Marc Andreessen the famed technologist and investor famously said almost 10 years ago that “software is eating the world.” The industrial market, famously slow to move, has been resembling that remark over the past year. In this episode, Emerson has announced an acquisition and an investment in software. Yes, the valves and DeltaV Emerson. Or, the big guys get bigger.
OSI Inc. is a leading operations technology software provider that broadens and complements Emerson’s robust software portfolio and ability to help customers in the global power industry, as well as other end markets, in their quest to transform and digitize operations to more seamlessly incorporate renewable energy sources and improve energy efficiency and reliability.
Digitization is critical for the power industry to modernize and improve the reliability of the electric grid. Incorporating clean and renewable energy sources, such as solar and wind, requires balancing the variable nature of renewable energy with the often bi-directional demands of the grid. By combining Emerson’s domain expertise and leading technology in power generation with OSI Inc.’s complementary software and reach within the power transmission and distribution sectors, the acquisition will equip customers with the end-to-end ability to monitor, control and optimize real-time operations across the power enterprise through scalable, software-enabled automation and data management.
“An enormous change is underway as utilities globally are investing to digitize the grid and adapt to rapidly evolving energy sources and new technologies that increase consumer choices,” said Lal Karsanbhai, executive president of Emerson’s Automation Solutions business. “This acquisition will help the power industry maximize the remarkable opportunity to harness renewable energy sources and to accelerate the transformation to the smart power grid. Emerson now has the opportunity to be a leader in this large, rapidly growing market with a compelling and complete software and technology offering.”
Karsanbhai continued, “Our $1 billion standalone software and associated engineering implementation services portfolio is quickly growing to meet customer needs and support operational performance, analytics and digital transformation. OSI Inc. is a great business with a track record of high growth, strong profitability and long-term customer loyalty. This acquisition builds on Emerson’s software footprint and supports customers in providing comprehensive end-to-end solutions to help the power industry continue transforming to meet the needs of tomorrow.”
OSI Inc. is headquartered in Minneapolis, MN and has approximately 1,000 employees globally.
The acquisition is expected to close in early fiscal 2021, subject to various regulatory approvals and other customary closing conditions.
In additional news, Emerson announced it has made an equity investment in inmation Software GmbH, a global software platform developer that further deepens Emerson’s data management and integration capabilities. The investment will increase data visibility and provide unified, actionable information to empower fast decision-making and optimized operations.
inmation aggregates global operational data from across the enterprise into the Plantweb digital ecosystem to create an OT data lake – a centralized storage repository – that serves as the foundation for business intelligence and analytics.
“Emerson and inmation are committed to advancing our customers’ digital transformation initiatives, bringing disparate data together with advanced analytics to provide the comprehensive insights needed to drive business results,” said Stuart Harris, group president for Emerson’s digital transformation business. “Our joint solutions unlock vital information in legacy systems, aggregate data from diverse sources and securely connect to the cloud – enabling plant and enterprise-wide operational improvement.”
The investment will complement Emerson’s effort to build an innovative software platform that provides data aggregation, artificial intelligence, machine learning, augmented reality and workflow management. The platform, coupled with the expertise of the two companies, will further enable customers to realize a measurable return on their digital transformation efforts.
“Emerson’s longtime leadership in digital transformation, global execution and customer service capabilities made them a natural partner,” said Timo Klingenmeier, CEO of inmation. “We see widespread industry benefits as we pair Emerson’s award-winning Plantweb digital ecosystem with inmation’s data management software platform to offer customers end-to-end solutions.”
inmation Software GmbH is based in Cologne, Germany.
This is a stylized bullet used in aircraft machine guns during World War II. By 1940 my grandfather had become a manufacturing production superintendent of a GM plant in Dayton, Ohio that manufactured Frigidaire refrigerators. With the entrance of the US into the war, the Army figured weaponry was more important than refrigerators. They took over the plant and converted it to the manufacture of machine gun bolts to arm aircraft.
When I was quite young, grandpa would tell me stories of how production sucked and a general came to him and gave him the job of turning the plant around and getting production going. The pressure was intense. “We’ve got boys dying over there and we need this support,” he was often told.
By age 10, I had heard (probably several times) about how he had taken a couple of days to stand up on the mezzanine and watch. Then he began reorganizing the equipment and processes to reduce wasted time and motion. And got production up to where it should have been.
He also told me stories of being an apprentice machinist at The Monarch Machine Tool Company making huge lathes and other machinery.
So, I grew up on manufacturing stories. About the lessons he learned when the company sent him to General Motors Institute for classes (not bad for a guy whose step-father wouldn’t let him finish high school).
When I started my career working in manufacturing, I carried his lessons. We were “Lean” before Lean was a thing. If only I were a writer back then…
I read many political theorists in graduate school and was deeply affected by reading a short piece by the young Karl Marx on alienation. Marx meant by this that in the days prior to industrialization a craftsman built an entire thing. There was a little piece of “him” in everything he made. It was his creativity, knowledge, skill that went into making something that someone could use for a long time. I knew some craftsmen when I was young. They had little schooling, but they were some of the smartest and most creative people I’ve ever known.
Industrialization and mass production brought with it the assembly line. Men (and sometimes women and children under terrible conditions) would be hired at poor wages. They neither had nor were provided with training for skills needed to build a product. Rather, the people were merely a replaceable component in a big and inhumane system. Marx called this “alienation” as in humans were alienated from the fruits of their labor. Fifty years of labor unrest, protests, violence followed as people protested the conditions. And also how a very few became very rich while almost everyone else lived in poverty.
Seth Godin produced some thoughts on this topic (not Marx, but industrialization) in his latest Akimbo podcast. Listen to this and the prior one on Interoperability to get you thinking about the morals and ethics of what we do.
On the one hand, we who strive to make industrial manufacturing and production better provide much benefit to our societies. On the other hand, we need to take care to consider the effects of what we do on people, environment, and society.
I had not intended it since I’m not much of a holiday type of person, but these thoughts seem to go along with the US celebration of Labor Day this weekend. I hope you have a happy and safe one.
Whenever I begin to feel down about humans and the human condition, whenever politics and social media crap get to be too much, then a story about the human spirit comes my way.
I met a couple of members of the Harting family at a tech event several years ago. The company exemplifies the “connection” part of The Manufacturing Connection even though I seldom acknowledge them
But to think, there the family was in the peace following the devastation of the Second World War starting a company that has grown and thrived for 75 years.
For 75 years now, the HARTING Technology Group has been driving technological change and providing decisive impetus for the future. The vision formulated in 1996 by the owner family “We want to shape the future with technologies for people” remains the guiding star of our entrepreneurial activities. September 1 marks the 75th anniversary of the founding day of the family company. The manufacturer of everyday products such as waffle irons and irons has evolved into a worldwide leading supplier of industrial connection technology for the three lifelines of data, signal and power, a global player fielding innovative products and solutions focusing on Industry 4.0 and digitization.
Wilhelm and Marie Harting opened the “Wilhelm Harting Mechanical Workshops” on September 1, 1945, in a repair workshop covering about 100 square meters in Minden, Westphalia. Wilhelm Harting initially concentrated on everyday consumer goods, which were in short supply after the war: Immersion heaters, hotplates, energy-saving lamps and electric firelighters that sold like hot cakes. His wife delivered the goods by bicycle in the surroundings of Minden and was paid with bread, bacon, eggs, and legumes. For copper and other raw materials, the company’s first buyer had set off to Cologne and Wuppertal with his rucksack. The return trip was on a coal freight wagon.
The nascent company had a stand at the first HANNOVER MESSE in 1947 and received numerous orders for alternators, starters, regulators, fuel pumps and ignition distributors.
The company grew rapidly and needed more space. From 1950 onwards, the company gradually moved to the neighbouring refugee settlement of Espelkamp. By 1955, the company already had 500 employees and was able to double its turnover to 8.6 million D-Mark within a year.
The Han (HARTING standard), patented in 1956 and a registered trademark since 1957, became the standard, the epitome of the industrial connector and laid the foundation for the ascent of the medium-sized company from East Westphalia. Thanks to the Han-Modular series, customers are able to achieve optimal design solutions for the supply of machines, systems and plants. Today, the Han-Modular represents the market standard for modular industrial connectors.
Like the company founders, Dietmar and Margrit Harting are also committed to the region. They support projects, initiatives and associations in the fields of culture, sports, education and science. Margrit Harting, until 2018 also Vice President of the Chamber of Industry and Commerce of East Westphalia in Bielefeld, has received several awards for these activities. She is Honorary Chairwoman of the Philharmonic Society of Eastern Westphalia-Lippe, Honorary Chairwoman of association for the promotion of the Minden-Lübbecke district, Honorary Chairwoman of the Local Cultural Agency Espelkamp, and honorary citizen of Leibniz University Hanover. In 2002 she received the Espelkamp Medal.
For many years, Dietmar Harting was active as a leading luminary in national and international associations and committees, including as President of the German Institute for Standardization (DIN), President of the German Electrical and Electronic Manufacturers’ Association (ZVEI), member of the Presidium of the Federation of German Industries (BDI), President of CENELEC (European Committee for Electrotechnical Standardization) and Chairman of the German Commission for Electrical, Electronic & Information Technologies in DIN and VDE (DKE). From 1995 to 1998, Dietmar Harting was a member of the “Council for Research, Technology and Innovation” under Chancellor Helmut Kohl and from 2004 to 2006, he was also active as a member of the “Partners for Innovation” initiative of Chancellor Gerhard Schröder and Chancellor Angela Merkel respectively. Several organisations honoured his high level of commitment with honorary membership or honorary presidency. In 2013, the Erich Gutenberg working group bestowed its “Praktikerpreis” (Practitioner Award) on Dietmar Harting.
In 1998, the entrepreneurial couple received the Order of Merit of the Federal Republic of Germany and in 2009 the Federal Cross of Merit First Class. In the same year, the city of Espelkamp acknowledged the Hartings by bestowing honorary citizenship. Dietmar Harting was also honoured with the Lower Saxony Cross of Merit 1st Class in 2004 and has been an honorary doctor of Leibniz Universität Hannover since 2010.
Dietmar Harting was Chairman of the HANNOVER MESSE Exhibitors’ Advisory Board for many years and also a member of the Supervisory Board and Executive Committee of Deutsche Messe AG. In 2008 he was awarded the Golden Trade Fair Medal. To this day, the technology group ranks as one of the very few companies to have been present at the trade fair every year without interruption.
In October 2015, after almost 50 years in the management of the Technology Group, Dietmar Harting handed over the reins as Chairman of the Board to his son Philip (46). Today, Philip Harting and his sister Maresa Harting-Hertz (Member of the Board for Finance, Global Purchasing and Facility Management) work closely with their parents Margrit and Dietmar Harting on the Board.
The HARTING Automotive subsidiary develops and produces charging equipment for electric and plug-in hybrid vehicles. HARTING is also making its key contributions to sustainability in the generation of regenerative energy and has long featured as an experienced and reliable partner to the wind turbine industry.
In recent years, HARTING has been increasingly relying on cooperation activities, networks and partnerships such as the MICAnetwork and the Future Alliance for Mechanical Engineering, with which Industry 4.0 and digitization are being driven forward, while shaping and co-determining the networking of processes and objects. The Technology Group regards partner networks as an ideal platform for the further development of Integrated Industry. In this way, the future can be shaped and designed with technologies for people and values created.
I knew when OSIsoft brought in VC money a sale was imminent. Sure enough. This morning’s blockbuster announcement proclaimed AVEVA the winner of the battle. $5.0 billion is a nice chunk of change for a software company, but the financials are solid and AVEVA should get a nice reward for its investment.
Rick Bullotta kicked things off this morning with a LinkedIn post “Boom. The value of the TwinThread and Aveva partnership just grew exponentially!” A number of interesting comments ensued.
Many questions involved Schneider Electric, owner of more than 50% of AVEVA. Will that make other industrial suppliers who partner with OSIsoft (Rockwell Automation, Emerson, et. al.) nervous about the neutrality of OSIsoft’s PI databases? At the earlier AVEVA virtual conference this year, Schneider’s CEO took pains to discuss the Schneider-AVEVA relationship and how AVEVA is run as a separate company. Time will tell, of course.
Another comment about the value if AVEVA can create some deep links into the PI historian with its other products. That would be an interesting competitive event.
I think the emerging digitization competition between AVEVA and PTC could be something to watch.
Pat Kennedy, founder and large shareholder of OSIsoft, retains a courtesy (and I’m sure strong advisory) position with the combined company. He also becomes one of the top 5 shareholders in AVEVA. That will make for some interesting board meetings.
Here is the announcement I received this morning:
AVEVA, a global leader in industrial software, and OSIsoft, a global leader in real-time industrial data software and services, have announced an agreement for AVEVA to acquire OSIsoft for $5.0 billion. AVEVA and OSIsoft will combine their complementary product offerings, bringing together industrial software and data management to help customers in industrial and essential organizations accelerate their digital transformational strategies as efficiency, flexibility, sustainability and resilience become increasingly urgent requirements for customers.
OSIsoft’s data management software will complement AVEVA’s comprehensive end-to-end engineering, operations, and performance offerings. Integrating OSIsoft’s PI System into AVEVA’s comprehensive software portfolio will create an integrated data foundation that can drive big data, Cloud and AI-driven insights to create meaningful business outcomes for customers. This combination enables AVEVA to grow and diversify the industries it serves as well as continue to expand its footprint in existing and new markets and geographies.
Together, AVEVA and OSIsoft can provide full-stack solutions that span edge, plant, and enterprise deployment models, strengthening AVEVA’s position as a global leader in industrial software. With a combined 93 years of operating expertise and experience, they share a history of meeting the rapidly changing and evolving needs of their industrial customers, built on foundations of customer centricity and world-class talent. In addition to sharing a complementary solutions portfolio, this transaction further validates AVEVA’s leading position in digitization and IIoT.
OSIsoft’s PI System enables customers to collect, normalize, store, and stream real-time, high-fidelity operational data to applications, analytics, and AI and ML platforms. PI System acts as a single system of record for operations data, designed for massive cloud-enabled scale and data sharing across enterprises, and enables insightful operations decision making. OSIsoft works with over 1,000 of the world’s leading power and utilities companies, 38 of the Global Fortune Top 40 oil and gas companies, all of the Global Fortune Top 10 metals and mining companies, 37 out of 50 of the world’s largest chemical and petrochemical companies and 9 out of 10 of the Global Fortune Top 10 pharmaceutical companies.
Building Stakeholder Value and Improving Sustainability
The complementary product offerings of AVEVA and OSIsoft will allow the combined company to continue to generate significant value for its stakeholders by creating new opportunities for innovation using new and emerging technologies. The two product suites are open and interoperable, and many customers leverage both solution sets today. As a combined entity, AVEVA and OSIsoft can further deliver on their sustainability goals, driving significant benefits and value for their customers. With broader, deeper scale and scope to lead the digital transformation of the industrial sector, the combined company will drive greater efficiencies and sustainability for many diverse essential industries, including consumer packaged goods (CPG), pharmaceutical, water and wastewater, and utilities, creating strengthened product offerings.
Commenting on the agreement, Craig Hayman, CEO of AVEVA, said: “Combining AVEVA and OSIsoft is yet another significant milestone in our journey to achieving the ambitious growth goals that we have set. This will not only help us serve existing customers better but also open the flood gates to new opportunities which will accelerate the delivery of our digitization vision. Data has been enabling organizations to more effectively determine the cause of problems by allowing them to visualize what is happening in different locations, departments and systems. This agreement will enable our customers to improve business processes as well as eliminate inefficiencies. We are extremely proud to be moving into the next chapter with an even stronger solutions portfolio as well as an ever-increasing and robust customer base which continues to make us leaders in our sector.”
OSIsoft founder and CEO Dr. J. Patrick Kennedy added: “Joining forces with AVEVA enhances and extends our ability to deliver on our key commitments to our customers, partners and employees. Together we will be better able to service the largest digital transformation projects in history, including across industry 4.0+ and IIoT. AVEVA’s interest in OSIsoft is a testament to our talented team, and the extraordinary value of the PI System as the real-time streaming data infrastructure that powers the industrial world. Today’s announcement is the culmination of a thoughtful search for a respected organization that would mesh with our own strong mission- and customer-driven culture. The next chapter in PI’s fifth decade will be exciting for our employees and customers, and I look forward to my continued involvement in my new role as the largest individual shareholder in the combined company and as Chairman Emeritus to ensure we realize the full benefits of this transaction.”
I love irony. No sooner had I discussed with a colleague about the time I worked for a couple of McKinsey alums than I received an email promoting a new study undertaken by, you guessed it, McKinsey. Actually the McKinsey Global Institute (MGI). The paper’s authors researched global supply chains very timely in light of the Covid-19 pandemic. The report highlights vulnerabilities in global supply chains and how resilience takes priority, calculating ongoing cost of shocks and prospects for production to shift.
Industries experience month-long disruptions every 3.7 years on average
Companies can expect supply chain disruptions to erase 40 percent of a year’s profits over the course of a decade on average—and extreme events take an even bigger toll
Up to a quarter of global trade flows could move to different countries over the next five years if companies restructure their supplier networks and governments take action. But moving supply chains is not the only way to build resilience.
The idea of chasing low-cost labor across the globe while ignoring supply chain risks and costs always seemed goofy to me. For, I didn’t waste my years as the unofficial chief manufacturing cost analyst for a medium-sized manufacturer. But here is some weighty analysis that emphasizes the risks.
Based on the frequency and cost of disruptions, MGI scenarios show companies in most industries can expect shocks to erase 45 percent of one year’s EBITDA on average over the course of a decade. A single extreme event could cause even bigger financial losses. On top of this bottom-line impact comes the additional cost of rebuilding damaged physical assets, losing market share to competitors that are able to sustain operations, and significant societal harm such as loss of life, loss of jobs, shortages of critical goods, and damage to communities.
Geographic concentration can often produce supply chain bottlenecks when a shock hits. MGI finds 180 goods that are exported primarily from just one country, worth $135 billion in trade annually. Another issue is that large multinationals can have thousands of suppliers—but most have little visibility beyond the top tier of those tightly interconnected networks.
Will companies restructure their supply chains as part of a flight to safety? Yes and no, the report finds. There is an economic logic behind the way industry value chains have evolved. Given the scale, complexity, and interconnectedness of value chains, they are harder to move than is commonly realized.
MGI estimates that 15 to 25 percent of global goods exports, worth $2.9 trillion to $4.6 trillion annually, could conceivably move to new countries over the next five years. This is based on both economic factors, such as the cost of relocating production, and non-economic factors, such as governments changing policy to promote domestic production of goods deemed essential or important to national economic security.
“The prospect of a significant geographic rebalancing in global supply chains represents a risk for the companies and countries that might lose out—but a potentially significant opportunity for those that manage to capture a share of this production. This could have important consequences for future growth and employment,” says Susan Lund, a partner at the McKinsey Global Institute. “But supply chains involve thousands of independent firms, reflecting specialization, access to consumer markets around the world, substantial sunk costs, and long-standing relationships. Relocating is not a simple task.”
To attracting more production, countries need to develop strong supplier ecosystems, specialized workforce skills, robust infrastructure, and an attractive business environment.
There is more to resilience than changing where goods are made, however. Operational choices and the structure of a company’s supplier network can heighten or lessen vulnerability to disruptions. Common practices such as sourcing from a single supplier, relying on customized inputs with few substitutes, and carrying substantial debt can magnify the financial impact of a shock if they are not calibrated to account for current levels of risk.
Among the steps companies can take are mapping the sub-tiers of their supply chains in detail and connecting them digitally for better transparency; building the capacity to flex production across multiple sites; holding more inventory; and strengthening their balance sheets.
The COVID pandemic is prompting action at a time when cost structures are changing across countries and revolutionary digital technologies are gaining traction in global manufacturing.
“Supply chain shocks are not a new phenomenon, but only a handful of leading companies have really moved to minimize their risk until now,” says Katy George, senior partner and global leader of McKinsey’s operations practice. “That’s largely because of a perception that resilience has to come at the cost of efficiency. But that’s no longer true. Now companies have new tools at their disposal to become more resilient and more productive.”
Back in the 80s and perhaps before, I started listening to a radio personality/philosopher called Earl Nightingale. His recording of The Strangest Secret became the first gold album for a talking program (rather than music). He was still in his 20s when he discovered the core understanding that drove the rest of his life–you become what you think about.
He had another pet theme that I thought made sense–hydrogen as fuel. It is plentiful. Its combustion by-product is water. What’s not to like (other than a huge infrastructure devoted to another fuel).
Those days are returning. Several articles have popped onto my radar screen in the past week trumpeting the theme of hydrogen as fuel.
I sense business opportunities for some business-savvy engineers.