Cloud MES: How manufacturing software is migrating to the cloud (2023)

In short

• Enterprise software, such as ERP, is increasingly moving to the cloud; Cloud adoption for manufacturing software, such as MES/MOM, is much lower but accelerating.
• 29% of manufacturers in a recent survey indicated a move of MES software to the cloud in the next 2 years.
• The Cloud MES market is estimated to reach $2.34 billion by 2026.

Why it matters?

• Offering cloud-based MES solutions will provide new business and growth opportunities for manufacturing software vendors.
• Widespread adoption of cloud MES will help manufacturers scale operations globally with complete operational visibility and control.

Introduction

According to the World Economic Forum, it is estimated that by 2025, 463 exabytes (1 exabyte = 1,000,000 TB) of consumer data will be generated every day globally. Factories are expected to add 22 zettabytes (1 zettabyte = 1000 exabyte) of data on top of this.

The challenge istomake use of the data in a meaningful wayand use it to create value.However, today,asignificantportion (~55%, according to Splunk)of this data is “dark”(i.e.,it is not used for any analysis).A major reason whydata remains “dark” is becauseexisting toolsarenot designedto handle the volume and variety of datagenerated.

In the lastfew years,companies seekingto“light up”this dark datahaveincreasingly beenadoptinga technology that allowsdatatobe capturedand analyzed in a significantly more powerfulway: The cloud.

Migration to the cloud

When compared to existing technologies,thecloud isproving to be more efficient and superiorby providingascalable infrastructurewheredata canbe securely collectedand accessed from anywhere and on anydevice.Migration to the cloud hasalreadyproven to be a gamechangerin day-to-dayusage for severalenterprise softwarecategories.Microsoft 365has becomethe de-facto cloud-based standard for enterpriseproductivitysoftware. The 2020 success storyofthe Zoom video conferencing toolcan be largely attributed to itscloud-native framework thatallowed the company to quickly scale and managenew customersduring the pandemic.

Our data shows that manufacturing software is following suit.Benefits such as easy scalability,smaller upfrontinvestmentsand operational costs, fastdeployment,andremoteaccessibilityalso makethe cloudadvantageous forfactories’manufacturing software.

AQ4/2020surveyof49manufacturersconducted by IoT Analyticsshowed that themove of manufacturing software to the cloud is broadeningandaccelerating.While nearly 50% of today’s PLM and ERP systemsand roughly one third of MES/MOM and CMMSsolutionsare alreadypartiallydeployedineither a private or public cloudenvironment, many companies are planning to move more such workloads to the cloud in the next2 years.29% of respondents, for example,planto move their manufacturingexecution system (or a large part thereof)to the cloud in the nexttwoyears.

As can be seen by this data set, migration to the cloud in the manufacturing industry is following a top-down approach along the ISA 95 automation pyramid. ERP and PLM systems were the first software to migrate to the cloud (e.g., Oracle’s Netsuite ERP and Cloud PLM), and now MES/MOM systems and CMMS are increasingly moving to the cloud as well (e.g., Plex Systems, Fiix)

Our research shows therearetwovery differentwaysin whichthese software suites are migrating to the cloud:

1. Lift & Shift:Theexistingsoftwareis“lifted”from on-premisesand hosted on aprivate or publiccloud infrastructure located off-premises.
2. SaaS:The software is“cloud-native”, meaning it is multi-tenantandbuilt on thecloud managed by thesoftwarevendor.

Thecloud-basedMESmarket

As canbe seenin thedata set above, there is a clear trend towards cloudMES.

IoT Analytics’latest reporton the topicestimates thecloudpenetrationof Manufacturing Execution Systemsto increase,with cloud MESforecastedtobecome a$2.34 billionmarketin 2026.

End usersare increasinglyadoptingcloud MES as it allows themto take advantage of the latest IoT technologies and offersbetter scalability thanon-premiseMES systems.Additionally,increased focus and investment on digitization efforts accelerated bytheCOVID-19 pandemic in developed economieswillincrease MESmigration to the cloud.

The preferred method ofmigrating MES to the clouddepends onmultiple factors such as capital investment,operational expenses, scalability, and dataownership.

Software-as-a-Service architecturesare expectedto grow considerably faster thanLift and Shiftarchitectures due totheeasy initial setup and integration withexisting cloud-based software infrastructure.SaaS deploymentsareoften preferredby small and medium corporations looking to digitize their operations with limitedupfrontinvestmentsince SaaS solutions require little to no existing IT infrastructure.

“Lift and shift”architectures simply movetheexistingon-premiseMESsoftwareto anoff-premisescloud infrastructure.Largecorporations with global operational footprintsusually preferthis methodfor upgrading existing MES systems to the cloud.Privatecloud-based lift and shift migrationis expected to be thedominantcloudtype for deploying MESsinceit provides complete control and ownership of infrastructure, data, and operations to the end-user; however, itisofteninitially moreexpensive thanusing apublic cloud-based liftandshift migration.

KeyManufacturing SoftwareTrendsin the Cloud

Cloud adoptionis alsoacceleratingkeytrendswhich will affectthe operation offuture factories.3 key trends identified in our analysisinclude:

1. The convergence of software tools

The capabilities ofkey manufacturing softwaretoolsareoverlapping more and more.This isparticularlyapparent for the interfaces of ERP systems and MES systems as well as IoT Platforms and MES systems, especially when hosted in the cloud.WhileIoT platforms, for example, were initially optimized forhandlinga wide range ofIoTdatagenerated byconnectedfactories, legacy tools (particularlyMES;ERP to a lesser extent) haverecentlyalso developed new functionality to handlesimilardatastreams.The abilitytohandleIoT data is just one ofmanyways inwhichMES platformfunctionalitiesand IoT platformfunctionalities are convergingin the manufacturing context.As these software tools continue to overlap more,end-usersnow havemultiple options for performingmanufacturing softwaretasks.

2. Increasing integration ofAItools

As the cloud allows powerful computation,manufacturing software increasinglyintegrate machine learning and AI-based toolsthat go beyond simple OEE and SPC calculations.BothestablishedMESplayers and new startups are creatingAI-basedmanufacturing softwaremodulestodifferentiate themselves.MPDV’sHYDRAMESfor examplenow includesapredictive quality solution. US-basedstartupFalkonryis basing their entire manufacturing software business around AI/ML, offering solutions such as“predictive production operations”.

3. Increasing integration ofdigitaltwincapabilities

Using thefast scalability and massive storage of the cloud,manufacturing software tools (particularlyMES and IoT platforms)areincreasinglyintegrating model-based digitalrepresentationsof factoriesfor process optimization, simulation, what-if/scenario analysis,and other use cases.MES vendorPlex, for example, offers a“what-if” analysisthatleverages a digital twin of operations to simulate changes to operations such as new shifts, maintenance downtime,or availability.GE’s Predix APMmodule offers digital twin-based asset performance management.

Future Outlook

“Historically our members havenot talked much about the cloud;‘Ain’tnever going to happen’wasthe generalattitude. Then in ~2017,all of the sudden it was there. Everyone wassecretly using the cloud in some capacity. Technically(from both a security andrelabilityperspective)it performs much better than what they had sitting in their office.”

—Former executive atManufacturing Enterprise Solutions Association(MESA)

Make no mistake, there aremany end users inavarietyofindustries thatindicate that theywill never movea significant portionof theirmanufacturing softwareto thecloud due to security, privacy, reliabilityand / orlatency concerns.But inthe coming years,a largepotionof manufacturerswillmove manufacturing software applications to the cloudbecause thebenefitsoutweightthe costs / risksinmany settings.Our data shows that business and shopfloor softwarethatare non-critical and non-real-timewill leadthemigration.Shopfloor-level control logic operations will take longer to move to the cloud due to gaps in realizing ultra-low latency communication with high reliability;however,new developments in5G and wireless communicationwill likelyaddress these concernsand open the door to even moremanufacturing workloadseventually migrating to the cloudin the coming decade.In combination with relatively newtechnologies like artificial intelligence and digital twins,the cloud is set to become anindespesibletool for improving manufacturing operations.

More information and further reading

Are you interested in learning more about Cloud MES?

The “Cloud MES Market Report 2021-2026​” is a comprehensive85-page report assessingthe cloud MES market. It includes a definition of cloud MES, market projections, adoption drivers, case study analysis, key trends & developments.It is part of IoT Analytics’ ongoing coverageof IndustrialIoT and Industry 4.0 topics (Industrial IoT Research Workstream).

This report provides answers to the following questions (among others):

• What are the functionalities of MES software and how has it evolved over the years?
• What is the adoption level ofcloud-basedMES solutions?
• Whatarethe different cloud-based solutions available for MES?
• What are the technologies that are acceleratingtheadoption of cloud MES?
• What are the growth drivers and inhibitors ofthecloud MES market?
• How big is the cloud MES market? Market segments include:
  • Cloud type (private cloud, public cloud)
  • Cloud service type (Lift and shift, Software-as-service)
  • Region
  • End-user industry
• How competitive is the cloud MES vendor landscape?
• Howdocloud-based MES compare to IoT platforms and similar software tools?
• What are the key trends and developments associated withthecloud MES market?
• And more…

Sample:

The sample of the report provides a holistic overview of the available analyses (outline, key slides). The sample also provides additional context on the topic and describes the methodology of the research. You can download the sample here:

Are you interested in continued IoT coverage and updates?

Subscribe to our newsletter and follow us on LinkedIn and Twitter to stay up-to-date on the latest trends shaping the IoT markets. For complete enterprise IoT coverage with access to all of IoT Analytics’ paid content & reports including dedicated analyst time check out Enterprise subscription.