This is a collaborative effort with my colleagues: Bob Parker, Pierfrancesco Manenti, and Lorenzo Veronesi.
On May 29th, Dassault Systèmes announced its intent to acquire Apriso, a leading provider of manufacturing software, for approximately $205 million.
According to the announcement, Apriso's manufacturing execution systems (MES) capabilities will be integrated with Dassault Systèmes' digital manufacturing application portfolio, DELMIA.
More specifically, Apriso's FlexNet offering will become part of the DELMIA brand, with the intent to enable global manufacturers to more easily manage and execute enterprise-wide manufacturing operations processes.
The move is an important one for both companies for several reasons. For one, it is part of a longer term strategy for Dassault Systèmes that started with the acquisition of Intercim - a specialty vendor of MES solutions for the aerospace industry (see PLM on the Shop Floor - Dassault Systèmes Acquires Intercim ) - in 2011. The announced acquisition of Apriso further strengthens Dassault Systèmes' ability to support integrated digital design, digital manufacturing and manufacturing operation management across a number of different industries.
This strategy reflects a trend we've seen occurring over the last few years, of partnerships and acquisitions between PLM and MES vendors. In particular, Dassault Systèmes' rival Siemens was an early mover in PLM/MES integration. Siemens purchased the former UGS in 2007 and set out plans to integrate it with its MES suite Siemens SIMATIC IT. Interestingly, in January 2011 Apriso announced that it had joined PTC's Partner Advantage Program, with the objective to more effectively compete and take market share from common PLM/MES competitors. Although this partnership is not expected to be cancelled in the short term, Dassault Systèmes will gain advantages from Apriso knowledge of PTC and will weaken PTC's position in delivering integrated PLM/MES, particularly in industries like consumer goods.
The Apriso acquisition also extends Dassault Systèmes reach deeper into the manufacturing software domain with tools that promise only to grow in importance. As noted in IDC Manufacturing Insights' Operations Technology 2013 Top 10 Predictions report, IDC predicts that manufacturing operations technology spending will outpace the growth of any other business applications in manufacturing in the next five years. More specifically, IDC Manufacturing Insights believes that manufacturers will significantly invest in new Manufacturing Execution Systems (MES) applications in order to harmonize production processes across multiple plants.
In the near term, the Apriso acquisition enables Dassault Systèmes' to broaden its MES portfolio beyond Aerospace and Defense to include consumer goods, packaged goods, high tech, life sciences, transportation & mobility, and industrial equipment. Apriso's clients are among the largest global manufacturing organizations, including L'Oreal, Saint-Gobain, Valeo, Cummins, British American Tobacco, Volvo, GM Powertrain. This gives Dassault Systèmes the opportunity to cross sell Dassault Systèmes' broader portfolio of applications. This is particularly interesting for consumer products industries that are the sectors where Dassault Systèmes is searching for growth opportunities.
Looking ahead, Apriso offers Dassault Systèmes' opportunities to strengthen its manufacturing intelligence capabilities by incorporating DS tools for social collaboration, search, dashboarding etc.. In the long term, there is potential for Apriso to become a process orchestration platform as part of the DS middleware stack.
Apriso also benefits from the acquisition, becoming a part of a much larger organization and gaining access to the global manufacturers that make up the DELMIA customer base, and to the sales/support resources that can help it to scale globally.
One of the risks for Apriso relates to its small size relative to Dassault Systèmes. Apriso needs to make sure they maintain a fair level of "independence" so that they can maintain their recognized brand, define their MES specific go to market strategy and thus ensuring they can continue on their aggressive growth path. The recent acquisition of Intercim didn't go like this. We haven't seen Dassault Systèmes particularly active in leveraging its extended MES capabilities brought by Intercim. About 70 Intercim employees have been integrated in the DELMIA organization and the Intercim software integrated into the DELMIA portfolio, but the Intercim brand is not visible.
Our expectations and hopes for the acquisition of Apriso are for a different strategy. Apriso is a much larger organization than Intercim, with outstanding clients across a variety of industries. It is also recognized as one of the MES vendors that created disruptive innovations in how MES is deployed - notably the shift from single-plant MES to multi-plant MES.
What are the benefits for manufacturers?
First of all, worldwide manufacturers now have more alternatives to select from in their path to PLM/MES integration. This will accelerate investments in more standardized PLM/MES integration from both Dassault Systèmes and Siemens. It will also stimulate MES investments in companies like PTC or Aras which are lagging behind their competitors in this respect. Manufacturers will see a multiplication of initiatives and a general lowering of prices.
Manufacturers will gain multiple business benefits from the effective integration of the product life-cycle process, as managed by PLM solutions, and the control of manufacturing operations, as carried out through MES solutions. Overall, by sharing knowledge about product and production processes across the company functions of engineering/product development and manufacturing, manufacturers can further reduce time to market. Apriso client Cummins summarized this very well: "As a global power leader, Cummins Inc. designs and manufactures a wide range of products for a diverse set of markets and customers," said Robert Borchelt, Director of Manufacturing IT Systems and Industrial Controls in the Cummins Corporate Manufacturing group. "We view the integration of product design and manufacturing operations software as a critical next step in accelerating new product introduction and in configuring our products to meet the needs of specific markets and customers. Product proliferation and globalization are two key challenges in front of us and we believe the ability to manage products and processes globally is critical to our market growth plans."
The completion of the acquisition is subject to normal closing conditions, including regulatory approvals. The transaction is expected to be completed in July 2013.