A recent survey by Valtech and Copperberg shows that composable architectures (43%) have overtaken platform solutions (41%) as manufacturers' preferred IT strategy. Even if the lead is still small: in 2023, more manufacturers will rely on composable architectures than on monolithic platforms for the first time.

Are we seeing a turning point in the digitalization of the manufacturing industry? There is much to suggest so. The focus on composable can be explained by current industry trends: The merging of physical and digital production worlds, new output-oriented models of work organization and the need to offer B2B customers a customer experience (CX) similar to what they already know from B2C companies.

But what constitutes a composable architecture? And how does it help to overcome the current challenges facing the industry?

Flexible towards a uniform IT ecosystem

In the last ten years, manufacturers have predominantly used little customized software. There are certainly advantages to buying a monolithic software solution. You can usually get started more quickly and have to worry less about the design or development process. But this short-term advantage can lead to serious problems in the long term, as the software solution cannot be adapted to the company's constantly evolving requirements.

The result? Instead of being a tool for business growth and innovation, the software used ends up slowing down the company's success. This is particularly the case when companies use different solutions in isolation from one another. This is often the case in the manufacturing industry, as companies often grow through a series of mergers and acquisitions. This can result in a highly fragmented IT landscape, which experience has shown can take on extreme forms with up to 30 different ERP systems.

Composable software works very differently. Like Lego, each component of a composable solution is a reconfigurable building block that digitally maps a core requirement. In this way, companies can build a truly individual IT solution. A Composable architecture is not implemented in a one-off roll-out, but in several coordinated implementation steps. This means that some innovations can be introduced quickly and have an immediate positive impact, while others take more time and need to be approached carefully.

To summarize: A composable architecture allows companies to create a unified IT ecosystem in a flexible way. For large industrial companies with hundreds of applications, numerous ERPs and many different CRMs, this can be a decisive advantage. All these applications and systems contain valuable information. But all too often this information is hidden in silos. By bringing all the data together, manufacturers can finally get a complete picture of their business and customer base. The modular approach leads to improved data analysis, greater operational efficiency and cost savings. All of this can serve as a catalyst for a number of other exciting developments.

When is a Composable architecture a good fit?

Composable is not suitable for every company. Companies need to have reached a certain level of digitalization and be ready to embark on a longer journey of digital transformation. Composable doesn't just mean implementing new software, it requires a new way of thinking. Thanks to a set of principles and IT frameworks, manufacturers will be able to think off the beaten track, seize new opportunities and put their own customers at the center.

For companies to successfully pursue a composable approach, the initiative and necessary support must come from top management. Experience over the years has shown that composable technology initially requires a top-down approach. The management level must be prepared to drive organizational change and thus increase business value. It is also clear that not everyone will be comfortable with this. Companies should therefore only opt for a composable strategy if the management level is really behind it.

Ready for the change?

In recent years, we have seen that B2C companies are far ahead of the B2B world in adopting composable architecture. In the survey mentioned at the beginning, the manufacturers surveyed stated that two of the biggest hurdles to making the most of investments in digitalization are isolated data and fragmented IT ecosystems. To overcome these complex challenges, a composable strategy provides a solid foundation.

This is not to say that everything is easy for manufacturers pursuing a composable approach. Precisely because software becomes so flexible to use, it takes more courage to trial and error to find out what works best. This can take some time. Composable workflows are also becoming more powerful and complex and therefore consist of multiple components, different interfaces, data formats and data processing requirements. This can make administration difficult, which is why organizations need to ensure they have robust data governance frameworks in place that can handle the changes that come with composable technology.

However, the gap in composable technology between B2C and B2B is starting to close. Driven by the increased expectations of B2B customers, manufacturers that have traditionally focused on selling physical products are turning to new digital services that extend their core offering. For many manufacturers, services such as predictive maintenance, digital documentation processes and automated spare parts ordering offer huge profit margins.

At the same time, we are seeing a new generation of decision-makers coming to the fore who are at home in the digital world. Fewer and fewer customers are asking manufacturers for a face-to-face meeting and a factory tour before they make a purchase. Many are now familiar with and even prefer digital communication. These decision-makers expect a seamless digital experience throughout the sales cycle and prefer to make their purchases online rather than picking up the phone and speaking to someone to place an order. But service agents need not worry: In the world of complex B2B products and services, they remain an important part of the sales process. Many interaction processes will become digitalized. However, this will also leave more time for valuable activities such as consultations for questions before the actual order is placed.

The author: Herbert Pesch is Managing Director at Valtech B2B.

© Valtech / Copperberg

With lucrative new revenue opportunities and the ability to develop a more comprehensive understanding of customers, it's no surprise that manufacturers are finally investing in composable technology and building a strong digital ecosystem. Although investment in digital transformation has slowed over the past year, the popularity of composable is not waning. That's because even the most stringent CFOs are recognizing the tangible benefits.

Industry data, customer demand and sentiment among decision makers all point to tremendous growth in composable software. It's a great way to flexibly solve IT challenges and create new revenue streams. But ultimately, it's about more than that. It's about improving CX, anticipating customer needs through data, introducing new digital services quickly and flexibly, and positioning manufacturers for long-term success.