The Siemens ecosystem is becoming more open, cloud-connected, and approachable for a broader range of companies and users, including startups and Small and Medium Enterprises (SMEs), with the continued expansion of Siemens Xcelerator, which touches all Siemens digital business products, partners, and solutions. This is a cultural and technical paradigm shift for Siemens, driven by a need to engage and support new cohorts of users, working styles, and industries with integrated, partner-enabled solutions at any scale. As of Fiscal Year (FY) 2022, 3,100 companies are taking advantage of Siemens’ new Software-as-a-Service (SaaS) offerings, with 59% being new customers and 74% SMEs.
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Siemens Xcelerator Digital Business Update
Siemens’ digital business revenue grew to €6.5 billion in Fiscal Year (FY) 2022 (a 15% Compound Annual Growth Rate (CAGR)) following the global launch and rollout of Xcelerator in June 2022, continued investment in the cloud (€281 million in FY 2022), and cultural transformation to be more open in its disposition toward partners, products, and solutions. In FY 2023, the company plans to invest more than €300 million in cloud-enabled solutions, and evolve the Siemens Xcelerator portfolio of hardware and software to become modular, cloud-connected, and built on standard Application Programming Interfaces (APIs), so customers can get the same high degree of flexibility, interoperability, and innovation from solutions regardless of scale, scope, or engagement model. Siemens expects to achieve double-digit revenue growth for its digital business through FY 2025 as new offerings and capabilities are released via Xcelerator, which consists of a 1) portfolio of solutions, 2) partner ecosystem, and 3) marketplace.
Portfolio, Ecosystem, and Marketplace
Siemens first launched the Siemens Xcelerator portfolio in 2019 to integrate its core Digital Industries Software offerings with Mendix’s multi-experience application development platform. Since then, the portfolio has expanded significantly in terms of both capability (e.g., Xcelerator-as-a-Service (XaaS)) and customer base, with examples ranging from sustainability-focused startups to established global automotive Original Equipment Manufacturers (OEMs), such as Hyundai, Kia, and Daimler Truck. Now, Siemens Xcelerator is the ecosystem of customers, partners and developers plus a marketplace, in addition to the portfolio, and all three elements apply to all businesses of Siemens (not just Digital Industries / Digital Industries Software (DISW)).
The most recent communication from Siemens establishes four design principles for the Siemens Xcelerator portfolio: interoperability, flexibility, openness, and as-a-Service. Siemens’ products that adhere to these design principles and technical governance, receive an “X” designation. For example, within Digital Industries, there is Teamcenter X and NX X; within Smart Infrastructure, there is Building X; and within Mobility, Railigent X and Mobility Software Suite X. Each of these solutions also has a non-X counterpart. Solutions with an “X” designation are cloud- and Software-as-a-Service (SaaS)-enabled and leverage open APIs so customers and partners can integrate and extend the software to meet their needs.
The Siemens Xcelerator partner ecosystems primarily consists of companies that 1) build & sell, 2) consult & service, or 3) enable & run solutions in partnership with Siemens. There are more than 4,000 existing Siemens partners that fit these criteria and Siemens is actively recruiting companies as Siemens Xcelerator partners and to create and enable new solutions on the Siemens Xcelerator Marketplace. Currently, about 65 companies are on the marketplace and there is a pipeline of more than 200 external requests from companies that want the same.
The marketplace today, is for lead generation; it focuses on education, exploration, and the exchange of ideas, tools, and capability. Over time, it will become a marketplace to buy & sell, but transactions are not yet supported. The near-term vertical market focus is food & beverage, healthcare, and commercial real estate, so customers can expect solutions and partners to ramp up first in these areas. However, Siemens plans for rapid expansion; in 2023, its focus will expand to include 17 other verticals.
Open = Easy, Fast, and Scalable
These developments have been well received as evidenced by recent adoption and revenue growth, but it isn’t all smooth sailing. Siemens needs to ramp up in multiple areas at once and this is a very heavy lift. It is starting with three distinct verticals with food & beverage, healthcare, and commercial real estate. Getting these activations right requires tight alignment with not only product teams, but also customers, channel partners, marketing, and sales.
Next, and related, is dialing up the incentive structure between and across parties to get people to think less in terms of discrete products and more in terms of curated solutions that answer dedicated customer needs. This is a seismic cultural and technical shift for Siemens and introduces the need to figure out and communicate a strategy for longer-term monetization and governance. Policies are likely to be different between industries (i.e., utilities versus higher education) and it will be challenging to support multiple areas in parallel (portfolio, ecosystem, marketplace; up to 20 vertical industries) to fulfill an ambitious update and release schedule.
Partners want to be part of the solution journey and bring their offerings onto the Siemens Xcelerator Marketplace, and the marketplace is good for industry because it means customers can go to one place for holistic solutions from across the ecosystem (not just Siemens) to master their challenges faster. The risk with any marketplace is that the sandbox becomes messy or crowded, although Siemens is doing its part to mitigate the issue by curating the marketplace, and that monetization and governance are not right-sized.
Progress and adoption with Small and Medium Enterprises (SMEs) is promising, but Siemens must innovate how it goes to market, including via new financing options on the marketplace, i.e., buy now, pay later; pay as you go; value-based; or with guarantees. Overall, Siemens’ biggest challenge will be to scale Xcelerator to all products and verticals in a way that supports these cohorts.