The quantity of Digital Plant acquisitions has risen in 2019, particularly for small promising start-ups who continuously poke the established software bears.
The development of technology in areas such as machine learning, asset performance, condition monitoring and predictive maintenance to name a few has sparked a frenzy among the sector.
Large traditional process manufacturing businesses (eg Honeywell, GE, Siemens, ABB) are becoming increasingly active in adding to their software portfolio, but what are the benefits of this and how does it affect the wider Digital Plant landscape?
Notable M&As within the process industry
AspenTech’s acquisition of Mtell saw them greatly add to their prescriptive maintenance software range back in 2016.
Mnubo & Sabisu were also acquired by AspenTech in 2019. These acquisitions enable AspenTech to build on their AI offering.
In September, Siemens moved to acquire PSE as part of their Digital Industries shake-up. The addition has added to Siemens’ end-to-end lifecycle of solutions for the process industries.
Twnkls were acquired by PTC in June as part of a move which strengthens PTC’s AR and IIoT offering.
Another industrial AI acquisition was made when SKF acquired Presenso, a move which SKF hopes will change the way the industry looks at reliability.
Short term gains
- Software accessibility enhanced for the end-user market
- The acquired organisation instantly gains access to new customers whilst the acquiring organisation can offer a more complete lifecycle of software to existing customers
- Saves time and money on research & development
- The acquiring organisation can become an overnight market leader within a field, such as condition monitoring, increasing their market share significantly
- An acquisition also includes welcoming new talent into the business, offering a new dynamic to a workforce
Long term loss
Acquisitions encourage both macro and micro environmental change. If implemented poorly, acquisitions can offer many challenges for the long-term growth of Digital Plant including:
- Cultural clashes and conflicting vision over future business goals
- Some employees may not be part of the acquiring company’s vision, and therefore be made redundant. It’s difficult to attract and retain talent within the industrial software sector, so discouraging this process is unaligned to the wider sector
- Acquiring an organisation too early may off course the potential they had shown earlier, and prove to be a costly error
- Market saturation will restrict new revenue streams and hamper future investment into software development
An emerging technology market is a hub of innovation for any given sector and offers limitless opportunity for existing organisations to better their offering. For example, the ever increasing importance of Industrial cyber security has forced the likes of Honeywell & GE Digital to acquire early innovators of the software.
Many businesses are taking a proactive approach to acquisitions as oppose to reactive and spreading their risks in order to better compete in the Digital Plant space. They have such a depth in variety of software that macro environmental factors, such as oil prices, do not have a disastrous effect on their performance.
From a recruitment perspective, the talent operating within an acquired business are nervous. They’re often not convinced that things will remain the same, despite operating under the same brand, especially if the acquisition was spontaneous and without warning.
To address this, smaller software providers are now forming strategic partnerships with larger businesses to evaluate the chemistry between the two organisations before committing to an acquisition.
Only time will tell whether acquisitions are negatively affecting software development. What we are seeing though is whilst the SME market is attracting leading talent, acquisition periods are causing a great deal of unrest and people are nervous of becoming a number in a larger organisation.
Has your organisation been acquired? How has it affected your employment status? Do you feel acquisitions are limiting software growth within the Digital Plant sector?