Industrial software for manufacturing – outlook and dynamics 2024

As the popular focus regarding Industry 4.0 has shifted to all the technologies that enable the so-called smart factory, it’s easy to overlook the essence. Data is and remains a vital part of that essence. Data – and how it’s leveraged across the value chain – is what the whole bridging of cyber and physical in manufacturing and Industrial IoT is all about.

The spend on manufacturing execution systems is forecasted to grow by 13.5% CAGR and be worth US$2.3 billion in 2024. ERP systems account for over fifty percent of the spend as they provide customers with a single solution to monitor activities on the production line, to understand the firm’s ability to fulfill orders as well as automate many back-office functions

What else is the life cycle and value stream dimension of the Reference Architectural Model Industrie 4.0 (RAMI 4.0) than an end-to-end series of data mapping stages, moving from data to value?

On a system level, this translates in the principles of horizontal integration (the value and supply chain) and vertical integration – from sensors and actuators up to the enterprise resource planning (ERP) level with the various industrial software applications for manufacturing such as manufacturing execution systems (MES) and manufacturing operations management (MOM) in-between.

Just as is the case as in all areas where IT and OT converge and digital transformation occurs with the Internet of Things, artificial intelligence and machine learning being present across systems, by definition, the borders between applications and thus industrial software applications are gradually blurring.

Integrations, APIs and connectors, disappearing information silos and a different view on the role of these various systems that is far less linear than before are all impacting the whole industrial software application space, not just in manufacturing. And the winners – ultimately – will be those with an open, standardized and interoperable ecosystem approach that can rapidly integrate next-generation solutions.

Industrial software concept

Industrial software propositions in manufacturing as segment borders blur

The propositions of suppliers of industrial software and manufacturing software applications are already evolving with a blurring of borders between different software segments in manufacturing, from MEM and MOM to ERP and inventory management.

In an update on the industrial software market in the manufacturing segment until 2024, ABI Research analyst Michael Larner reminds how data underpins activities such as onboarding raw materials, optimizing the production line, organizing the facility, and even to understand clients and the final customer.

Whether you want to call it industrial transformation, Industrial IoT or smart manufacturing: this is what Industry 4.0 is indeed about, an end-to-end, integrated approach with data being omnipresent on all levels. Since Larner mentions facilities as well, think about the similar evolutions which we see in facility management and buildings.

The software applications no longer just provide data regarding the current conditions. As a result of suppliers investing in AI and machine learning, the applications’ analytical capabilities can help manufacturers plan for future scenarios in their facilities and the wider operating environment

Factories today run on data, ABI says. Well, they’ve been leveraging data for quite some time, it’s just the degree in which they do that has changed a lot. And, of course, the sources (Internet of Things), formats and volumes have increased, (soon) enabling new capabilities whether it’s in the scope of more autonomous production systems or predictive maintenance, to mention two.

Moreover, once there is some standardization in an industrial data context, there is that whole ecosystem transformation aspect with, in the end, new business models, probably leveraging ‘true blockchain’ on the horizon that we often forget in times of short-term automation goals. In practice, we’re far from there yet since things do move slower than we sometimes believe. But it’s good to remind Industry 4.0 is about that as well.

Industrial software spending in manufacturing – ERP accounts for majority of spend, MES software highest growth

To harness the data, manufacturers turn to software applications such as ERP, manufacturing execution systems, manufacturing operations management, Product Lifecycle Management (PLM), Inventory Management, and CRM and Demand Planning, ABI reminds, going back to the company’s forecasts.

The total spending in the industrial sector and manufacturing sector on these applications is expected to grow from US$18 billion in 2019 to just over US$27 billion in 2024, according to the firm.

The biggest chunk of the spend is for ERP systems (over 50%) as these systems enable users to monitor activities on the production line, to understand the firm’s ability to fulfill orders as well as automate many back-office functions, with a single solution. As you probably know, the ERP market is also in flux with a shift from systems of record to systems of engagement, intelligence and ultimately systems of decisions, once called i-ERP (albeit also slower than once expected).

The highest growing industrial software segment from a spending perspective in ABI’s outlook is for MES software. With manufacturers looking to optimize the performance of individual machines and the production line, the spend on manufacturing execution systems is forecasted to grow by 13.5 percent CAGR and be worth US$2.3 billion in 2024.

Industrial software for manufacturing - Software applications in the manufacturing setting report ABI Research
Software applications in the manufacturing setting report ABI Research

ABI’s Michael Larner also emphasizes how the segment definitions are blurring and gives two examples of evolving supplier propositions in that sense:

  1. ERP suppliers continue to add modules such as MES and MOM while
  2. Inventory management providers are adding demand planning capabilities.

He concludes: “Data now flows from the production line to the boardroom and, thanks to APIs, between the software applications. Manufacturers should partner with system integrators to design and assemble their data jigsaw”. As ABI Research puts it: plenty of opportunities for all types of suppliers to meet manufacturers’ appetite for data.

More in ABI Research’s Software Applications in the Manufacturing Setting application analysis report.

A diverse mix of vendors are targeting the industrial markets including software giants Oracle, Salesforce, and SAP, and those with a heritage in industrial manufacturing such as ABB, GE, and Honeywell. The vendor mix includes others with an industrial focused software portfolio, such as Dassault Systèmes and Siemens, and start-ups like Katana and Archdesk, which are helping smaller manufacturers scale.