German industrial giant Siemens announced its intent to buy Product Lifecycle Management (PLM) software provider UGS Corp. for $3.5 billion — a marriage aimed at bridging the gap between how products are designed in engineering and how they’re built and manufactured on the factory floor.
The Siemens Automation and Drives (A&D) Group is positioning UGS’ PLM and CAD software as a natural extension to its own industrial automation products, which encompass everything from the hardware controls and sensors used in production equipment to the manufacturing execution systems (MES), process control systems and industrial communications deployed by companies to operate their production facilities. In addition to its widely used CAD/CAM and collaborative product management tools, UGS had begun to nudge its product line closer to this manufacturing turf courtesy of its 2005 acquisition of Tecnomatix, software used to digitally build and simulate manufacturing lines.
UGS Spokesman John Clendening called the acquisition a “game changer,” providing customers with an integrated option of hardware and software across the whole product lifecycle. “Customers will now be able to benefit from the integration of the physical world through Siemens’ automation, design, and production technology with the virtual world of our PLM and CAD software,” he said. Clendening said he expects UGS to operate as a division of Siemens Automation and Drives, with little or no management or product changes and with the benefits of a larger R&D budget.
Analysts said the acquisition, which is subject to approval, provides Siemens with a way to reach upstream into product development. “This is all part of the trend of joining the product launch process with the factory floor,” said Mike Burkett, vice president with AMR Research Inc., a market research firm in Boston, MA. “This connects the design engineer to the rest of organization.”
While the companies were not yet releasing details on product strategy, analysts, including Burkett, said they expect the pair’s products to be integrated over time, including the development of a common data model. Once this level of integration is achieved, design engineers using UGS’ CAD products would potentially gain access to a richer set of information to enhance their product designs. Specifically, engineers could tap into data on the manufacturability of the products they’re working on and be able to incorporate that knowledge into subsequent iterations of their designs.
“The more information they can bring in, in a way that’s not obtrusive, will improve the design capabilities of the front-end engineer while reducing the amount of work necessary when you actually get a product into production,” explained Ken Amann, director of research for CIMdata Inc., a research and consulting firm specializing in design based in Ann Arbor, MI.
Creating tighter links between engineering design and manufacturing and production is not necessarily new. Dassault, a key UGS competitor in the PLM space, has been pursuing a similar strategy for some time, with a heavy focus on its Delmia digital manufacturing software. Philippe Forestier, head of Dassault Americas, said the UGS/Siemens merger was simply confirmation that Dassault has been on the right track. “Our strategy has always been that digital product development and digital manufacturing are tightly linked,” he said. “Our strategy … and the recognition that PLM is important is reinforced by this acquisition.”
Siemens is not the first big player to acquire UGS. The company, which was formed by a series of acquisitions, was owned by consulting giant EDS until it was spun out in 2004 and bought by a private equity group of Bain Capital, Silver Lake Partners and Warburg Pincus. Analysts said one of the major challenges for the newly purchased UGS and the integrated product development and digital manufacturing strategy will be UGS’ ability to operate effectively as part of such a large organization.
“Part of why UGS was spun off from EDS was that they couldn’t execute under a big umbrella and they couldn’t distinguish themselves as a company competing in the PLM space,” said AMR’s Burkett. “Well, here they go again. We’ll have to watch how well they can execute over the next six months once they’re buried under the Siemens umbrella.”
UGS’ storied acquisition past is not a concern, according to some users. “We’ve had the software with various names since 1984/85, and regardless of what the company may be called, what we’ve always appreciated is that UGS has always advanced the product,” said John Manderfield, design manager with Consolidated Container Company of Atlanta, GA and chairman of PLM World, UGS’ user conference.