Siemens can design the whole vehicle—ICs to engine to body—plus the factory that makes it.
We got to know Tony Hemmelgarn, CEO of Siemens Digital Software Industries, a little better at Siemens annual Media and Analyst Conference in Detroit. We found out that he lives nearby in Canton, right outside of Detroit and not far from the airport (Detroit Metropolitan Wayne Country, or DTW). He is a grandfather and has four grandkids. He stays fit with a mountain bike and a road bike. With all that out of the way, he’d much rather talk about the business.
What follows are excerpts and highlights of our conversation.
Siemens, as both an industrial giant and a software vendor, is in a unique position to determine what software engineers and manufacturers need—and provide it. The others, direct competitors as well as companies that Hemmelgarn refers to as hyperscalers, are just guessing.
But first we have to hear about Metaverse. Since Facebook announced Metaverse, it must be mentioned in any technology conversation.
“There’s a lot of talk about the Metaverse today. We get calls from the hyperscalers. They want to work with us because they need to get a good picture of what’s going on in a factory. Anybody can fly through a factory and get a visual. But how do [you] get the engineering behind it? You heard me talk about Amazon yesterday and our work with digital twins. We talked to Amazon and said maybe there’s some things we could do together with Metaverse. It’s all early. I know we’ve got a ways to go. But from what we see of AR technology, you can use the Metaverse to embed yourself into a factory as it is being designed or as it is running and see what is going on in real time. It is then that the Metaverse starts to take on a little bit more reality than what we have today. The good thing is the hyperscalers are going to invest a fortune in this. They’re using gaming engines and all kinds of things to make this happen. We want to work with them and bring our engineering content in.”
You were very proud to welcome Hyundai as a customer. You were in charge of Sales. That must have been exciting.
Flipping Hyundai ranks up there. They were our competitors’ accounts for 40 years. They went through a benchmark and scored very well. We may have shocked them with how well we did. But any time you make that kind of change, it’s not just changing the software. It’s the process of the people. And that’s hard. We’re very happy they came our way. If you look at what’s happened in the automotive industry—all the major automotive companies have come our way. Daimler made a switch. Hyundai. We flipped Chrysler years ago. We’ve taken a lot of business away from our competitors in the automotive space. It’s because of our integrated solutions.
The feedback we get [from the customers of other software vendors] is that some of them are struggling with their implementations. Our competition is struggling. They talk a lot about version three and six, and it hasn’t really taken off. In the benchmark for Hyundai, our competitor tried to show the old version and the new version but couldn’t get into the new version. We were able to get to both versions. We showed them what we did at Daimler, how we moved them. And we transitioned Daimler in a year and a half less than they thought we would take.”
You were head of Sales previous to the CEO position. Did you participate in the benchmarks?
I did not because it was during COVID. We had a small team traveling and it was very difficult. We had to have the guys quarantine for 7 to 10 days. I couldn’t do that. It was a crazy time. They would throw you in a room with a mattress on the floor. Maybe there was hot water or a heater. You would have an Internet connection. They slipped some food through the door every day. Some noodles or something like that. In three or four days, you’d go crazy, right? Bob Jones did that. I spoke to Bob and his team on the phone a few times. But I was not there.
Our other big win was Lockheed Martin Aeronautics.
Customers are still doing benchmarks?
Yes, but now process is a big part of it. More than anything, it’s a process change. Yes, absolutely. But it’s also, can you do what you said you’re going to do? How would you do body design, those types of things for me agreeing to prove all that out? So, I always say the categories are kind of religious, meaning most times it’s not about technology. It’s: I use this toy like this, so I don’t want to switch. It’s a religious battle halftime, so when you are able to flip somebody who’s in a long time, you can see how hard that is for somebody who’s ready to make that change. You know, they’re stuck. They like the tool they’re using, even if it’s not as good as something else. They don’t want to go through that process of changing.
Congratulations on the big wins. Do you see a shift towards Siemens software in general or only these big companies?
We’ve grown our business. We don’t publish numbers externally, but we have outgrown the market.
Outgrown the market with new users or with competitive wins?
Absolutely. We have pulled customers away. But it’s also an expansion of accounts.
There’s a net gain of customers, after you account for Siemens customers who switch to the competition.
We don’t ever lose anybody. We retain our customers for a long time. We haven’t had a major customer flow away from us like this [flow coming to us].
But I have to say that when you say when small and medium-sized companies are benchmarking SaaS [software as a service], it’s a lot different. You won’t know. They do their trials. If they can’t use an SaaS application because SaaS has no support, we can win with our software because we provide support. We help our customers. But those customers are not going through a big long benchmark. They’re going to try it. They’re not going to like it. They’re not going to use it. They’re going to go somewhere else. We make sure we’re there to support them through the onboarding process. Sure, that makes us different.
What is Siemens’ position in the Big Four (Autodesk, Dassault Systèmes, PTC and Siemens) as far as revenue?
That depends on how you define the PLM space. We’re by far the leaders in PLM. [Dassault Systèmes] acquisition of Medidata is in the pharma space. That is very loosely connected to PLM. That doesn’t really make sense. What do medical data records have to do with PLM? There’s some parts there for the PLM, but most of the business is not PLM.
You see Dassault Systèmes’ acquisition of Medidata as a lateral move or market expansion?
They’re going after business and profit. I’m not arguing with their acquisition. It was probably a smart move for what they wanted to do, but now they look like a holding company. Is [medical records] part of their core portfolio? When you think about what we have in our core portfolio, we’re the largest PLM business out there—by far.
What is the annual revenue of your division?
It’s about EUR 4.4 billion.
The acquisition of Mentor Graphics brought the mechanical and electrical design disciplines together. How’s that working out?
That has been a clear reason why we are winning these big accounts. We can handle the vehicle’s printed circuit boards and electrical systems. We had the vice president of GM talking about the service system of the vehicle, showing us all the electrical wires running through the vehicle. That need to show them clearly came early after the Mentor acquisition. The Mentor acquisition made sense. Then we got deeper. [With] the integrated circuit, people were asking why ICs were made in 2D. Our integrated circuit analysis let them think in 3D. I talked yesterday about the 3D stacking of chips for better performance in a smaller footprint. That requires design, PLM, MBSE [model-based systems engineering] and simulation tools to be able to solve that 3D problem. A 3D stacked chip will have heat issues, packaging issues, all kinds of things.
And it’s not just the integrated circuit. We have PAVE360, which advances autonomous driving by validates autonomous vehicle programs with software before they go into silicon, before they go into an integrated circuit.
That’s with technology from Mentor. I think it’s been a very good acquisition. It was good from the beginning. Now it’s playing right into our comprehensive digital twin. People are seeing what it means for integrated circuits.
You mentioned that companies are giving more input to integrated circuit design? What do you mean by that?
We’re seeing more companies doing it [integrated circuits] themselves. Like Apple. Like [a famous car company we can’t divulge]. Because they need to build their own integrated circuit for a couple of reasons. First of all, they need to protect their intellectual property. Second is safety. Autonomous vehicle companies are very concerned about safety and performance. We’re really focused on those areas. We can support both on a SoC (system on a chip).
We had a presentation on integrated circuit today with Ravi [Ravi Subramanian, Sr. VP and GM at Siemens EDA]. Ravi will tell you that to design the electrical system takes a collection of everybody’s tools to make all the bits and pieces. For the integrated circuit design, we are by far the dominant tool. We do verification, simulation, validation of manufacturing … everything. No one has a chip tool of that caliber. We are dominant. And it goes from there—the computers, printed circuit boards, the wiring, … the whole electrical system.
Thanks for your time, Tony. Before you go, can you tell me how you got into this business?
Sure. You know, I’ve been doing this a long time. It’s kind of funny when we talked about cloud today. One of the first jobs I had was CAD/CAM Incorporated, and believe it or not, they were onto the cloud. They were doing time-sharing of Intergraph equipment. That was back when Intergraph was running on DEC VAX computers. Remember those? They were $70,000 a pop. There was a company that used VAXs and telephone lines to create essentially what we call the cloud today. So, I say I was doing cloud before cloud was cool. I’ve just been in this business so long that I can see the cycles.
