From product to software

From even a quick walkthrough of the fair grounds at SPS it was clear that the manufacturer’s push for ‘Industrie 4.0’ has gained traction. Whether it is a readily available connectivity solution or concepts to be implemented in the future, every one of the major industrial automation suppliers have an ‘Industrie 4.0’ offering. For example, SAP is trying to leverage its existing market penetration as an Enterprise Resource Planning (ERP) software supplier to enter the ‘Industrie 4.0’ market through their SAP Leonardo platform. Similarly, Siemens is increasing its push towards ‘Industrie 4.0’ through alternate business models such as a software as a service subscription. It was announced during the show that Siemens will help the companies with financing to adopt the latest MindSphere 3.0 as a solution for ‘Industrie 4.0’. PTR believes that these events indicate a restructuring of the automation component supply chain in by 2030.

In 2030, rather than automation suppliers primarily selling components for factory equipment, supplier’s business models would heavily revolve around software engineering and solutions. This does not mean that they will no longer offer motors, drives, gearboxes, or other industrial components, this simply means that the equipment manufacturing would be outsourced while the software solutions and platforms would be done in-house or via acquisition. Furthermore, this trend will gain additional traction as Artificial Intelligence (AI) inherits a more integral role within industrial automation and increases the need for software engineering. There will be an optimal ratio of software solutions to equipment offerings but there is little doubt that the primary revenue of tomorrow’s automation suppliers will be from software.