Realize LIVE 2023: Siemens says it’s shifting the conversation
There’s something special about being at a user conference in person. The random encounters. A roomful of people nodding when they agree with a speaker — or the look of confusion when the room’s experience doesn’t match. The band that plays the audience into the hall early in the morning for a keynote. The buzz over meals. It’s magic, and I’m so glad it’s back.
I spent time last week with Siemens Digital Industries Software (SDIS from here on in because it’s such a mouthful), their customers, and partners at Realize LIVE in Las Vegas. I wanted to hear about three basic things: (1) how SDIS is doing on its ambitious targets for revenue and growth; (2) what their customers are thinking and talking about; and (3) how the FORAN naval architecture and marine design tools are being integrated into the NX/Teamcenter/Xcelerator world; and I wasn’t disappointed.
Let’s start with the business of SDIS: how big is it, anyway? In its most recent earnings release, Siemens said that DigitaI Industries Software had revenue of €1.165 billion in the March quarter, up 11%. Siemens noted that PLM revenue was up “in the low teens” year/year and that EDA was up “in the high-single digits.” SDIS revenue was around €4.8 billion for the trailing twelve months, which is up about 9%. That’s big.
CEO Tony Hemmelgarn told us that SDIS is ahead of its projections for things like cloud/SaaS sales and that “very shortly, we’ll be at over $1 billion in cloud ARR … 74% of cloud orders are from SMB. This creates new opportunities for us, but this isn’t just about new customers. Our existing customers have embraced this strategy — we are seeing an expansion rate of over 16% in our existing accounts.”
To emphasize just how established SDIS in key accounts, Mr. Hemmelgarn said, “100% of the US national security launch vehicle [teams] use Xcelerator. 100% of the US submarine and aircraft carriers are using Xcelerator. 100% of manned space flights are with us. 95% of commercial aerospace engines [he stopped himself there, saying it might be 100%, but there are some startups he’s not sure of]; 100% of the top 12 global 500 aerospace and defense companies are using our accelerator software.” You get the idea —he gave similar stats for auto and other verticals: SDIS is deeply embedded in many of the world’s biggest, most consequential enterprises and appeals to younger firms with its SaaS offering.
Add all this up, and Mr. Hemmelgarn is convinced that SDIS is taking market share, saying that “the dynamic has changed. The battles we’re having, it’s not the same battles as in the past; it’s changed. In fact, in many cases, our competition isn’t even talking about what we’re doing because they don’t have the electronics and everything we’re discussing. And that’s what our customers are talking to us about. It’s changing the way they think about their problem.”
I found that fascinating and decided to test it with some Realize LIVE attendees. The first thing is, yes: they agree that SDIS has an extensive offering that meets their needs today — and is going in the direction they think they’ll need for the foreseeable future. Of the perhaps a dozen people I spoke to about this, most were NX users, a couple were Teamcenter admins, and two were EDA customers. They were at Realize LIVE to get certified, to learn how peers are using these solutions, and to see if there wasn’t something to be learned from others’ implementations — but they weren’t comfortable talking about the potential impact of all of Xcelerator or SDIS on their businesses; they were specialists and proud of that.
This makes sense — this was, after all, a user conference. I did run across a couple of managers who were starting to think about how solutions from vendors like SDIS can solve bigger, business-sized (as opposed to department-sized) problems. They were hearing SDIS’ Xcelerator/workflow/interconnecting-everything messages and taking them on board. Perhaps most important to Siemens: they want to look within the Xcelerator portfolio and across SDIS to help them with these issues. They are not looking at outside vendors, except possibly a systems integrator or consultancy, to help define the problems and outline solution architectures.
Also from my very unscientific survey (over breakfast, mostly): these users are heartily sick of digital twins, digital threads, and digital transformation. These sound big, complicated, expensive, and like they’ll get in the way of designing the best battery, robotic arm, or engine part. I can’t say I blame them —these are big, possibly messy IT projects— but I wonder how SDIS (and we industry analysts) can reach these people, given the language we all use—something to ponder this summer.
So, do these people care that SDIS is enormous? Sort of. Not that it’s big for the sake of big. But big because it means there’s money to invest in bringing NX, Teamcenter, Xcelerator, and other products to new technological heights—and that matters to these users, a lot. Do they want to see SDIS on a list of the world’s top ten software providers? Not so much. These companies don’t have great reputations right now, and they don’t necessarily want to see SDIS in that company. Interesting.
A couple of other tidbits: We typically think of the big Siemens acquisitions, like the UGS/SDRC deal that started all of this. But Mr. Hemmelgarn said that 33 deals have closed during his time with the company — many small ones alongside Mentor, Mendix, and the others that immediately come to mind. He said that SDIS is held accountable for its integration plans and that aside from one small “yellow” acquisition, all are “green.” “That’s almost unheard of in acquisitions. M&As [mergers and acquisitions] are really hard, and I think we’ve got something that seems to scale fairly well.” I didn’t know SDIS had done 33 deals –there usually are about 20 logos when they show a “how we’ve grown” slide– impressive.
The relationship with SAP is … proceeding. You may recall that the two companies announced 18 months ago that SAP PLM customers would be transitioning to Teamcenter and that the companies would jointly pursue opportunities. Mr. Hemmelgarn said creating interfaces between Teamcenter and S/4HANA has taken time. However, now SAP Teamcenter by Siemens is on SAP’s price list and is being sold by its sales teams, sometimes alongside Siemens resources. Still confusing is that both companies offer MES (manufacturing execution) solutions, but, as he said, “the customer has the choice. If you’re open, you’re open.” He added, “The number of opportunities has ballooned in the last few months. I’m much more optimistic about what this could mean to both [companies] and our customers than I was a year ago.” So, after a slow start, things are moving more quickly now.
I have much more to say—about Siemens’ FORAN acquisition for the shipbuilding community, cool new stuff coming in NX, a lightweight CAD/CAM tool called Zel X –who knew??–, partnerships with Microsoft and IBM, and exciting uses for executable digital twins (what words should I use here??) — but this is already far too long. Thank you for reading. More soon.
You can watch select presentations, including Mr. Hemmelgarn’s keynote session, here: https://events.sw.siemens.com/en-US/realizelive/content-library/ . There were a lot of great sessions; I totally recommend the main stage presentation on Wednesday by Molex’s Don Hantyshin about how critical the supply chain is in new product creation. And for some true inspiration, see how Easton LaChapelle of Unlimited Tomorrow makes affordable, modular prosthetic arms and hands. Amazing.
And put it on your calendar right now: the next Realize LIVE Americas will be in Las Vegas on May 13-16, 2024.
Note: Siemens graciously covered some of the expenses associated with my participation in the event but did not in any way influence the content of this post. The cover picture is of Tony Hemmelgarn during his keynote presentation; I grabbed the uncredited photo from Siemens’ wrapup, https://newsroom.sw.siemens.com/en-US/realize-live-recaps-day-one/ , because all of mine were terrible.