Software AG bags major IoT deals

Analytics and integration firm Software AG has scored a couple of major industrial IoT wins, it claims, running to seven and eight figures over multi-year subscriptions, and generally reasserted its buoyancy as the enterprise queue for digital-change has been reshuffled in the wake of the coronavirus (COVID-19) pandemic.

Software AG told Enterprise IoT Insights it has secured a couple of headline contracts lately, and also seen its sales funnel swell with new prospects. It said its recent rush of business has gone some way to prompt it to reaffirm financial guidance for the year, revised downwards in April in the wake of the initial COVID-19 outbreak, and to raise confidence that supply of industrial IoT will remain buoyant, even in the short term.

The new deals – with an unnamed elevator company and an unnamed medical equipment manufacturer, notably – are multi-year multi-million euro contracts to support the groups’ respective digital transformation efforts.

The “eight-figure” elevator deal is geared around running data insights from the field (“100,000s elevators, up to a million, even”), mainly for maintenance purposes. The contract with the medical manufacturer runs to “seven figures”. The first of them has kicked off a spate of contract wins, the company said; the second has highlighted the surging appetite for industrial IoT from the healthcare sector in the wake of COVID-19.

Overall, Software AG has hardly been impacted during the first six months of 2020, according to Bernd Gross, the company’s chief technology officer. Long six-to-nine month sales cycles, typical of software businesses, have so far minimised any drop-off, he noted.

Indeed, first-half bookings grew 30 percent, overall, with group revenue stable at €411.7 million (compared with €411.4 million in 2019). Product revenue, covering licences and managed services, was €319.9 million in the period (compared with €317.7million).

Bookings were up by 31 percent and 39 percent within its IoT-focused integration and analytics units, respectively, even if revenues slipped marginally as sales shifted onto subscriptions. The company had already hit 50 percent of its Q3 targets by the end of August as well, according to Gross. The management team has also instilled linear sales targets, so accounting periods are not backloaded each time, and performance is better modulated.

“For the first time, sales are developing very nicely along a linear path,” he said. As well, its ‘sales pipe’ appears healthy through the end of 2020, including in the US. Gross commented: “We are cautious still. I don’t want to be too optimistic. But on Q4, you can only look at forward-looking indicators – sales funnel, pilots and engagements, and so on. These are all very strong.”

So, what gives? How has a business that is serving large parts of a crippled industrial sector, in almost lockdown for most of the year, posted such decent business? The answer, reckons Gross, is in the diversity of its customer base, and the critical nature of its technology. That’s the story, at least; the forced drop-off in certain verticals has been offset by the pickup in sectors like healthcare, notably, as well as in retail and the wider manufacturing space.

Gross tells it: “The reason is we are working in many different industrial verticals. We are in 14 different industry segments, and while some of them have not been working, others have been working better than before. So we have not really been doing much business in the automotive or aerospace market, for example, just as nobody has. But we have doubled and even tripled revenues in the healthcare segment, say.

“And that goes, as well, with the nature of our software, which is mission-critical. Because you can’t just say, ‘I don’t do integration’, anymore – your back office processes are dependent on it. It is not just nice-to-have software. It impacts your core processes. So that is playing in our favour, as well.”

This bodes well, surely? To ride out a global pandemic, with rising sales in developing sectors, which had been slower previously to grasp the nettle of industrial IoT, in time for when the economy (presumably) rebounds? “Absolutely. That is our view. We anticipate increased demand for our technology, due to COVID-19, and also just because of the critical nature of the software for key business operations.”

He goes on: “Software technology is so important now. Elevator companies and medical device makers have to transform. It is the same for all OEMs, literally; they have to become software companies. And our position is we are an independent software powerhouse, with a focus on enterprise, with the capabilities to help them along. That is resonating extremely well.”

“We have great interest from OEMs, looking not just for our technology, but for a very intimate strategic partnership. They want joint development teams and executive steering committees on strategy and process. They want to understand how a software company thinks, and builds, and works. They are looking for engagement way beyond just the technology.”

He reflects on the company’s two big headline wins. “You know, you ask afterwards what sealed the deal. Because it is such an important decision, and useful to understand. And they say, ‘listen, it’s your team, and your commitment to help us transform’. That is a very good sign for us. Bigger software companies can’t do that. They can’t come with the management, and do workshops; they work very differently.

“Our approach is paying off. People believe us because we have the technology, we have the DNA of a software company, and we have the knowledge in these vertical domains. They want to learn from us. And that is a nice situation, because we can leverage our technology and experiences.” Enterprise IoT Insights