A handful of German companies are rushing onto the Internet of Things, hoping their early entry will secure them vital spots as machines begin communicating with each other to boost efficiency. Amid their haste to not miss out on the next big thing, many are cooperating with each other on some level, even as they each individually hope to corner the market.
Munich conglomerate Siemens has introduced Mindsphere, a software platform that allows companies to write apps for their specific equipment. And Software AG, the second-largest German IT company after SAP, last year doled out €49 million for Cumulocity, a six-year-old start-up that connects equipment with communication networks – the basic concept behind the Internet of Things, often referred to simply as IoT. Meanwhile Munich start-up, Device Insight, is also producing an IoT platform which is already being used to connect professional cleaning equipment from Kärcher.
“It will be crucial, particularly for German manufacturers, to exploit IoT opportunities in the future,” experts from the Fraunhofer Institute for Industrial Engineering wrote in a recent study. IoT platforms will allow companies to remotely monitor specially equipped facilities and even make it easier for factories to run efficiently. For instance, a carmaking robot could automatically order new parts when necessary, or tell the maintenance division that it needs repair. Market research company IDC expects worldwide spending on IoT to reach almost $800 billion (around €644 billion) this year and consultancy McKinsey sees IoT technology adding as much as $3.7 trillion (€2.97 trillion) in value to factories that use it, by 2025.
We don’t think there’ll be just one platform. Customers should have a choice. Michael Haag, Kuka developer
Siemens has already formed the user group Mindsphere World around its platform to curry interest. It’s even lured German manufacturing robot maker Kuka, a unit of Chinese household goods company Midea, to join even though Kuka is hoping to find acceptance for its own Connyun IoT platform, which connects more than just its own robots. “Mindsphere World is a good opportunity for us to exchange ideas,” says Kuka developer Michael Haag. “We don’t think there’ll be just one platform. Customers should have a choice.”
The choice may not be all that wide though. At Siemens, experts believe only three or four of the more than a dozen platforms are likely to survive long-term. The Fraunhofer Institute expects a wave of consolidation that will cast some early attempts aside but also make the survivors stronger just as the market explodes. Siemens estimates that 75 percent of the world’s factories will be using the IoT in 10 years' time, compared to just 3.5 percent currently.
French computer services company Atos has already developed about a dozen apps for Mindsphere, most being virtual-reality applications for supporting training or maintenance. Another monitors shipping containers and their contents for logistics companies, to help improve capacity. Siemens has an advantage because Mindsphere is already on the market and oversees 45 million of its customers’ automated systems. More than 140,00 customers are working on applications.
Software AG is also already in the IoT market and is uniquely positioned to profit because of its deep experience in helping companies unite unique processes with off-the-shelf enterprise software. Although it only had €14.9 million in IoT sales last year, it expects that figure to potentially double in 2018 and to keep doubling for up to five years thereafter. "Dynamic growth rates will enable us to quickly reach the €100 million mark," CEO Karl-Heinz Streibich says. Software AG had revenue of €879 million in 2017 and already contributes technology to Octo Telematics, which installs black boxes in cars to help drivers save on insurance.
In September, the company unveiled a five-way venture with German equipment makers DMG Mori, Dürr, Zeiss and ASM to bundle the IT activities and move them into the cloud, an IoT prerequisite. The venture was dubbed Adamos and is developing a platform for networked industry.
Still, the cornerstone of Software’s IoT strategy is Cumulocity, which was initially developed by Nokia employees. "With our platform, you can network everything from beer glasses to bucket excavators," says Bernd Groß, co-founder and head of the company. A waste disposal company in the Netherlands, for example, uses the system to monitor the fill level of containers and optimize truck routes.
The examples show that the system works well in real life. However, several competitors now offer similar systems. "A year ago, Cumulocity was leading the way, but now companies like Microsoft, Amazon and SAP are following suit with core functions," said Stefan Ried, who is responsible for the Internet of Things division at German market researcher Crisp Research.
"We are accustomed to tough competition," says Software CEO Streibich. "Our platform is technologically mature, while others are just starting to develop." In order to expand the business, Software AG is prepared to make substantial investment and has even hinted at cooperating in some capacity with Siemens.
Andrew Bulkeley is an editor with Handelsblatt Global in Berlin. Christof Kerkmann is an editor for Handelsblatt and writes about the technology sector. Axel Höpner is head of the Handelsblatt Munich office. To contact the authors: [email protected], [email protected]. [email protected]