Bernd Gross is the chief technology officer of Software AG, having joined the company following its acquisition of Cumulocity, which he founded in 2012 as part of a management buy-out from Nokia Siemens Network. With 25 years of international experience in the IT industry and in management positions, including in the UK, Finland and Silicon Valley, USA, he is one of Germany’s pioneers and thought leaders in the areas of digitisation, cloud computing, the Internet of Things and Industry 4.0. Here he tells IoT Now managing editor, George Malim, that we are entering the third generation of digitalisation and that this is introducing a truly connected world which will transform how we interact, transact and innovate, as well as facilitate far-reaching changes to society.
George Malim: You have been strongly promoting the vision of a truly connected world. What does a truly connected world mean?
Bernd Gross: Technology is facing the third generation of digitalisation. The first wave was the emergence of PCs and IT systems in businesses with enterprise resource planning (ERP), customer relationship management (CRM) and databases which created a massive amount of automations. The second wave was the internet. With that came a huge disruptive force and digitalisation that has affected every industry. The third generation of digitalisation is the ubiquitous, connected network.
This is truly a driver for massive disruption in many industries and vertical markets. The consequence of pervasive connectivity is huge because it connects the physical world of machines with apps and, in the business-tobusiness (B2B) context with enterprise, on-premise IT. The convergence is between the physical world of operational technology (OT) with IT.
It is driven by three domains; enterprise on-premise IT, physical OT and cloud applications. Companies describe this in consumer terms but forget to mention the enterprise. With our WebMethods integration technology we have nearly 20 years of heritage in understanding the connected world and that’s why we emphasise this new world as truly connected.
GM: How can organisations remain competitive in today’s connected world?
BG: When you look at this truly connected world in the B2B context it drives companies into a new direction, one centred around the connected customer experience.
This is a massive shift for some enterprises. For example, at Tesla Elon Musk is able to respond to a tweet from a customer suggesting an improvement to a vehicle and say it’s a great idea, we’ll make it available in the next software update. That’s so powerful because it provides a connected way of continuously improving the customer experience through software and services. Previously, a car maker would have had to delay introduction of a new feature until the next new model was introduced in several years’ time. Now it can simply be added to the next over-the-air (OTA) software update.
It’s not just the automotive industry that is transforming in this way. We’re working with companies from wind farm makers to paint shop robot manufacturers and industrial pump providers. These companies are transforming their business from selling products to providing services.
There is a generalised debate about what this connectedness means to business’s future product offerings and many are quite afraid of this new way of competitiveness because it means they have to innovate continuously.
GM: Can you explain your vision of a truly connected world from app to edge?
BG: In many use cases, because we’re B2B focused we are actively involved in edge computing. For example, with mission critical artificial intelligence (AI) a cloud connection can’t be used if there’s high latency or a risk of low connection reliability. You can’t guarantee much less than a second of round-trip delay if you have to send data over the network for centralised analysis. Therefore, you need to perform processing at the edge to eradicate the potential for excessive latency.
Our vision is that you need to have a seamless technology architecture, so you can run the same apps on public cloud, at the core on-premise and at the edge. The platform needs to be so versatile that all three are supported. This is important because it isn’t optimal to process all data at the edge, or on-premise or in a public cloud. Each has their own advantages for specific tasks and therefore all should be accommodated.
For us this is very good. We’re a 5,000-person company with US$1bn revenues but from a software market point of view, we’re not a superbig player. We’re focused on what we’re doing and the world is recognising a flexible platform is needed.
GM: Are subscription-based models transforming the financial model of the enterprise?
BG: The answer is yes and at Software AG we’re also moving into the subscription model ourselves. Why? – because customers want the subscription model. Companies want to avoid having upfront investment and instead want to pay for software licences and maintenance via a quarterly fee. It’s better for them but it’s absolutely better for us because the subscription model transforms your relationship with your client.
Of course, the traditional model, with its high upfront charges and all-you-can-eat licensing, has some advantages but it lacks the continuous customer engagement required to allow our customers to remain competitive. The old way would see, three or four years into a project, an account manager ask a customer if they want to extend the agreement but this means there is always a focus on the original scope of the project and it isn’t a close, collaborative engagement.
With subscription, it’s different because the client can move away if the project isn’t successful. As a vendor that means you have to make the project work. We’re able now to better understand what clients’ problems and issues are and we’re better able to deliver them the solutions to those. To achieve this you need to turn the engagement into a collaborative process.
GM: Do you believe that the everything-as-a-service mindset is essential to evolving to a truly connected enterprise?
BG: This is related to the previous answer and everything-as-a-service is like the subscription model. For example, our customer Gardner Denver is an air compressor manufacturer. It used to sell air compressors but now it is moving to offer compressed air as a service. Its customers won’t buy a machine, instead they’ll pay for the compressed air the compressor makes. Similarly – and this is an old example – Michelin has been offering tyres as a service to truck fleets for many years. Instead of selling tyres, it sells the service of knowing tyres will be replaced as necessary.
The ability to offer everything-as-aservice is very important and requires transformation of the business mindset. Telsa is superior on connected customer experience in that it behaves like a software company but is selling cars. However, this sale or lease isn’t a subscription.
The most aggressive proposition would be usage-based. Not just to have a car for US$1,000 per month but to pay based on how much you drive it. That’s the service mindset.
GM: How does Software AG help customers on their journey to a truly connected enterprise?
BG: We find that all customers are starting from a different place in their journey, so the flexibility of our technology and our propositions allows our customers to progress in the most efficient way for both their starting point and their level of ambition.
The organisational mindset will often have to change to be come a truly connected enterprise and it’s a big project to reinnovate an organisation. Software AG can help with that. In addition to our IoT and integration capabilities we have analytics capabilities and API management. This fits very well in the connected world because customers need solutions which integrate with business IT systems as well as an IoT platform which manages the IoT and OT infrastructure. We also have technology in our Business Transformation unit which supports business process and enterprise architecture design and management. These are two key elements in the evolution to a truly connected enterprise.
GM: IoT plays an important role in providing data insight, what is Software AG’s approach when using data to improve the customer experience?
BG: Data insights are very important because it is the insight that generates the improved customer experience. In the third generation of digitalisation we are experiencing horizontalisation. It starts with the integration of on-premise databases, trouble ticketing and other enterprise systems with new services in the cloud. These need to be brought together via hybrid integration with the physical world, the things out there.
We call this end-to-end integration and with this integration you gain data insights. In that sense you get insight you can analyse with tools and empower business users to do their analytics themselves without the need for data scientists. Of course, there are some cases in which data expertise is needed but in 80% of the cases, self-service analytics is sufficient and can help enterprises integrate data, generate actionable results and automate responses.
The operationalisation of these automated responses requires horizontal integration.
GM: What impact is the truly connected world having on society?
BG: One of the global challenges we are facing is the aging of society. This isn’t just a German or Japanese problem, it’s global. The UN assumes that productivity improvements 1-2% will not be enough to offset the aging population. It predicts a drop of 30-40% in GDP and if that happens people will not be able to maintain their lifestyle.
Some scientists believe this could create civil unrest therefore I believe the third generation of digitalisation with a truly connected world will unleash a new way to drive efficiency, productivity and innovation which is very much needed by society in general.
I fear the image of these technologies is not well-regarded in the public domain as people worry about automation and their jobs but the next level of efficiency gains are needed and technologies have the answer. We need to smooth the path to progress by anticipating what is happening well in advance and preparing for it effectively.
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