How Siemens grew 25% in two years by building SaaS for digital twins

Businesses are increasingly moving from selling products to selling everything as a service to take advantage of cloud innovation. In general, they face revenue losses over several years as they reorganize existing products into subscription services.

But some transitions are much faster. Siemens Digital Industries grew revenue from about $15 billion a year to $20 billion in just two years after transitioning its digital twin portfolio to the industrial metauniverse cloud called Siemens Xcelerator.

VentureBeat sat down with Cedric Nycke, CEO of Siemens Digital Industries and member of the board of Siemens AG. He gave us a glimpse under the hood of that success and some insight into the future of the industrial metaverse.

For context: Siemens Digital Industries is a division of the holding company Siemens AG, which specializes in tools for the design, testing and manufacturing of physical products such as cars, aircraft, computer chips and consumer products. Other Siemens divisions focus on trains, smart infrastructure, healthcare and energy.

The pearl of the Siemens portfolio

Digital Industries is the crown jewel of Siemens’ portfolio, Neike said. Own factory automation tech, the programmable logic controller (PLC) is installed in 30% of all manufacturing equipment, and its design and product lifecycle management tools are a staple of most industrial companies.

“We are in the early years SaaS [software-as-a-service] transition, but we’re actually moving our customers to SaaS faster than expected,” Neike said. “We want to help engineers design the product mechanically and electrically, test it and optimize it.”

When Neike first took over Digital Industries two years ago, he launched an ambitious three-pronged digital transformation strategy:

• Moving all digital software to the cloud and connecting it to the Siemens Xcelerator industrial metaworld platform for digital twins. This includes tools for product lifecycle management, IC design, physical modeling, and low-code application development. Digital Industries also works with Siemens subsidiaries to create comprehensive digital twins for buildings, infrastructure and rail infrastructure.
• Connecting production equipment to the cloud. Siemens’ production customers generate about 2,200 terabytes of data per month. Siemens wants to help them more efficiently analyze, filter and train artificial intelligence (AI) algorithms on this data. For example, Siemens is opening up its PLCs to the Siemens Xcelerator program to help businesses connect automated manufacturing to digital twins.
• Extending digital twins to the supply chain to improve efficiency and sustainability, and integrating carbon footprint analysis tools between partners. Internally, Siemens has created a Degree Framework that sets measurable social, management and environmental goals. It also added new tools for calculating CO2 emissions in the product bill of materials (BOM) so that businesses can optimize the right balance of cost and CO2 emissions. Siemens also cooperates with the German automotive industry Catena-X share sustainability data across the supply chain.

Industry 4.0 is catching up with the conversation

Neike attributes the massive growth to the ketchup bottle effect, where you flip the bottle over, nothing comes out, but after a few hits it all comes out at once. “Everyone was talking about automation and digital twins, but now they’re investing in it,” he said.

Siemens has one of the most comprehensive portfolios of simulation, optimization, test and design tools for digital twin communication. For example, its PLCs in the factory generate terabytes of data that can calibrate a serial digital twin with live data from the factory. This can help teams look for bottlenecks and quality defects.

The goal is to change the way industry builds factories for new products. Siemens tested a combination of these capabilities on its in-house PLC factory test bench. When semiconductor shortages began, teams at the factory used this set of digital twins to redesign the board to take advantage of the new parts, optimize the design, and put it into product within days. This type of redesign can take six months or more using traditional approaches.

Siemens also plans to go beyond selling individual tools and services to create a platform for new industries and infrastructure. For example, he just launched a project together with Company car cages, a joint venture between Mercedes, Stellantis and TotalEnergies to create several battery gigafactories. Siemens helps with manufacturing automation, electrification and building management to accelerate construction and operations.

It is not yet clear whether the industrial metauniverse will be one fully integrated platform or islands of integrated digital twins that live separately multiverses. Vendors must find the right balance between staying competitive and helping customers connect different systems.

Neike predicts: “Companies will have centers of gravity that they are very good at. We’re really good at building a model of the data, modeling it and telling the machines what to do in the manufacturing process.”

Siemens is betting big on partnerships to fine-tune the details. For example, this partnership with Nvidia use the Omniverse platform to make industrial digital doppelgangers as good as in a Hollywood movie and integrate Nvidia GPUs into Siemens industrial edge computers. He also collaborates with dozens of leading experts in the field, including Esri, Bentleyand Accenture. These partnerships will allow Siemens to focus on its core competence in engineering and manufacturing solutions in key verticals.

“We know how a brewery works, how a car factory works and how a battery works. We’re not going to build big cloud systems ourselves,” Neike said.

No company can do it alone, but Siemens is becoming an organizer in this space to combine industrial expertise and technology to bring to market the best solutions for customers who see value in faster time to market, more sustainable and economical processes, and best-in-class engineering. In the long run, Neike hopes to combine some of the best aspects of Silicon Valley with German industrial construction.

“Silicon Valley has this ability to scale tremendously,” Neike said. “Returning to Siemens, I discovered the ability to deeply understand processes. And I think something needs to be done by bringing the two together and really making sure that we radically move Siemens to the cloud. We need to make it open, interactive and interoperable.”