The #MondayMusings Industrial Transformation blog series provides insight and analysis for executives from the previous week’s briefings, events, and publications @LNSResearch.
On July 31, manufacturing ERP vendor Plex Systems announced the acquisition of DATTUS, an Indianapolis-based software company focused on collecting machine data from the factory floor and applying advanced analytics. Terms of the deal were not disclosed.
Doubling Down on the Factory
We’ve written extensively about Plex Systems over the past several years (2018, 2017, 2016). Manufacturers have been adopting the Plex manufacturing Cloud as their ERP solution mainly because of Plex’s strength in factory and quality operations, where the company’s ERP solution is competitive with dedicated manufacturing execution system (MES)/manufacturing operations management (MOM) solutions. The fact that Plex delivers these capabilities via the Cloud has made them one of the first choices for industrial leaders with a clear Cloud strategy, though there are now other competitive offerings in the Cloud (see below). Plex has also been the choice of industrial leaders at companies up to $250MM in annual revenues, but LNS believes there is a strong opportunity for leaders in companies up to $1Bn to leverage Plex.
The acquisition of DATTUS, with its focus on acquiring shop floor data and applying analytics to it, pairs well with Plex’s historical strength in the factory. Although Plex has existing partnerships that provide data connections to production machines, those connections have been transaction focused, e.g., tracking containers of material as an operation is completed. DATTUS provides another level of factory connection: Edge hardware that collects massive amounts of data from sensors in machines and transmits the data to a central repository in the Cloud. Potential uses for this data include predictive maintenance, energy monitoring and optimization, and overall operational efficiency. Note that Plex had previously demonstrated integration capabilities with Kepware, a machine connectivity and data historian solution that was acquired by PTC in 2016; with PTC having evolved to focus on smart connected operations - and thus offering more future co-opetition for Plex. It was an intelligent move by Plex to acquire these functions and make them part of the company’s core capabilities.
The addition of the DATTUS solution also offers existing Plex an opportunity to gain new capabilities (and thus additional revenue) and brings Big Data and Industrial Internet of Things (IIoT) expertise into the company’s talent pool, enabling them to address the requirements of this emerging market.
Manufacturing ERP and IIoT
Several companies in the IIoT space have released new products in the last year with factory data collection capabilities, including PTC/ThingWorx. While none of these approaches the functionality of a full-blown MES or manufacturing ERP solution, they offer a means of gathering factory data without major rip-and-replace projects, and indicate a future direction for these IIoT platforms, with more factory functionality expected in the next few years. At the same time, SAP’s April announcement of the Digital Manufacturing Cloud and other companies’ announcements regarding Cloud ERP give industrial leaders more options if they decide to pursue a Cloud deployment for MES or ERP. In other words, Plex has been facing new competition from increasing manufacturing functionality within IIoT platforms while more traditional MES/ERP competitors are offering Cloud manufacturing solutions.
The DATTUS acquisition provides Plex with a strong first step towards greater IIoT functionality and gives industrial leaders another good reason to consider Plex for their factory and business operations. LNS believes that the DATTUS acquisition can potentially move Plex from “the manufacturing Cloud” to a digital manufacturing platform with a unique feature-set; for example, combining the financial information from Plex with predictive maintenance capabilities based on the DATTUS technology could enable Plex to offer a predictive cost of downtime analysis. Mid-sized manufacturers that are forward-looking and innovative - and that want to capture the value of industrial data and use operations as a differentiator - should keep a close eye on Plex.
Based on research published in LNS Research’s “Analytics That Matter” report, it’s clear that IIoT technology adoption is moving along quickly, with steady increases in the budget over each of the last four years. In fact, both the pilot and budgeting stages are well above that of traditional enterprise applications like ERP. For a company like Plex that is looking to increase its growth rate, the growth exhibited by the IIoT space is desirable.
The factory data collection and manufacturing analytics market has many well-funded startups: MachineMetrics, Seeq, and Sight Machine, to name just a few. It’s likely that many of these will be targets of acquisition in the coming years. At the same time, larger IIoT providers such as PTC/ThingWorx are also targeting this market on their own or via partnerships. By being an early mover among mid-market ERP vendors, Plex was able to strike a deal with the factory data company of their choice and gain first-mover advantage, giving industrial leaders an important reason to look at the company’s platform. At the same time, Plex acquired a very early stage company with technology deployed primarily in pilot projects, and they need to demonstrate that the solution can scale seamlessly and deliver value in production environments.