Siemens closes Mendix acquisition — here’s why it matters

Oct 1, 2018 | Hot Topics

As you may remember, Siemens announced over the summer that it would acquire Mendix, makers of a low-code app development platform. That deal closed today and we learned a bit more about Siemens’ plans for the platform (and how it will affect the bigger Siemens business). First, though, a quick recap of the transaction: Siemens AG acquired Mendix for €600 million (around $730 million) in cash and committed to a “significant multi-year investment” to accelerate innovation, R&D, and the roll-out of the Mendix platform. Part of that rollout: Mendix will be adopted across other Siemens businesses as the standard low-code platform it will use to bring new software solutions to market. And part of that is the “combination of Siemens’ Digital Enterprise Software, MindSphere and Mendix” which “extends [its] industry leading digital innovation platform”. Finally, Mendix is now part of the Digital Factory business, until the reorg, when it becomes part of Digital Industries.

Why do this in the first place? There aren’t enough data scientists in the world to meet the anticipated demand for IoT-ready applications. Every manufacturer wants access to data to make better decisions, whether as a machine designer to monitor operations, as a machine user to optimize a heterogeneous production line, as a regulator to ensure compliance, and so on. The market already offers IoT platforms that aim to connect data and analytics engines, but what happens if there’s a unique need?

And what if you just want to make an app to connect your back office IT systems to a customer portal, for self-service? Or one internal system to another?

In both cases, companies today typically rely on consultants who don’t know the business and are purely IT problem-solvers. There’s definitely a place for that expertise, but wouldn’t many companies benefit from learning, in-house, how to make those connections? Apply their knowledge of the business to the IT problem, rather than the other way around? And then keep that knowledge and the app-creation expertise in-house?

Enter Mendix and other low-code platforms. As Siemens said in its announcement, “With the addition of Mendix, Siemens enters the rapidly growing low-code application development market and will invest in Mendix to build on its market-leading position, across both its existing customer verticals and the Siemens customer base.” It sounds like Mendix will be sold on its own as a platform, and embedded into many of the greater Siemens AG’s offerings.

Derek Roos, CEO of Mendix, highlighted how important it is for Mendix to stay open and neutral: “Our platform will remain industry and ecosystem agnostic. We will build on our industry-first partnerships with SAP and IBM, and we’re going to bring even more differentiated software solutions to market by combining Siemens’ deep vertical know-how with the Mendix platform.”

And here’s where it gets interesting. When we add together Siemens PLM with Mendix with MindSphere, we will in time get to the point where  Siemens’ industrial customers can extract the value of their live manufacturing data by making it more easily accessible and then analyze it to gain insight. By themselves, perhaps with a MindSphere app as the data input mechanism, and perhaps with a MindApp or two as needed — but in a low-risk, fast, reasonably low-effort way.

Klaus Helmrich, a member of the Managing Board of Siemens AG and the executive tapped to lead the new Digital Industries business once the reorg completes, said “Billions of intelligent devices and machines generate massive amounts of data, creating a bridge between real and virtual worlds. Turning these vast amounts of data into value is a key success factor for our customers. Siemens is committed to investing in our digital innovation platform that helps our customers design, optimize, build, and accelerate their product and manufacturing innovations. We have brought together the main domains involved in the innovation process, are connecting them through a collaborative platform, building a digital feedback loop leveraging IoT and delivering this system on the cloud.”

A couple of things about this acquisition strike me as note-worthy. First, Siemens is all about industrial use of technology. Mendix is far more agnostic, with customers in insurance, banking, government and consumer products (the use of, not only creation of). It’ll be interesting to see how Mendix’ broader user base informs the industrial sector and how the incredibly intense demands of industrial IoT influences Mendix’ overall platform development.

Next, from the #SIAC in August, Siemens is looking at Mendix to help transform the somewhat staid German company into one that it more agile and entrepreneurial. Siemens has 350,000 (?) employees; Mendix has 500 (?) –the exact numbers are less important than the order of magnitude of the difference difference–so it will be tough for Mendix to lead by example. But its focus on building user communities, platforms and not point solutions, and cloud-agnostic solutions, will likely become the yardstick by which other business within Siemens are measured.

Finally, combining some flavor of Mendix with MindSphere is smart. Siemens wants to create “the digital operating system for the physical world:” –a bit grandiose, that– but the concept makes sense. As Mr. Helmrich points out, there are billions of intelligent devices already connected to the cloud, with more coming online every day. Turning all of that noise into the intelligence that creates business value is an enormous undertaking that a company like Siemens, with its 350,000 employees and global reach, can attempt. By integrating Mendix and MindSphere, they build a toolkit that lets customers and IT partners get to work.

According to Mendix, when the deal was announced, the company retains its name, management structure, and offices. Customers should expect “faster innovation, more reach and an even better customer experience” — just under the big-company umbrella of Siemens.