Siemens redefining its business from power systems to digital solutions

The recent Innovation Day of Siemens India, held in Mumbai, brought the German industrial conglomerate’s global talent pool, including its Chief Technology Officer Roland Busch to showcase the next generation digitalization technologies to Indian customers.

It’s not just technology; Siemens is bringing the entire eco-system that includes domain expertise and vendor network. The company launched India operations of its global venture arm Next 47 to invest in technology startups, aligned with its offerings.

Power systems to digital solutions

The intent is clear, Siemens is trying to redefine itself from being a pure power system supplier to a provider of end-to-end digitalization solutions for industrial businesses. This they have been doing it for a decade by acquiring technology companies and integrating new methods of automation.

Siemens has invested 15.6 billion euros to develop its digital capabilities. The company employs 24,500 software engineers globally as a part of its R&D backbone.

The shift was necessitated as its traditional business of power systems hardware that falls under capital goods is linked to economic cycles.

For instance, in India, Siemens had a lull for some time due to the slowdown of private capex in power and infrastructure and large orders from the central government in rail, and transmission were not coming forth.

Also, the intense competition from South Korean and Chinese companies is also forcing Siemens to diversify.

Siemens, through digitalisation solution, is helping companies across business verticals to save energy, reduce development timelines, streamline production, predict maintenance of assets and give companies better control over their manufacturing operations – using power of technologies such as cloud computing, artificial intelligence, internet of things, and data analytics.

In the initial phases, Siemens is adopting a “pay as you save” model to generate revenues from digitalisation.

Two platforms that Siemens is hoping to drive digitalization growth in India are MindSphere and Digital Twin.

MindSphere is a cloud-based, open IoT operating system to connect the virtual world with the real world from factories. Siemens runs four MindSphere centres in India. Each of these centres will specializes in a particular industry. With about one million devices connected via MindSphere, the company is looking to work together with its customers and co-create solutions which will ultimately improve overall productivity and efficiency.

The digital twins on the other hand will help improve development, testing, production and operations.

Huge potential

Siemens sees huge potential of digitalization adoption in India, given the government’s thrust on increasing the share of manufacturing from the current 17 percent of GDP to 25 percent.

“This would mean an incremental annual manufacturing output of 500-600bn requiring a capex of USD 1.3-1.5trn, a significant chunk of which would need to be exported (as there is a limit to domestic consumption) and therefore, in order to compete globally, the need to adopt digital technologies would be paramount in the manufacturing landscape,” said Antique Stock Broking in its report.

To showcase the potential benefits of digitalisation, Siemens turned its 40 plus years manufacturing plant at Kalwa near Thane, Maharashtra, into a digital factory. Kalwa unit manufactures low-voltage switch gear.

The company says the digitalisation helped the factory expand product variants from 77 to 180 and reduced quality checks from 62 to 22. The plant can now manufacture over five million devices annually. Products at the plant communicate with machines, and all processes are optimized for IT control, resulting in a minimal failure rate.

Siemens in planning to extend the production methods deployed at the plant to be a standard for small and medium-sized manufacturing units in India.

Gradual adoption

Siemens has made some progress. The company is implementing pilot projects for around 120 customers. The company is working with an Indian automotive company to help roll out several products through virtual commissioning and offer a fully electric drivetrain solution to Indian automakers developing hybrid buses. It also helped automate a dairy in Gujarat and pharmaceutical companies enable better compliance with USFDA regulations, improve production per batch and hasten the migration from lab to factory.

But, the migration has been slow and gradual.

“We are at this tipping point,” said Roland Busch, Chief Technology Officer of Siemens AG, in an exclusive interview to Moneycontrol.

“We have conservative customers, rightfully so, because these customers are working on a living environment. So you don’t want to screw up your manufacturing line, or, or your turbine or whatever, kind of assets. So this is a reason why customers are more careful in deploying, but once they got the idea, and they see the value, they’re ready to adopt,” Busch said.

Busch also blames the delay in adoption to missing competence to connect the operational world and the IT world, as most consultants who come from IT consulting lack understanding of operations.

“If you went on to roll out, then you have to make a plan, where to invest, how to invest, what do you do first, what’s the sequence in order to really get your savings as you as you spend money, and to lay out that plan requires a certain level of consultancy, which, is about to be built up in the market,” Busch said.

Siemens India, which follows the October-September financial year, had revenues of Rs 12,293 crore, of which 18 percent came from digital factory business. However, analysts estimate the digital business to grow at 20 percent, the highest compared to all its verticals in the next three years.

“IoT driven solutions for productivity improvement are gaining traction globally with various studies forecasting strong pick up over the next 2-3yrs. Within the Indian context we believe that MNCs operating in India may adopt IoT as a part of their global parent’s technology absorption. Various small scale productivity improvements in process industries may continue. SIL, with its strong in-house technology expertise and domain knowledge across various industries, definitely has an edge,” said HDFC Securities in its report.