Schneider Electric Warns Closed Automation Systems Cost Industry Millions

Fadekemi Ajakaiye

Schneider Electric on Tuesday released new global research showing that closed industrial automation systems are eroding the competitiveness of manufacturers, with mid-sized organisations losing an average of 7.5% of their annual revenue as a result of inefficiencies.

The report, titled “Open vs. Closed: The $11.28M Question for Industrial Leaders,” was conducted by global analytics firm Omdia. It found that losses are driven by downtime, compliance retrofits, delayed production and other operational inefficiencies often masked by the perceived stability of legacy systems. Large enterprises lose about $45.18 million on average, while smaller manufacturers face even steeper proportional impacts, with losses reaching up to a quarter of their annual revenue.
According to the research, traditional hardware-defined automation systems were built for static environments and are increasingly unable to keep up with today’s dynamic industrial demands. Their rigidity turns routine updates into costly engineering projects, while proprietary architectures limit data access and slow responsiveness.

Much of the challenge stems from hardware complexity. Many companies operate between two and more than ten distinct automation platforms, each requiring separate maintenance. The study said this fragmentation reinforces vendor dependency, with nearly a third of technical issues requiring specialised support at a time when manufacturers are grappling with workforce shortages and skills gaps. Siloed systems also hinder predictive maintenance and delay issue resolution, contributing to expensive downtime and reduced productivity.

Omdia’s findings point to the need for a transition to open, software-defined automation systems, which the researchers describe as a scalable and future-ready approach that modernises legacy operations, accelerates returns on investment and strengthens industrial resilience.

By separating software from hardware, manufacturers can integrate multi-vendor systems more easily, respond faster to market changes, run small-batch production efficiently and close engineering skill gaps. With real-time insights more accessible, companies can make faster decisions, improve product quality and cut costs.

Schneider Electric said customers already adopting software-defined automation are realising these benefits. Many begin with pilot projects before scaling across full plants or multiple sites, gaining improved data ownership, better quality control and clearer cost transparency, while also preserving previous investments in hardware.

“This research echoes what our customers tell us every day: industrial systems must adapt as fast as their markets,” said Gwenaëlle Avice Huet, Executive Vice President for Industrial Automation at Schneider Electric. “It’s particularly encouraging that smaller enterprises, the backbone of our economy, stand to gain the most in annual savings that can be reinvested in innovation and growth. Open, software-defined automation is a proven solution that empowers industrial players of all sizes to build resilience, drive innovation and thrive amid rapidly shifting consumer demands, regulatory pressure and market volatility.”

The report estimates annual losses at $6.1 million from reduced operational agility and resilience due to inflexible hardware systems that require physical modifications for functionality updates. It says 77.4% of such systems demand physical changes, with modification costs ranging from $25,000 to $50,000 per hour and as high as $250,000 per hour for companies with revenues above $1 billion.

A further $2.28 million is lost annually to optimisation and efficiency gaps linked to maintenance burdens, downtime and talent shortages. Nearly a third of companies surveyed manage more than ten hardware platforms, each with unique management needs. The study also attributes another $1.2 million in annual losses to preventable quality failures and poor data management caused by proprietary systems that create silos and limit integration. Only 28% of companies have real-time access to critical operational data.

An additional $1.7 million is lost to sustainability and compliance costs as companies are forced to retrofit hardware in response to regulatory changes.

Anna Ahrens, principal analyst at Omdia, said industrial leaders are adopting tactical solutions to stay competitive but face mounting pressures as product lifecycles shorten, supply chains fracture and talent shortages worsen. “Agility and flexibility aren’t optional. They are survival,” she said. “Every quarter a business delays addressing the cost of closed automation ecosystems is another $1 million-plus in lost value — money that could be reinvested in growth and innovation.”