Why MES Disruptors Often Aim to Displace Excel Instead of Legacy Solutions

In ABI Research’s recent Hot Tech Innovators: Manufacturing Execution Systems (MES) report (PT-4029), newcomers routinely cited Microsoft Excel or paper as the primary displacement target for their new solutions. At first glance, this finding may be interpreted in two ways: first, as a sign of no-confidence expressed by MES newcomers toward their more established competition. Why claim to fight companies such as Siemens or SAP and lose when new business can be more optimistically defined through upgrading manufacturing floors still using Excel or paper-based solutions. The second interpretation, however, is more nuanced and may hold more truth: the reason these MES newcomers target in-house or Excel or existing MES platforms is not because they fear the competition, but because they are rewriting the definition of it.

Exploring the first assumption, that MES newcomers target Excel and paper because it lets them avoid established MES providers, finds it carries serious plausibility, but not for the reasons legacy solution providers may think. Established companies obviously hold major advantages in brand recognition, implementation track record, sales reach, and reference customers (excluding some Mergers and Acquisitions (M&A) MES creations such as Elisa Industriq or Velotic). Reputations are forged through time and success, and newcomers face a challenge in that their reputations—for better and for worse—largely have yet to be established.

The less considered advantage is Artificial Intelligence (AI). This is not to say that established MES providers have largely superior AI-driven offerings. In fact, ABI Research proved this assumption untrue in the recently published AI in MES Software: Key Use Cases and Market Leaders report (AN-6598). Once again, it is not technology but the (lack of) reputation working against MES newcomers when it comes to AI solutions. Manufacturers are understandably weary concerning AI in their manufacturing workflows; even sophisticated, specialized AI programs have too high a hallucination rate to be deterministic enough for the average factory floor. Manufacturers want every assurance possible when determining which solution, and to what extent, enters its processes. If the choice is to go with an organization with 30+ years of product effectiveness and compliance excellence versus a company that has been in business a total of 6 years, it is easy to see which business decision requires more convincing.

Nevertheless, these advantages should not lead to feelings of complacency among legacy MES players. The fact that so many manufacturers remain on Excel—enough to support the establishment and rise of numerous new MES organizations—then that indicates a severe problem in traditional MES service. Many manufacturers, especially small to mid-sized companies or those in newer industries (such as outer space) find legacy solutions either too broad, too expensive, too slow to practically deploy, or too disconnected from other digital transformation initiatives such as specific Internet of Things (IoT), quality control, or work instruction digitization use cases. Pressure has already existed to move MES away from a monolithic structure and toward more modular deployment for these reasons, but the full shift is even deeper than just architecture deployment design.

Generally speaking, the MES market is, at its foundations, not simply a David versus Goliath story. Rather, its narrative can be better likened to market expansion and change. The MESA-11 and ISA-95 frameworks helped define MES historically, but manufacturer need is shifting, expanding for solutions that connect execution workflows with quality, work instructions, IoT data, enabling faster deployment models, and generally shifting the MES away from a static system of record and more toward a reactive toolset. Many MES newcomers covered in the research, such as Pico MES, Epsilon3, and Manufacturo have broadened or redefined MES platforms accordingly. This can be as simple as the full integration of a Quality Management System (QMS) into the baseline MES platform, or as drastic as using an IoT-first approach to lead MES integration.

These innovations allow MES newcomers to target manufacturers that established MES providers cannot, not without upselling. Suddenly, the manufacturer still using Excel because legacy platforms did not adequately satisfy becomes not just the prime, but the sensible target.

These findings highlight a truth for established MES providers: it is time to seriously rethink what MES platforms can truly offer. Disruptors entering the space are discarding conventions to find new business opportunities that did not exist before and building strong competitive differentiators in the process. ABI Research will be more fully exploring the topic of MES diversification in coming research, as this is a trend exacerbated by newcomers, not begun by them.