The T&M industry is seeing an interestingly challenging time with revenues down by around 15%. Could test equipment have become so productive that people spend less on test? What’s this interesting relationship between NI and competitors like Tektronix? And, which is this new disruptive technology NI has under wraps?
Rahul Chopra had a chat with Eric Starkloff, Senior Vice President of Marketing at National Instruments to get some answers.
Q. You had blogged about an interesting topic that adversity and recession, creates an opportunity for good R&D projects and good organisations to rise. How is your take on that after 4 or 5 years?
A. I think that’s been certainly proven true. When we see challenging times, we generally operate a little different from the other companies in our industry. We take a long term approach and we know in particular that the innovation we create, the R&D we create takes a long time, and so we preserve that R&D investment even in more difficult times. I wrote that at a time when the world economy was obviously at a low point. Most of our competitors and peers in the industry had laid off large amount of their R&D staff and we didn’t do that, we actually hired some people, because some very smart people were looking for work. That’s an opportunity we take and in that time frame, for example, we started working on some major products like the vector signal transceiver, and a lot of work on FPGA. The advancements of LabVIEW FPGA are driving a huge amount of our platform growth rate now.
Q. For NI, is the current era also posing any challenges or is this a good time going ahead, economically?
A. Now, this is an interesting time. The economy is a bit uncertain and I think test and measurement in particular is fairly weak. If I look at my peers in the industry globally, the test and measurements firms we track, revenue is down about 15%. It’s not a good, healthy market, and it’s weaker than the overall economy. I talked to the leaders of other test and measurement companies trying to figure this out. We’ve done much better than those companies, but we’ve seen a generally mediocre economy.
Q. What could have been the reason for this down turn, is it just reflecting the economy or could there be something else?
A. I think there’s a couple of reasons. One, the challenges of the PC industry have had a bit of a ripple effect. The PC industry is down, with the most negative growth it ever had. Even though there is a big rise in these mobile devices, it seems that the test industry doesn’t get quite as much revenue on that. It doesn’t affect NI as much, but for things like oscilloscopes the most common application is debugging processors and things like that.
I think the other reason, frankly is, NI is having an effect on the market. We know that when we sell our solutions in the test and measurement or embedded systems, we lower the overall cost for the customers. That’s our goal and this has had an effect of lowering the amount of test equipment purchase. When customers get 30x improvement on test time, they spend a lot less on tests. So it’s new opportunity, new business for us, but the overall market goes down when things like that happen.
Q. I also see that there is an interesting relationship with some of your competitors like Tektronix. How has that driven the overall scheme of things while you’re creating a challenge for them and yet you’re also working with them?
A. This is sort of the model that we have, it is different from that of any other test and measurement companies or embedded companies for that matter. The platform-based approach implies that this platform should be open in its connectivity to so many devices, so we don’t really have any sort of pure competitors. We have companies that are partners, peers and competitors all at the same time. Like in the Tektronix’ case, we provide connectivity to all of Tektronix instruments through our software; that’s a key partnership. We did co-development with them in a hardware model; that was a key partnership. At the same time there are elements where we compete. We provide modular digitizer/oscilloscope, and we compete. Tektronix does much of their testing and production within our equipment. So they’re our customers, and as is Agilent, as is Rohde & Schwarz. As a core software tool, we have to connect to every software device in the world. Our customers require that, and we invest a lot to make sure that we have good connectivity with all the other companies’ instruments.