Industrial software giants gain mass

Like the creation of planets, massive entities keep adding mass until they settle into an equilibrium, and so Aveva acquires OSIsoft for $5bn.

As some correctly predicted the spin-out of industrial software from industrial automation companies paved the way for the emergence of industrial software giants.

AVEVA Group plc, a UK listed company, was a reverse takeover by Schneider Electric’s Software Business of Aveva delivering a £10 per share distribution per Aveva share.

Autodesk recently acquired Innovyze, Inc., Provider of Smart Water Infrastructure Modeling and Simulation Technology, for $5 Billion.

But will this consolidation benefit clients?

It’s either a win-win-win or mixed messaging in the PR about the OSIsoft acquisition.  First para in the Aveva commentary: “This transformative deal for AVEVA, strengthens our position as a global leader in engineering and industrial software.”  Commentary by CRN: “in a move that gives AVEVA and its partners the capabilities to help industrial customers accelerate their digital transformation efforts.”

That’s not to say that the customer benefits aren’t articulated: to CRN – “Our real goal here is to accelerate digital transformation in the Industrial sector, which is one of the last industries to go through this digital transformation at scale” which could be interpreted as ‘we’re doing to do it to them because it’s good for them even if they’re not yet embracing it’; and in Aveva’s own words – “AVEVA and OSIsoft will combine to help customers in industrial and essential organizations accelerate their digital transformational strategies by driving greater efficiencies, lower costs, deeper data-driven insights, sustainability and business resilience” which is a finely crafted sentence.

This progression is great for shareholders, especially in the short-term.  But will it serve customers well over time?  The problems for customers are that the solutions become more and more industry-agnostic and the cost of integration increases.  They are further removed from their customers’ engineering mindset which is focused on hardware-based products.  As large entities, innovation slows and products ossify, ready to be supplanted by the next wave of innovation.  Hardware companies, stripped of their engines of growth are condemned to low margins and low value.

You may not know or remember the Arthur Andersen story.  An accountancy firm (plus tax and corporate finance) grew an IT consultancy that became Andersen Consulting.  Having been nurtured by its parent in its initial growth phase, and following a structure which prevented full profit-sharing (Andersen Worldwide consisting of Arthur Andersen and Andersen Consulting), it spun itself out when profits and growth and resentment were high.  Arthur Andersen went on to regrow another consultancy business in its place (Arthur Andersen Business Consulting), needing a new engine for growth, a talent magnet, and a way of fulfilling its customers’ needs.

It might be better perhaps if the hardware companies and accountants could hold onto their high-powered engines, whether home-grown or acquired, and if solutions could remain industry-specific and if the rate of innovation could be maintained.