Enterprise and Controls Companies Converge in the Information Management World

Forward-thinking industries initially regarded enterprise resource planning (ERP) solutions as efficient means of automating business processes. During ERP's relatively short lifetime its character has been modified such that the latest versions are flexible information management tools, applicable to diverse industries and several points in the supply chain.

By Matthew Peach, Contributing Editor February 1, 2000


Software & information integration

Enterprise resource planning (ERP)

Manufacturing execution system (MES)

Forward-thinking industries initially regarded enterprise resource planning (ERP) solutions as efficient means of automating business processes. During ERP’s relatively short lifetime its character has been modified such that the latest versions are flexible information management tools, applicable to diverse industries and several points in the supply chain.

It remains to be seen if the term ERP, which some technophiles dismiss as redundant, persists in common usage throughout the world’s manufacturing and process industries, but what the acronym represents will undoubtedly grow in influence on business management techniques as well as on IT and software investment policies.

Generally, the mid-1990s saw explosive growth in sales and adoption of ERP systems with some vendors’ year-on-year growth rates greater than 20% or 30%. This growth tailed off by 1998-99, as many specifiers put the brakes on software acquisition in anticipation of the millennium bug striking. Now analysts and vendors both expect business will improve from about the second quarter of 2000, although purchasing activity is not expected to rise to the previous peak growth rates seen in 1997.

A market survey between July-October 1999, sponsored by IT and management consultancy Cap Gemini (Paris, France) revealed that ERP applications grew by around 6%, compared to growth rates of around 20% between 1996 and 1997.

Tony Kelly, head of ERP at Cap Gemini, said, ‘As the corporate market is mature, the growth taking place is in extended functionality rather than in back office ERP licenses. Caught in a trap of their own success, the big ERP vendors, such as SAP and Oracle, are pushing harder into niche segments, with industry-specific versions of their products, and also into the midsize market. Here, they are coming into conflict with a host of aggressive and successful vendors, like Industrial & Financial Systems (Linköping, Sweden; Tucson, Ariz.), which has been active in these markets for years.’

In recent years, major changes to the traditional ERP package have been extensions into the supply chain on the one hand and into customer relationship management (CRM) on the other. Many key vendors now offer integrated software suites covering the spectrum of raw materials resourcing, supply management, and processing, as well as marketing and sales of finished products.

Traditional demarcation between automation and enterprise has diminished with greater emphasis on managing information through the supply chain.

Integrating business and process

Regarding the controls industry, strong signs point to the integration between distinct sectors of business management and process management. Recognizing that many traditional marketplaces have become sluggish and saturated, the likes of Invensys, ABB, Honeywell, Siemens, and Moeller now find new business in ‘hybrid’ areas between process control and enterprise management.

Last year, for example, Invensys Intelligent Automation (London, U.K.) acquired ERP software supplier Marcam (Newton, Mass.) for $60 million. The deal not only represented a shift in Invensys’ strategic approach; it also signified a confluence of the ERP and automation arenas.

This acquisition was the latest in a series of mid-1990s Invensys buy-outs (in its former incarnation Siebe), which included Predictive Controls (1997), and Wonderware and simulation software developer Simulation Sciences (both 1998).

Analyst firm ARC Advisory Group (Dedham, Mass.) says the acquisition of Marcam placed Invensys ‘at the leading edge of automation suppliers seeking to expand their enterprise capabilities, heralding a new generation of plant-centric information systems.’

If, as is expected, Invensys integrates Marcam’s MS-Windows NT and object-based ERP and enterprise asset management (EAM) software with Wonderware’s FactorySuite, it could offer a seamless solution that addresses both automation and enterprise requirements. This will pressure other automation suppliers to enter the ERP and EAM space and provide similar solutions, contends ARC.

Siemens is also well along this path. Helmuth Milles, head of software and systems in the Automation & Drives division (Nürnberg, Germany), confirmed that Siemens is also developing direct links between automation and enterprise solutions, such as those offered by SAP, Baan, and Oracle.

Mr. Milles says, ‘The new area in our activities will be a middleware industrial framework, based on Microsoft’s DNA architecture. We will guarantee to the customer vertical integration [from] the controls area, through the functionality/execution area, right up to ERP.’

The common customers of SAP and Siemens plan their business processes by implementing the standard SAP R/3 software. These processes then are integrated throughout the company with Siemens Automation & Drives’ solutions.

Siemens A & D Software and Systems House (Nürnberg) offers integrated, consistent solutions based on industrial standards that link business management processes with automation technology. This also enhances the options available in Siemens’ Simatic PCS7 process control system.

This integration enables complete transparency of business processes. Information from the ERP level is immediately available at the manufacturing execution system (MES) level and vice versa. Data from the shop-floor level can also be reliably used for management planning. Applications are linked via a mechanism based on standard methods for modeling and integrating existing business applications, workshop and legacy systems, and general system units. Based on the Siemens ‘vertical integration’ approach, there is continuous data flow between the planning and operative levels within a client company.

Siemens Software and Systems House is a partner of SAP AG (Walldorf, Germany) within the latter’s Complementary Software Program and is the European Certification Center for software products to be certified for linking to SAP R/3.

The challenge facing companies in the processing and manufacturing industries is optimization of sales oriented production. This process must take into account different production locations, raw material quality, and variable customer requirements, but when achieved it will ultimately lead to greater production flexibility.

Bridging different worlds

Until recently, ERP, MES, and automation levels were regarded as three completely different areas, relative to both project integration and the basic methods of data and instruction management. Siemens’ Framework application provides the integration platform. The Business Modeling Factory tool is used to define the business processes to allow users to link applications easily. Thus, MES products are linked to the ERP layer through open interfaces. In a technological sense, standardized middleware products like Siemens’ Silogics and @aGlance from Intuitive Technology Corp. (Marlboro, Mass.) provide a bridge between the three worlds of control, MES, and ERP. With its Silogics product, Siemens has a certified integration platform that allows software systems from partners to be more easily integrated into SAP R/3.

The next step in this joint venture between the German giants will be an integration/application framework that describes interfaces for the individual components in the field, available to both the ERP and the automation world. The application framework offers a way to simplify communication and better protect investments made for interfaces.

In the last two to three years, the cost of entry has been reduced. Even the larger ERP suppliers claim to offer minimal consultation and rapid implementations. These developments have clearly been to find new business in the large pool of mid-sized companies that might previously have shunned ERP because of its cost or inflexibility.

As with many other areas of software business, there are diverse and sometimes contradictory marketing messages from the various suppliers. Having saturated ‘top-tier’ marketplaces in hydrocarbon processing, and automobile and aerospace manufacturing, larger ERP vendors generally claim to have scaled down some of their products to suit the needs and wallets of the middle tiers. But, traditional suppliers to the mid-market claim that larger systems are too unwieldy and take too long to implement for this market sector.

Integration vs. best-of-breed

System integration is one marketing buzzword offered to an increasingly cautious market that spent millions protecting itself from the millennium bug. The other contradictory message-freedom to buy best- of- breed-often comes from the same source; vendors need to be all things to all markets.

So it’s no surprise that several controls companies are bringing the functionality of their systems at least half way towards those of the ERP system vendors, who, in turn, appear to be making moves on the control companies’ traditional markets.

The timing of controls companies making moves to interface seamlessly with enterprise management systems coincides with the leading providers of ERP moving up a step in their ambitions to develop e-commerce applications. ERP developers are increasing the flexibility of their products by incorporating data navigation that offers a window on supplier availability or customer demand, for example.

One significant influence on both supplier and purchaser behavior in the ERP/automation sector is the increasing need for different industry sectors to share information to make the most of available business opportunities. According to data warehouse software company Business Objects (Paris, France; San Jose, Calif.), 70% of enterprises already share or plan to share data with customers and 60% with their suppliers. When it comes to stock holding and productivity, it appears that confidentiality is a disadvantage and the latest ERP packages will actually help your customers/suppliers access your latest data.

Many ERP suppliers say their products are no longer luxury add-ons to manufacturing, but entry-level prerequisites. The ERP sector is suffering from the same ills faced by controls companies: market saturation and generally flat performance due to year 2000 and adverse economic conditions. This is forcing the key players to behave in the same way as the innovators in the controls sector. They are buying each other while waiting for the upturn and they are developing new software suites to sell into the burgeoning e-commerce sector.

Related Resources