By Kapil Venkatachalam, Technology Crossover Ventures
On bright sunny days it may seem as if the smart factory of the future is already on the horizon. We’ve heard much about the autonomous facilities of Industry 4.0, and we are eagerly waiting for the Industrial Internet of Things (IIoT) to transform yesteryear’s workshops into the predictive, adaptive and highly efficient manufacturing nerve centers of tomorrow.
But while manufacturing software vendors want their customers to focus on the technological bells and whistles of the future, many manufacturers I have spoken with are still grappling with the clunky and highly customized systems they’ve relied on for the past 20 years. According to LNS Research, which surveyed 400+ manufacturing executives, adoption of IIoT is still in its early adopter phase.
Source: LNS Research
Before they can propel their factories into the 21st century with IIoT, manufacturers must first ask whether their existing manufacturing software foundation is strong to support their needs over the next 25-plus years. I think not, and I believe we are on the verge of a silent revolution in manufacturing software that will rival the impact of the assembly line in the automotive industry. Manufacturers that start by exploring and adopting a new breed of modular, easy-to-use and flexible software for their core manufacturing software foundation will lead the way forward; those that don’t will be left behind.
Most manufacturers around the world, even the most advanced, rely on a collection of core mission-critical pieces of manufacturing software, including PLM (product lifecycle management), MES (manufacturing execution system) for shop floor control, and ERP (enterprise resource management) for resource management. Most of these software solutions were designed well over a decade ago, to do one thing and do it well. But none of them were designed to work with each other, so they operate in silos linked together via custom integration code.
Larger vendors have tried to minimize the pain by buying competitors to fill functionality gaps and make these disparate products more compatible. But this is less than ideal. At best, these customized solutions are like slapping very expensive BAND-AIDs on a loosely held skeleton.
And customers have clearly noticed. Having evaluated many manufacturing software companies, and as a current investor in ERP/MES provider IQMS, I’ve had the opportunity to speak with scores of manufacturers that are struggling with this issue. More often than not they complain that their legacy systems were simply not designed for today’s business environment in which companies want real-time visibility across their manufacturing operations and mobility. Nor can these legacy systems be easily upgraded to keep pace with emerging quality control and compliance requirements across a broad swath of sectors, including automotive, medical devices, consumer products, chemicals, and food and beverage. Maintaining and upgrading these highly customized systems typically requires further customization, which is both costly and time-consuming. In the end, manufacturers wind up getting caught in an endless and expensive cycle in which there is no clear path forward and no easy migration choices.
There is no doubt that there are some scenarios where IIoT has clear quantifiable benefits today – efficiency improvements in isolated production environments, proactive maintenance, etc. However, we still have a huge disconnect between the vision of the smart factory of the future and the reality that customers are currently living on the shop floor. How can you capitalize on the full potential of IIoT when your core manufacturing systems (ERP, PLM, MES) are not seamlessly talking to each other? It is increasingly obvious that the path forward will require manufacturers to take a step back to build the proper foundations upon which smart factories can operate.
Today, companies are emerging in the PLM and MES space that offer easy-to-use software with modular design, innovative pricing models and flexible deployment options. Innovative pricing models through open source/freemium and subscription offerings help mitigate the earlier barriers that existed for adoption and replacement of incumbents. The modular software architectures separate the core business logic of the product from the user-defined configuration layer, allowing users to customize their UI /UX while letting the software be easily upgradable and connectable to other software offerings.
Incumbent manufacturing software vendors have taken notice and are actively experimenting and rolling out subscription pricing, but their product offerings appear to remain largely unchanged. These are real issues, and manufacturers should be open to evaluating the next generation of mission-critical manufacturing software. This will enable manufacturers to mitigate their risks as they slowly migrate their systems to a much more stable foundation designed to break silos and provide end-to-end visibility.
This will no doubt be a challenging process for manufacturers, but the alternative is worse. Those that don’t start evaluating these options may not be able to take full advantage of IIoT – not when it takes millions of dollars and months of delays to roll out even minor upgrades to their creaky old systems. The world is moving much too quickly now, and it won’t wait for laggards to catch up.
About the Author
Kapil Venkatachalam is an investor at Technology Crossover Ventures and his areas of focus include vertical market software and services, business analytics and security. His current investments include IQMS, FinancialForce.com, Alarm.com , Rapid7 , OSIsoft and Genesys. His prior investments included TOA Technologies (acquired by Oracle), Splunk , ExactTarget , and Seismic Microtechnology (acquired by IHS). Kapil is currently on the Board of IQMS.