(Bloomberg) -- When Roland Busch took over as chief executive of Siemens AG, he promised to lead the German industrial giant in a new direction, taking a page from Silicon Valley’s playbook and investing heavily in technology and software that yield higher profit margins.

About 18 months into Busch’s tenure, the company’s chief technology officer and strategist, Peter Koerte, shed light on a question that’s been nagging analysts ever since: just how big a makeover does he plan for the 175-year old company?

Here are edited excerpts of the interview, complementing Siemens’s quarterly earnings Thursday. The company said it expects orders in the industrial automation and digital maintenance division to normalize and start working down record order books as supply of semiconductors improves. 

Q: Siemens is positioning itself as a technology company, combining the real and digital worlds. What does that mean in practice?

Koerte: As a tech company, Siemens is using the latest, state of the art technology that combines hardware and software solutions to help customers from industry, infrastructure and mobility to achieve their goals. We connect technology and software for the benefit of our customers. Siemens is one of the top industrial software firms worldwide, as evidenced by the 44,000 employees we have in digital and software activities.

Q: How exactly do you merge the hardware and software products?

Koerte: We take data from sensors in our hardware products such as trains, building management devices, or programmable logic controllers (PLCs). We analyse that data on site – on the so-called edge – or link it to a cloud infrastructure in the background. We use software-based algorithms or machine learning to derive value from the data – to make processes and products better, faster or more sustainable and less resource-intensive.

Q: You’ve recently launched the Siemens Xcelerator platform for digital transformation. How does that platform fit into the business?

Koerte: With Siemens Xcelerator, we are offering solutions that brings together a portfolio of IoT-enabled hardware software and services rather than just selling individual hardware or software products. And we do that in an open and interoperable way. Our customers often have data from their devices that is hard to integrate into software from several companies. Siemens Xcelerator is built on technical governance principles that enable different solutions to work seamlessly together, making it possible for our partners to include their offerings alongside our own. 

Q: But your customers might not be too willing to grant access to production data, for example.

Koerte: Our aim is to generate value for the customer, not to own their data. We convey to our customers that they can improve processes or utilize capacities better by sharing data with us, which they continue to own as a matter of course. And we have learned one thing: customers don’t want to buy and implement another closed software platform or system; they want to buy and combine solutions for their problems. With Siemens Xcelerator, customers buy solutions as a service, when they want it, in the extent and for the duration they need.

Q: So will the Siemens of the digital age be more of a software solutions provider than a hardware maker?

Koerte: No, we offer a full technology stack from field devices to edge to software and cloud solutions. Our target is rather to connect technology for the benefit of customers. In ten years, Siemens will still be in the industry, mobility and infrastructure businesses. But everything we do will have something to do with data from sensors, from intelligent devices, apps or digital replications of whole factories. We will be a technology provider for intelligent hard- and software.

Q: Do you plan to sell off more business units to reach that goal?

Koerte: We’ve already successfully found new owners for a number of the more hardware-based businesses such as Flender, the parcel business or Yunex for traffic solutions. And we’re now in the process of carving out our large-drive applications business. Portfolio management as a focused technology company is also about strategic bolt-on acquisitions. Just recently, we completed the acquisition of Brightly, a leader in software-as-a-service in the digital building space, which fits perfectly into our Smart Infrastructure business and meaningfully complements our latest Siemens Xcelerator solution for buildings, Building X.


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