Microsoft, PTC, and IBM Planting Their Flag in Germany to Drive Industrie 4.0 Strategies

Within the first few months of 2017, Microsoft, PTC, and IBM all made substantial investments to bolster their IoT presence in Germany. In April, Microsoft opened its third global IoT laboratory in Munich, joining the company’s other IoT labs in Shenzhen, China, and in its U.S. headquarters in Redmond, Washington. In March, PTC announced that it was partnering with McKinsey & Company to create a global network of Industrie 4.0 Digital Capability Centers, with the first one opening in Aachen, Germany on March 30. In February, IBM Watson Group opened its US$200 million IoT headquarters in Munich and announced new business ventures with Visa, Bosch, and BMW. These investments and initiatives are all aimed at advancing Industrie 4.0 strategies that drive a new, connected era of industrialization. However, they also serve as an indication that German manufacturers are in a somewhat better position to implement IoT solutions such as factory automation and smart manufacturing than their U.S. counterparts, due in part to substantial support from both the private and public sectors.    

Germany realized the potential impact IoT could have on its manufacturing industry early on and created Industrie 4.0, an initiative launched in 2011 and focused on implementing high-tech strategies to promote the shift from traditional manufacturing to smart manufacturing. Manufacturing is a huge component of Germany’s economy, with the industrial sector making up 28% of GDP in 2016, compared to only 19% of U.S. GDP. In 2015, the German government announced a €200 million investment to drive Industrie 4.0 research across government, academia, and business. The main goal of Industrie 4.0 is the digitization of all machines and objects within the production line to ultimately make production processes more flexible and lead to the development of more customized products. Industrie 4.0 paved the way for the Made in China 2025 initiative and similar smart manufacturing initiatives within the U.S.

Headquartered in Needham, Massachusetts, the Industrial Internet Consortium was founded in 2014 by AT&T, Cisco, GE, IBM, and Intel. Like Industrie 4.0, it is focused on aiding the adoption of connected manufacturing systems and business processes. Unlike Industrie 4.0, which is largely funded by the public sector, the IIC is driven largely by private sector investment and collaboration. While public sector initiatives in the U.S. do exist, like the US$140 million Department of Energy Clean Energy Smart Manufacturing Innovation Institute (CESMII), there is little collaboration between the public and private sectors to advance smart manufacturing capabilities within the U.S.      

This is not to say that government is the solution in driving national IoT adoption, but rather that to achieve the business impacts of smart manufacturing processes, there need to be effective partnerships and collaboration between both the public and private sectors. German chancellor Angela Merkel consistently brings up Industrie 4.0 and smart manufacturing in her speeches about the business or economy. However, in the U.S., there is a stark contrast between the current administration’s manufacturing promises to bring back manufacturing jobs and trends within the Industrial Internet of Things (IioT), which are geared toward increased job cuts due to automation.

Because of this gap, U.S. companies like IBM and Microsoft are investing their IoT headquarters and labs in countries like Germany where there is not a disconnect between the goals of the private sector and the goals of the government. When IBM, a founding member of the IIC, invests US$200 million into its IoT headquarters in Munich, it should serve as a warning sign that U.S. manufacturing is falling further behind. According to a survey from the Boston Consulting Group in 2016 that polled 300 German and U.S. companies, German companies were more likely to adopt new industrial technologies than their US counterparts. 19% of German companies already implemented IoT solutions compared to 16% of U.S. companies, while 60% of German manufacturers are planning to adopt these solutions within the next few years compared to only 40% of U.S. companies. In order to maintain manufacturing competitiveness, the U.S. needs to embrace digital manufacturing strategies, or else it risks falling even further behind its global counterparts.