CIMdata's Vice President, Stan Przybylinski, recently sat down with Joe Bohman, Senior Vice President, Lifecycle Collaboration Software, Siemens Digital Industries Software, to learn more about the company's cloud strategy.
Let's find out!
The content was edited for length and clarity.
How important are cloud-based solutions to the strategy of Siemens Digital Industries Software (Siemens)?
There are two lenses we can use to talk about the cloud: Siemens Digital Industries Software (Siemens) and product lifecycle management (PLM). We can start with the widest possible lens and then focus in on PLM.
As for your question, at some point it’s not whether the cloud is important to us, it’s whether it’s important to our customers, and of course, the cloud is very important to our customers. I think that that’s evident in the growth of the big cloud infrastructure providers. I think everybody is very familiar with the growth of Amazon Web Services (AWS). Just looking at some of their numbers from FY19: $35 billion, up 37%. I always pause on that…what is 40% of $35 billion? $14 billion, that’s a big number. Then if you look at Microsoft Azure, in Q4 it was up 62%, again on a large number.
I think it’s very important to our customers because when I talk to CIOs they see it as an opportunity to optimize their cost. There’s an element of economies of scale that comes from these big cloud providers. For example, for AWS Simple Storage Service (Amazon S3) they’re down to just north of two cents per gigabyte per month. It’s hard to get to those sorts of numbers without those economies of scale. So, I think it’s important to our customers because of the tremendous economies of scale that are being brought to bear, and the cost savings that come along with that.
There are also opportunities for new value, like some of the artificial intelligence (AI) processing and other things that uniquely take advantage of the cloud.
Taking it from the customer point of view to us, what does it mean for us strategically? Let’s start with Mendix and the Mendix Cloud Platform. Mendix was born on the cloud. Every single day we’re running millions of customer applications in the cloud, helping those customers deploy those applications rapidly and helping to maintain them so that our customers don’t have to, which is a great example of how we are using the cloud to solve customer problems. Beyond Mendix, our MindSphere IIoT as a service solution was also born on the cloud. Our ability to use this offering to process Internet of Things time series data brings unique value using the cloud.
If we focus just on Teamcenter and Teamcenter X, the cloud and our cloud-based capabilities help us in a number of areas. We use the phrase “instant-on PLM.” Companies getting started with PLM often face a lot of overhead and friction, and the cloud helps us remove this barrier for our customers. In the past if you were going to get started, you needed to think about servers, acquiring expertise in administering the software, tailoring it to your company’s needs, and upgrading it when necessary. Using the cloud, and again, economies of scale, we can offer that “instant on” experience. The cloud offers us unique opportunities to solve customer problems and to bring them additional value.
Teamcenter Share is another interesting solution leveraging the cloud. Looking at the market we see a need for a solution to support collaboration among a broad ecosystem and we are delivering it using Teamcenter as a backbone. This offers a more robust alternative to ad hoc file collaboration using tools like Dropbox, SharePoint, and OneDrive. Together, Teamcenter X and Teamcenter Share can support a wide range of supply chain collaboration scenarios.
Every CIO has a map of how they are going to get to the cloud and we can participate in that journey. The key thing for us is to add value. Anybody can run in the cloud. We are not a me-too player. It’s how do you find some of these additional values as you go through that transition? Many of us have been around for a while and have faced a number of market and technology transitions, right? Unix to PC to Windows. Client-server to Web. Many IT imperatives have cut across our industry and in every case it is about how you embrace the new technology or approach. It creates an underlying current and how do you flow best with that current? How do you adapt to it in a way that both you and your customers benefit?
Please describe the ecosystem of infrastructure, applications, and partners that are part of your offerings?
At the bottom of the Mendix Cloud Platform are Foundation Services, core services like identity and security. Identity services run on a MongoDB at AWS. We’ve done some work on Teamcenter X, MindSphere, and Mendix to tap into the AWS platform at the lowest level. From a security perspective, one of the most interesting developments is that our aerospace and defense customers, our most security-conscious customers, are working with us on the cloud.
On top of that you layer elements like the Amazon S3 storage system and how we communicate with the Aurora database server in AWS.
This creates an interesting technical challenge, as we also need to be open to other infrastructure to meet customer requirements. For example, we have a lot of customers that have deep relationships with Microsoft and ask if we can run on Microsoft Azure? The answer is absolutely. We’re certified on Azure and AWS.
Some customers choose to run their Azure implementation themselves but they do not benefit from our deep technical work with AWS if they choose that approach.
A big open question is how best to do business in China. What is the right certification there? In non-Chinese markets it is clear that customers prefer AWS or Azure, with some requesting Google Cloud. In China it is not as clear cut a decision. Many assumed that Alibaba Cloud would be the winner, but it is still not clear.
How does your solution and its go-to-market address the issues raised by your customers and prospects (e.g., packaging, licensing, deployment options)?
With Teamcenter X we are focused on a special set of applications that get our customers up and running quickly, with an “instant on” experience. Then we make the adoption of new applications and growth to full PLM easy.
Anyone interested in experiencing Teamcenter for themselves are welcome to try Teamcenter X for free, without the need of any installation or setup.
A lot of our work is on start packages and applications, with best practices built-in to help our customers realize immediate value. The goal is that, no matter where you start, the solution can grow with you. We also see a big opportunity for industry-focused applications, and our experience creating our Industry Catalysts provides a lot of great material on which to base them.
Our Mendix Data Hub is also critical to this strategy, putting data in the middle, where Siemens and our partners can work to add value for our customers. The biggest win is that Mendix comes with many connectors to other enterprise data sources, an essential capability since a typical CIO may have hundreds of systems. Mendix is a great tool to help them do a lot more with significantly fewer IT resources.
With Teamcenter X we also see a huge opportunity for our channel partners. We are targeting the small and medium-sized business (SMB) segment with that offering, and channel partners are a perfect fit. For example, one way for channel partners to leverage our solutions on the cloud is to use Mendix to help build composite applications for their customers. Their teams interact with their customers and work to build these applications. It helps both them and their customers to learn how to do a lot more with less resources than other more traditional means.
The “instant on” message really resonates with this audience. Smaller customers have challenged us on time to value. They are not IT experts and do not have hardware just laying around on which to install and run new solutions. They ask how Siemens can help them speed time to value at a reasonable price? This is one of the core issues addressed by our approach.
Another big issue we address with Teamcenter X is upgrades. Every customer has the challenge of keeping their software up to date. Salesforce is always in the news, in part because of the acquisition of Tableau and their recent bid for Slack, but mainly because of their rapid growth. What is it that CIOs like in their model? It is always up to date. They ask us when will Teamcenter always be up to date? How can Siemens address that issue? That is where Teamcenter X comes in.
For new customers a gating item is customization, so we’ve developed a thoughtful approach that allows us to be flexible, yet more readily handle upgrades in a scalable way.
For new Teamcenter X customers that come in through an “instant on” package, the upgrades will be seamless. For larger customers that come to us and ask us to take on their existing Teamcenter implementations, including the customizations, it becomes a broader business conversation. We have cloud-based Teamcenter X customers that range from 20 seats up to customers with thousands of seats.
Licensing is per user, per month, all in. It is a sliding scale based on the size of the deal. Our goal was not to have price books with hundreds of items. We wanted to simplify the price list for Teamcenter X. This is a SaaS or annual run rate type of business that has an operations component to it, a bit different than our traditional business.
Of course, we are not the only fish in the pond. Everybody takes their journey to Microsoft and Amazon, or maybe talk to other companies about their journeys. The first thing they will tell you is that the cost of goods sold (COGS) line looks quite different. But we have built a model to take on these operations, hardware, and other issues that can offer our customers an attractive price point, and we are able to do that while having a good business on our side. You do look at different key performance indicators (KPIs) when delivering this model and COGS is key for us. Using AWS services to help deliver our solution is an important contributor to reducing COGS.
How would you describe your primary target customers (e.g., startups, small to medium sized enterprises, anyone)?
We can offer solutions to a wide spectrum of customers, from smaller companies buying packaged solutions and scaling up to the largest enterprises.
As I mentioned earlier, we have been surprised that some of our large aerospace and defense customers with thousands of seats have expressed interest in the cloud. I think that contracts like JEDI, a $10 billion cloud buy, are influencing the market. We have also started to see deals across a wide range of industries, from machinery to electronics/semiconductor to the automotive supply chain. We can engage with some of the larger customers through our managed services business, and for the small ones, the 20 seat deals, we have Teamcenter X and our start packages and “instant on PLM.”
Can you provide any information on your installed base that are in production: how many customers, their industries, etc.? How well has it been growing recently and what do you expect over the next 2-5 years?
Teamcenter X was announced in May. As is often the case it was pre-announced before it was in the price book. We are melding those new offerings together with our existing managed services businesses that has been running for several years. Managed services growth rates are currently in the high double digits, and we don’t see this trend stopping anytime soon.
How are your offerings going to evolve in the short to medium term (1-3 years) – what are the primary themes/strategy on your roadmap?
One of the big initiatives is what we call Active Architect, a low-code way to customize the Teamcenter user interface. This will allow our customers to extensively tailor their user experience without impacting their ability to upgrade the system.
We are working on upgrades for all of our APIs. By using Mendix and some of the other things we spoke about, like Active Architect, we are driving to an environment where you can very easily tailor the solution how you want it. We also support their ability to do mashups.
You can also expect to see a lot of industry-focused solutions. Our work on our Industry Catalysts will provide a fertile ground to take that work and turn it into solutions for Teamcenter X.
Finally, one of the other things we are seeing from our larger customers is the desire to support a “composable enterprise.” With Teamcenter, we are moving to a microservices architecture and supporting multi-tenancy. The cloud will enable us to decompose these parts of our solution into reusable composable blocks, and some of our larger customers are well positioned to take advantage of that capability. Smaller customers can get some of these same composition abilities using the Mendix Data Hub.
This blog post is part of a collaborative research program on adoption and use of cloud/SaaS PLM solutions. CIMdata is looking for industrial respondents for a survey that CIMdata is running on this topic: [Take the Survey]
We look forward to hearing your comments and hope you are able to take the survey!
Stan
