Digitalized Heavy Machinery

Honeywell’s latest bid demonstrates prevailing trend

On August 15, Honeywell International, the Morris Plains, N.J.-based manufacturing conglomerate, put $3 billion on the table in an offer to acquire JDA Software Group, Inc. The acquisition is still in limbo (challenged by an alternative offer by private equity firm Blackstone Group LP) but demonstrates an important prevailing trend in the industry.

Honeywell’s recent bid to acquire the software group exemplifies a larger movement. The heavy machinery industry is steadily moving towards digitalization, and companies are anticipating a full eclipse in the end. General Electric, perhaps the most vocal in this regard, has demonstrated its stance via acquisitions and public image. The company clearly wants to appear as an innovative entity; a new breed that fuses all the benefits of new-age technology with work-and-grind industrial.

As many of us are already plenty aware, this digitalization process involves a lot of things we cannot actually see or touch. Subsequently, workers on the ground floor (literally and figuratively), must now learn to trust in screens that control something miles away, data that resides in the air, and scheduled, self-performed maintenance that the machine sometimes does itself. Workers from the golden age of manufacturing are resistant, but corporate decision-makers cannot afford to be. Steve Rosenbush of the Wall Street Journal writes:

“The digitalization of physical objects, from machine parts to a pair of jeans on a store shelf, is changing the way companies think of themselves and their markets. The role of service and the customer are replacing older concepts such as sharply delineated products and markets, as a result. That jet engine? It’s now a plane conveyance service with continuous software updates and a (hopefully) guaranteed result. And in a world of interlocking software platforms, competition becomes more complex, too. Fasten your seat belts.”

Note how Honeywell fits into this trend in terms of their range of products. Its business units cover everything from aerospace to fire safety, but they have recently emphasized the expansion of their automation and control systems sector. Older divisions, such as its home generators and HVAC/R equipment, have been absorbed into into units like performance materials and technologies.

For the specifics of this acquisition, however, Blackstone’s alternative offer gives JDA Software Group another option to consider, and could prevent Honeywell from its second acquisition of a technologically advanced company in as many months. It purchased Intelligrated, a supply chain and warehouse automation firm, for $1.5 billion in July.

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