Acquisitions in Digital Manufacturing - what this means for the industry?
I've noticed an interesting shift in start-up strategy across the Digital Manufacturing industry, and nowhere is that more obvious than looking at the recent acquisitions and mergers.
Here's some of the major deals from the last quarter:
• Autodesk acquired MaintainX (for around $3.6 billion!)
• SAP acquired both Dremio and Prior Labs
• Mistral AI acquired Emmi AI
• AVEVA acquired TwinThread
This is a selection of the biggest acquisitions that have happened recently, and they all follow the same pattern – the aim is to create a more complete digital manufacturing software package. Gone are the days of having platforms in different niche areas (such as MES, APS, CMMS); now it's all about bringing everything together under one convenient, enterprise-sized roof.
Fewer platforms working alongside each other, more platforms that do everything.
What does this mean for the industry as a whole?
This is a shift that's been taking place for a while, but has really come to life over the past few months.
The biggest impact this has is on start-ups entering into the space. We've noticed a real change in how these companies set out their goals - no longer are SaaS start-ups setting up to be a complementary addition to larger enterprise software packages; instead, their entire position is to eventually be bought out by one of the major names and become a fully-fledged addition to their software package.
The blueprint is fairly simple: create a software that is complementary to one of the major providers, set up a company to bring this to market and prove its value, then get bought by one of the major providers for a large sum.
This isn't a pie-in-the-sky dream for start-ups to achieve, it is a real strategy that many have successfully completed. The large-scale enterprise companies are in an extremely acquisitive mood and, as an example, Ideagen has completed around 10 acquisitions across Europe in the last year alone. It's not unreasonable to say that hundreds of start-ups are being acquired across the industry on an annual basis.
This, naturally, is having a significant impact on recruitment for these start-ups. So what are the biggest shifts, and how can companies capitalise on them (or deal with them)?
A dream for C-suite talent
When start-ups are looking to bring top C-suite talent into their teams, they usually sell one of two major factors. The first is a genuinely game-changing product or solution that'll have a major impact on the industry, and the second is offering equity alongside plans to sell the company in a few years (making them a boatload of money!).
With the way the industry has changed in recent years, more and more start-ups are positioning their proposition on that second point. On paper this makes it seem easier as a start-up to attract top-level C-suite candidates, but if this is the proposition that every start-up is pitching to market, before you know it everyone is back at square one and the playing field is level again.
In this situation, the software solution becomes the major selling point again. Pushing the positive impact it'll have on the industry and the enterprise software provider that you eventually aim to be a part of can be the difference when candidates are faced with a plethora of options.
Issues for less senior roles?
What can be a major selling point for C-suite candidates could potentially have an adverse effect on the ability to attract candidates in other positions. Picture the scenario: you're recruiting for a management position in your new start-up. You've got a great candidate, meeting all the requirements and who has big ambitions.
They then ask the question, 'what are your growth plans for the next 2-3 years?' If you respond saying that the plan is to sell in 2 years so the company won't exist anymore, there's every chance this could put some candidates off accepting the offer.
Even in the modern age where shorter tenures are more normalised, it's a tough sell to the majority of candidates to get them to join a company that intends not to exist in a few years' time. That is, unless you find a tantalising reason for them to join. And there are a few options that could be enough to convince candidates:
Experience – Start-ups are an environment like no other. It's fast-paced and the expectation is that you'll wear a number of different hats; despite what your job title says you will be doing a big mix of whatever is needed at the time. This'll really appeal to some candidates as it gives them an opportunity to learn and take on a lot quickly, strengthening their profile for any future opportunities. Nowadays, for the right employer even just having start-up experience on a CV can make a candidate stand out in the talent pool.
Flexibility – The nature of a start-up is perfect to offer employees flexible working patterns. Work-from-home, flexible working hours, work-from-anywhere schemes, these are all great options in a start-up where the need to be available on a consistent basis is crucial. Not only that, flexibility is one of the most sought after perks for candidates in this labour market. This can be a major draw, even if it's only for a few years.
To summarise, this start-up shift is having an interesting impact on recruitment, making the sell to C-Suite and senior professionals easier than previous but it has made selling to more junior staff members a bit more challenging. The proposition of your company and the progress someone can make in a short space of time has become a crucial selling point.
So those are just a few of my thoughts on the current state of the digital manufacturing software market. Interested in what these shifts can mean for your recruitment strategy? Reach out to me on john.hill@fmctalent.com and lets discuss.