Sustainability & Circularity was a driving theme at the annual HxGN Live! event this year. Held in person after a long two year pandemic gap, and with a record attendance.
The Hexagon story, one of innovative hardware scanning solutions and design software to support engineering and construction markets. The partnership with AspenTech strengthened front end engineering on new projects – concurrent design & engineering practices, fast evaluation of multiple design concepts and 3D plant layouts, capital & operating cost impacts, analysis of risk & design trade-off decisions
A suite of integrated technologies to support manufacturing operations – real time performance data capture from operational assets, deep analysis, visualizations, predictive failure-alerting, tagging & categorization of faults, workflow triggers for mitigation, and added capabilities to operate digital twins round out the portfolio.
ArcInsight Research believes the Power of Platforms & Insight gives Hexagon a coherent and compelling story for its target markets. Software and hardware tied together brings unique capabilities to manufacturing – delivering high productivity, minimizing resource usage, assuring consistent product quality.
Businesses operate in highly regulated environments. They are expected to achieve medium and long term growth expectations set by investors, handle a serious shortage of trained experienced workers brought on by an entire generation of operators preparing for retirement, manage business continuity in the face of more frequent and more severe natural calamities, resist the ever present and persistent threat of cyber intrusions by state and malicious entities, and be mindful of GHG emissions,.
Straddling such unprecedented business challenges require a tightly synchronized and situationally-aware monitoring system – sensors, connectivity, data analysis, autonomous decision making and actuation.
The added constraint introduced by mandates to build sustainability within the heart of production necessitates creative engineering approaches to minimizing carbon content both in production input as well as the final product. Additional design challenges involve exploring alternate energy sources to run manufacturing operations, new biological products/processes to absorb carbon from air, identifying alternative materials to replace present carbon-intensive fuels, all the while demonstrating comparable (or superior) physical and chemical qualities to satisfy their customers. Let’s stack one final challenge on top of all this. Expect companies to do this at scale and repeatedly with all customers, across the world.
Hexagon’s Xalt Platform tied to Asset Lifecycle Insight
The 2022 HxGN Live! showcased interesting changes. The transformative acquisition of Infor’s Asset Management business brings new capabilities to fill out the market portfolio. The PPM division rebranded itself Asset Lifecycle Intelligence (ALI) to reflect its deep focus through the life of industrial assets, some of which include asset visibility combined with the ability to monitor asset-geolocation and health scores.
Predicting asset failures before they disrupt production, real time inventory tracking for spares closely tied to client CMMS systems enables new managed equipment strategies, higher maintenance effectiveness through real time operational visibility and better quality decision inputs for the front-line manufacturing worker delivered exactly at the point-of-need through handheld and wearable devices. These devices (some incorporated into Hexagon’s solution portfolio) overlay plant asset identification info, real time performance parameters and its health score delivered whenever they point to it.
Enhancing workforce effectiveness and process safety ties this directly to operational and sustainability excellence goals. A must-have report for corporate boardrooms and institutional investors.
Sustainability Is A Profitable Proposition
Hexagon’s enterprise wide Sustainability imperative is very effectively demonstrated through its portfolio of solutions which focus on waste reduction both for input materials and of energy and labor-usage, by streamlining tasks. The company is inspiring its customers to embrace “humans-out-of-the-loop” approaches through sensor enabled data capture that reduce COGS but also enhance product consistency, lower rejects, lower rework, smaller inventory requirements all leading to very tangible financial outcomes in the form of higher product gross margins. Clearly sustainable can also mean more profitable operations.
Three Competitive Elements
As we delve into Hexagon’s vision of the future of manufacturing, one must not underestimate the criticality of three competitive differentiators that stand out from our global analysis of industrial companies and markets: robust data-management platform wrapped around a product portfolio, a strong OT/ICS cybersecurity assurance, and the ability to transition customers to SaaS / Subscription recurring revenue business models.
ArcInsight Research believes they will feed into business and financial success going forward.
Our analysts are pleased to report Hexagon scores quite well in several aspects as evinced from briefings and conversations with key business leaders. A deeper ongoing analyst assessment may be of benefit to Hexagon.
Transitioning Customers to SaaS / Subscription Models (Increasing Share of Recurring Revenues)
When the transition is managed by the book and product-market fit succeeds, bottomline results can be dramatic. On the other hand, getting to the other side of the chasm is fraught with several execution challenges which must be managed and monitored carefully. For a public company the scrutiny of this transition by financial markets can be harsh and often subject to skepticism in its early stages.
Given that, what are the key drivers compelling customers towards a shift to subscription buying?. There are several factors –
a. Capex pressures
b. Reducing dependence of on-premise IT infrastructures & staffing cost
c. Margin pressures forcing companies to focus on high-margin services from fixed-license software products (servitizing products + productizing services = higher margins)
d. Industrial digital transformations forcing a review and rethink of “just-in-case” capital expenditure practices to a “pay-as-you-go” operation expenditures
e. The shrinking pool of highly-skilled deep-domain industrial experts (operate onsite / manage advice & critical decision making all handled remotely)
f. Industrial autonomy is approaching reality. Managing plants with minimal operating staff (process management & control staff operates onsite. Advanced process control & process optimization capabilities operate in the cloud
g. Remote (cloud-enabled) collaboration has become a necessity even in a post-pandemic scenario (share/modify design & engineering models, visualize strategic options, discuss process optimization strategies, leverage digital twins to analyze real time process data, and many others.)
OT/ICS Cybersecurity
As manufacturing environments move towards modernizing systems, boosting productivity, and raising overall operational efficiency, the progression is leading to these infrastructures becoming more interconnected and integrated with other IT systems and introducing automated methods to strengthen their overall OT asset management capabilities.
With every new asset deployed in support of growth, innovation, and efficiency efforts, the enterprise attack surface expands. The number of vulnerabilities is also rising rapidly year over year while the time it takes for attackers to exploit them is dropping. Vulnerabilities exist in many utility-owned devices such as voltage regulators, smart switches, capacitors, RTUs, human-machine interface (HMI) systems and SCADA software.
Traditional IT endpoint cybersecurity tools address only 20% of OT/ICS-centric cyber assets, leaving proprietary, heterogeneous industrial control systems hidden and vulnerable. Hexagon added PAS Cyber Integrity as an offering to protect all control systems (Level 3 – Level 0) against cyber threats. Another valuable acquisition to the Hexagon lineup.
Xalt’s Smart Data-Management Framework
Hexagon has a strong go-to-market story with its Xalt Framework and data platform. It underpins Hexagon’s digital solutions with technologies that address critical IoT challenges of enterprise integration, cloud orchestration, data visualization, mobility access for front line workers, edge connectivity, and allowing customer/industry solutions to leverage the power of artificial intelligence.
ArcInsight Research provides a conceptual diagram to summarize its perspective of the power of Xalt’s framework and the potential value this alone could deliver to industrial customers, and to Hexagon’s own marketplace approach with an integrated suite of products, platforms & vertical solutions.
ArcInsight also shares an early assessment of Xalt’s market potential as it evolves its own capabilities.
Putting Your Money Where Your Mouth Is
Almost every large public company is expected to talk about sustainability, and dedicate a few pages and slides in their annual performance reporting. A large number of them see sustainability initiatives as an unnecessary loading on to their overall product cost. A few actually believe sustainability can be a profitable business. One has gone ahead and invested its own money into actual sustainability projects with real profit goals, in order to prove what they believe in.
Hexagon’s R-evolution business unit focuses on leveraging the power of solar power, wind energy and solar thermal energy to ultimately build the blueprint for a fully sustainable green hydrogen economy.
Showcasing most of Hexagon’s own “plan-to-design-to-build-operate-to-maintain-to-secure” technologies it sells to its own customers across the plant lifecycle, its initial investment in a solar plant in Spain is its initial proof point that the company puts its money where its mouth is. R-evolution has also launched a corporate venture fund to support other entrepreneurial projects that align with this ultimate blueprint.
About the author
Praas Chaudhuri is CEO & Principal Industry Analyst supporting Industrial Autonomy, Intelligent Cities and the broader Digital Transformation markets. A regular visitor to Hexagon’s annual HxGN Live! event, he also covers most major companies in the industrial manufacturing, mining, process automation, as well as software, hardware, satellite imaging and other innovative technology players focused on building AI-enabled applications to support industrial use-cases. Based in Silicon Valley, Praas is a former strategy consultant with several additional stints in corporate planning & strategy roles at large manufacturing and technology companies. He can be reached at pchaudhuri@arcinsightpartners.com
About ArcInsight Research
ArcInsight Research works with leading global industrial companies involved in smart city infrastructure, process equipment, control software and hardware, design, simulation, operations, optimization. It is deeply plugged into the technology ecosystem – bleeding-edge startups and the investor community.
The group was founded in 2010 by consulting firm partners and senior experienced executives with deep global experience in industrial domain research, strategy consulting, technology and and investment banking. The firm aims to equip senior industry leaders with tools and perspectives to view the bigger picture and longer term over-the-horizon opportunities, and also support their strategy with a tangible path to execution.
The strategy advisory approach offered by ArcInsight Partners is a valuable partnership opportunity for enterprises that may be either starting out on the digital transformation journey, in the midst of of transformation and looking for fresh perspectives to position themselves for a highly connected algorithm driven world.
Some of our past advisory engagements have included assisting clients –
– Validate transformation goals and its transformation journey
– Assess new target markets; Validate TAM and growth rates
– Validate drivers for new business model; Transition strategy to SaaS / Subscription models
– Design new service opportunities
– Build monetization and revenue models;
– Map in-house competencies; Sales strategy and key account coverage
– Structure appropriate partner ecosystems for effective value delivery
– Due-diligence for potential acquisition & partnership targets; Assess deal valuations
