SAP AG's adaptive manufacturing strategy got a big boost today when the enterprise application giant announced it will acquire Lighthammer Software Development Corp., a small-but-growing maker of manufacturing intelligence software, for an undisclosed amount.
The deal, expected to be completed early next month, will fold Lighthammer into the SAP Manufacturing Industry Solutions Group, but keeps the Lighthammer management team -- including co-founders Russell Fadel and Rick Bullotta -- and the entire 60-person workforce intact in its Exton, PA. headquarters, just a few towns away from the SAP America's headquarters.
For industry observers who have been watching the SAP/Lighthammer partnership unfold over the last several months, the acquisition comes as no surprise. The two companies have been hammering out ISA-S95 interoperability issues between shop floor operations and enterprise applications. The aim: to enable the creation of role-based manufacturing intelligence dashboards that provide real-time access to data that correlates events and KPIs from shop floor systems with enterprise applications.
"This is a unique value proposition that is key for us to enable our manufacturing strategy," said Andy De, SAP's director of applications solutions management. "For the last 18 months Lighthammer has gone through great pains to make sure it is well integrated with SAP NetWeaver."
The vision is to create a tightly integrated offering that is multi-tiered, according to Lighthammer CTO, Bullotta. One level of the offering will replace any third-party development code with corresponding SAP technology for a tightly integrated plug-and-go solution, he explained.
Future products, to be outlined more fully in the fall, will add more analytics integrated into the S95 data model, he said. This will be beneficial to Lighthammer's current installed base. The company currently has about 150 customers, 85% of which are also SAP users. In addition, there is the potential to leverage Lighthammer's analytics outside of manufacturing.
Lighthammer, a private company which reportedly doubled in revenue year over year in 2004, now has at its disposal a global network of resources for developing, testing and marketing products. "We sat back and realized given the market size it's not a big win for us if we got to 500 or 700 customers when there are 10,000-to-15,000 customers out there," Bullotta said in an interview with Managing Automation. "But to go after them we'd have to establish global sales support ... we could go back and raise more money and do it the old fashion way, but at the same time we were in discussions with our peers at SAP."
In fact, the discussions have been ongoing since December, spurred by SAP's adoption of the S95 model, which is integral to the integration between production and enterprise operations. "What is lacking in S95 is that there is no analytic model [detailing] what levels do you aggregate and what do you look at," said Bob Parker, vice president of research at Manufacturing Insights, a unit of International Data Corp. "SAP had a choice. They could build it or make an acquisition. And Lighthammer is so much ahead of anyone else in building this analytic model, SAP said, why reinvent it?"
As SAP and Lighthammer celebrate their union, questions remain concerning the 15% of Lighthammer's customers that use a different ERP vendor. "It's business as usual," Bullotta said, as the company's Java-based composite architecture is flexible and the company will continue its development plans supporting other ERP applications.
And what about SAP's other partners? Well, "it makes life easier for our other partners to integrate [with]," especially those in the MES space, De said. That in turn, "lowers total cost of ownership for the customer and accelerates the value for [our] partners."