Winning Through Open-Source Software in Manufacturing Digitalization

The manufacturing sector is in an interesting situation. It's caught between a future with immense promise and a present with high complexity. The promised ROI of digital transformation (DX) is into the trillions of dollars globally over the next decade. For manufacturers, this is more than just an opportunity for incremental improvement; it is a fundamental shift to competitiveness.

Yet, on the other hand, a starkly different narrative is heard from the factory floor. Despite the commitment of many IT and OT teams, paired with colossal investment, the path to digitalization is proving to be unexpectedly slow. About 70% of digital transformation projects are (self-reported!) considered failures. Falling short of their objectives and failing to deliver the promised return on investment (ROI).

To break this impasse a strategic shift and pivot will be needed, industrial IT and OT need a decisive pivot to open-source software (OSS). With its core principles of collaboration, transparency, and interoperability—manufacturers can systematically remove barriers that have slowed their DX. Open source provides the tools and the philosophy necessary to acquire and transport data more effectively, build powerful analytics and interaction applications that deliver real ROI, and, most of all, escape vendor lock-in.

The Digitalization Paradox in Manufacturing

The economic case for digital transformation in manufacturing is unequivocal and immense. The global digital transformation market, valued at nearly $1 trillion in 2020, is forecasted to be over $2.7 trillion by 2026. This growth is driven by the operational benefits; the primary motivators for these investments are to achieve greater operational efficiency (cited by 40% of executives), a faster time-to-market for new products (36%), and an improved customer experience (35%).

To understand the paradox, one must dissect why manufacturing initiatives fail. These challenges are connected with one-another, and are symptom from more systemic issues. Financial constraints and ROI, particularly high initial costs for hardware, software, and integration, coupled with pressure for rapid ROI, create a catch-22. DX is now viewed as a cost center rather than a source of operational improvement and thus ROI. A lack of qualified workers and in-house skills, especially in IT, is another roadblock. With manufacturing competing for talent with tech and finance. Then there’s legacy systems, where factory floors have old, incompatible machinery and systems, making upgrading or retrofitting this "rigid infrastructure" costly and complex, often stalling or killing projects. Finally, cybersecurity fears arise from increased connectivity in factories, expanding the attack surface and making the implementation of robust and costly cybersecurity solutions complex, especially for SMEs.

The Iron Grip of Proprietary Systems and Vendor Lock-In

The challenges detailed in the earlier, stem from the same key issue – the manufacturing industry's historical and continued reliance on a technological paradigm built around closed, proprietary systems. This licensing model, which was key in enabling the first wave of digital automation, has now become a barrier. Its defining characteristic is vendor lock-in, a condition that systematically stifles innovation, inflates licensing costs, and holds the industrial sector as a whole back from progress.

Innovation has always driven industrial automation forward. The transition from mechanical systems to electrical relay logic in the early 20th century, and then to the maturing of Programmable Logic Controller (PLC) in the 1960s, transformed the factory floor. PLCs, followed by Supervisory Control and Data Acquisition (SCADA) and Distributed Control Systems (DCS), brought control, reliability, and programmability to industrial processes. These technologies were the engines of the Third Industrial Revolution. Industrial automation was leading the way in what was possible with digital systems, and combining these systems with one another in new ways. The manufacturers were driving innovation in the software industry and gaining real momentous ROI.

Since the late seventies, software became a copywrightable good, and with a shift happened mostly in traditional applications of the software – Vendor Lock-In.

Vendor lock-in is an economic and technical condition where a customer becomes so dependent on a specific vendor's products and services that switching to an alternative provider becomes prohibitively difficult or costly.

With that, manufacturers used to lead the way three quarters into the 20th century, now are stuck with their 21st-century digital ambitions.

The traditional, vertically integrated model of industrial digitalization, ‘featuring’ vendor lock-in, is a critical hindrance currently. This paradigm now showcases inflated costs, lack of innovation, interoperability issues, and a skills gap. These issues have effectively made manufacturers followers rather than leaders in the realm of software-aided business. To regain an edge a fundamental shift is a requirement. This shift requires abandoning vertical point-solutions and instead embracing a new technological foundation that is inherently open, fostering interoperability, and freeing manufacturers from the constraints of single-vendor control.

DX with Open-Source Software

In contrast to the closed, proprietary software, the open-source variant offers a fresh approach to creating and distributing software. Born from the need of collaboration and transparency, open-source software (OSS) provides fundamentals to break vendor lock-in once and for all.

In 1983, MIT programmer Richard Stallman, annoyed by the practice of withholding source code, founded the Free Software Foundation. His goal was to create a completely free (“Free” as in speech, and also “Free” as in beer) operating system, establishing a philosophy built on the user's right to run, study, modify, and redistribute software. In the late 1990s, this movement gained a more pragmatic and business-friendly identity with the coining of the term "open source".

The value proposition of OSS is great and shows up in four key points:

1. Cost-Effectiveness
2. High flexibility and extensibility
3. Cross-Industry collaboration
4. Stability and Strategic Control

To go over each, one by one.

The most immediate appeal of OSS is the absence of high upfront licensing fees. OSS is not "free" when considering the total cost of ownership (TCO), which includes implementation, integration, training, and support. The crucial difference lies in where the money goes. With proprietary software, a large portion of the budget is spent on license and maintenance fees that primarily benefit the vendor. With OSS, that same capital can be reinvested into activities that build direct value for the manufacturer.

Secondly, flexibility of software and freedom to extend it – the single most powerful advantage of OSS. Because the source code is accessible, manufacturers are no longer constrained by a vendor's limited feature set or development roadmap. Anyone can propose changes that modify, adapt, and extend the software to meet their operational needs. If a particular open-source tool doesn't support a niche industrial protocol, the company has the option to build that integration itself or hire a third party to do so. As these investments do not provide an edge over competition, it’s almost always shared within the OSS community – building libraries of open toolchains.

Extending on that; Cross-industry collaboration enables wildly different use-cases with the same fundamental problems to resolve to apply their knowledge and craft serving all other businesses. For example, database technology has been perfected for decades by banking and trading companies to allow for atomic transactions and durability of data of those transactions. These scalability improvements have profound impact for manufacturing use-cases around the world, helping out with compliance, track-and-trace, and more.

Finally, Long-Term Stability and Strategic Control is implicitly featured with OSS. With proprietary software, a manufacturer is exposed to the business risks of the vendor. If the vendor is acquired, goes out of business, or simply decides to discontinue a product line, the manufacturer can be left with an unsupported and obsolete system. With OSS, the code is publicly distributed and cannot be withdrawn. Even if the original maintainers abandon a project, the community—or the company itself—can "fork" the code and continue its development. This provides a level of long-term stability and strategic control over critical technology assets that is impossible to achieve in a vendor-dependent relationship.

Finale

The manufacturing industry faces a challenge with its digital transformation efforts. A reliance on proprietary systems has contributed to an impasse where investment does not always produce the expected results. This model, characterized by vendor lock-in, can lead to higher costs and constraints on innovation, causing manufacturers to lag in technology adoption.

To move forward, a different approach can be considered. Open-source software (OSS) offers a model that addresses many of the barriers causing digital transformation projects to fail. With OSS, companies can gain more strategic control over their technology, redirect funds from licensing fees toward in-house capabilities, and connect previously isolated systems. This allows a manufacturer to shift from being a consumer of a vendor's technology to a director of its own.

The conversation is therefore shifting from if manufacturing should adopt open source, to how it can be implemented to improve operations and deliver a return on investment. This transition presents new questions, but it is one that companies do not have to approach on their own. At FlowFuse, we work with manufacturers to navigate this change, and we would love to explain how an open-source strategy can transform your factory of the future. Download our comprehensive whitepaper "Open Source Software for Manufacturing," to learn how to transform your factory operations and secure a competitive edge.