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ERP's Shop Floor Grab

Oracle's stealthy announcement of its Manufacturing Transaction Hub in November 2007 signaled more than just one vendor's move to win budget from manufacturers seeing greater value in sharing data between shop floor systems and the ERP suite. With Oracle entering this market and SAP already making waves with its Lighthammer acquisition, the question of whether deep integration between the shop floor and ERP and other back-office systems is coming soon to a plant near you is now resolved. The answer, in case you didn't get it, is a resounding yes.

 

The bigger question lies in figuring out which vendor or vendors will provide this new capability, and therein lies an important strategic issue for many manufacturers. Is shop-floor-to-ERP integration a capability you should get from your ERP vendor or your MES vendor? In other words, is the shop floor an extension of your back office or vice versa?

 

Regardless of relative merit, market trends may give this prize to the ERP side. After all, the forces aligning on the ERP side — SAP, Oracle, and IBM, which dove in by buying Trigo, Cognos, and other enterprise software vendors — hold a lot of sway over the executives who sign on the dotted line for what is a non-trivial integration exercise.

 

There's also the problem of birthright, to take these vendors' viewpoint, especially that of Oracle. As one of the founders of the relational database market (a market based, incidentally, on research funded by IBM), Oracle believes that its raison d'etre in the enterprise is stewardship over every possible source and repository of data. More and more, data that doesn't fit the traditional RDBMS model is part of this birthright.

 

Likewise, SAP believes that the processes that drive the executive side of the enterprise, embodied in its ERP and SCM applications, are the locus for all strategic business operations, and that all processes, and, therefore, their data, lead to SAP's ERP system. So, SAP similarly sees its birthright as stewardship over the key processes in the enterprise, ensuring that these processes get the right data, no matter whence it comes.

 

This means rather bleak tidings for MES-centric vendors, particularly those that think specialization at the data historian level is, by itself, enough of a competitive differentiator. As Oracle is out to prove and SAP is already proving, the data side of the integration opportunity pales in relation to what that integration can actually provide: Analysis and performance management is the high-value offering, not the data that feeds only one side of that integration.

 

And that is the final issue that will nail this decision once and for all: Analytics and performance management solutions are the real prize, not the data. That means IBM, SAP, and Oracle — all of which have made big buys in analytics and performance management — are counting on data being secondary to the revenue they can glean in analytics.

 

It's not the end of the line for the MES data vendors — not yet. But the decision about which vendor provides access to which data has now been vastly simplified, in favor of ERP-cum-analytics vendors. Even if a best-of-breed MES vendor may offer superior functionality, that functionality may not be enough to stop this trend — or keep MES vendors from being bought up in a forthcoming fire sale.

Source:  Editorial from the February 2008 issue of Managing Automation, ERP's Shop Floor Grab, by

Joshua Greenbaum, Contributing Editor

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