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What Do Recent Mergers and Acquisitions of PM Services Companies Mean for Manufacturing Companies?

Recently we have been witnessing a wave of mergers and acquisitions of PLM services companies. Here are some examples, listed chronologically:

  • In October 2013, Accenture announced the acquisition of the PRION Group – a consulting and systems integrator that specializes in Siemens PLM software.
  • Later that month, Accenture announced plans to acquire PCO Innovation, another PLM consulting group.
  • In April, 2014, KPIT Technologies reported the acquisition of I-Cubed, a PLM product and services company specializing in PLM data migration. Only a few months earlier, I-Cubed acquired Akoya, a should-cost analytic software company.
  • On May 21, 2014, Kalypso, an innovation consulting company announced it had merged with PLM consulting firm Integware,

I don’t think the increased activity in of mergers and acquisitions focusing on PLM services, or the fact that Accenture all of a sudden is paying attention to PLM is a mere coincidence. Rather, it is an indication of a gradual change in how enterprises view product lifecycle management, the role of PLM software in the enterprise, and, with those, new opportunities for PLM related growth.

For years, PLM companies focused more on PLM /PDM implementation than on actually improving business processes. While the business benefits of PLM were well articulated and supported by rosy ROI models and complex colorful architecture slides, many manufacturing companies were unable to achieve the process changes and enterprise software integration that were need to reap the promised benefits, and ended up implementing a PDM system. Albeit critical for managing product data, this reality might explain why some manufacturers feel they might have overpaid for their PLM implementation efforts.

The status quo may be changing, and organizations that have gone through massive implementation projects are ready for more. They need to improve their capacity for more complex multidisciplinary decisions using product data, whether it’s stored in PLM/PDM, ERP or in other, less structured forms; they need to improve collaboration in elongated and fragmented design partner networks and supply chains; they need to leverage product and consumer insight garnered  from social media, warranty claims, and channel activities.

Indeed, a great deal of this movement is driven by PLM vendors, flaunting new ideas and vying to show value in a pretty much non-differentiating arena. Likewise, services companies such as those mentioned in the opening part of this article are trying to add capabilities and scale to capture new business opportunities in activities that I often lump under the umbrella of “enterprise PLM.”

And there’s more. The availability of cloud-based PLM 360 from Autodesk, and modern, flexible and easy to consume PDM software from companies like Aras and GrabCAD, while perhaps not enough to challenge the hegemony of Dassault Systèmes, PTC and Siemens, certainly raises the bar and put pressure on the traditional PLM vendors to demonstrate similar functionality and aptitude that are better aligned with modern enterprises.

However, with the exception of Accenture, the PLM services companies we’ve mentioned are small companies that while relatively successful, are unable to scale to fulfill the market demand for deep domain expertise and competence to deal with business process complexity. In fact, Accenture’s aggressive push into the space of previously occupied by boutique consultancies poses a risk to many of these companies.

More Mergers and Acquisitions on the Horizon

I expect we will see more mergers and acquisitions of PLM and technology consulting companies, especially in the burgeoning area of ALM and in complex simulation. There are a number of small but capable companies in this space that are unable to scale unless they become part of a broader underpinning and are less resources constrained. It wouldn’t be right to name them here (feel free to contact me directly if you are interested in discussing them.)

Manufacturing companies should pursue opportunities to leverage product data to improve product related decisions, especially in downstream activities such as DFX, serviceability improvement and supply chain optimization. Look for partners and providers that offer a broad portfolio of domain and process expertise along the entire product lifecycle and strong process integration capabilities in addition to “just” IT.