Sustainability as a Market Driver: IoT for ESG (Environmental, Social, Governance) | Software AG

Bernd, you were at the global All Hands Meeting in Berlin last week. What exactly did you do there?

Bernd

We brought the entire IoT Analytics business unit together at Software AG. Software AG’s Extended Cumulocity Family met in Berlin. Not everyone could be there, but most of them came. We had 350 colleagues there, from over 35 countries worldwide. A quarter of them female colleagues! I’m really happy about that, because it’s not that easy to have a high rate of female colleagues in the software industry.

That was a super event. We discussed global strategy topics, but also a lot about working methods, processes, technical details, roadmaps. We are just introducing CI/CD, Continuous Integration/Continuous Delivery. We are almost done with that. This is an exciting topic that helps us to be more efficient and to produce with higher quality. There were a lot of topics, and it was also finally necessary to meet face to face again.

One could now ask a bit critically: How does this fit into the topic of ESG, Environmental, Social, Governance, and Corporate Social Responsibility for you?

Bernd

It’s a big discussion up front, of course: should people be brought together worldwide? 80 from India alone, but also from America, California, San Diego … This not only costs a lot of money, but also pollutes the environment. That’s also a very clear issue, you have to weigh things up. Personally, though, I don’t think we’re going to avoid disaster by just doing without. I don’t think that’s the right way to go if everyone were to say, “I’m not going to fly anymore,” or I’m not going to eat meat from one day to the next. Then, I think, we also get social tensions and problems in our society.

From there I keep it with Bertolt Brecht – “Grub first, then ethics!”. Of course, you always have to be careful whether you can quote that … but there is also a lot of truth in it. I think that in climate change, too, we need a socially acceptable change in our entire system. But not by pure renunciation. Certainly, we can partly contribute directly ourselves through renunciation – but not completely. The balance has to be right.

That was our response within Software AG. That’s why we said we’re going to go through with it. We bring people together. I also think that this will make us more efficient again in the medium term, and even better in terms of processes – which in turn will save us energy and travel. So you have to find the middle ground.

As you said, it’s about the whole system in the end. You should not see it in black and white. The topic of sustainability is complex. That’s why we want to talk a little bit more specifically about different use cases, how you approach this with Software AG or Cumulocity.

Software AG is also well known in the IoT environment. But for those of you who may not be working with you in depth today, by way of introduction: You guys are one of the leading IoT device management and application enablement platforms with Cumulocity IoT. You help to manage any devices, machines … in the Internet of Things: the things … on the one hand. But also, on the other hand, to make this data usable through a wide variety of applications.

You have been around since 1969. Over 50 years on the market! In that time, you’ve helped over 10,000 companies and organizations connect systems using software. Furthermore, what many may not know is that Cumulocity was acquired as a startup to address this growing IoT sector.

Today we are talking about the challenges of climate change. The topic of sustainability is quite broad. What is your vision for Software AG and Cumulocity IoT?

Bernd

As you just said, Cumulocity was acquired by Software AG. I’m one of the co-founders of Cumulocity and I’m still involved – with my heart and soul. We were acquired five years ago, and I was the CEO there before, the general manager. We have managed to get our platform into use worldwide.

Then we decided to embark on a new phase of growth with Software AG. That has – touch wood – worked out quite well so far! We have grown enormously not only in terms of the number of employees, but also in terms of the number of our customers. We have hundreds of customers and very exciting projects.

The acquisition also fundamentally changed Software AG. It has to be said that when we joined the software product family, Software AG was still very much focused on the classic enterprise B2B on-prem business. There, we as a native cloud platform with multi-tenant capability have helped modernize the overall portfolio in terms of the cloud.

In addition to being responsible for the IoT Analytics business unit, I am also the Group CTO, Chief Technology Officer, of Software AG. Within the framework of this, we have modernized the software very strongly with the entire team over the last few years, made it cloud-capable … changed the business model from on-prem, multimillion and software maintenance, i.e. perpetual software license. Towards recurring software licensing models with subscription and pay as you grow. Today, Software AG is in a completely different position than it was five years ago.

Now to the vision: It plays an important role! We have set ourselves the – ambitious – task of being the leading software pioneer for the connected world, with a focus on B2B. We have over 10,000 enterprise customers worldwide. All of them are in a difficult situation: they see that networking is playing an increasingly important role, as is the convergence between their operating units – operational technology and IT are playing an increasingly important role. You have to think holistically. We call this the Truly Connected Enterprise. Other popular names for this on the market are Frictionless or Seamless Enterprise.

Our vision is that the more on-prem IT applications, cloud applications and the physical world converge, this triangle, the more our software will be in demand. Because we play a crucial role in these three areas to harmonize, to integrate the data. To integrate systems and automate process flows.

Customers have different goals when it comes to sustainability – economic or ecological, where you launch initiatives to conserve resources and drive innovation. How are you, as Cumulocity and Software AG respectively, helping along the way?

Bernd

The essence of many of our projects is very much related to … we call it an adaptation lifecycle. Very many customers start with efficiency improvements. They are basically looking for networking, IoT technology. This helps to achieve certain efficiencies. This often also means – fortunately – that we can save CO2. Not only the working hours, but there are often huge additional effects.

We always see three steps. If you leverage efficiencies in the first, like a logistics company that fills and empties recycling containers … They can use fill level sensors to optimize their routes every day as needed. Instead of running a specific route once or twice a week, they now use our technology to run dynamic routes that are reassigned to drivers each morning. This reduces logistics costs by up to 30 percent!

Here, not only time is saved, but also CO2 output, consumption of diesel and many other issues. This first step, whether it’s in logistics or in energy management – a huge topic in factories at the moment … Or whether it’s advertising pillars that are switched off or dimmed at night … There are an incredible number of use case examples, and the first step immediately has a positive impact on sustainability.

Challenges, potentials and status quo – This is what the use case looks like in practice [12:47]

The topics you have now addressed were already a perfect example from your daily practice. You have a wide variety of customers and references that can be viewed online. Issues are also raised with us on the platform, as well as the aforementioned night marking with Telefónica and Lanthan Safe Sky.

Do you have three use cases that you address from your daily practice?

Bernd

One example that is particularly close to my heart at the moment is wind turbine management. The background to this is that we are now helping two large wind turbine manufacturers from Germany to optimize their operations with our software. Nordex from Hamburg and Enercon from Aurich, East Frisia. Both are leading wind turbine manufacturers with tens of thousands of wind turbines in operation and being expanded. We’re talking about hundreds of coal-fired power plants that we’re replacing with wind energy.

In principle, you can imagine that our software is used to implement the connections and optimize the electronics. Self-programmed systems are then often replaced by our software. We follow an edge cloud concept, the SynEdge, open source software. It now also runs on PLCs from Phoenix Contact and other partners of ours, for example.

The entire projects not only reduce hardware, i.e. electronics costs for wind turbine manufacturers. But they also help to improve efficiency through maintenance, i.e. a lot of service optimization. The typical monitoring examples – condition monitoring, alarm management et cetera.

What we also do far beyond that is to consider: How can we optimize energy efficiency? What else can we do via data analysis to optimize wind energy production, i.e. the cost of energy? There are “lower costs” on the one hand and “higher energy production” on the other. There are experiments with rotor blades, for example, to optimize wind alignment. Through intelligent feedback loops, we can try to increase energy efficiency by 2-3 percent. This is a huge potential for turbine manufacturers!

We also have various companies that work very close to the shop floor. Above all, there are also many digitization leaders who are optimizing their shop floors with a wide variety of use cases in terms of IoT. Do you have an example of that from your company as well? What can you do on the shop floor itself?

Bernd

We cooperate with many partners. For example Festo, ifm, Turck or also SMC. The latter certainly known as one of the larger digitization and automation companies in Germany. They use our edge and cloud technology to optimize compressors, for example. The electronics of these compressors often come from SMC.

Through continuous monitoring and optimization, they manage to produce Compressed Air up to 20 percent more efficiently – in other words, compressor efficiency increases by 20 percent, is how I would put it. That pays back into the CO2 footprint account. If I enable 20 percent efficiency improvements in compressor technology, that obviously means a reduction in energy and also in overall expenditure. That’s why, for me, IoT is often inseparable from environmental issues.

I also think there is great potential to make such intelligent components and data of wear limits usable and to talk more and more with the manufacturers. SMC is also represented in our network by Oliver Prang. The corresponding podcast episode is linked in the show notes. It’s also worth taking a look at the use cases.

Do you have a third example for us?

Bernd

One of my favorite partnerships right now is ERA – the Electric Racing Academy. We are now one of the main sponsors. You have to think of the project like this: It’s not just about electric racing, i.e. moving away from combustion, the internal combustion engine – toward electrification. This is an important issue; that’s why we also wanted to meet with them. Our logo can be seen on their cars. There are networked videos on our website.

By the way, we are always asked about the topic of sound. “Racing, Formula 1, that also lives from the sound of the cars! – If you take a look at electric racing, go there: The sound is enormous, almost better! That is no longer an argument for me. Quite similar even to the combustion engine, but still a bit more dynamic even. Certainly also a matter of taste.

But what I think they do well: That they don’t just consider this CO2 footprint issue. But if you think more holistically, you should probably also take a look at the keyword ESG. They make it possible, for example, to gain access to sports racing without having to invest a lot of money. If you watch Formula 1, for example – you can’t do that. You need to invest millions of euros over Formula 3 … 2 … 1. This is already a certain problem if you want to provide access to this sport.

ERA’s founder, Beth, sees three points of view. She wants to contribute to the environment, so the CO2 footprint – that’s why electric. But the other issue is access to sports. She is totally fanatical about racing. She wants to provide access, and they are also approaching schools with this, universities to expand it. And – what I also like about this – they also have special programs for young women and girls.

There’s really no reason why Formula 1 is all men. It has probably grown socially, out of history, that way. So there are no men’s or women’s Formula 1 championships either. There is only one open to all, and yet we see no women. So there’s a problem in the system.

These are three things we are trying to address in our partnership with ERA: Environment, CO2 – access, affordability – and the issue of equality. Three important topics that can be presented in ONE project.

I personally can tell you a thing or two about that – I studied mechanical engineering myself and I am a motor enthusiast. In college we also had a racing car. I’ve been riding motorcycles since I was 16 years old – it’s a passion. There are of course the ladies, the women out there who are motor enthusiasts. This is a world that can be made accessible, and it should go without saying – but it’s not. So it’s great to see that you guys are supporting at this point to get girls to the topics early as well. I know what it’s like to sit in the Electrical Drives lecture with just three women.

But back to the topic of IoT!

Bernd

These cars are fully networked. That’s where we use our edge and cloud technology again, and we can analyze data and fingerprints in real time. For example, in the event of driving errors, we can provide drivers with immediate feedback. In the test laps, “Hey, that wasn’t the optimal curve” … That is analyzed by the team in the back office, so to speak, and passed on directly as feedback. How efficient is the driving style in terms of electrical energy performance?

Another issue is also: the data is made accessible via a REST API interface. This also allows different advertisers to use data for their own opportunities. There is even an idea that in real time – during the race – you set up a video race, a virtual race. So that you can see the drivers in real time and sort of get involved and ride along. There are really many, many approaches on how to fully digitize this inherently analog racing theme and make it accessible to a larger audience.

Topic Types of Data: Which ones are value-added that you need to implement your own business case or use case? For example, you talked about optimal curves. That’s probably where you pick up the motor data on the drivetrain, which you pick up through your interface?

Bernd

Exactly. We can use, for example, the steering wheel, the position of the tires, the accelerations… We have, I think, over a thousand data points. You can’t recycle them all, but that doesn’t make sense either. It’s like on the shop floor or with wind turbines. There I have 20 000 data points – but actually I only need 200. It is similar here. You have to approach this from experience, analysis and optimization, which data is really useful.

These cars have a CAN interface. With our technology, this can even be done without software coding. We have a user interface to integrate CAN bus systems. This is done relatively quickly, collect and store the data. We use a cloud data lake for that. But the intelligence then comes at the point of working with the data, analyzing, optimizing. There we are still closely connected with the racing team. Even while the races are going on, we usually have a team on site for support.

How exactly does data analysis work with you as a solution partner? We had three specific examples with Nordex, SMC and ERA. Potentially, however, other customers and partners may also be listening. – How do you approach such an issue collectively and what does it take? Assuming I am the next SMC or Nordex.

Solutions, offerings and services – a
look at the technologies used [26:17]

Bernd

In principle, we are seeing more and more partner-oriented projects. Partner Ecosystem is an extremely important topic for us. This can only work if there is a mutual win-win with a positive effect.

We have a multi-tenant cloud platform that you can also label and brand. We have an Edge concept and a SynEdge concept for embedded developments for this purpose. And the rest, the solution issue, very often comes from partners. That means the embedded hardware development, the application development, both below our platform, the sensor technology, the automation technology … that often comes from partners.

And also above the platform … so what goes beyond our ready-made use cases, such as device management, condition monitoring … beyond the standard IoT use cases that are immediately available on our platform in self-service … these are our partner topics. Often our partners develop the special applications on our platform.

That is, depending on the use case, you look at how you do both data acquisition, processing, and analysis. This means that if, for example, Nordex says we need an embedded hardware partner, you have one on hand. Or if SMC says we have our own gateway, our own partner, they can tie that in. At this point you are open?

Bernd

Absolutely! We actually have two ecosystems, not just one. A device ecosystem on the device side – it’s publicly available in our Device Portal. You don’t have to subscribe, you can just go on it and watch it. And you can also certify your own device, automated. This is also designed to be efficient for everyone involved. You can also download SDKs and our software there. We also have a lot of open source software in the field.

On the other hand, we have a solution portal where applications are created. As a strategy, maybe again, we often market ourselves as buy-and-build. Not Buy-or, Buy-AND-Build. That means, in principle, you can use our technology. You then already have some use cases embedded – like device, firmware or software management. Or MLOps for IoT devices. This is all already embedded.

But the right solutions – Buy and BUILD – come through our partners. They’re basically building them on our platform.

Data acquisition is one part. Then it’s about processing in the cloud – that’s a core element of Cumulocity, after all. That is, the whole issue of device management, asset management, where does what data go and what devices are mapped to the cloud … that’s something you map with Cumulocity, right?

Bernd

That’s right. We also use a kind of digital twin management or asset management technology. These are the standard applications that are actually needed across verticals – whether it’s in the medical field … for example, Boston Scientific uses our technology, or Eppendorf, Hill-Rom. Whether that’s at the shop floor level or tele-supply chain, transportation. — We focus more on the horizontal level and expect domain-specific, application-specific developments and activities through our partners.

The analysis of the data also depends on this. At Nordex it was different rotor blade data and at SMC it is compressor data. That means you also look with your architects, what know-how do I need in each case? Am I doing something in terms of AI, or what elements are there in the Cumulocity IoT that I can finish using to do analytics, right?

Bernd

Yeah, I’m always a little wary of “analytics” because that’s a big topic. We say we OPERATIONALIZE Analytics. For example, what is being discussed a lot right now is the topic of machine learning ops. Actually, if I’m implementing device sensing or machine learning devices and I have hundreds of thousands of them, how can I constantly update them in a dynamic setup? Renew the software? Renew the analysis? – In an efficient setup? I don’t want to reload the whole software, but only certain packages, certain things.

That is our strength. We containerize. We help to optimize this software and firmware management in an environment with masses of devices, hundreds of thousands. But we’re not the ones who would write the rules or the machine learning algorithms, for example. That would be our partner play again, or their customers with their contractors or their partners. But we would be the technology where the entire system is managed in the lifecycle.

Exactly, with ERA it would also be like that: It’s about optimal curves, that kind of thing – these are things, of course, that your customer or your partner knows, who manages that closely and then selects the individual technologies.

Bernd

Exactly. We don’t have the domain expertise, and we don’t want it. After all, we want to scale globally in our field. That is why we are very dependent on partnerships.

Results, business models and Best
Practices – How success is measured [32:30]

In summary, what is the business case for your customer? Do you always know the business case of your customers and what does it look like?

Bernd

We know it partially, but not always. At times, these are trade secrets. They often keep that to themselves because it also differentiates them from the competition.

But we know different ones. Some where we see that we’ve had a 350 percent return on investment in a year, so it’s really significant. But you also see some where you say the networking, the analysis as a strategy over many years. They don’t see the need to immediately implement the one use case as a business case.

One thing can be said quite clearly, however: we have a very large market growth. This year we are growing by 50 percent. We have an Annually Recurring Revenue concept as a business concept, so very strong in pay as you grow; we grow 50 percent via that. Focused purely on IoT, we are one of the big players in the platform business globally – and we wouldn’t be growing as fast if it wasn’t a business case. That’s clearly a sign to me that the solutions, the stakes and applications are paying off.

We are also seeing larger and larger applications. For example, Schindler elevators. They have now connected 600,000 worldwide … want to connect 1.2 million – they don’t do that for fun. Digitizing the elevators and connecting them via our technology is an investment. Or the wind turbines or compressors.

I think the market is in a completely different status than before Corona. I can definitely say that. The market we see in the IoT environment worldwide is in a strong roll-out. Networking is a hot topic for many companies.

By the way, also through analyst reports: I recommend this to many companies, and also startups, who ask us how we managed to do this. Do not underestimate the analysts! They are so, perceived, neutral. Advisor. Gartner or Forrestor or even many other well-known analysts … for example, we are one of the leading global players in Gartner’s Industrial Internet of Things Magic Quadrant. There’s another one coming out soon, so we’ll probably be even more leading – I’ll just say that now. But these are also important tools, and I recommend this to our partners as well! Not to be neglected.

In this fragmented market, IoT, visibility is key. You have to fight hard for it. Just doing good projects and not talking about them – that’s not going to help you achieve disproportionate growth. This is an important topic!

We also want to support this through our activities: To provide visibility for such great partners and projects in our community. You’re seeing more and more projects achieving initial success, with a business case. There’s a lot going on.

If we still look at the future, for example the next five years, where do you see the biggest approaches in sustainability for IoT?

Bernd

First of all, IoT and sustainability, circular economy, they go hand in hand for me. Technology, to speak more broadly, the networking of the world – that is taking place. And digitally, too; not just economically. This will fundamentally enable processes to be optimized. Process twins are now also available. How can I realize optimizations? Simulations of entire factories? What Siemens is currently doing in the industrial software sector already seems very futuristic in part, with the entire simulation of a factory’s production via data, digital twins. And then the programming of the automation about it – that is, after all, their goal …

That’s futuristic. But if you think about how much more energy-efficient a factory can be built if you optimize that from the start – it’s gigantic. I don’t think there is ONE point at all. Rather, digital networking has an extremely high leverage to make us more efficient together, i.e., to save energy and reduce CO2 footprints.

There you have nicely closed the circle to the beginning: The bottom line is holistic networking – which brings us back to the vision you mentioned at the beginning!