SAP Enters into the Manufacturing Execution System Market: an Opportunity for System Integrators?

MES (Manufacturing Execution System) solutions have existed for more than 20 years in order to answer specific needs of manufacturers, such as:
⇒ Performance / Productivity (Automotive…)
⇒ Traceability / Quality for completing regulations (CPG, Life Sciences…)

But business issues of this sector are daunting:
• Mass production has led to mass customization: production units must be flexible and must adapt quickly to evolving demand
• Globalization: reorganization of the flux and reactivity

In order to be successful in this market, there must be better integration/communication between the different components of the value chain : MES to MRP to SCM; all providing real-time data.

This has led to the trend of company’s moving away from in-house or legacy MRP to ERP (especially SAP!), as well as the trend from in-house or legacy MES to a new generation of more flexible MES solutions that offer higher level of integration and coordination with the ERP system.

SAP, in order to benefit from the development of the MES trend, first bought Lighthammer (in 2005) and set up the Composite Application Manufacturing Integration and Intelligence (xMII) component, offering communication between SAP and the MES tools. This week, SAP has decided to cross the line and to buy its closest partner in this field: Visiprise.

Is this an opportunity for system integrators?

In fact, the system integrators have invested more in this market since the last 3 years, and they will benefit from the development of SAP’s MES ecosystem : Visiprise, Apriso… Will they benefit more?

For SAP, entering the MES market opens up new dimensions. MES involves the integration of real-time plant operation processes, with requirements and contacts on the customer side being different from those for ERP systems, which traditionally are more transaction-oriented. SAP will face the competition from players as Siemens or ABB. This will be a challenge for SAP, but PAC believes this takeover is a smart move. Thanks to its large MRP/ERP market share and its technology capabilities, SAP can be expected to successfully meet this challenge.

For those IT integrator’s that are closer to the manufacturing side of the business, such as T-Systems and Capgemini (which have Technical IT competencies with Sogeti)… I believe they will benefit more from the development of the MES market, given their long time experience in this market and understanding of complex manufacturing processes.

While manufacturing makes up more than 50% of SAP’s revenue, this movement into MES represents a new growth avenue, even in the company’s most traditional sector!