Enterprise Asset Management (EAM) Consolidates

On July 6, privately held software giant Infor (a subsidiary of Koch Industries) announced an agreement to sell its global EAM (Enterprise Asset Management) business to Hexagon AB for roughly $2.75 billion in cash and stock.

A bit about Infor EAM

Infor’s EAM business has approximately 500 employees located around the globe. The Infor EAM offerings focus on digitizing maintenance via native mobility applications. The objective of EAM is to empower field technicians to provide more targeted service for hard assets using data collected and analyzed from production assets to improve asset performance, optimize the resources of mobile technicians, employ digital visualizations to assist with analytics, and guide workflow and processes to improve outcomes while incorporating safety and environmental health alerts.   The offerings include industry-specific capabilities for manufacturing, transportation, the public sector, healthcare, and more.

About Hexagon AB

Hexagon AB is a publicly-traded company, with approximately 21,000 employees in 50 countries and net annual sales of approximately 3.8 billion euros. The company describes itself as a leader in digital reality solutions that combine sensors, software, and autonomous technologies to leverage data in order to improve efficiency, productivity, quality, and safety across industrial, manufacturing, infrastructure, public sector, and mobility applications.

Rationale for the Deal

According to the CEO of Hexagon Ola Rollén, the combination of Infor EAM’s asset management capabilities with Hexagon’s digital reality solutions and platforms promised to improve capital asset performance far beyond what EAM can accomplish alone — particularly in areas like enhancing predictive maintenance, reducing energy usage, and supporting sustainability initiatives. Infor’s EAM organization will operate as part of Hexagon’s Industrial Enterprise Solutions segment, and the goal is to serve all Hexagon businesses that are focused on asset-intensive ecosystems including manufacturing, industrial facilities, mines, farms, autonomous mobility, buildings, infrastructure, smart cities, and defense.

What is Enterprise Asset Management?

Enterprise Asset Management (EAM) refers to the processes involved with managing maintenance of a business’s physical assets and equipment throughout each asset’s lifecycle. The objective of EAM is to maximize asset/equipment lifespan, reduce costs, optimize the quality and utilization of assets, increase efficiency, and improve safety. EAM solutions typically employ data analytics on information gathered from assets, centralizing information to provide a single source for actionable information on discrete machines, for comparing/benchmarking, and for tracking issues, resolutions, and best practices.

EAM software is especially useful for supporting maintenance in three categories according to Gartner:

1. Fixed plant assets, such as power generation, manufacturing, and oil refineries;
2. Linear assets, such as power lines, rail, and pipelines; and
3. Mobile and fixed fleet assets, such as service equipment, rail cars, locomotives, trucks, transformers, and pumping stations.

About the EAM Market

The EAM software market includes project/performance management, asset performance management, and asset/project portfolio management. According to SelectHub, the EAM market is predicted to grow from $5.1 billion in 2020 to $8.2 billion by 2024 with Asia and North America the fastest growing EAM markets.   Cost is the major entry barrier to the adoption of EAM software, followed by hesitation to adopt new technology and geopolitical volatility. The relatively modest pace of growth for EAM software is characteristic of more industrially oriented technologies, where there are challenges involved as well with integrating legacy operational technologies with advanced data analytics.

Momenta’s Take

The Infor-Hexagon deal reflects a rebalancing of Koch’s software portfolio (given that Infor was Koch’s first major software purchase this allows for greater focus on core mid-market ERP capabilities) while aligning the more industrial-based EAM offerings with Hexagon, which has the sensors, hardware, and automation expertise to better leverage the additional capabilities. The evolution of EAM into more proactively oriented APM (Asset Performance Management) is a secular trend driven by analytics that seeks to deliver more anticipatory guidance to businesses. The challenge for many pure software firms has been the need for partners with the industrial client footprint and hardware/sensor capabilities to provide real-world proof points. Looking back at the vision of initiatives like GE Software/Digital, the value of layering software analytic platforms onto physical assets resonated well, but the execution is not so easy. The Infor-Hexagon partnership appears to be manageably more modest in its ambitions, while both parties have skin in the game as well. While a significant deal financially, and needed consolidation in the fragmented EAM market, the success of the combination will have far greater implications as a lighthouse combination for the rest of the industry.

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