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Cloud-based Software and Services

Florian Güldner David W. Humphrey
Director of Research European Research Director
ARC Advisory Group ARC Advisory Group
fgueldner@arcweb.com DHumphrey@arcweb.com

1. Traditional Software

2. Change in Software

3. Traditional Services

4. The Merge

VISION, EXPERIENCE, ANSWERS FOR INDUSTRY © ARC Advisory Group • 2

VISION. Selected companies have already moved to different models. EXPERIENCE.Software and Services Yesterday and Today • Large software with additional add-ons • License for 3-4 years or longer • Financing models to split cost over time • Client – server model • This is already changing. ANSWERS FOR INDUSTRY © ARC Advisory Group • 3 .

Level material use. etc. minutes. maintaining records and III Dispatching Production. EXPERIENCE. ANSWERS FOR INDUSTRY © ARC Advisory Group • 4 . Reliability optimizing the production process Assurance timeframe: shifts. Timeframe: months. hours.The Traditional Framework Business Planning & Establish basic plant schedule production. shifts Manufacturing Operations Work flow / recipe control. manipulating I the production process Level The actual production process 0 VISION. detailed Production Scheduling. and shipping. days. weeks. stepping the process through stats to produce the desired Level Management end products. delivery. and II automated control of the production process Continu Batch Discrete ous Control Control Level Control Sensing the production process. supervisory control. seconds Level Monitoring. Logistics Determining inventory levels IV Plant Production Schedule. operational Management.

EXPERIENCE. ANSWERS FOR INDUSTRY © ARC Advisory Group • 5 .The Traditional Framework VISION.

AIM 0 0 0 1 0 1 1 1 0 1 0 0 0 0 1 0 0 1 1 0 1 1 1 0 0 1 1 1 1 1 0 1 1 0 0 1 1 1 0 1 0 1 1 1 0 1 0 0 0 1 0 1 1 1 0 Line Manager 0 0 0 1 0 0 1 1 0 0 0 1 0 MES / CPM. EPC. ANSWERS FOR INDUSTRY © ARC Advisory Group • 6 . EXPERIENCE. EMI. GIS 1 1 0 1 0 0 0 1 1 0 0 1 0 Plant operator: 0 1 0 0 1 1 1 1 0 0 0 1 0 0 1 1 1 0 0 1 1 0 1 0 0 1 0 0 0 0 0 1 1 0 1 0 1 1 0 1 0 0 0 0 0 0 1 1 1 Machine Operator: HMI 0 0 0 0 0 1 0 1 1 0 1 0 0 0 0 0 1 0 1 0 1 1 1 1 0 0 Hand 1 0 1 0 1 0 1 1 0 1 0 1 0 1 0 1 1 0 1 1 1 0 0 1 0 0 over 0 1 1 0 0 1 0 0 0 0 0 0 1 1 1 1 0 1 1 1 0 0 1 1 0 1 1 0 0 0 0 1 0 0 1 1 0 0 0 Product/machine/plant design: 1 1 0 1 0 1 1 1 0 0 0 0 0 1 0 0 1 0 0 1 0 1 0 1 0 1 1 0 1 0 1 1 1 0 1 1 0 0 0 0 0 0 1 0 PLM. SI. … 1 0 1 1 0 1 1 0 0 1 0 0 0 1 0 0 1 0 1 1 0 1 0 0 1 1 1 1 0 0 1 0 0 1 0 0 0 1 1 1 0 0 1 1 0 0 1 0 0 0 0 1 1 1 1 1 1 1 0 1 1 1 Graph . EAM 0 1 0 1 0 0 1 1 1 1 1 1 1 1 1 0 1 0 0 1 0 1 1 1 1 1 0 1 1 1 1 1 0 0 0 1 1 1 1 0 1 0 Maintenance Team: 1 1 0 0 0 1 1 0 0 0 1 0 0 0 0 1 1 0 1 0 0 1 0 FSM. OEM. PAM 0 0 0 1 0 0 0 1 0 1 0 0 1 1 1 0 1 0 0 1 0 0 0 0 0 0 0 0 1 0 0 1 1 1 0 1 1 1 1 Closing 0 1 0 1 1 0 0 0 0 1 1 1 1 1 1 1 0 0 0 1 0 1 0 0 0 1 the Loop(s) ARS.Source: Wikipedia VISION. APM. The Traditional Framework 1 0 0 1 0 1 1 0 1 0 0 0 1 1 0 1 0 0 0 1 Accountant: ERP. EDT: User. GIS.

ANSWERS FOR INDUSTRY © ARC Advisory Group • 7 . EXPERIENCE.The Traditional Framework Will the traditional framework remain valid VISION.

EXPERIENCE. ANSWERS FOR INDUSTRY © ARC Advisory Group • 8 . Who and how these questions will be answered. will change! VISION. The Traditional Framework • Who is doing the job? • What’s up?  FSM planning & execution  HMI: machine  ERP costs  MES/CPM: production • Where is it going to happen?  LIMS: laboratory  EMI  GIS • What are my costs? • HOW is my asset doing?   ERP: EAM: everything machine (lifecycle)  ARS: Can my asset do it?  AIM: How long will it continue doing it?  APM: optimization  APM: What’s up? • How are we going to produce?  PLM: discrete  EDT: process As long as these questions remain. the fundamental model will remain.

Traditional Software 2. EXPERIENCE. The Merge VISION. ANSWERS FOR INDUSTRY © ARC Advisory Group • 9 . Changes in Software 3. Traditional Services 4.1.

Subscription only Announcement to go subscription only VISION. ANSWERS FOR INDUSTRY © ARC Advisory Group • 10 . • Theoretically: revenues • One-time payment: 4 year license time • Subscription: 4 times 25% of original sales Example Company • Revenue drop of -75% in any given quarter • But: No 1:1 change as business models were not 100% one-time payment (leasing etc.) • Example: around -20% on a year to year basis. The Valley of Tears • Switching to subscription models means lower revenues for a transition period. EXPERIENCE.

Platform EAM Warranty SFA Planning/ Purchasing Projects Portfolio Analytics Operations IT PAM Support Order Scheduling Receiving Mgmt Mgmt HMI. Changing Software Business Inbound Plant Product Plant Internal Plant Product Customer & Operations Supply Chain Design. Design. Operations Collaboration Support Support Order ERP SCM Engineering Engineering MOM P2B Services Services Fulfillment Financials SRM PPM PLM CPM/MES Enterprise IT APM PSM CRM HR SCP Capital PDM EMI. Mobile Platform RCM Repair Management Compliance WMS Project Formulation Quality. ANSWERS FOR INDUSTRY © ARC Advisory Group • 11 . CAPA Technology TPM Services APS VISION. EXPERIENCE.

EXPERIENCE. EAI BAS Service Enterprise Network CAE Risk Mgmt Web. Portal. CAD Specification Inventory BI. ChangingSoftware Changing Software Business Inbound Plant Product Plant Internal Plant Product Customer & Operations Supply Chain Design. Commissioni Social 3D. Design. Mobile Platform RCM Repair Management Compliance WMS Project Formulation Quality. Automation Mobile Help Desk Mgmt Virtual Enterprise MRO Simulation. Operations Collaboration Support Support Order ERP SCM Engineering Engineering MOM P2B Services Services Fulfillment Financials SRM PPM PLM CPM/MES Enterprise IT APM PSM CRM HR SCP Capital PDM EMI. etc ng Spec Mgmt Digital AIM Factory MPM VISION. EMI. ANSWERS FOR INDUSTRY © ARC Advisory Group • 12 . Kanban. Management Sustainability Construction Simulation. MDM BIM Retire and 3PL Performance Sequencing Procurement Mgmt Logistics BPM AIM Recycle TMS Mgmt & Supply CAD/CAM/ Safety. Platform EAM Warranty SFA Planning/ Purchasing Projects Portfolio Analytics Operations IT PAM Support Order Scheduling Receiving Mgmt Mgmt HMI. CAPA Technology TPM Services APS MDM 3PL Planning Mgmt LIMS Infrastructure Facilities Mgt Product WMS Enterprise Lean.

CAPA Technology TPM Services APS MDM 3PL Planning Mgmt LIMS Infrastructure Facilities Mgt Product WMS Enterprise Lean. EMI. Commissioni Social 3D. Platform EAM Warranty SFA Planning/ Purchasing Projects Portfolio Analytics Operations IT PAM Support Order Scheduling Receiving Mgmt Mgmt HMI. CAD Specification Inventory BI. Kanban. Operations Collaboration Support Support Order ERP SCM Engineering Engineering MOM P2B Services Services Fulfillment Financials SRM PPM PLM CPM/MES Enterprise IT APM PSM CRM HR SCP Capital PDM EMI. Management Sustainability Construction Simulation. EXPERIENCE. Automation Mobile Help Desk Mgmt Virtual Enterprise MRO Simulation. ChangingServices Changing Software Business Inbound Plant Product Plant Internal Plant Product Customer & Operations Supply Chain Design. ANSWERS FOR INDUSTRY © ARC Advisory Group • 13 . Portal. Mobile Platform RCM Repair Management Compliance WMS Project Formulation Quality. Design. EAI BAS Service Enterprise Network CAE Risk Mgmt Web. MDM BIM Retire and 3PL Performance Sequencing Procurement Mgmt Logistics BPM AIM Recycle TMS Mgmt & Supply CAD/CAM/ Safety. etc ng Spec Mgmt Digital AIM Factory MPM VISION.

ANSWERS Drives. Basic Analytics Storage / Database Device Management. EXPERIENCE &FOR . Advanced analytics Event & Action management. Design. ChangingServices Changing Software Business Inbound Plant Product Plant Internal Plant Product Customer & Operations Supply Chain Design. Modules . Operations Collaboration Support Support Order Engineering Engineering Services Services Fulfillment Service Orchestration. INDUSTRY MPU/CPZ © ARC Advisory Group • 14 . Gateways (HW) Operating System for IIoTVISION HW. Edge analytics Connectivity.

) VISION. Conn Mng t. Changing Software • Instead of large software. smaller apps are sold • Apps are assembled based on micro services (also backing Security & Privacy APP Data Storage services) • Micro services are cloud endemic Visu. EXPERIENCE. Nor aliza. Microsoft. GE. etc. ANSWERS FOR INDUSTRY © ARC Advisory Group • 15 . Proc • Specific to the application layer of a specific cloud environment ectivi essin ty g (Amazon. SAP. Siemens. Intel. maliz Devi (PaaS) tion ation Anal ce ytics Actio Mng n t.

ANSWERS FOR INDUSTRY © ARC Advisory Group • 16 .Doing Business with Apps • Fundamentally different from business with software / functions (see valley of tears) • Business Models:  For Free  One-time payment  Subscription  Consumption  Pay per use  (Guaranteed uptime)  (Throughput) VISION. EXPERIENCE.

EXPERIENCE.Doing Business with Apps Challenges Benefits • New players • Low barrier to entry • Creating a value proposition (connectivity • Scaling up step by step alone is no value) • Better match of supply and demand (also • Monetization small companies can have all necessary • Trust software) • Cyber security • Free trial – no risk • Split of risks and benefits • Mutual benefit and risk sharing • Assuring cash flow • “breathing” scope of software and services • Less loyal customers VISION. ANSWERS FOR INDUSTRY © ARC Advisory Group • 17 .

Traditional Services 4.1. Changes in Software 3. The Merge VISION. Traditional Software 2. EXPERIENCE. ANSWERS FOR INDUSTRY © ARC Advisory Group • 18 .

• Large share of services  Are still cost driven (by the hour)  Are still in fixed cycles  Are often corrective VISION. EXPERIENCE. ANSWERS FOR INDUSTRY © ARC Advisory Group • 19 .Traditional Service Business • Lifecycle Services of automation equipment:  Spare parts  Maintenance  Plant maintenance  Retrofit  Modernization  Field services  ….

when an asset is not performing • Technical Requirements:  Data! (… and the question.A I XPERIENCE NSWERS FOR NDUSTRY © ARC Advisory Group • 20 .E ISION . who finally owns it)  Cyber security  Seamless data transfer  Application specific V .Change of Traditional Service Business • The big trends:  Performance-based contracting  Value add services  Outsourcing • Requirements:  Application know-how  Trust!  Local staff on-site  Broad understanding of automation technology (not just one brand)  Ability to guarantee a performance and take the costs / risks.

Traditional Services 4.1. The Merge VISION. EXPERIENCE. ANSWERS FOR INDUSTRY © ARC Advisory Group • 21 . Traditional Software 2. Changes in Software 3.

EXPERIENCE. ANSWERS FOR INDUSTRY © ARC Advisory Group • 22 .The Merge Outsourcing Supported Operations II Supported Operations I Supported Setup Template Clash / Merge with Service Business based App VISION.

there are:  Efficiency gains for the owner / operator  Efficiency gains for the software/service provider  Ability to create better hardware • In our opinion.The Merge • Ultimately the merge of software and services is an efficiency gain • Data will bring transparency and correctly leveraged. ANSWERS FOR INDUSTRY © ARC Advisory Group • 23 . efficiency gains will be split between the involved parties. This means:  Prices of software / services will drop  Prices of spare parts will drop VISION. EXPERIENCE.

and all other parties involved. OEMs. VISION. ANSWERS FOR INDUSTRY © ARC Advisory Group • 24 .surveymonkey. EXPERIENCE.de/r/ARC_Cloudbased_Software-Services Target: The target of this research is to understand the future demand and supply of cloud enabled software and services and develop a path from today’s to tomorrow’s landscape. suppliers. system integrators.Online Survey Online survey on cloud based software and services: • Key results and instant strategy report for free • https://www. This survey addresses users.

com or visit our web pages at www.arcweb. Thank You! For more information.com . contact the author at fgueldner@arcweb.