Microsoft Acquires IoT/OT Security Leader CyberX

The news in brief: CyberX’s IoT/OT-aware behavioral analytics platform integrates with Azure security to deliver end-to-end security across managed and unmanaged IoT devices

Everyone has discussed Industrial Control Systems (ICS) cyber risks almost to the point of nausea for several years. Startups in the OT cybersecurity space began popping like dandelions in spring. For a couple of years their display spaces at the ARC Industry Forum paid for the room and then some.

While I like all these companies, I couldn’t see how any could make it long as a standalone company. Sure enough, CyberX has agreed to be acquired by Microsoft.

Here is the justification: As enterprises implement digital transformation and Industry 4.0 for greater efficiency and productivity, boards and management teams are increasingly concerned about the financial and liability risk resulting from the deployment of massive numbers of connected IoT and OT devices. Adversaries targeting this expanded attack surface can cause substantial corporate impact including safety and environmental incidents, costly production downtime, and theft of sensitive intellectual property.

By integrating the CyberX platform with the Azure IoT stack, Azure Security Center for IoT, and Azure Sentinel, the first SIEM with native IoT support, Microsoft will now provide a simpler approach to unified security governance across both IT and industrial networks, as well as end-to-end security across managed and unmanaged IoT devices, enabling organizations to quickly detect and respond to advanced threats in converged networks.

“CyberX’s technology and team are a great addition to Microsoft,” said Michal Braverman-Blumenstyk, Corporate Vice President, Cloud & AI Security CTO, and Israel R&D Center GM. “With CyberX’s expertise and innovative platform, together with Microsoft’s exciting security products, Microsoft is offering a powerful and scalable solution that accelerates digitalization for enterprises at all phases of their IoT/OT journey.”

Founded in 2013, CyberX achieved tremendous growth with the world’s largest enterprises adopting its IoT/OT security platform to secure their facilities worldwide. Leveraging patented, IoT/OT-aware behavioral analytics, CyberX’s agentless technology deploys in minutes to deliver deep visibility into IoT/OT risk — including asset discovery, vulnerability management, and continuous threat monitoring — with zero impact due to its passive Network Traffic Analysis (NTA) approach.

“Nir and I founded CyberX with the goal of delivering a scalable solution that would be easy to deploy and reduce risk for enterprises worldwide,” said Omer Schneider, co-founder and CEO of CyberX. “We’re thankful to our loyal customers and partners as well as to our dedicated employees whose innovation and hard work made it possible for us to reach this important milestone, and also to our investors for their ongoing support.”

“By joining forces with Microsoft, we will rapidly scale our business and technology to securely enable digital transformation for many more organizations,” said Nir Giller, co-founder, GM International, and CTO of CyberX. “Together, CyberX and Microsoft provide an unbeatable solution for gaining visibility and a holistic understanding of risk for all IoT and OT devices in your enterprise.”

CyberX’s founders will join Microsoft and the platform will continue to be enhanced and supported by CyberX personnel. In addition, Microsoft is committed to the channel and will continue working with CyberX’s strategic reseller and technology partners worldwide. The CyberX platform will continue to be available in a hybrid model supporting both cloud-connected and air-gapped networks.

From the Microsoft point of view—Two years ago, Microsoft announced a $5 billion investment in IoT and with this acquisition, the company is eager to continue solving these challenges. Some specifics:

• With CyberX, customers can discover their existing IoT assets, and both manage and improve the security posture of those devices. For example, customers can, often for the first time, see a digital map of thousands of devices across a factory floor or within a building and gather information about their security state and connectivity.

• CyberX’s further integration with Microsoft’s broad portfolio will allow Microsoft to continue to deliver more value to customers. For example, in conjunction with Azure Sentinel, SecOps personnel will be able to identify threats that span OT and IT converged networks that were previously challenging to detect.

• Microsoft appreciates that some customers need help improving the security of their existing IoT environment and is excited that CyberX’s technology and team will be an incredible addition to the company’s commitment to both IoT security and innovation as customers work to digitally transform their businesses.

National Instruments Rebrands, Acquires Data Analytics Company

I debated for most of the day about using my energy to work on this blog post about NI (formerly known as National Instruments). It has long been one of my favorite companies. Its user conference, NI Week, overflowed with energy and bright engineers with big ideas. The founders were brilliant, yet humble, men. And I met some of the nicest people in the industry there.

Their marketing and PR people identified me with automation and control, for obvious reasons. Beginning in about 2010 or 2011, they seemed to become more distant until by the 2011 and 2012 NI Weeks, they didn’t talk to me about a single interview. I met with marketing people through 2014, and then all was quiet.

But I’m a keen observer. I noticed that industrial automation and even IoT were being rapidly de-emphasized in favor of the test market. That’s where the company started and remains the core competency. I also noticed that by 2012 the keynotes were no longer about “gee whiz” technology but rather about big engineering ideas—none of which were in industrial control and automation.

And they began emphasizing “NI” rather than the entire name more than 10 years ago.

Therefore, the big splash about rebranding and new directions were not entirely a surprise to me. Well, the green color scheme was. And I have a pet peeve about senior executives explaining what the logo means. I believe that a logo should be self-evident. But as for a new direction, everything they talked about were things I’ve seen them doing for years—solving big engineering problems, community contributions, diversity, sustainability. It’s almost like internally they realized what they had become. But I knew it. No longer the company of the small sale where the average order was $1,000, but now the company of solving big engineering problems.

Which is all good.

Even so, I am interested in data—data acquisition, analytics, and data used for problem solving.

Therefore, the acquisition. This should be a great move. I’m a possibility thinker, so I see these moves and see all the possibilities for good that can happen with a strong merger.

The news in short:

The acquisition strengthens data analytics software capability to provide enterprise-level value.

NI has entered into a definitive agreement to acquire OptimalPlus Ltd., a global leader in data analytics software for the semiconductor, automotive, and electronics industries. The acquisition will expand NI’s enterprise software capabilities to provide customers with business-critical insights through advanced product analytics across their product development flow and supply chain.

NI and OptimalPlus serve highly complementary positions in the semiconductor, automotive, and electronics industries. NI test systems are used in semiconductor manufacturing with OptimalPlus serving as a leading supplier of semiconductor manufacturing data analytics. Similarly, the NI automotive and electronics production test offerings are complementary to OptimalPlus’ growing automotive and electronics analytics business. Combining the strength of NI’s software-centric approach with OptimalPlus’ enterprise-level analytics software is expected to dramatically increase the value of test and manufacturing data, enabling product insights that will improve quality, efficiency and time to market for both NI and OptimalPlus customers.

“The addition of OptimalPlus’ data analytics capabilities will enable us to accelerate our growth strategy by increasing enterprise-level value for shared customers in the semiconductor and automotive industries.” said Eric Starkloff, NI President and CEO. “During this age of digital transformation, we remain committed to delivering innovative software and systems that leverage a robust data platform to address our customers’ business challenges. I welcome the employees of OptimalPlus and look forward to collectively accelerating our long-term growth ambitions.”

“OptimalPlus is excited to join the NI team. We are confident NI is the ideal partner to accelerate our innovation and increase sales opportunities through advanced product analytics,” said Dan Glotter, OptimalPlus Founder and CEO. “It is evident we share the unique commitment to high-quality software tools and need for world-class customer experience. The acquisition by a technology leader like NI is testament to the leading-edge innovation delivered by our R&D, Product and Data Science teams in Israel and to the great dedication and commitment of our employees across the world. Together with NI, we will provide enterprise-level analytics to enable customers to achieve their digital transformation objectives while expanding our customer reach.”

The acquisition is subject to customary closing conditions, including regulatory approval. The transaction is valued at $365 million and expected to close in early Q3 2020. OptimalPlus had 2019 revenue of $51 million and employs approximately 240 employees. Due to the highly complementary nature of the companies, there will be minimal cost synergies from this transaction. NI plans to fund the transaction through a combination of cash on hand and debt.

About OptimalPlus

OptimalPlus develops analytic solutions based on its big data platform technology which combines machine-learning with a global data infrastructure to provide real-time product analytics and to extract insights from data across the entire supply chain. Serving tier-1 suppliers and OEMs, in the market of semiconductor, automotive and electronic industries. The company provides technology to enhance key manufacturing metrics such as yield and efficiency, improve product quality and reliability and provide full supply chain visibility. OptimalPlus headquarters and R&D are in Israel with offices in Asia, Europe, and the United States.

Digital Infrastructure and Solutions Company Expands and Focuses

Digital Infrastructure and Solutions Company Expands and Focuses

In brief: During its brief history as a collection of Hitachi Ltd. data properties, Hitachi Vantara continues to grow and remake itself. It has now added Hitachi Consulting and Intelligent Data Cataloging company Waterline Data. The new company combines IT Infrastructure, Data Management and Analytics.

The first news is the combination of Hitachi Vantara with Hitachi Consulting as one company to create a new digital infrastructure and solutions company.

The new Hitachi Vantara aims to become the world’s preferred digital innovation partner by unlocking the “good” in data that benefits customers, raises the quality of people’s lives and builds a sustainable society. Hitachi Vantara will specifically bring a competitive edge to the digital domains that matter most – the data center, data operations, and enterprise digital transformation.

The new Hitachi Vantara combines the best consulting-led digital solutions and vertical industry expertise of Hitachi Consulting with Hitachi Vantara’s IT domain expertise. Going forward, the integrated company will help customers develop practical, scalable digital strategies and solutions that transform operational processes, improve customer experiences and create new business models to drive innovation and growth.

For example, the new company will offer a holistic manufacturing industry practice as one of several vertical industry practices. The manufacturing practice will integrate consulting methodologies for addressing quality, customization, sustainability and new business models with data-driven solutions such as Lumada Manufacturing Insights from Hitachi Vantara, which integrates silos of manufacturing data and applies AI and machine learning to evaluate and enhance overall equipment effectiveness (OEE).

“A barrage of data and technology is disrupting enterprises and industries the world over,” said Toshiaki Tokunaga, chief executive officer and chairman of the board, Hitachi Vantara. “Through the integration of Hitachi Consulting, the new Hitachi Vantara will be uniquely equipped with the capabilities our customers need to guide them on their digital journeys. We’re going to be the company that helps customers navigate from what’s now to what’s next.”

The Hitachi Vantara portfolio is built upon a foundation of world-class edge-to-core-to-cloud infrastructure offerings, including the recently introduced Hitachi Virtual Storage Platform (VSP) 5000 series, the world’s fastest data storage array. The portfolio further features AI and analytics solutions, cloud services for application modernization, systems integration and change management services for SaaS-based ERP implementations and migrations, and Lumada-based digital industrial solutions. Hitachi Vantara’s offerings are all backed by world-class business consulting, deep experience in improving organization effectiveness, co-development capabilities and global delivery services.

With its expanded capabilities, the new Hitachi Vantara will play a key role in advancing Hitachi’s 2021 Mid-term Management Plan, which aims to make the company a global leader through “Social Innovation Business.” The Social Innovation Business strategy centers on combining Hitachi’s industrial and IT expertise and products to create new value and resolve social issues.

Hitachi Vantara will help advance the plan by expanding revenues from digital business, by digitally transforming Hitachi’s industrial businesses, by fueling international growth, and by delivering social, environmental and economic value which helps customers contribute to the attainment of United Nations’ Sustainable Development Goals.

As announced in September 2019, Toshiaki Tokunaga, a 30-year Hitachi veteran who has successfully transformed several Hitachi businesses, will serve in the dual role of chief executive officer and chairman of the board of Hitachi Vantara.

The company’s two business units, Digital Infrastructure and Digital Solutions, will be led by Presidents Brian Householder and Brad Surak, respectively. Hitachi Vantara today also announced details of other appointments to its executive leadership team.

Hitachi Vantara Will Integrate Advanced Data Cataloging Technology Into Lumada Data Services Portfolio

In further news, Hitachi Vantara announced acquisition of the business of Waterline Data, which is headquartered in Mountain View, CA. It provides intelligent data cataloging solutions for DataOps that help customers more easily gain actionable insights from large datasets and comply with data regulations such as GDPR.

Waterline Data delivers catalog technology enabled by machine learning (ML) that automates metadata discovery to solve modern data challenges for analytics and governance across edge-to-core-to-cloud environments. Waterline Data’s technology has been adopted by customers in the financial services, healthcare and pharmaceuticals industries to support analytics and data science projects, pinpoint compliance-sensitive data and improve data governance. It can be applied on-premises or in the cloud to large volumes of data in Hadoop, SQL, Amazon Web Services (AWS), Microsoft Azure and Google Cloud environments.

Waterline Data’s patented “fingerprinting” technology is the cornerstone of its solutions, removing one of the biggest obstacles to data lake success. Fingerprinting uses AI- and rule-based systems to automate the discovery, classification and analysis of distributed and diverse data assets to accurately and efficiently tag large volumes of data based on common characteristics.

Integrating Waterline Data technology with Hitachi Vantara’s Lumada Data Services portfolio will provide a common metadata framework to help customers break down data silos distributed across the cloud, the data center, and the machines and devices at the edges of their networks. By applying DataOps methodologies to the unified datasets, customers can more rapidly gain insights and drive innovation.

“Our research illustrates that almost half of enterprise data practitioners are spending more than 50% of their time simply trying to find and prepare data for analysis. Data catalog products have emerged in recent years as strategic imperatives for enterprises seeking to address this challenge while also improving data governance,” said Matt Aslett, research vice president, 451 Research. “This acquisition is logical and strategic: Waterline Data’s capabilities are a complementary fit for Hitachi Vantara and its Lumada Data Services portfolio. Adding Waterline Data furthers the company’s ability to address growing demand for products and services that deliver more agile and automated approaches to data management via DataOps: helping enterprise consumers of data ultimately leverage information in a fluid, yet governed way.”

“Hitachi Vantara provides customers with the digital building blocks, DataOps approaches and industry solutions they need to transform their organizations through data-driven insights,” said Brad Surak, president, Digital Solutions, Hitachi Vantara. “Waterline Data technologies complement Hitachi Vantara’s DataOps expertise and will become key offerings in the Lumada Data Services portfolio, bringing our customers greater visibility, tighter quality control, improved compliance and better management of their data.”

Financial terms of the transaction were not disclosed. The acquisition of Waterline Data is subject to customary closing conditions and it is expected to close in the fourth quarter of Hitachi’s fiscal year 2019 (ending March 31, 2020).

Upon completion of the acquisition, Hitachi Vantara will make Waterline Data technologies available as standalone solutions as well as integrated components of the Lumada Data Services portfolio.

Digital Infrastructure and Solutions Company Expands and Focuses

PwC’s Q3 M&A Analysis of the Manufacturing Sector

I have received news of PwC’s Industrial Manufacturing Deals Outlook. I guess you have your good news and your bad news.

From the report’s summary: While disruptive factors are prevailing and point to an economic downturn, many of the positive factors we have highlighted in our previous publications are still relevant in Q3 2019. As stated in PwC’s publication “Winning through M&A in the next recession,” the M&A environment is cyclical and has historically followed economic downturns, as capital available for deals typically decreases; however, the next recession will be different. We believe the downturn will be unlike historical downturns as disruptive economic factors are partially offset by a few positive factors, leading buyers to continue to pursue M&A activity.

Positive factors impacting the deal-making landscape in 2019:

  • Record levels of dry powder from private equity funds and healthy corporate balance sheets coupled with the repatriation of cash for US-based multinationals indicate sufficient levels of capital to pursue acquisitions, which will prevent deal activity from dropping too low.
  • High valuations have been a factor for the decline in deal volume from YTD 2018 to YTD 2019. However, as the economic outlook declines, valuations will likely fall, which will provide opportunities for buyers with high levels of capital. If buyers are aggressive during the downturn, M&A demand should be higher than historical downturns.
  • The prominence of megadeals is reflecting a decoupling of the megadeals segment of the M&A market from the lower-growth global economic environment.

Disruptive factors likely to create a pause in deal making in 2019:

  • The Chinese and US economies are pointing to economic slowdowns. Chinese GDP growth in 2019 is expected to be between 6.2%–6.4%, a decrease from approx. 6.7%–6.8% in 2018. The US GDP annualized growth in 2019 is expected to be between 1.8%–2.3%, a decrease from approx. 3%–3.5% in 2018.
  • Uncertainties as it relates to length of economic slowdowns around the globe, Brexit, and the continued struggles to negotiate trade agreements and tariff concessions between the US and China, remain on the minds of deal makers.
  • The PMI index has dropped to 47.8 at the end of Q3 2019, which is the lowest it has been since 2009.

PwC also captured some quick highlights below:

  • Scale Transactions will Continue to be the Focus for the Industrial Manufacturing Sector
  • Macroeconomic factors – the trade war, slow GDP growth and high valuations – continue to affect the M&A environment across the industrial manufacturing industry.  The latest September numbers from the Institute for Supply Management also showcase the struggle the sector is experiencing with the U.S. manufacturing purchasing managers’ index coming in at 47.8%, marking the second consecutive month of contraction and was the lowest reading in more than 10 years.
  • So far in 2019, M&A activity in the industrial manufacturing industry has been driven by scale transactions, which is primarily focused on product, customer and geographic expansion. We believe this trend will continue into next quarter and 2020. Here’s a breakdown of Q3 2019 M&A analysis of the industrial manufacturing sector:
  • Total deal value declined by 32% to $18.1 billion when compared to Q2 2019. For YTD 2019, the deal value also declined by 16% to $64.5 billion vis-à-vis YTD 2018.
  • Deal volume in Q3 2019 and YTD 2019 declined by 10% and 11% over Q2 2019 and YTD 2018, respectively.
  • There was no megadeal in Q3 2019.
  • All the categories within the sector saw a decline in deal value during the third quarter except the Electronic and Electrical Equipment and Rubber and Plastic Products. However, the Industrial Machinery drove M&A activity with 40% and 35% in value and volume respectively.
  • North America’s deal value significantly declined by 55% in the third quarter compared to the previous quarter, but the region was the most active acquirer with 36% of deal volume, followed by Asia and Oceania.
  • Although there are factors that point to an economic downturn in the near future, we believe the next recession will be different as it pertains to the M&A environment and could potentially lead buyers to continue to pursue deals.

Executive summary

Worldwide cross-sector deal value decreased 13% from YTD 2018 to YTD 2019, while deal volume remained flat at a 1% increase during the same period. Consistent with cross-sector worldwide, Industrial Manufacturing value has decreased 16% from YTD 2018 to YTD 2019. The primary driver of value decline is related to the 11% decrease in deal volume during this period, which is reflective of some of the lowest quarterly activity since Q1 2014.

Consistent with the trend noted in our Q2 2019 publication, year-to-date activity has been driven by scale transactions, which are primarily focused on product, customer, and geographic expansion. The decrease in deal volume is a result of macroeconomic factors such as the lingering trade war, anemic GDP growth around the world, and high valuations. While overall deal value has seen a decline, the aggregate value of the top ten deals year-to-date has remained stable at $30.3 billion YTD 2018 and $31.4 billion YTD 2019. As such, these macroeconomic factors have not deterred deal makers from turning to M&A to meet their strategic objectives.

Trends and highlights

  • In Q3 2019, the total deal value declined by 32% to $18.1 billion when compared to Q2 2019. For YTD 2019, the deal value also declined by 16% to $64.5 billion vis-à-vis YTD 2018.
  • Similar trend can be seen in terms of total deal volume. Deal volume in Q3 2019 and YTD 2019 declined by 10% and 11% over Q2 2019 and YTD 2018, respectively.
  • Average deal size declined by 15% to $83.6 million in Q3 2019 compared to Q2 2019. The average deal size also declined by a mere 2% to $93.7 million in YTD 2019 vs. YTD 2018.
  • Out of the top ten deals in YTD 2019, four deals took place in Q3 2019. These four totaled up to ~$9.3 billion, and accounted for more than 50% of the total deal value for the quarter.
Digital Infrastructure and Solutions Company Expands and Focuses

Acquisitions Bolster Incumbents Further Consolidate Industry

The IT architecture of industrial / manufacturing applications increasingly boosts the role of cloud and edge. These technologies have become core to Industrial Internet of Things (IIoT) and improved Software as a Service (SaaS).

These recent acquisition news items reflect the acceleration of the trend. One is from Siemens and the other PTC.

Siemens plans acquisition of Edge technology

In brief:

  • Siemens further expands its digitalization portfolio for industry
  • Technology basis is the Docker IT standard
  • Siemens Industrial Edge ecosystem enables easy and flexible use of Edge apps

Siemens is planning the acquisition of Edge technology from the US company Pixeom. With this action, Siemens is strengthening its Industrial Edge portfolio by adding software components for Edge runtime and for device management. Siemens Industrial Edge provides an ecosystem, which enables the flexible provision and use of apps. This means for example that appropriate apps can analyze data locally at the machine and send relevant data to the higher-level Industrial Edge Management System for global analytics. With this acquisition, Siemens is driving forward the expansion of its Digital Enterprise portfolio and the integration of cutting-edge technologies for the digital transformation of industry.

With the resulting Industrial Edge ecosystem, industrial companies can use production data even more efficiently and react more flexibly to changes in conditions.

Ralf-Michael Franke, CEO of Siemens’ Factory Automation Business Unit, explains: “Cutting edge technologies such as Edge Computing open up new scope for automation. With Siemens Industrial Edge, we are creating an open edge ecosystem which offers benefits for companies of any size.”

Siemens is using Docker standard container technology: the provision of apps in the management system will therefore be just as simple as functional upgrades and updates of Edge devices in the factory from a central point.

Siemens intends to acquire this technology from Pixeom and use it in the Factory Automation Business Unit, which is part of Siemens Digital Industries. Pixeom has sites in San José, California and Udaipur, India and employs 81 people worldwide. Closing of the transaction is planned for the fourth quarter of 2019. Both companies have agreed not to comment on the financial details of the transaction.

PTC Makes SaaS Acquisition

I sat in on the analysts/press conference where PTC president and CEO Jim Heppelmann discussed the reason for this announced acquisition of Onshape, creators of the “first” Software as a Service product development platform. The company had also just released fourth quarter results. PTC has a little more than $1 billion in revenues, with about 45% CAD and 35% PLM. Interestingly, the IoT business contributes just over 10% of revenues.

Onshape’s product development platform unites computer aided design (CAD) with data management and collaboration tools, for approximately $470 million, net of cash acquired. The acquisition is expected to accelerate PTC’s ability to attract new customers with a SaaS-based product offering and position the company to capitalize on the inevitable industry transition to SaaS. Heppelmann believes that that cloud-based SaaS is the future of CAD. Pending regulatory approval and satisfaction of other closing conditions, the transaction is expected to be completed in November 2019.

Located in Cambridge, MA, Onshape was founded in 2012 by CAD pioneers and tech legends, including Jon Hirschtick, John McEleney, and Dave Corcoran, inventors and former executives of SolidWorks. Onshape has secured more than $150 million in funding from leading venture capital firms and has more than 5,000 subscribers around the world. The company’s software offering is delivered in a SaaS model, making it accessible from any connected location or device, eliminating the need for costly hardware and administrative staff to maintain. Distributed and mobile teams of designers, engineers, and others can benefit from the product’s cloud nature, enabling them to improve collaboration and to dramatically reduce the time needed to bring new products to market – while simultaneously staying current with the latest software.

“PTC has earned a reputation for successfully pursuing new innovations that drive corporate growth,” said Heppelmann. “Building on the strong momentum we have with our on-premises CAD and PLM businesses, we look to our future and see a new growth play with SaaS.”

This acquisition is the logical next step in PTC’s overall evolution to a recurring revenue business model, the first step of which was the company’s successful transition to subscription licensing, completed in January 2019. The SaaS model, while nascent in the CAD and PLM market, is rapidly becoming industry best practice across most other software domains.

“Today, we see small and medium-sized CAD customers in the high-growth part of the CAD market shifting their interest toward SaaS delivery models, and we expect interest from larger customers to grow over time,” continued Heppelmann. “The acquisition of Onshape complements our on-premises business with the industry’s only proven, scalable pure SaaS platform, which we expect will open new CAD and PLM growth opportunities while positioning PTC to be the leader as the market transitions toward the SaaS model.”

For customers, the SaaS model enables faster work, improved collaboration and innovation, with lower up-front costs and with no IT infrastructure to administer and maintain. For software providers, the SaaS model has been proven to generate a more stable and predictable revenue stream, increase customer loyalty as customers benefit from earlier adoption of technology innovations, and enable expansions into new segments and geographies.

“At Onshape, we share PTC’s vision for helping organizations transform the way they develop products,” said Jon Hirschtick, CEO and co-founder, Onshape. “We and PTC believe that the product development industry is nearing the ‘tipping point’ for SaaS adoption of CAD and data management tools. We look forward to empowering the customers we serve with the latest innovations to improve their competitive positions.”

Onshape will operate as a business unit within PTC, with current management reporting directly to Heppelmann.