Software AG says interest in its digital transformation activities will lead to “sustainable and profitable growth”. Philippe Guenault, the French manager of the company, explains the appetite for IOT among his clients.
Software AG's results for the first quarter of 2021 show a mixed financial picture, as the company moves towards subscription-based revenue models.
Last Friday, the company released first quarter 2021 results, showing revenue of € 183.1 million, down 7% year-over-year. In the fourth quarter of 2020, Software AG reported sales of 237.8 million Euros.
Software AG reported operating profit (EBITA) of 24.5 million Euros, down 38% year-on-year, and net profit (non-IFRS) of 17 million Euros, down from at 27.9 million Euros in Q1 2020. Cash flow of 39.8 million Euros, down 23% over one year, was recorded.
The company notes that the sale of the Software AG Spanish Professional Services business unit reduced costs in the first quarter of 2021.
Growth of the IoT marketThe provider's Digital Business Platform (DBP), which includes cloud and IoT, reported revenue of € 98.9 million. Reservations there represent 67.4 million Euros, with growth of 21% and annual recurring revenues (RAR) up 11% year on year.
“This year it's about doubling our strategy and investing for growth,” commented Matthias Heiden, CFO of Software AG. “With recurring revenue reaching 89% of total revenue from our products, we see that the investments we have made increase the predictability and quality of our revenue stream. We remain focused on balancing our investments with careful cost control to ensure we achieve our margin ambitions. "
"France remains a small country, but a strategic country" for Software AG, explains Philippe Guenault, the manager of AG Software in France for more than three years. The company claims 220 customers in France. And to cite in this perspective the Helix strategy, defined three years ago by the new CEO of the company Sanjay Brahmawar, whose goal is to make growth where the company was previously making a profit.
IOT for historical and new players“The B to C data market now belongs to American companies. But that of B2B data and industry 4.0 is still very open,” assures Philippe Guenault and to point in this direction the driving role of German industry. “There is an appetite from these companies to set up IOT. And they are naturally, more than in France, sought out providers to do so. The French are no longer asking the question of "make or buy", with open source, for example. "
A long-standing player in the mainframe and automation, the company is therefore resolutely turning to IOT and its recurring revenues. With its Complicity IOT brand, a company acquired in 2015, Software AG offers an IOT platform that embeds more than 300 technologies, offered as a white label at Siemens or even with telcos operators.
And for that, she returns to see her clients. Like Durr, specialist in painting robots for the automotive industry.
Software AG has positioned IOT sensors on these robots to improve the quality control of the machines.
"There is a terrible gap between the number of POCs and the number of deployments"
But new customers may also be interested in the German company's IOT offerings. “There is a replacement market for these platforms,” says Philippe Guenault. “We are replacing Prefix (GE), we are replacing Scada systems. But there is also a market where the IOT is being discovered. And to cite the case of Green flex, a renewable energy subsidiary of Total, which now offers a service offering, built on the Software AG platform.
On the strength of its capacity for industrialization, Software AG is placing its hopes in terms of IOT on the rise of customers. “Everyone has done a POC, but there is a terrible gap between the number of POCs and the number of deployments. The questions of security and industrialization are essential”, indicates Philippe Guenault. “These topics have often been overlooked. What is important is the valuation of information, the work between IT and OT, and how we create lasting offers. "