Seeking plant-savvy services

Growing user interest in an application category not only represents an opportunity for software vendors, but for the IT service providers that deploy the packages. ERP suites traditionally reign as the application category of highest user interest, but that's changing, according to Boston-based AMR Research.

The ERP focus is shifting in favor of applications that handle production management and other aspects of manufacturing operations. Among the benefactors—besides manufacturers that stand to gain new capabilities—are IT services suppliers adept at deploying manufacturing execution systems (MES) and other plant operations software.

"There is an emerging services opportunity around the whole manufacturing operations space," says Simon Jacobson, an AMR analyst. "People are rediscovering the importance of manufacturing's role."

AMR annually asks companies to rate the applications spending domain of highest interest. For its recently completed 2007 spending report, 23 percent of respondents cite manufacturing operations as the most important area, followed by ERP at 19 percent. That's a flip-flop from AMR's 2006 report, in which 34 percent of respondents rated ERP highest, with manufacturing operations at 21 percent.

So exactly what is prompting the surging interest in systems to handle manufacturing operations? Some believe it's a natural progression in the rollout of corporate systems, while others see it as part of a mandate to further reduce manufacturing costs.

"Most manufacturing enterprises have gone through ERP implementations, and they've discovered that some of the value promised by ERP can't be generated unless there is much better information about what's happening within the four walls of the factory," says Michael Grasley, director of consulting with ASECO Integrated Systems, an IT services company that implements MES solutions.

The acquisition of manufacturing intelligence vendor Lighthammer by ERP giant SAP a couple of years ago, cites AMR's Jacobson, also served to validate the importance of manufacturing intelligence among senior executives. "That acquisition helped put the spotlight on systems for the analysis and consumption of manufacturing information," says Jacobson.

The IT services opportunity around manufacturing operations spans multiple applications, Jacobson adds. Besides MES, manufacturing operations encompasses systems for enterprise manufacturing intelligence (EMI); enterprise asset management, and even product life-cycle management capabilities such as specification and recipe management. The entire software and services opportunity for manufacturing operations will be between $5 billion and $6 billion next year, according to AMR.

Services represents a big part of the pie in any management application market. For example, says Jacobson, in the roughly $1-billion MES market, MES vendors typically get 30 percent to 40 percent of their revenue from services. Dedham, Mass.-based ARC Advisory Group also sees a significant services play in what it calls the collaborative production management (CPM) market, which is roughly equivalent to MES. Of the $1.3 billion spent worldwide on CPM in 2005, 55.4 percent was for services, according to ARC.

So while the services numbers are relatively small when compared to the billions spent on IT services worldwide (see Quick facts on IT services), there is little doubt that billions are being spent on services at the collaborative manufacturing level. The qualities needed in a services company differ at this level, and typically revolve around a deep understanding of production management, as well as a grasp of the data generated by plant automation systems.

"Clients are looking for an understanding that spans supply chain, ERP, and control systems; as well as direct experience with plant floors and understanding of the terminology spoken by plant-level supervisors and operators," says Krishnakumar "K.K." Nagarajan, North American Plant Automation Solutions practice head for Tata Consultancy Services (TCS), a leading Indian IT services firm with practices devoted to MES, advanced control, and other manufacturing-centric areas.

AMR's Jacobson says some large IT services firms such as Accenture have expertise with manufacturing and supply chain management, but so do some Indian organizations with global operations, including TCS and Wipro. Additionally, there's Atos Origin, a large European IT firm with global reach, and a rung of services firms with deep expertise in MES and enterprise manufacturing intelligence that might not be as large as the biggest IT services firms, but can scale their work to multiple sites. These include ASECO or Entegreat, says Jacobson.

Other players in the IT services market for manufacturing operations include ERP integrators with expertise in production execution modules, MES vendors, as well as regional resellers of industrial automation software.

Plant-level IT services aren't necessarily limited to a single plant. Nagarajan says TCS helps clients with global MES rollouts, or with companywide "adaptive manufacturing" initiatives that establish key performance indicators, or KPIs.

"A client might be looking at 30 or 50 plants globally," says Nagarajan. "Not only do they want deployments done efficiently at each plant, but they want them done consistently. As a result, these companies need global presence from a services provider."

Ralph Gordon, a practice director with Atos Origin, agrees that larger enterprises are after services suppliers that can help them with global projects. With about 1,100 consultants involved with production solutions, he adds, Atos is well positioned to help a company formulate manufacturing strategy and mesh it with the client's supply chain goals. "Slowly but surely, we are seeing more collaborative production management initiatives on top of MES as a driver for our services, and linking that to the supply chain environment," says Gordon.

ASECO's Grasley says while much of ASECO's work is in implementing software packages, it also focuses on upfront performance assessments. REC Advanced Silicon Materials, a manufacturer of silane gas used by the semiconductor industry, brought in ASECO for an MES needs assessment.

The scoping phase of the project, says Rob Kultgen, a staff engineer for REC, involved assessment, establishment, and documentation of requirements for an MES. The company selected a solution from Wonderware Corp., which ASECO helped implement in roughly two months, says Kultgen.

"We were looking for someone to provide a solution, as opposed to wanting to sell software," says Kultgen. "ASECO drove the scoping, and helped us put in the appropriate level of software and integration to solve the MES requirements."

With ERP bridging into areas of production execution, some operations-related IT work goes to organizations that handle ERP. Bigger services providers such as TCS and Atos Origin, for instance, will help SAP enterprise system users decide how to deploy SAP's composite application for manufacturing intelligence. In the small and midsize market, where ERP often is used for basic MES functions, some resellers focus on solutions with a shop-floor bent. For example, Fullscope, a reseller and implementer of the Dynamics AX ERP suite from Microsoft Business Solutions, built modules for process industry manufacturing, distribution, and quality management under Microsoft's Industry Builder initiative.

John Lischefska, a Fullscope VP, says that under the initiative, other Microsoft resellers also may offer the modules, but Fullscope sets itself apart by delivering services personnel with vertical industry expertise and knowledge of plant-floor systems used in process and batch verticals. "With MES-level applications, the consulting talent must be more equipment technology and device savvy, and more focused on the manufacturing process," he says.

Some MES vendors also have services capabilities to augment services by channel partners, or to perform broader operational support or assessments. Rockwell Automation, says Michael Cudemo, business development manager for Rockwell's vertical focus on the medical device sector, offers what it calls Manufacturing Assessment and Planning (MAP) services encompassing strategy and systems design work.

Rockwell's services also may include help in establishing KPIs such as overall equipment effectiveness (OEE) that go beyond the deployment of Rockwell's software. For example, Northfield, Ill-based food products giant Kraft enlisted Rockwell's services to establish OEE for multiple plants. According to an ARC case history on the work with Kraft, services included strategy development, KPI and business issue identification, solution design, and production performance applications support.

Cudemo says manufacturers typically seek improvement in four areas: process reliability, operator productivity, equipment performance, and supply chain performance. Consistency is an overriding goal when establishing production and performance-management solutions.

Concludes Cudemo, "Customers say to us, 'Help us integrate our business processes and production disciplines with our control disciples in a consistent way.' "