These seven news stories caught my attention last week.
UTC is acquiring Rockwell Collins for $30 Billion creating an Aerospace Tier 1 behemoth. Airbus and Boeing are not too happy as consolidation will loose their pricing power. It could be a good news for engineering services if some of the operation synergies and pricing power are diverted into R&D spending. (Read here)
John Deere is buying an AI startup to automate farming. Blue River Technology builds machine vision tools that help farmers scan fields, assess crops, and get rid of weeds — all at the same time. This acquisition shows how traditional manufacturer can leverage technology to extend their product to solutions and services and thus remain relevant in this era. It also shows that enterprises will not solely rely on technology software and service providers for solutions and might acquire technology startups on their own. To me, this is one of the greatest risks that technology software and service providers will face in future. (Read here)
Talking about enterprise investment in technology startups, there is another interesting news from the telecom world. Swedish telco Telia is investing in eBuilder which will help Telia to automate device care for its customers using machine learning. It will potentially save operating cost, develop a new revenue stream and enhance customer experience. Telia will be the only telco in Sweden to gets to use it exclusively thanks to its investment though telcos outside Sweden can use eBuilder's technology. I wish some telecom service provider would have developed this solution. This again highlight risk that enterprises might bypass technology service providers and acquire technology startups on their own to remain relevant. (Read here)
Altran, the largest engineering service provider by revenue, acquires GlobalEdge, a 1000 people strong engineering service provider for $65-$80 million. It will help Altran to expand is customer foot print in the US, delivery foot print in India and service foot print in software and embedded engineering. It shows that acquisitions will be the critical part of the growth strategy for engineering service providers to maintain double digit growth. (Read here)
Aras announces $40 Million investment led by Silver Lake and GE Ventures. Aras is an upcoming PLM software provider disrupting the PLM market with its cloud based software. SaaS adoption has been slow in PLM unlike in HCM and CRM world where Workday and Salesforce have led the disruption. But it looks that it is going to change now. Already Aras has some marquee customers for PLM such as GM and Airbus. GE's investment is interesting. PLM is a big hole in GE's software portfolio, and I thought that GE would acquire one of the top three PLM software provider ( either PTC or Dassault) to compete with Siemens. It looks that Aras may be the option for GE as well. (Read here)
Jaguar Land Rover will be all electric by 2020. This shows that EV is an idea whose time has come. Currently, EV is less than 2% of the global car fleet, and prediction is that by 2035. 6% global car fleet will be EV. I think we will hit the 6% number much earlier than 2035. It's good news for engineering services as Automotive OEMs, and tier 1s will accelerate R&D investment in EV and self-driving cars, they might shift some more of IC mechanical work to engineering service providers. Already some of the EV and self-driving R&D work is coming to engineering service providers. Technology shifts are not bad for the outsourcing industry. Isn't it? (Read here)
Aveva to merge with Schneider Electric in $3 Billion deal. This shows both challenges and opportunities as industrial manufacturers become ISVs. It's difficult to grow and build scale organically. Engineering ISV consolidation could be a good news for engineering services if some of the operation synergies are diverted into R&D spending. (Read here)
