to bring innovation to market. We do that in a lot of different ways, but the primary ways are through our products, our platforms and our high performance architecture.
There's a lot of new products coming out. I think we talked earlier today about 55 new platforms are being influenced and literally hundreds of products that are derived from that. Those are valuable to our customers, but they also create a foundation. And they're the foundation of our future proof next generation architecture. And so while we might talk about the individual capabilities and features, it's really the value of the architecture that's come to market.
That's going to change what we offer in the market. It's going to change how our platforms evolve. They'll become smarter, more productive and more secure and they're going to provide hopefully more value to our customers across their automation life cycle. And we think of that as customers who design, operate, maintain their systems. You also saw a lot of that this morning in the discussion we had from Procter and Gamble.
And so that offering will evolve. Our software systems will focus on productivity. They'll focus on engineering reuse. We'll provide engineering content for our customers so they can build their machines and their systems faster. Our systems will evolve.
We'll build system intelligence in. A number of those showed up today, things like batch and hybrid right into our control system, model predictive control for advanced capabilities and other things that just simplify the life of an OEM like automatic tuning and commissioning. And so those platforms, as they become smarter, more productive and more secure, a key element to that is connectivity. Everything is going to be connected. You saw many, many examples of that today.
You can't have to seeing that standard unmodified Ethernet any place you walk out on the floor. That connectivity is an opportunity. It's an opportunity to drive more value. But it's also a responsibility, so security becomes even more important. And so secure industrial Ethernet is really a priority for us in our products and platforms as we offer things like network switch technologies as well as in capabilities we build into that architecture.
So this year, we have a big focus on authentication and policy management. So how we ensure connectivity is secure in our architecture. And then how we protect the customer's intellectual property, how we detect tamper detection so our customers know that their systems are secure. And so security is also a journey. That will evolve as we add more capabilities and as that threat landscape evolves.
But security has become one of those key tenants of our secure industrial infrastructure.
Yes. Want to emphasize one point as well, and that's the strength of being a single integrated business. We have products that come from both segments, but all of those products are completely aligned with the high performance architecture that we're talking about. They all use the same communication services. They're all intended to provide value in a system across the business, across both segments.
And that's caused our processes within the company to evolve. And so designing for security has become important not just for the Clear Security products, but the entire architecture. And so to complement those innovative products is domain expertise across a very broad range of vertical industries. Very few competitors can match our reach into the portfolio of discrete and process applications that we have. We have a thriving, profitable solutions business that delivers complete solutions in our targeted applications, and we have a well defined systems integrator program that extends that expertise and geographic reach.
And that's really important because particularly in process applications, customers absolutely need to be given the confidence that we understand their applications and are worthy of their trust. We also take a life cycle approach to our value add. We provide consulting services to help customers better define their problems, the engineering and design services, the life cycle support programs, up to and including the migration of those legacy systems to new products. And in addition to all the new products that you saw on the show floor today, we've also extended our ability to serve our market with new application expertise as well as services to be able to leverage our technology to be able to provide support over the life cycle of those projects. So we talk a lot about plant PAX, and we're winning an increasing number of projects that integrate that modern DCS system with our intelligent motor control to show customers a new way of doing things.
And again, that narrows the field of competitors who even have the portfolio who can compete with us there. We have serialization and traceability solutions that are helping food and beverage and pharmaceutical customers address increasingly stringent demands for traceability. And we're reentering the powertrain market in time for automakers to meet the more stringent CAFE fuel efficiency standards. On the services side, we've grown or acquired services in areas that leverage our own technology. 1 of the most exciting is in the network services, including security area.
As customers begin their journey to the connected enterprise, having a sound backbone, well designed and future proof is really important, but rarely can they do that themselves. And so that's a fast growing part of our services that will
than the exactly same amount by negative currency translation impact. So clearly, we have had a big headwind from currency over this period and particularly in the last couple of years. If you look at the bottom left, adjusted EPS, you can see here the quick recovery that we saw after the 2,009 recession in EPS levels. And we've continued to increase our adjusted EPS even in years when our sales decreased due to currency. On the bottom right, decreased due to currency.
On the bottom right, you'll see free cash flow. I guess what I would like to point out here is that our cash flow has been much more stable through the cycle than either sales or earnings. And I think the strong free cash flow conversion is a very good indication of the high quality of our earnings. And then finally, on the top right, return on invested capital, I think it would be fair to say that our ROIC is best in class and an indication of a few things about the company. First, we have very strong operating margins.
So we have a strong numerator for that calculation. We also have more of an asset light model. We're not very capital intensive as it relates to growth. And we're primarily an organic sales company. And I think all three of those contributed to those very high ROIC levels.
At 33% in fiscal 2015, ROIC was a record for the company. And finally, on cash deployment priorities. Our cash deployment priorities remain unchanged. We're going to continue to fund acquisitions that we believe can be a catalyst for higher rates of organic growth. We will also continue to return cash to share owners through dividends and share repurchases.
We announced last week a 12% increase in our dividend. This is the 7th consecutive double digit percentage dividend increase since the beginning of 2010 and it's an indication of our confidence in sustainable cash generation. We significantly increased our share repurchases during fiscal 2015 and that was a consequence of our strong free cash flow. Overall, in 2015, we returned $950,000,000 to share owners and that was a 19% increase compared to fiscal 2014. And I think we've consistently demonstrated our commitment to share owners returning over $3,500,000,000 of cash over the past 5 years.
For fiscal 2016, we expect to spend approximately $500,000,000 on share repurchase. And with that, I will turn it back over to Keith.
Okay. As we talked about on the earnings call and Ted just reminded us, we are currently operating in a very challenging environment, but we've seen this before and have proven that we can navigate successfully through slow periods and come out stronger on the other end. We're pretty clear about what we need to focus on in the near term. The first thing is growth and there are still opportunities there. We have a robust set of new products, services and capabilities, including our next generation high performance architecture.
From an industry perspective, we expect auto and consumer to be the strongest this year and productivity projects to continue in heavy industries. Cost management is always important and even more so in a low growth environment. While we've taken restructuring actions and will drive cost productivity, we do need to sustain critical R and D and customer facing investments. They are the foundation of our intellectual capital business model. And Ted mentioned, our effective cash deployment priorities will continue in fiscal 2016.
So at the end of the day, even in a slow market environment, we will balance delivering short term financial performance with investing in the business for the long term. It is important that you understand how we measure ourselves. It will help you understand how we run the business. As most of you know, our annual incentive compensation is based on 4 key metrics: sales and EPS growth, free cash flow and ROIC. We believe these are all critical to driving long term shareowner value.
But there are a few other areas that we feel are very important in the health of the business. Share gain through a cycle is arguably the best measure. We don't have the best data globally, but we do use the best resources available and that data shows consistent share gain in controllers, intelligent motor control, safety, process and services since 2,008. We've challenged ourselves to deliver cost productivity every year. 2015 was an outstanding year for productivity, and we expect another strong year in fiscal 'sixteen.
Every year, we conduct a comprehensive survey of our customers that results in a loyalty score. We've seen steady improvement in the score and continually challenge ourselves to do better. We've talked about the connected enterprise a lot today and it is important that we develop metrics to track our progress here. 2 of the more important ones, our growth in our network infrastructure portfolio, both products and services and logics growth. Both areas outperformed the company in 2016 or 2015, I should say, and we expect that to happen in 2016 as well.
It is important that we hold ourselves accountable for these outcomes. We continue to believe, not surprisingly, that Rockwell is a great investment. We operate in an attractive market and we are solely focused on that market. It is all we do every day. Our pipeline of growth opportunities is robust and will help us sustain our market leadership and grow share.
Our experienced leadership team, many of whom you've met today, is adept at managing in all market conditions. And our strategy as an intellectual capital business built on differentiation enables us to generate high returns and strong cash flows. Our innovation engine is really humming and we are all laser focused on execution. Our track record of returning cash to shareowners, strong balance sheet and culture of ethics and integrity should help all of you sleep at night. This is a great slide to end on.
From the end of 2,008 to the end of 2015, with respect to total shareholder return, we've clearly outperformed the S and P and delivered an annualized return over that period of over 18%, albeit from a low starting point in 'eight. We believe that our above market sales growth, earnings leverage, superior return on invested capital and a disciplined approach to cash deployment have all been important factors in that outperformance. And we are committed to making sure that, that continues. We have never been better positioned and we will have a great future. So with that, I'll turn it back over to Frank, I'm sorry, Frank, to Patrick and we'll have the other gentlemen come up and we'll start the Q
and A. About a foot shorter than Frank. Yes. Okay. With that, a couple of people around here with microphones.
So if you raise your hand and wait till the microphone is there for the people on the webcast. And also, please limit your question to one question and a follow-up. Thank you.
Okay, who's got the microphone?
Thank you. Looks like I have it here. Just on the two questions. On the long term performance, I did note in the recent 10 ks that you moved from kind of the 6% to 8% top line growth and double digit EPS to just kind of an outgrowth type of format and structure. Sounds like a pragmatic thing to do perhaps with currency and everything, but is there something embedded in that in your view of how the market grows the next 5 or 10 years that's different than what you thought before?
No, Jeff. We still have the same long term goals. But we felt with last year and this year for us to comment at that same rate was inappropriate, quite frankly. So we believe in this period that the most important thing is that we're outgrowing the market, But our long term goals have not changed. And that was simply to reflect the current environment.
And we've always talked about that being a growth rate over a cycle and it's slowing now. So we didn't want to quite candidly mislead at this point. But our long term, no change.
Right. And then really just more of maybe a housekeeping question. But given the way all the verticals have moved around, could you size us now, maybe in those 5 big sleeves you put on Slide 19, I think it was, kind of what the end market percentages are as we ended 2015?
Sure. Well, from a single market, we lump consumer packaged goods in 1, That would be consumer packaged Goods, Life Sciences and Home and Personal Care, that's between 30% 35% of our sales. The heavy industries would be a little over 50%, the largest being oil and gas around 12%. After that would be mining, then which would be mid single digits. And then we have pulp and paper, metals and water and wastewater, really all of those are basically under 5%.
And then transportation, which would be automotive and tire, that would be roughly 12% to 15%. And I think that pretty well covers the major categories that we had up
there. Hey, Keith. So obviously, a lot of talk today about the Connected Enterprise and Rockwell is the prototype Connected Enterprise. Maybe just talk about how it's changed the way that you operate the company in terms of maybe try and quantify the performance improvement you've had as you've gone through this process in terms of margin, but more press more importantly in terms of flexibility of cost base and the way you're able to you rebalance your manufacturing, especially now that we're starting to negative on volumes, how do you expect your flexible flexibility of cost to compare to the move prior down to levels?
I'll make a couple of comments and then Ted may want to add as well. And when we're done, you can also grab Marty Thomas and he'll fill you in. We've this has been a great journey for us as well. We're not just talking about this for our customers. This is something that we take very seriously inside our own business.
It started with when we put in the new business system. But what we've been talking about is basically driving 4% to 5 percent cost productivity year after year throughout the organization. And the standardization that we've done in our business processes, the ability now to basically we have re footprinted our manufacturing structure over the last 5 to 7 years. It's much more global. So we're able to compete in each region appropriately, particularly with our customer facing resources, whether it be our services people or our engineering domain expertise, as Blake mentioned, we certainly have taken advantage of regional and global design centers, engineering centers for some of our solutions portfolio capabilities.
And we've dramatically expanded our presence in Asia to be able to, what we would call, have the Asian mindset and mentality from a core design standpoint. So this is the 2 things we've been able to do is, 1, lower our engineering cost per hour to be more competitive in our solutions business. Ted talked about the fact that we have a profitable solutions, a very profitable solutions business today. Part of that has been by reducing our cost structure. As we globalize that business, we are able now to have worldwide visibility to our supply chain and we're able to make real time changes based upon either events, whether they be events in our production areas or quite frankly, environmental impact to our supply chain based upon other disasters that are not under our control.
So it has really, really changed our approach to how we drive the business, where, as I said, we have process standardization. And we're talking about now the monthly operations meetings are about sharing best practices and driving the implementation and execution. And the next phase of this is, we're going to put analytics on our manufacturing lines, on our equipment and be able to demonstrate to our customers exactly what we're talking to them about. And in fact, what you heard Jeff talk about this morning as to where they're taking their business. So we have a much more integrated supply chain.
We have 3 types of businesses 3 types of manufacturing, build to order. We have I'm sorry, build to stock. We have configure to order and these build to order and all of those have different dynamics in the manufacturing process and we're able to optimize each one of those. We've taken days out of our inventory. We've reduced our inventory by over PPM for quality.
We've improved our customer delivery by about 16 points over that period. So really, it's driven a lot of the performance. And Ted mentioned that we were able to today, we roughly have the same or in 2016, we'll have the same sales in 2011, but we have dramatically improved our margins and our cash flow during that period. And I would say the Connected Enterprise had a very large portion of that from an operating standpoint and the single business entity that Blake talked about with respect to how we approach the customer, how we use the same security, the same dimensions of usability, the same network tools. All of this is in our design of our products and that has dramatically saved us money in that, which enables us to have a much richer, stronger innovation engine.
And quite frankly, on the floor, you're seeing the first outputs of some of that. We have a lot more to go, but you're starting to see how we're able to drive our internal productivity, just like we talk about with our customers. So we've done it across all areas, including the functions, whether it be legal, whether it be defense organization, Susan's HR organization, all of our functions have to drive productivity, and we do that based upon our internal processes and business systems. Thanks for the short answer.
Just a quick follow on. You guided for mid single digit declines in the current quarter. I don't think your guidance bakes in December shutdowns unusual shutdowns in December. I don't think you're baking in channel corrections through this distribution. Any sign of any of those two things happening that could make maybe make this quarter a bit worse?
Yes. So Nigel, kind of based on one
of your comments, we recently surveyed our U. S. Field sales organization just to see if they were hearing anything about unusual shutdowns at the end of this year. And basically, the answer was no. I mean, there always there's always some company that's going through something that caused a shutdown 10 year, but nothing unusual in that regard.
Hey, Keith and Ted, it's Steve. Maybe you can't see out here. So listen, last year and the year before, you talked about around $65,000,000,000 of the global installed base of legacy automation systems reaching the end of their useful life. You talked about $13,000,000,000 that number actually more than 25 years old. So now I guess it's 26, 27.
And I think the assertion was that over the next few years, you'd see many of these companies that would no longer be able to keep pushing off their upgrade investments. And we'd see at least some parts of a wave of global upgrade cycles in Cognizant with better payback, better efficiency, all the things that you that we saw today on the floor. Obviously, there's macro issues here and investors and I are having this argument about cyclical sorry, secular versus cyclical impact. But what are you seeing when you think about those metrics and are customers able to defer this again? Are you just seeing continued deferral, where you thought maybe that, that wasn't as possible before and now you're saying, well, maybe they have the ability to defer this even further than we thought?
Well, I think deferral is always an option, quite frankly. But I don't think we've talked this past year about some improvement in the pulp and paper industry, particularly in North America. That is an example of ultimately you get to a point where you need to modernize. And so we're seeing modernization investments in that industry, simply because they truly are at the extended end of the equipment. And so that we think will continue.
We talk about now the last year or so, we've been talking about mining, where they're going to switch to the OpEx. Well, a big portion of that OpEx is the upgrade of the existing equipment. So we'll see that happen in the mining industry. I think it's too early to say that's what we're going to see in the oil and gas industry, although it won't be for modernization as much as they have to drive efficiency now and they have to drive productivity. And we're starting to see where the with the price of oil now being expected to stay low for a longer extended period of time, they have to compete on $45 $50 a barrel oil.
That's very different than $100 $115 So we think as the year progresses and as we get into next year, we'll see the productivity drive in oil, in the oil and gas industry as well. So I think each one of the heavy industries are on somewhat of a different cycle, depending upon where they are in their, in the natural evolution of their business cycle. The one I didn't mention was metals. There's a tremendous overcapacity in metals worldwide. But we see isolated geographies that are also isolated locations that are also looking at the need to modernize to stay competitive even in that industry.
There's not a lot, but it does offer opportunities to upgrade that installed base. So it's mixed. And but we do see the need for ongoing modernization and upgrades.
I think also, specific to the U. S. Market, until recently, we had 3 very strong years in the U. S. And if you set aside oil and gas and maybe set aside automotive, I believe what was driving that strength in the U.
S. Was largely about upgrading the installed base. I mean, in those other industries, clearly, there wasn't a lot of new capacity going in. And so I think we were seeing that. Hopefully, what we're seeing right now will be a short term pause and we'll get back on that track in the U.
S. But I believe that is what drove the last 3 years.
Great. Thanks. And then as a follow-up, a little more detailed debate that we got sparked by what we saw on the floor in the show. And that's offering commercial off the shelf versus ASIC controllers to your customers to meet their needs and the potential impact on pricing in the pricing business model. So talking about this with some investors, what do you guys see as kind of any risk to that over time as that evolution takes place and customers maybe take advantage of that?
Well, let me start and then Frank, the
expert here can add
to it. We don't see quite frankly. We have historically had ASIC designs, but we are in the process of putting together part of the LOGICS platform, what we would call a COTS based controller, because there is a role as we move more into the information management space, where it has a very appropriate role, including some of the analytics and model predictive control capabilities where they're much more information intensive than they are control intensive. So we will in certain applications have mixed systems and mixed solutions. But once again, it's about multi disciplined control using the same software development and networks.
And it's got to be robust, because it still has to live in the factory floor. So we think we'll continue to drive differentiation, but it will be a part of a broader portfolio. So let me stop there and see if see what Frank wants to add. So maybe Keith, in addition to that, I'll provide some context and a few other forward looking comments. The context I'd offer is we use COTS technology, commercial off
the shelf processors in our panels today, in our communication cards today, in our drive products today and in a number of other areas. And so it's we're not unfamiliar with that. The second comment I'd have is we'll continue to offer custom silicon in our processing family as we have in the past, and that affords us opportunities for capabilities, for performance, for security and other features, and so that will continue. The third comment I'll make is we're doing something unique with that silicon in that we're using that common logic's architecture that we've been so successful with in bringing that forward onto those platforms. And so we made some investments a number of years ago, seeing that future coming towards us and the ability to innovate.
And so that was by plan and desire, and it's not a short term decision. And then finally, I would offer that we're learning how to apply innovation in that platform. But certainly, at the top end of our OEM performance business, that will also offer other opportunities for them for integration of robotic high speed condition monitoring, advanced quality and other capabilities.
Keith, over here. Question on acquisition. So sensors, is that there's more sensors going into the controllers and the systems. Is there any interest in getting vertically integrated there or more vertically integrated either organically or organically? And then second, could you just remind us priority for M and A as you look at cash deployment because M and A has been somewhat quiet over the last couple of years?
Okay. A couple things with respect to sensors. We have a very good sensor business today. We've done a lot of that, quite frankly, through acquisitions. We see acquisitions as a way to continue to expand our sensor portfolio.
And it's an area that we continue to look at, particularly, as we mentioned earlier, intelligent assets are at the core of the connected enterprise and sensor inputs will become more critical as time goes on. So that would be one of the areas and we would look to expand into different geographies as part of that as well. As far as acquisitions in general, Ted's chart, I think, adequate not adequately, appropriately identified. We see that as the second use of our cash. We are, as we said, a very much an organic growth company, which is expense dollars, P and L dollars.
Cash deployment is a different situation where we can use that to make acquisitions. We've identified acquisitions as a way to expand our product available market. We have built a safety business pretty much strictly through acquisitions. The reason we've been quiet, although we've made a couple, is because we haven't found ones. We don't believe we need to make acquisitions to execute the strategy.
As Ted mentioned, we talk about acquisitions as a way to accelerate and catalyze organic growth. And so we want to make sure that they fit and that we're being financially prudent in our approach to it. So but we see acquisitions as a great opportunity to augment our organic growth and we And hopefully, if we're going to see a slowdown, there may be better opportunities than existed the last couple of years.
Steve? A lot of discussion around oil and gas and other industries, but I guess, maybe the elephant in the room and perhaps the linchpin of the entire industrial economy is automotive. You guys have a great visibility in all the projects that are going on. I think a couple of years ago, you referred to it as kind of a mini bubble of CapEx. It's gone up a lot since the downturn.
2016 looks like it's pretty stable, but how does kind of the project pipeline look as we kind of head into 2017? And when do you think that cycle is really kind of at the 9th inning? And then maybe a question for Ted. I know you guys don't give this information out update on how big the revenue base is as a percentage of your portfolio? And then break that down between the MES, a percentage of your portfolio?
And then break that down between the MES, the HMI and the embedded software, just so we get a good idea since you guys are talking about this a lot?
Well, let me do the automotive first. We see this next year that automotive will be one of the growth markets for us. We probably are more bullish longer term on it at this point because of our ability to address powertrain. And as we continue to evolve the FANUC relationship, if that becomes everything we expect it to be, we think that we can see a deeper pipeline, a fuller pipeline of projects into the 2017 2018 timeframe because the only way these standards are going to be met, the new fuel standards are going to be met is by more engines, different engines, I should say, and different transmissions. And that's the heart and soul of powertrain.
And we've seen the front log there increase. If we can improve on a win rate there, we expect to see automotive as a good opportunity into the future. So that's the way we're planning it. We're working very aggressively in each region to be able to win these projects and we're working very closely with the OEMs as well.
And it's part of the benefits of closely with the OEMs as well and it's part of the benefits of the relationship with Fanucar. Do you think if the automotive CapEx is down 10% in any given year that you can kind of blow through that and still hold your revenues flat in that sector?
Well, blow through it is a strong statement. Everybody probably has a different idea of what that means. But I think if we are able to execute in the power train, I think a small decline will not hurt us, because that we view that as an expansion of our available market and we should be able to do well. I think it's not so much the CapEx as it will be well, I think the CapEx will be driven by how the auto sales are going and therefore their ability to reinvest in new models. And that's been our story forever.
It's about the new platforms and at what rate are those going to be generated.
So on software, I don't think we've ever provided an exact number for software, but I would say it is if you talk about the 3 basic software only businesses we have, it would include our programming software, our visualization software and then the MES that you referred to. All of those together are less than 10% of our total revenue. That piece of our business over time has been growing faster than the company average, and particularly the MES piece of that. Maybe the other important thing I would say is, I think measuring our success in software strictly on the basis of how fast that part of our business grows is probably not the right way to think about it. I mean, we have become a software business And the vast majority of our product development, particularly in the architecture and software space, is basically software development.
But it's software that's embedded in our products. And so I think just looking at that pure software revenue is
not necessarily the best way to measure the contribution of software to our business. I just made 2 additional comments to that. That embedded software is also throughout our entire intelligent motor control portfolio. So it's a large part. And then the second thing I would mention is, we do expect to see growth in our visualization platform.
I hope you were able to see some of the new platforms out there, the VUE. We believe that as that our attachment rate will grow in that because of the tight integration between VUE and the Logix family. So that is an area that we have high expectations for as part of our software business.
Okay. With that, we're a little bit after 3, so we're going to end it here. Thank you again very much for those of you who came here to Chicago and thank you for those who joined via the webcast. So we'll close out the webcast right now. And safe travels home here.