For a market that has been declared dead many times in the blogosphere over the past few years, the Manufacturing Execution Systems market has been pretty lively in 2020-21. Much of the activity (as reported in this years Magic Quadrant) has been the crush of vendors rushing to embrace microservices, containerized applications and low-code/no-code development. Specifically, the 20% of our ~50 surveyed vendors with microservices on their roadmap in 2019 has ballooned to 75% in 2021.
What’s going on here?
Could it be that ‘the composable enterprise‘ has reach the shop floor? Ironically, this what SOA and composite applications were supposed to do (but didn’t) ten years ago. While there are offerings in the space that fit the bill of providing a platform-as-a-service (PaaS), low-code/no-code capability for “do it yourselfers”, the vast majority of these offerings are used primarily for low level dashboards, reporting and targeted tactical analytics, some relying on customer-sourced applications. Industrial strength MES still requires governance, regulatory compliance, security, configuration management, version control and both process and data integration to other stakeholder systems in the IT / OT infrastructure. The PaaS/no code offerings available today are the antithesis of traditional MES (but are still marketed as MES). On the horizon there is a future model that embraces both composability and control, but that is not necessarily the driver of current MES vendor behavior, and there is hesitancy at the customer level in broad adoption of nocode MES in production. All of this highlights how composability is no more than a contributing factor to vendor roadmaps.
Could it be that allure of IIoT platform players is actually having an impact on traditional MES vendors (and their revenue streams)? Manufacturers are under extreme pressure to digitize, and IIoT projects have the attraction of lower cost, new technology and faster time-to value. However, the so called IIoT-based “Lite MES” solutions are light on functionality. Alternatively, major suppliers in the MES space continue to add extended functionality (at added cost). Enterprise MES is an 80-20 proposition, with only the largest 20% of plants able to justify the expense. Traditional MES enterprise solutions are hampered by the lack of a credible return on investment (ROI) for smaller plants in large enterprises. If the smaller plants can settle for the reduced functionality of lite MES, how does that impact the large MES players? In reality, those smaller plants would never be in play for the large providers anyway, and, out of survival instinct or #FOMO, most of the large MES provides are building, buying or partnering for IIoT capability. As IIoT platforms are becoming commodities. vendors in the MES space are hitting CTRL-SHIFT-R for the next best thing as the IIoT platforms and cloud services mature.
It’s not the composable enterprise, it’s not IIoT. The main driver pushing the microservices development frenzy in this market is the cloud. This is due to a number of factors including
- COVID-19 underscored the necessity for more pervasive access and control, and the benefits of cloud-based solutions in not only enabling the new “work from anywhere” paradigm, but as a fundamental next-generation technology enabler.
- Cloud is mandatory for business initiatives for connected factories and digital supply chains to drive scale in digitization/smart factory initiatives for manufacturing operations.
- Emerging technologies (example: 5G and edge computing) are removing the last remaining concerns that manufacturers have about performance and uninterrupted availability in cloud solutions.
Gartner has predicted that the survivors in MES will be a cloud-native solutions, supported by on premise edge technology to provide an 100% availability should the cloud connection be interrupted. Despite how business will be done in the future and the clear imperative, the MES vendor response to cloud has been mixed:
- There are still a few MES vendors that respond to our questions on cloud deployment with “we can provide a cloud version, but our customers are not asking for it”
- There are others that take the relatively easy (and ineffective) road of virtualization, taking the MES monolith and installing in on a private server somewhere for each customer requesting a cloud solution
- The majority of on premise MES vendors are making the move to microservices, PaaS, containerized applications, etc. specifically aiming at a cloud future. Some have already released these offerings, with portions of the solutions currently cloud-native.
- Finally, there are MES solutions that were designed and built as cloud-native solutions, initially found in mostly discrete manufacturing environments where latency and availability requirements are less rigorous.
The winners and losers will be determined by the vendors ability to embrace cloud-native technology (not ASP and centralized app servers) and with a minimal on premise footprint. To date, even some of the early adopters of the microservices approach still average less than 10% of their customer base as cloud deployments. This slow progress to the cloud by the mainstream MES vendors is striking. How long will the market wait for these stalwart vendors to embrace cloud-native solutions?
“Is it easier for the cloud-native MES providers to add on premise edge technology, or for the on premise MES providers to become cloud-native?”
This will be an interesting next few years in the MES market. Stay tuned!