In the future all companies will be software companies. Microsoft CEO Satya Nadella made that prediction three years ago, saying that every business will build applications, use advanced analytics, and provide SaaS services (Software as a Service).
You can already see plenty of businesses transforming themselves into software companies. The big digital disruptors already offer data-driven apps to their customers as part of their value proposition -- Uber, Netflix, Amazon. This may take a different shape, depending on the vertical. Apparel retailers might provide software-generated insights into how a consumer might improve his or her style or look. Insurance companies may provide mobile alerts about how to better protect assets -- for instance, move your car because there's a flash flood on the way. Manufacturing companies might develop a software system that better manages the unique operations of the manufacturing floor. Digital disruptors are moving more quickly in this direction.
But how do you move from being a manufacturer of physical things to a software development company? It wasn't an overnight process for contract manufacturer Sanmina. The company manufactures electronic parts for a variety of industries, including communications equipment, medical equipment, aerospace, cloud computing infrastructure -- just about everything except consumer products, according to Manesh Patel, CIO, who spoke with InformationWeek in an interview. Yet Sanmina has packaged the platform it created to run its own manufacturing operations and turned it into a software-as-a-service offering to benefit other manufacturing companies, effectively also becoming a software company. How did this new business happen?
To manage its internal processes for contract manufacturing, Sanmina has relied on the backbone software systems for that industry -- generically known as MES (Manufacturing Execution Systems) -- the enterprise software for manufacturing processes. According to research firm Gartner, systems typically include applications for dispatching, product management, quality management, track and trace and genealogy that lets you track each item in the production process, data collection, plant key performance indicators, and more.
MES vendors fall into a number of categories, but many are companies that offer ERP or PLM (product lifecycle management) software and then create an add-on manufacturing system to go with it. These are systems that Manesh Patel has worked with over the course of his career.
Patel had spent a career in electronics manufacturing, originally starting at a European manufacturer of electronics for automakers, and then moving to Silicon Valley and working with some startups before joining Sanmina 21 years ago. During his time at Sanmina, the company has made a number of acquisitions.
"Manufacturing is different from factory to factory. Building in all that variability is difficult. We've built in a high level of flexibility and variability."
-- Manesh Patel, Sanmina
Everyone in IT knows that when you acquire another company you get a look under the hood of their IT operations in the form of purchased applications, internally developed apps, and other processes, too. So over the years Sanmina's IT organization got first-hand experience with a number of the different vendors and systems for managing manufacturing processes. Some of Samina's acquisitions may have used a packaged product from a vendor that provided MES software. Other operations may have relied on more primitive methods -- a spreadsheet for instance. Sanmina learned from each of the systems over the years.
Creating a more unified system that pulled from the best practices of all of these acquisitions was an evolutionary process, Patel said. Over time the company migrated more towards open technology, moving to Linux and Java. Developers rewrote applications on new platforms. IT connected the platforms using APIs and web services. Then 5 years ago, Patel said, the organization decided to rewrite all of it and put it into the cloud to create a unified, cloud-based system. That's how the 42Q platform was born.
As CIO, Patel oversaw the effort to create this proprietary, standardized MES software system that all of the company's 50-plus manufacturing facilities across 23 countries could use. He said Sanmina learned from its own internal operations and also from its customers.
"We've got strong manufacturing DNA in our IT organization," Patel said. "IT has always worked collaboratively with our manufacturing teams."
But while manufacturing may be the same, there are differences among products and the needs of the system that manages making different products.
"Manufacturing is different from factory to factory," Patel told me. "Building in all that variability is difficult. We've built in a high level of flexibility and variability."
Plus, these systems have tended to be on-premises due to high volumes of data and the need for low latency, Patel said. First, "the sheer amount of data that flows on the manufacturing floor requires a fast network. If you are an operator on the shop floor, you want an instant response."
However, the 42Q platform operates in the cloud. According to the company, the cloud-based MES software minimizes latency by using a digital representation or "digital twin" of the manufacturing operations, providing real-time visibility into the business. Sanmina said the system gives it real-time manufacturing visibility, process, and quality control across its operations and will serve as the backbone for "instant IoT" and manufacturing initiatives. Patel told InformationWeek that the 42Q platform is hosted on one of the "tier one" providers of public cloud services.
Sanmina launched the 42Q platform as a commercial manufacturing SaaS to other manufacturers in May of 2016. Gartner analyst Rick Franzosa told InformationWeek that the pure-play cloud provider could be an MES market disruptor. But the road ahead is not without challenges.
"42Q has proven themselves as the in-house MES system for Sanmina Corporation," Franzosa told InformationWeek. "They have a compelling subscription-based product offering that should do well as cloud MES acceptance grows... 42Q’s success will be predicated on the acceleration of cloud acceptance and their ability to get out from under the shadow of Sanmina with some marquee clients of their own."
42Q is not included in the first edition of the Gartner Magic Quadrant for Manufacturing Execution Systems, published in November 2017. Franzosa said that only 12 of the 40 companies considered made the cut, and that the inclusion criteria included financial, market penetration, business growth, and global coverage considerations.
Patel serves as an advisor to 42Q now, but not as an executive or manager at the company, which is operated separately from Sanmina. 42Q's customers include multiple manufacturing companies. The platform company's corporate site says that Bloom Energy is among the customers.
One of the first questions that prospective customers ask is whether their data is kept secure from Sanmina itself, since 42Q is division of Sanmina, albeit run as a standalone company. That's because Sanmina may be a competitor to the customers who use the 42Q service. Patel said that the data is kept separate and private from Sanmina's.
Sanmina has not only become a software company, developing and hosting its own MES cloud software, the company has also packaged and is now selling the platform as SaaS. Because in the future, every company will become a software company.
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