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3 August, 2021

Siemens plans to shift its software sales to the SaaS model

02 July, 2021

Siemens is planning a “fundamental transformation” of the way it sells software products, starting next year, when its Digital Industries (DI) business will start to transition a significant part of its software activities to Software as a Service (SaaS). It says that the new SaaS offerings that will give users greater accessibility, easier collaboration and unlimited scalability to help them accelerate their digital transformation.

For Siemens, the transition will lead to more resilient and predictable revenue stream for the DI division and will help to drive growth by opening up new vertical markets, and attracting new users and customers – especially in small and medium-sized companies which will be able to reduce their investment in complex IT infrastructures. Despite the “temporary burden” of making the transition, Siemens expects the DI division to retain a profit margin of 17–23%.

Siemens announced at the changes at a virtual Capital Market Day where it also unveiled a new growth strategy with financial targets for accelerated, high-value growth of 5–7% compared to the previous 4-5%. It expects net income this year to be in the range of €5.7–6.2bn.

“Our customers benefit from our ability to combine the real and digital worlds,” says president and CEO Roland Busch told the attendees. “This unique capability enables Siemens to support its customers in a way that no other company can.

“Digitalisation, automation and sustainability are growth engines for our business,” he continued. “Here, our core business and our digital business reinforce each other in a virtuous cycle. This effect forms the foundation of our growth strategy for achieving more profitable growth.

“As a focused technology company, we want to strengthen our position in all our markets and enter adjacent profitable markets. And we’re now making our commitment to sustainability clearer than ever,” Busch concluded. Siemens is committing to cutting emissions in its supply chain by 20% by 2030, and aims to achieve a carbon-neutral supply chain by 2050.

Siemens CEO Roland Busch: “Digitalisation, automation and sustainability are growth engines for our business”

Following the spin-off of Siemens Energy in 2020, Siemens is now a technology company focusing on the industry, infrastructure, transportation, and healthcare markets. It is active in sectors that form the backbone of the global economy and offer great potential for digital transformation and enhanced sustainability.

Siemens is also planning to enter attractive adjacent markets worth around €120bn. To tap these markets, it is using a combination of organic and inorganic growth. The company cites its recent acquisitions of Supplyframe – the global marketplace for electronic components – and Varian Medical Systems, as “impressive examples” of this.

Siemens says it is “rapidly driving” its technology portfolio, which now includes software and automation systems, an IoT platform, and core technologies in areas such as AI, digital twins, 5G, industrial edge and cybersecurity. It expects to see profitable growth above the market average, with its core and digital businesses increasingly reinforcing each other. Siemens predicts that its 2020 digital revenues of €5.3bn will expand with a CAGR of around 10% over the period to 2025.

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