Around 20 years ago, I did one of my first interviews with Dassault Systèmes’ CEO, Bernard Charles. This was in 1998, and Charles had just bought robotics software company Deneb for $105 million. We were all wondering about his motives for paying big money for a small company.
I asked him, “Why did you buy a robotics company?”
“Well,” Charles replied, “I didn’t just buy a robotics company, I bought a piece of the puzzle to Dassault’s product realization platform.”
Back then, nobody was talking about platforms, so this was an interesting twist—and a prelude to PLM.
Dassault’s chief knew what he was doing then, and he knows what he’s doing now, 20 years later. Product development has evolved, and the perspectives are broader, but Charles is still building a platform. Today, it’s the 3DEXPERIENCE platform, of which Deneb is an integrated part of the DELMIA digital manufacturing applications; however, it’s no longer just a product development and realization tool set. 3DEXPERIENCE is a business platform that aims to cover all aspects of product lifecycles—from the product idea, through manufacturing and distribution, to the product in the hands of the end-user, and feeding field data back to the PLM system to be used as a foundation for innovation.
But one piece has been missing for becoming that broad kind of business platform: a midmarket ERP solution.
Today Dassault Systèmes filled that gap with the purchase of ERP company IQMS for $425 million.
IQMS' solutions are primarily aimed at serving small and medium-sized manufacturing companies, and is already well-known in the SOLIDWORKS sphere. In 2013, IQMS launched a SOLIDWORKS integration for BOMs (Bill of Materials) and ECO (Engineering Change Order).
Dassault's motive for the acquisition of IQMS is to sharpen and broaden the capabilities of the company's PLM platform, 3DEXPERIENCE (“3DX”), specifically for the SOLIDWORKS community. Money is a scarce resource among SOLIDWORKS users, but most of them still need an affordable, combined PLM/ERP platform that can handle both the product development side of the business and the Manufacturing Execution System (MES) requirements, including things like manufacturing planning, HR, finance, warehousing, distribution and quality management.
A Big Step Towards a Business Rather Than Only a Technology Platform
Bernard Charles has long declared that the aim of the 3DEXPERIENCE platform is to turn it into a business platform, rather than merely remaining in the product development and manufacturing tracks. The acquisition of IQMS is a big step forward—partly to expand 3DEXPERIENCE’s capabilities, and partly to make 3DEXPERIENCE more attractive for the smaller, SOLIDWORKS user companies as they move towards a digitization and cloud future.
Bernard wants these companies on the 3DEXPERIENCE platform; however, the SOLIDWORKS community has generally been resistant to make that move.
One thing that makes this purchase particularly interesting is that it is a PLM developer stretching its “tentacles” towards the ERP side. While there are exceptions like Aras’ acquisition of Impresa MRO (a maintenance solution), usually it is the ERP players who develop or buy PLM capabilities to adapt their manufacturing-related abilities to PLM systems. IFS is a good example with its Application suite, as are companies such as Oracle, who bought Agile PLM; SAP, who bought Right Hemisphere; and Infor, who integrated a version of Aras PLM's Innovator in their business system.
An ERP system, such as what Dassault bought, can mean that new technological capabilities to improve product realization are on the table. For example, a solution where the production of the manufacturing BOM (mBOM) is moved from ERP to the PLM system.
Is an ERP System Less Suitable to Manage the mBOM?
There has been a debate in the PLM community around the roles of PLM versus the ERP system. More specifically, the discussion has centered on the question of the ownership of the mBOM, which often has been produced in the framework of ERP solutions. The general pattern is that the mBOM is based on the engineeringBOM (eBOM), produced by the PLM system.
But since the BOM is the result of a lot of design activity in the PLM system, the issue has been whether it wouldn’t have been more “natural” to move that specific “ERP responsibility” over to PLM.
Since the BOM is the result of activity in the PLM system and doesn’t necessarily connect to the financial realm, it is the traditional province of ERP systems. For those who claim that the PLM system should be the holder of the BOM, the concept of coming in at the end of the process to say, “I want to own that final answer,” simply isn’t enough.
Bear in mind, the knowledge elements are the objects that gave rise to a decision that is embodied in a particular part, in a sub-system or in the entire system.
The structure of the product communicated to manufacturing is a critical step. A PLM system is in many ways the best equipped solution to represent the manufacturing structure, the variation of that structure by the factory and by the manufacturing process. With a deep set of tools for planning and configuration for managing the actual manufacturing environment, there are strong arguments for handing over the mBOM ownership to PLM.
Coming at it from the ERP side, the risk is that you don’t get “the full science of the product.” That approach may fail to represent the real way in which the decisions, logic and engineering rules are built in to the product.
So far, there are few signs of a change in the mBOM ownership debate. However, with an ERP system in the family, Dassault has a great opportunity to revolutionize the situation by creating solutions pointing in this direction.
IQMS’ FLAGSHIP PRODUCT, EnterpriseIQ ERP, is developed specifically for SMB and large discrete batch process manufacturers in the aerospace, medical device, automotive, food and beverage, consumer products, plastics, packaging and electronics industries. In the picture above is an example of the interface.
EnterpriseIQ ERP software offers tools to monitor, track and communicate business activities throughout the supply chain process. The estimating and quoting module helps build accurate sales quotes. The inventory module helps to facilitate lean manufacturing management concepts by building a separate inventory master record for each location. The solution also supports vendor management inventory (VMI) which allows businesses to manage the inventory stored at the customer end.
WebIQ recreates the existing EnterpriseIQ UI. In addition to providing the flexibility to use a range of web browsers, it eliminates the need to update client-side software or maintain terminal services functionality. “As a result, manufacturers can eliminate a significant layer of IT cost,” claims IQMS.
What Does Dassault Get for the Money?
What Dassault is taking into its software portfolio is partly IQMS's on-premise software EnterpriseIQ and WebIQ, a SaaS (Software-as-a-Service) solution.
The solution enables real-time management of technology, manufacturing and business-related ecosystems with digital links to order management, scheduling, production and delivery processes in real time.
Dassault intends to integrate IQMS solutions into the 3DEXPERIENCE platform in the cloud, with the idea being to provide the SMB category of manufacturers with access to an affordable system that not only improves the collaboration capabilities vis-a-vis partners, suppliers and customers, but also contributes to both more flexible and more efficient manufacturing management.
A Puzzle in SOLIDWORKS Users' Journey to 3DEXPERIENCE and the Cloud
The manufacturers primarily targeted by this purchase are, as mentioned above, the SOLIDWORKS users. By adding the IQMS pieces to the 3DEXPERIENCE puzzle, this to some extent PLM-reluctant community gets an incentive to join the journey towards Dassault's main platform and the cloud.
Engineering.com has previously reported on the battery of solutions initiated by Bernard Charles and SOLIDWORKS’ Gian Paolo Bassi, and the attempts to get the SOLIDWORKS generation of designers to move away from desktop CAD and onto the cloud and the significantly broader opportunities available on a modern platform like 3DEXPERIENCE.
Bassi pointed out in a recent engineering.com interview that during SOLIDWORKS World 2018, three solutions were launched as 3DEXPERIENCE bridges for 3D CAD desktop users: Social Collaboration Services, PLM Services and Marketplace. Of these three, two are available with SOLIDWORKS 2019 (Social Collaboration Services, Marketplace) and one (PLM Collaboration Services) has just entered the SOLIDWORKS test pilot program.
The 3D EXPERIENCE "PLM Collaboration Services" are designed to support and integrate all CAD files, including CATIA V5, SOLIDWORKS and others, into 3DEXPERIENCE's data-driven (as opposed to file-driven) layout in the cloud. Because product data is not in file-based organization in the database, but instead individually and aggregated, there is no need for any infrastructure or even installation of any client software except for the connections—the APIs—for different CAD programs.
But as we have discussed, a combined and affordable PLM/ERP solution is the kind of setup that is right up SOLIDWORKS users’ alley, and could trigger, "a volcano of activities around 3DX," as Bassi described it in engineering.com’s interview.
In addition to the add-in integration that IQMS launched in 2013 (BOM, ECO, etc.), the American ERP developer also announced the availability of its browser-based software solution WebIQ in 2016.
IQMS has Good Knowledge of Manufacturers' Needs
In a comment on the acquisition announcement, Bernard Charles said:
“We must no longer think of industry as a set of means of production, but as a process of value creation. This applies not only to disruptive startups and established corporations, but also to the hundreds of thousands of mainstream manufacturers that produce parts integral to the development of new consumer experiences. IQMS has cultivated a deep knowledge of manufacturing and manufacturer needs. We welcome IQMS to our team as we create a new category of business solutions that expands our offer for companies similar to those using SOLIDWORKS. They can embrace the platform phenomenon and flourish in today’s Industry Renaissance.”
Clearly, the purchase of an ERP solution for the 3DEXPERIENCE platform is a smart move by Charles and his team in more ways than just technical capabilities. The return on investment can also prove to be very good. Why?
The Future of ERP in Mid-Market Manufacturing
Analysts estimate today's ERP-related manufacturing market to be worth around $5 billion, with annual growth of 7 to 8 percent by 2023.
What is driving this growth? There are several factors, but the common denominator is disruptive technology. Bernard Charles has chosen to call this era of development "The Industry Renaissance," which is a colorful description of a convergent development line against a versatile and powerful collection of digital technologies that are set to transform all aspects of industrial activity. Mechatronics, digital twins, software, sensors, network connectivity, IoT, Industry 4.0, Augmented and Virtual Reality (AR/VR), 3D printing and other technologies are typical features of the development.
These are trends that the world's millions of small and medium-sized manufacturers cannot ignore if they want to be competitive. The challenges must be assumed, claims Charles:
“Assumed and optimized. We are talking about new ways of producing and doing business through digital transformation to innovate and accelerate growth in an increasingly competitive global market.”
But there’s more, as IQMS’ CEO Gary Nemmers points out. The company he’s heading can meet this development, and as a member of the Dassault family, “We can boost the business even more.”
“For years,” Nemmers continued, “Our business has been committed to maximizing our manufacturing customers’ success by delivering a comprehensive manufacturing ERP system built specifically for the mid-market manufacturers and backed by extensive support and educational services, which has earned us recognition in a number of industry reports and numerous business awards. As part of Dassault Systèmes, we can take the next steps in providing customers with new approaches to achieving operational efficiency and effectiveness, and doing so with a global reach.”
All in all, Dassaults’ acquisition is not only about providing a bridge for the SOLIDWORKS community to establish connections with the 3DEXPERIENCE platform; with IQMS’ solutions, Dassault can also attract new “disciples” on the growing global SMB market.
It is a great initiative that can contribute to broadening the ERP side of every company’s business and provide a seamless connection between technology and administration.
Over 1,000 Customers—Most in the United States
So far, we’ve naturally seen only a few customer reactions to the IQMS deal. One of them comes from Dassault software user Westfall Technik. “We focus on innovation, design and bringing the best manufacturing practices from around the world to all of our operations,” said Brian Jones, founder of Westfall Technik, Inc. “IQMS joining forces with Dassault Systèmes is exactly the kind of innovation we like to see from our partners. IQMS’s strength in manufacturing operations and Dassault Systèmes’ strength in design and digital transformation is a great outcome for Westfall Technik. We currently use both IQMS and SOLIDWORKS in multiple locations. We definitely look forward to the new partnership.”
IQMS solutions are used by more than 1,000 customers, based mainly in the United States, of which 2,000 manufacturing plants in 20 countries produce for automotive, industrial equipment, medical equipment, consumer goods and consumer packaging. In Europe, the system is more-or-less unknown, a situation that can radically change with IQMS in the hands of Dassault Systèmes.
The customer list includes Westfall Technik, KKSP Precision Machining, AMA Plastics, Donnelly Custom Manufacturing, FlowBelow Aero, Global Interconnect and others.
IQMS’s 2017 revenue was just under $60 million. The purchase price of IQMS will be paid in cash, and the completion of the transaction is subject to customary conditions precedent, including antitrust approval in the U.S.
Dassault writes that, “closing of the transaction is expected in early 2019.”
Finally, an interesting fact on the financial side of business: Dassault was advised by—among others—Goldman Sachs, the same company that bought a piece of Aras PLM just a few weeks ago.