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

Companies are increasingly moving from selling products to selling everything as a service to take advantage of innovations in the cloud. In general, they face loss of revenue for several years while converting existing products into subscription services.

But some transitions are much faster. Siemens Digital Industries has grown revenue from approximately $15 billion per year to $20 billion within just two years of transitioning its digital twin portfolio to an industrial metaverse cloud called Siemens Xcelerator.

VentureBeat spoke with Cedrik Neike, CEO of Siemens Digital Industries and member of the board of directors of Siemens AG. He gave us a peek under the covers of this 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 that focuses on tools for designing, testing and manufacturing physical products such as automobiles, aircraft, computer chips and consumer goods. Other Siemens divisions focus on trains, smart infrastructure, healthcare and energy.

The jewel of the Siemens portfolio

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

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

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

• Move all digital software to the cloud and connect to the Siemens Xcelerator industrial metaverse platform for digital twins. This includes tools for product lifecycle management, chip design, physical simulation and low-code application development. Digital Industries is also working with sister companies of Siemens to create comprehensive digital twins for buildings, infrastructure and rail infrastructure.
• Connect production equipment to the cloud. Siemens’ manufacturing customers generate approximately 2,200 terabytes of data per month. Siemens wants to help them analyze, filter and train artificial intelligence (AI) algorithms on this data more efficiently. For example, Siemens is opening up its PLCs to the Siemens Xcelerator program to help enterprises link their factory automation to digital twins.
• Extending digital twins into the supply chain to drive efficiency and resilience, as well as integrating tools to analyze partners’ carbon footprints. Internally, Siemens has drafted the Degree Framework, which sets measurable social, governance and environmental goals. It has also added new tools for calculating the carbon footprint of a product’s bill of materials so that companies can optimize for the right balance between cost and carbon footprint. Siemens is also working with the German automotive industry on Catena-X to share sustainability data across the supply chain.

Industry 4.0 catches up with talk

Neik attributes the massive growth to the ketchup bottle effect where you flip the bottle, 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, testing and design tools to link digital twins. For example, the PLCs in the factory generate terabytes of data that can calibrate a digital manufacturing twin with live data from the factory floor. This can help teams look for bottlenecks and spot quality flaws.

The goal is to change the way industry builds factories for new products. Siemens has tested the combination of these capabilities on its in-house PLC factory test bed. When the semiconductor shortage hit, teams at the factory used this ensemble of digital twins to redesign a board to take advantage of new parts, optimize the design and push it into a product within days. This kind of redesign can take six months or more with traditional approaches.

Siemens also wants to not only sell individual tools and services, but also build a platform for new industries and infrastructure. For example, it has just launched a project in collaboration with the Automotive Cells Company, a joint venture between Mercedes, Stellantis and TotalEnergies to build several giga-factory batteries. Siemens helps with factory automation, electrification and building management to accelerate construction and operations.

It is unclear whether the industrial metaverse will be one fully integrated platform or islands of integrated digital twins living in separate multiverses. Suppliers need to strike the right balance between maintaining a competitive moat and helping customers connect their different systems.

Neike predicts: “Companies will have centers of gravity, which they are very good at. We are very good at building a data model, simulating it and telling machines what to do in a production process.”

Siemens is investing heavily in partnerships to work out the pieces. For example, it has partnered with Nvidia to use the Omniverse platform to make industrial digital twins look as good as a Hollywood movie and to integrate Nvidia GPUs into industrial edge computers from Siemens. It also partners with dozens of leading domain experts, including Esri, Bentley and Accenture. These partnerships allow Siemens to focus on its core competence in solving engineering and manufacturing challenges in key vertical markets.

“We know how a brewery works, how a car factory works and how a battery works. We are not going to build the large cloud systems ourselves,” says Neike.

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

“Silicon Valley has this ability to scale tremendously,” Neike said. “When I came back to Siemens, I discovered the ability to understand processes in depth. And I think something needs to be done by bringing these two together and really make sure we take Siemens radically to the cloud. We need to make it open, interactive and interoperable.”