Software AG cites deals with AT&T, AWS, Dell in pursuit of €24bn IoT opportunity
Germany-based Software AG has reorganised its channel strategy to prioritise IoT platform deals with the likes of AT&T, ‘hyper-scale’ cloud deals with the likes of AWS, edge hardware deals with the likes of Dell, and IT and IoT reseller deals with the likes of Tech Data. It will put focus on these partners, and drive incremental IoT revenues via a traditional hard-core of Fortune 500 clients.
This was the message from the company at a small press gathering at the company’s headquarters in Darmstadt last week, as it seeks to capitalise on a €24 billion ($25.6bn) market for integration and analytics software, driven by the rush for enterprises to grasp the nettle of digital transformation. It will put heavy focus on certain verticals, where it has most traction. These are industrial IoT, telecoms and logistics. It will also put focus on certain geographies, which are driving the Industry 4.0 movement hardest. These are the US, China, and Japan, alongside Germany, France and the UK in Europe.
Software AG has regrouped around its core offer to “integrate data, devices, clouds, and applications” for enterprises seeking to embrace data and analytics as a springboard for new growth. This positioning forms the central part of a fresh go-to-market strategy developed under new chief executive Sanjay Brahmawar, recruited from IBM’s Watson IoT business towards the end of last year.
The company has reconfigured its digital business platform (DBP) line into three new “go-to-market identities”, each with its own usage and value: integration and API, with an addressable market worth €12 billion; IoT and analytics, worth €7.9 billion; and business transformation, worth €2.4 billion. These will combine and develop into a €24 billion market by 2023, it reckons, quoting research from McKinsey & Company.
Brahmawar says: “The biggest challenge for companies today is to capitalise on the data they have. Eighty per cent is sitting in companies already. The question is how to tap into it; the challenge is how to bring it together in order to work on it. That is the problem we are addressing.”
He adds: “Our integration expertise sits at the heart of this exciting space, where the powerful forces of digital transformation and real-time data intersect… It’s a €24 billion market, and we are in right place.”
But Software AG is caught between two stools, it seems: it is at once a seasoned provider of IT integration solutions for a roster of steady clients, and a bright young thing in the IoT space, seeking to integrate the IT and OT worlds, and drive the sector at large. The conservatism of the old IT space does not serve the roller-coaster ambition and opportunity of the new IoT space.
The company needs to be bold, and take cues from its newly acquired businesses, notably Cumulocity, whilst also serving and developing its core customers. This is the gist of Software AG’s new tactical revisionism.
It serves 50 per cent of Fortune 500 customers, it says, including “most banks and most insurance companies”. It sounds like a stat for the corporate brochure, but Brahmawar subverts it to show the potential as well as the stature of its captive audience. “Our share of wallet is very small. We have massive opportunity to grow that – by talking about our capabilities with IoT and self-serve analytics,” he says.
But its mission to integrate enterprise data, as the disciplines of IT and OT intersect, will also see it lean heavily on white-label and third-party arrangements. The company has been too reliant on direct sales, it admits. Just five-to-10 per cent goes through its “partner ecosystem”, whereas up to 70 per cent of software sales in the wider market goes via third-party resellers.
As such, the company has devised a “comprehensive partner programme” to redress the balance. “We need to capitalise on our partner ecosystem more,” says Brahmawar. “We have so much untapped potential.” The aim is to shift the burden and share the opportunity. It will put more business through partners, including telecoms operators and ‘hyper-scale’ cloud providers, as it tunes its product portfolio and geographic focus to better serve digital transformation.
Operators including Germany-based Deutsche Telekom, Spain-based Telefónica, and Australia-based Telstra already use Software AG’s Cumulocity IoT platform, acquired in early 2017 as the second instalment in an IoT/AI double-hander, following its purchase of US-based analytics firm Zementis in late 2016.
Brahmawar says Software AG is actively pursuing deals with US operators, among operators at large, to provide Cumulocity IoT as a white-label platform for their own IoT offers. He knows the team at AT&T from his IBM days, he says. “We will be talking with AT&T soon,” he comments.
As an aside, and a general commentary, Brahmawar suggests the operator community would do well to partner with a specialist on their IoT platforms. “All the teclos have taken a stab at building an IoT solution,” he says. Have they not been successful? “Probably not,” he replies. “If they had been successful, we would have seen it.”
Meanwhile, Software AG has also expanded its relationship with Amazon Web Services (AWS) to offer key components of its DBP portfolio as ‘computing services’ apps on the newly launched AWS Marketplace for Containers. These include its webMethods tools for API management, its Zementis framework for AI, and its Apama product for data streaming, among others of its IT integration tools.
A third plank of its channel strategy has taken shape with Dell, which is bundling Cumulocity IoT with a selection of its servers to provide a plug-and-play solution for easy deployment and configuration of edge-based IoT services. The packages up streaming analytics, smart rules, and field bus connectivity to run out-of-the-box. Brahmawar says Software AG is pursuing parallel deals with the likes of HPE.
As well, Software AG will make use of IT distributor Tech Data, a channel stalwart for Dell, to leverage third-party IT and IoT resellers.
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