What does a giant engineering and automation company like Siemens AG want with UGS, a design and product lifecycle software vendor? That's the first among many questions surrounding Siemens' announcement in January that it will acquire UGS and fold it into Siemens' huge Automation & Drives business.

The theory behind this combination is that manufacturers need to electronically link product design and development with production. This notion, which some call the digital factory, holds the promise of cutting the time it takes to get a product to market, reducing errors, and enabling collaboration on a global scale. It is seen as an essential part of the digitization of manufacturing itself, a broader vision of ultimate automation throughout the business.

Heady stuff, but it is possible to create so-called digital factories by integrating design and production. Siemens, like many others in the manufacturing automation business, sees this coming, but no other automation company has been gutsy enough to plunge in with an acquisition of a major product lifecycle management vendor. In one dramatic move, Siemens has both positioned itself at the intersection of these two forces and raised the bar for its competitors.

But the key to the whole idea is what happens at the intersection. As we know from technology industry history, it is much easier to acquire a company than to actually make it work within what many times is a different corporate environment. The technology industry is littered with acquisitions that rested on equally logical theories but didn't quite work out the way they were advertised. One example: Invensys's acquisition of ERP provider Baan in 2000 was based on the theory that factory floor systems needed to be integrated with business systems. The theory was right, but for a host of reasons Invensys could not make it work at the intersection.

Siemens has a big opportunity with the digital factory idea, but it will also face significant challenges. First, it will have to absorb UGS while simultaneously attempting a major cultural transformation as directed by Siemens' youthful CEO Klaus Kleinfeld. For its part, UGS will need to find its place and footing in Siemens' massive Automation & Drives business, which over the past few years has also been attempting to establish itself in the manufacturing execution systems (MES) business.

As this corporate coupling is consummated, Siemens will have to grapple with some key business model issues as well. The first is timing. How ready is the manufacturing market for the digital factory idea? How will an integrated offering be packaged and how will it be brought to market? Will an offering be based on one data model or a collection of data models? How will Siemens address UGS's design engineering buyers and how will it position UGS to companies that have multiple, disparate design systems? How will Siemens prove the advantages and benefits of the digital factory idea to manufacturers? How will Siemens define success with UGS?

For Siemens, the easier part — acquiring a PLM vendor — will be over in short order. Then comes the hard work of weaving together the two businesses culturally, organizationally, and technologically. Now, as they say, it's all about execution. Stay tuned.

What's your view of the digital factory idea? Write to me at Dbrousell@thomaspublishing.com.