Rockwell Automation and Emerson Spend US$8 Billion on a Pair of Acquisitions to Improve Industry 4.0 Software Posture

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By James Prestwood | 3Q 2022 | IN-6641

End-to-end software ecosystems represent the future of the Manufacturing Execution System (MES) market. Manufacturers are looking for solutions that can cover a much larger scope of their operations needs, rather than trying to piece together different discrete products from multiple vendors. Large vendors are responding to this change by making strategic acquisitions to plug innovation gaps into their offerings. This trend may start the clock on how long pure-play vendors are able to operate effectively and grow in the MES market.

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AspenTech and Plex Systems Snapped Up

NEWS


In late 2021, Rockwell Automation acquired Plex Systems (US$2.22 billion) and Emerson acquired AspenTech (US$6 billion). Plex Systems, founded in 1995 with revenue of US$150 million in 2020, offers a range of cloud-native Software-as-a-Service (SaaS) solutions, which includes functionalities for Manufacturing Execution System (MES), Enterprise Resource Planning (ERP), and Supply Chain Planning (SCP) deployment. AspenTech, founded in 1981 with revenue of US$600 million in 2020, provides asset optimization software across process-focused industries, notably oil & gas, chemicals, and Consumer Packaged Goods (CPG). Its overarching product portfolio, aspenONE, contains a number of products with capabilities for process simulation, statistical real-time analysis, and, critically, an MES. These two acquisitions serve to improve the digital transformation posture of Rockwell Automation and Emerson, while at the same time bolstering their respective MES offerings via expanded functionality and market share. They represent a continued move toward comprehensive solutions made up of modular components becoming the desired standard, as manufacturers look to upgrade not just individual factories, but their entire enterprises, supporting them with end-to-end digital threads. Vendors offering MESs that can be sold within this framework are ideal, and this is the primary struggle for pure-play MES providers only offering their own MES solution. Their offerings can be far less effective at building the digital threads that large manufacturers want.

Acquisitions for MES Innovation

IMPACT


Rockwell Automation and Emerson seek to achieve similar goals with their new acquisitions, to bring their MES offerings fully into the Industry 4.0 space. Large MES vendors, such as these two, have extensive legacy enterprise-level client bases that they are seeking to maintain. They are working overtime to bring smart factory features like delivery in the cloud and low-code functionality. Within the MES market, smaller players have been far more successful at developing these cloud-native, flexible, and modular solutions. The acquisition of Plex Systems and AspenTech enables a faster evolution of Rockwell’s and Emerson’s portfolios. Through its purchase of Plex, Rockwell looks to accelerate its Connected Enterprise strategy, adopting cloud solutions into its portfolio. Similarly, Emerson is looking to leverage AspenTech’s capabilities and expertise in designing software for process industries to further drive its software investment strategy. The exchange goes both ways, with Plex Systems and AspenTech providing their technical know-how in return for gaining access to their new parent companies’ large and established client bases.

Evolving from an MES Product to a Portfolio of Solutions

RECOMMENDATIONS


The MES marketplace is in an evolutionary stage, with many manufacturers seeing their MES as a strong foundation through which to drive their digital transformation projects. Large manufacturers, in particular, are looking for solutions, rather than products, that can provide them with end-to-end digital threads, connecting what were once discrete products into a cohesive whole. Pure-play MES providers are unlikely to be able to perform effectively given the proclivity for this cohort to offer MES as a discrete product, rather than as part of a greater whole/comprehensive solution. While AspenTech and Plex Systems cannot be considered as pure-play providers in the truest form, they represent core elements of these types of companies, being purely software focused, not having an ecosystem of products, and with smaller market scopes.

Pure-play providers may only have two routes available to them, as large vendors expand their market share and their innovative capabilities through acquisition. One option can be found in providing a niche patented feature that presents a strong asset that can be integrated into, or support, a larger vendor’s holistic ecosystem. For example, Mendix’ low/no-code offering was acquired in 2018 to extensively support the User Interface (UI) and configurability of Siemens’ new Xcelerator portfolio. Alternatively, is to develop strong capabilities in one market and design the software with that vertical in mind, with Apprentice.io representing an excellent example of this within the life sciences market. This would have the potential to outperform the software provided by larger vendors, which tend to fit their software to a vertical, rather than the vertical informing the software.

Acquisitions like those highlighted are only likely to increase in frequency within the enterprise software market, as large suppliers aim to meet changing client needs and plug innovation gaps into their own offerings.

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