What's good for GM...

June 7, 2007
I'm happy to report business is booming at our system-integrator firm.

John Odenthal President
Motion By Odenthal Inc. Chicago, Ill.

Edited by Lawrence Kren

Our work contributes to American productivity, so you'd think — to paraphrase former GM President Charles Wilson — that what's good for system integrators is good for America.

Not always. In my view, what's good for system integrators may signal what's not good for America. It depends on the job.

Let me first outline the kind of system-integration job that I believe truly benefits America. Currently, we are developing a system that will use advanced inkjet technology to print photographic-quality labels directly onto containers and bottles at a rate of 100/min. The machine will eliminate printed labels and let manufacturers match language and graphics to global markets on a container-by-container basis. Development of such a system is highly specialized and beyond what many engineering departments would undertake.

In contrast, jobs that cause us concern often involve contracts that, a decade ago, a client's in-house engineering staff would have handled. An uptick in system outsourcing suggests that clients have chosen to shed manufacturing-development infrastructure and instead focus on finances. Too often, hostile takeovers aimed at "unlocking the wealth" drive these corporate transitions. Usually, the company founder's heirs have elected to cash in on their inheritance, instead of continuing to grow the enterprise.

Unlocking company wealth invariably translates into selling off infrastructure to cut fixed costs. Early buyouts for engineering teams provide a fast path to cost cutting. These are the very engineers whose proprietary equipment designs have defined the firm's long-term market leadership.

If this sounds like consuming one's seed corn, it is. Companies run by lawyers and accountants tend to believe that boosting productivity is a matter of buying the right equipment on the open market. Why build when you can buy?

The reality is that off-the-shelf automation generally offers plain-vanilla performance. And plain-vanilla performance does not win market share because competitors can purchase identical equipment.

Shedding a seasoned engineering team may well unlock cash for stockholders and corporate raiders. Unfortunately, the resulting shell of a company will be hard pressed to stay competitive, never mind dominate its market. That is where we system integrators come in. The irony is that the engineers who accepted early buyouts often work as system integrators on assignments for their previous competitors. Competing globally demands innovative solutions. Tired, failed, "get-rich-quick" fiscal shenanigans deny resources for such initiatives.

Motion by Odenthal is a developer of industrial automation systems.

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