The product lifecycle management (PLM) market is all in a tizzy. Dassault bought MatrixOne. Siemens bought UGS. Oracle bought Agile Software.
“You could argue that now everybody has a few less choices; the market has consolidated to a few major players,” says Ken Amann, director of research for CIMdata (Ann Arbor, MI; www.cimdata.com). But then he points out that two of the three PLM vendors were already major players in automotive, and it’s not like two of the three acquiring vendors weren’t already providing PLM to some extent.
What’s become clear over the years, says John Squire, vice president of worldwide marketing, Dassault Systèmes’ Enovia brand (Charlotte, NC; www.3ds.com), is that “customers want to deal with fewer vendors, not more. PLM technology is becoming less of a factor. PLM depth of coverage, how rich the solution is, is becoming more of a factor.”
Therein lies the justification for these recent acquisitions, how the acquiring companies are going to differentiate themselves, and what automakers and suppliers should be looking for in the future.
Engineering, manufacturing, and PLM software vendor Dassault Systèmes’ acquired PLM vendor MatrixOne for $408-million just over a year ago. Squire says MatrixOne lets Dassault grant access to detailed product definition to virtually anybody in the extended enterprise, and to standardize business processes that use that information across disparate groups, including non-engineers and other people not necessarily using computer-aided design (CAD), digital mockup, or digital manufacturing tools.
According to Michael Burkett, vice president of product innovation for AMR Research (Boston, MA; www.amrresearch.com), while Dassault was “very good” at PLM for digital design, it would get knocked out of deals requiring enterprise-level PLM. “Often the product bought was MatrixOne.” So it made sense when Dassault acquired MatrixOne, thereby complementing Dassault’s two other PLM suites, Enovia and Smarteam. The acquisition gives Dassault a better capability to support business process flows across an entire enterprise. MatrixOne is also “better positioned to handle electromechanical systems,” continues Burkett. This is important with embedded systems so big in automotive; the industry needs a way to handle configuration management across the mechanical, electrical, and software environments.
In January, 2007, Siemens Automation and Drives (A&D) Group, a hardware company and manufacturing control powerhouse, acquired UGS for $3.515 billion. “I don’t think anybody saw that coming,” comments Dave Shirk, vice president, global marketing, for Siemens Automation and Drives, UGS PLM Software (Plano, TX; www.ugs.com). He’s right. “I was a little surprised,” says Burkett. “This [acquisition] is interesting.” Here’s why. In the past, Siemens used UGS Tecnomatix when providing services, particularly to design and specifically to simulate large assembly lines. Tecnomatix is not the biggest part of UGS. UGS sells a lot of CAD and a lot of PLM (i.e., its Teamcenter products). The complementary fit is in having UGS on the front end of product development and Siemens at the back end in manufacturing. There’s NX for design, Tecnomatix for simulating the manufacturing layout, UGS Teamcenter PLM for managing all the data, and other UGS design and manufacturing engineering software that rolls right into Siemens control logic on the assembly line. In short, this acquisition beefs up the Siemens catch phrases: total integrated automation.
Siemens has bought several companies over the years. This latest acquisition brings the virtual and physical worlds together. Better, says Shirk, “if Siemens can bring production and product lifecycles together, then it can create a platform that gives manufacturers the ability to gain a significant speed advantage in terms of time-to-market, which Siemens believes is the single largest driver to success and profitable growth for a manufacturer. Now Siemens literally has the ability to manage all parts of that lifecycle.”
Up to now, explains Shirk, “partners have led us to the ‘least common denominator’ model, kind of the ‘good enough’ level of efficiency. But they have not really understood the design intent of a particular machine or tooling environment.” Nor have they had the digital manufacturing software tools that stretch from “idea to truck,” to quote Shirk.
Virtual commissioning is another area liable to be affected by the Siemens acquisition. Rarely are automobile manufacturers and suppliers building new factories from scratch these days. Instead, manufacturing and assembly plants are pretty much a retrofit. The Siemens/UGS combination broadens the ability to design, reconfigure, and structure a plant or factory in software—to any level of accuracy, right down to PLC, CNC, robot cell, and so on. The accuracy of this virtualness increases significantly with the amount of data collection from the stub-your-toe factory floor and the virtualized design world. The interface, again, is UGS Teamcenter.
On May 15, 2007, Oracle (Redwood Shores, CA; www.oracle.com/agile) announced it was acquiring Agile Software Corporation (San Jose, CA; www.agile.com) for $495 million. While Oracle and Agile were still under an SEC-enforced blackout period, everyone else who did speak about this acquisition shared the same general thoughts. First, Oracle on the enterprise resource planning (ERP) side of the marketplace had some PLM functionality already, though the company was the last to market that functionality. Second, Oracle’s PLM is not significant in terms of market share. Last, Agile was ripe to be bought. In fact, it’s a perfect fit: Oracle had the biggest need for a solid PLM system, and the acquisition solves Agile’s financial problems. (The company has been unprofitable for several years.)
Said Jay Fulcher, president and CEO of Agile in a letter to customers and suppliers, “Agile’s PLM solutions will serve as the foundation of Oracle’s PLM offering. Together, we will have a best-in-class, integrated enterprise PLM offering.” There’s truth to that: Oracle is an enterprise software leader with ERP, supply chain management, customer relationship management (CRM), business intelligence, and master data management/product information management applications, as well as industry-specific applications. PLM is a natural fit and complement to that line up.
This acquisition, according to Burkett, transforms a “small PLM company operating among giants into a relatively small, but focused, PLM program backed by a giant.” However, he continues, this acquisition has probably the least impact to automotive. “Agile was never strong in automotive. Nor is Oracle.” Agile’s forté is in high tech industries, and lately in regulated industries, such as consumer packaged goods (CPG).
That said, Agile had made several acquisitions over the past few years. Of particular interest to automotive is Agile’s purchase in ‘05 of Cimmetry Systems, which sells the AutoVue visualization product. Back in 2003, Agile bought Germany-based Eigner, a PDM firm used in some automotive supply chains, particularly in Germany. Eigner has a large installed base in heavy discrete manufacturing, including industrial equipment, aerospace, and automotive suppliers. On the other side of the acquisition, Oracle has purchased dozens of companies over the years, including ERP vendor PeopleSoft and CRM vendor Siebel Systems. Both PeopleSoft and Agile already partner when opportunities arise.
Fifty percent to 80% of all mergers and acquisitions fail. The devil is in the details—technology integration, corporate culture, employee satisfaction (and the associated intellectual property in people), and so on.
The technology part is easy, relatively speaking. If the buying companies just integrated the acquired products into their existing product lines through some sort of hub, all the products would work nicely together within six months, estimates Burkett. It takes longer if the buying companies want all their products to work on the same platform. “Everybody likes to say they can [integrate the acquired products lines] pretty quickly,” says Amann. “Frankly, this is nothing that goes really fast.” For example, it took UGS several years to merge the SDRC line into Unigraphics. Dassault, says Amann, will probably use the MatrixOne underlying technology as a foundation to go forward; that is, “we’ll probably see more and more of that technology become pervasive inside the Dassault suite.” But that’s going to take some time. As for Siemens and UGS, it’s too early to tell how long it will take to integrate all the product lines.
The harder integration in an acquisition is with people. All of these companies have experience merging cultures together from all their acquisitions. Speaking about Siemens and UGS, Shirk says “there’s the German-to-American combination, but UGS itself is made up of different cultural personalities among the management team.” In other words, Shirk expects the cultural aspects about this acquisition will be minor.
And yet, Amann points out, “Siemens A&D has been primarily focused on manufacturing automation products and technologies. For the acquisition to be successful for UGS, the PLM market, and Siemens, Siemens must demonstrate an appreciation of all of the major phases of the overall product lifecycle, including those outside production.”
Dassault’s Peter Schmitt, vice president of marketing and business development, Dassault Systèmes’ Delmia brand (Auburn Hills, MI) has a different take. “In the software business, the only assets you have are the people and the knowledge of those people. There are no ‘unfriendly takeovers.’ If the teams don’t harmonize well, it’s not a good acquisition.”