Siemens India: Betting big on digitalisation

Engineering and digital solutions provider Siemens India has been making all the right noises when it comes to the scope of the digitalisation business—using digital technology to identify efficiencies in manufacturing and other processes. Given the government’s focus on pushing manufacturing, especially with initiatives like ‘Make in India’, it would seem only logical that a company like Siemens place its bets on digitalising India’s factories going forward.

However, with a depreciating currency, higher crude oil prices and concerns over the trade war between the U.S. and China, it seems like the one big engine that was powering India’s growth—government spending—could very well run out of steam. But Sunil Mathur, 55, managing director and chief executive of Siemens India, is unfazed. Speaking to Fortune India, Mathur made the case for doubling down on the company’s bet on digitalisation and explained why he thinks it will revolutionise the way businesses function in India. Edited excerpts:

How has the journey been for Siemens in India so far?

Siemens’ relationship with India goes all the way back to the 1860s when the first telegraph line was drawn between Calcutta (now Kolkata) and London, which the company helped establish. Since then, Siemens has been with India through thick and thin. Today we have around 20,000 employees, 22 factories, and 57 offices in the country. The good news is we’re not just getting German products and selling them here, but we are manufacturing here. So we are deeply entrenched in the ethos of the country. Right from power generation, transmission, healthcare systems, and energy efficiency for buildings, we touch Indians’ lives daily in many ways without them even noticing.

Siemens offers an open cloud-based Internet of Things (IoT) operating system platform called MindSphere. You recently launched four MindSphere application centres in India. Can you tell us what kind of work will be done here?

When you come in with any technology you have to look at two things: One is the technology in terms of the vertical for that specific industry, but you also have to look at the processes which are across verticals. So when you are able to bring them both together and host on one platform, you are able to track the product design, its production, and its performance even after sale. For example, you have a printed circuit board that is designed on a platform. You can also see how efficiently it can be produced, how to reduce inventory levels on the same platform. After it has been sold to a buyer and there is a failure somewhere, if you take out this circuit board and track the number on it, you can backtrack it all the way to when it was silicon; right down to what temperature it was soldered at, how was the configuration done, which material was used, the batch size. So that helps to find out the problem and fix it much quicker.

At MindSphere we take data from various units and put a refined version of it into the app, which can be accessed by customers on their smartphones or tablets. So, we can then turn around and tell a customer, sometimes a month in advance, that a particular motor is going to start vibrating or a particular pump will start leaking. The platform will also tell you what to do to fix it.

This entire process needs to be put together, and MindSphere is where these apps will be made. We have launched two in Gurugram, one in Noida, and one in Pune. At peak time for complex projects, we could have 900 people working across these centres.

You have said digitalisation is still a very small contributor to your total revenue. What is your outlook for this space?

We are already at 100 customers for digitalisation. These are customers who are testing the waters to see what it brings for them. But the potential is immense. We have a factory where we make contactors, which are industrial fuses. We wanted to expand and we decided to drink our own champagne so to speak. With digitalisation, we were able to go from 80 variants to 180 with virtually no additional capex, fewer people, and less space. The process was able to identify the areas of efficiency. This is exactly what an SME (small and medium enterprise) needs: expansion without spending too much money.

The opportunity in this space is huge. Every manufacturing unit, no matter what size, will eventually need digitalisation. The contribution of manufacturing to gross domestic product (GDP) is now at around 15% and the government wants to ramp it up to 25%, while taking GDP itself to around $4 trillion. That translates to a capex of $1.5 trillion in the next few years. When you look at it in that context, you will have to use digitalisation. If we don’t, then we cannot compete with the global players who are leveraging digitalisation already.

Given the precarious position of the economy, with headwinds in the form of rising crude oil prices, a depreciating rupee, and the concern over trade wars, do you think the government will be able to continue pushing spends to drive growth in manufacturing and infrastructure?

The question, to my mind, is not whether it will happen but when it will happen. It has to happen eventually. Even if manufacturing doesn’t go to 25% of GDP, 15% is still a huge piece of the pie. So, there will be opportunities and needs that we will have to address.

Smart cities is another area where you have said Siemens India can make a big difference. But there has been some criticism over implementation. What is your take on how this programme has shaped up so far?

Smart cities require a synergy between smart power grids, transmission, smart mobility, and much more. We are present in all these areas. Smart city planning requires having a vision for the city and working backwards from there, identifying the areas that need work, and the best way to do it. This holistic integrated planning is lacking right now; so far the smart cities initiative has just been projects that are bits and pieces of the whole. The good news is at least something is happening. Earlier, even these bits and pieces were absent. Could it be better? Of course! But how do we get there? That remains to be seen and worked out.

(The story was originally published in the October 2018 issue of the magazine)