With the rapid adoption of new technologies like 5G, AI, cloud computing, and IoT, smart industrial solutions such as industrial intelligence, connectivity management, and cloud-based industrial application platforms are generating huge value as they’re widely adopted in key industries, including electronics manufacturing, construction machinery, electric power, and iron and steel.
Against this backdrop, the industrial Internet ecosystem architecture has taken shape. Based on the integration of OT and ICT technologies, this architecture features the E2E acquisition, aggregation, and utilization of industrial data, and the migration of enterprise IT architecture to cloud.
As a key element of the Industrial Internet, industrial software is evolving to become cloud-native and more rapidly converging with ICT. This indicates that the industrial applications of the Industrial Internet are entering a crucial stage.
Collaboration between terminals, networks, cloud, and applications
The industrial Internet is the result of deep integration between next-generation ICT and manufacturing, as shown in Figure 1. Its core industrial technologies are terminals, networks, cloud, and applications.
Figure 1: Core Industries of the Industrial Internet
Terminals refer to basic industrial facilities with data awareness capabilities, meaning intelligent industrial terminals. Networks refer to connectivity, which means 5G industrial networks that feature high bandwidth, low latency, and massive connectivity; related network connections; network security; and other telecommunications technologies. The cloud refers to cloud-based data platforms that acquire, store, and compute industrial big data. Applications refer to industrial intelligence solutions based on ICT applications and cloud platforms used for the development, deployment, and application of such solutions.
The core industrial system of the industrial Internet includes two new industrial sub-domains as a result of convergence: 1) The edge computing sub-domain, which is the result of industrial automation and industrial networks extending towards edge computing; 2) The Industrial Internet platform and software sub-domain, which includes the intelligent upgrade of traditional industries such as industrial software, industrial networks, industrial equipment, and industrial security.
IDC divides Industrial Internet into seven market segments: smart industrial security, equipment IoT, cloud infrastructure, platform software ecosystem, industrial software development, terminal solution supply, and integrated industry consulting. It predicts that the industrial Internet will develop in four key areas and that smart industrial solution providers will compete for a stake in these markets. These areas are 5G networks, AI, industrial Internet platforms, and cloud-based software.
Two trends in software-dependent manufacturing
Trend 1: OT-ICT convergence and cloud-based software
When we talk about industrial software today, we're usually referring to ISA-95-based software systems such as EPR, MES, PLC, and DCS. With the advent of digitalization, enterprises now have higher requirements on data acquisition and processing for both production and management, as shown in Figure 2. Traditional ISA-95 architecture no longer meets enterprises' requirements to go digital and intelligent, so the industry urgently needs to upgrade and optimize the industrial system.
Figure 2: IDC's industrial Internet integration and evolution framework
In terms of software, the pyramid architecture represented by ISA-95 will become obsolete, and software at different levels of the pyramid, such as ERP, MES, and PLM, will be integrated into the industrial Internet platform. However, ICT and OT technologies must be deeply integrated to fully replace ISA-95 architecture.
The integration of software is reflected in industrial software becoming cloud-based more quickly. The most common way for enterprises to migrate to cloud is by deploying IoT access on industrial equipment at scale, using intelligent edge technology to migrate industrial data to cloud, and creating industrial digital twins.
IDC's data shows that China's cloud infrastructure market is developing rapidly. Public cloud accounted for 37.3% of China's industrial cloud infrastructure market in 2018 and 45.9% in 2020. Manufacturing companies in China with more than 250 employees have shown a strong desire to migrate production equipment, production control software, and operation management software to cloud.
Trend 2: Becoming cloud-native and the emergence of the people-machine-thing platform
With the increasing adoption of cloud computing, industrial software will look different on the industrial Internet platform. The microservice software architecture and a convenient PaaS-based development ecosystem will enable cloud-based deployment, joint contributions, sharing, and online operations. For specific industrial applications, traditional industrial software and industrial AI are integrated in a way that best encapsulates and shares industrial know-how, and provides massively customized and scenario-based industrial AI software applications.
It’s worth noting that the convergence of existing industrial OT systems with ICT means that software development, deployment, joint contributions, sharing, and operations will all become cloud-based, forming an industrial Internet platform that integrates data management, connectivity management, and software application management. This platform, also known as an industrial app, will be capable of interacting with people through intelligent terminals, enabling enterprises to integrate people, machines, and things.
Five types of players competing for dominance in cloud
As the industrial sector becomes increasingly cloud-based, companies in the industrial software industry are fiercely competing over ICT-OT convergence, cloud infrastructure construction, and cloud platform ecosystem construction.
Traditional industrial software companies keep increasing development efforts in the cloud ecosystem based on the existing industrial framework to accelerate the upgrade of industrial software. There are several types of companies in this market:
Industrial automation companies
These companies have been involved in key industrial areas for many years and possess a strong first-mover advantage. In recent years, international automation giants, such as Siemens, ABB, Honeywell, Rockwell, and Emerson, have constantly expanded their cloud services and enhanced their capabilities in software development, data analysis, and the cloud ecosystem through in-house R&D or acquisition. These companies aim to develop a full range of digitalized and intelligent production management software products.
For example, Siemens is the standard-bearer of Germany's Industry 4.0 strategy, and proposed digital factory solutions early on. MindSphere is Siemens's cloud-based IoT operating system. It helps enterprises establish connections between machines, systems, factories, and products, and offers intelligent decision-making through cloud-based big data analytics. The system also supports PaaS, providing cloud-based development capabilities.
Traditional software R&D companies and software R&D management companies
Companies such as Dassault, SAP, Oracle, and QAD have technological advantages in software R&D. With long-term expertise in their relative businesses, they’re familiar with what enterprise customers need, and can fully address those needs.
These companies have been involved in cloud services for a long time. For example, SAP launched the SAP HANA Cloud platform in 2013 to enter the PaaS market. The IT giant later added other features, such as IoT, to the platform, transforming it into the SAP Industry Cloud, which allowed it to start serving vertical industries. SAP Industry Cloud is a powerful system that can be installed and deployed on SAP's data centers, and also on multiple other clouds, including Google Cloud, Microsoft Azure, and Amazon Web Services.
Traditional automation solution providers
Aspen, MPDV, and Apriso are key examples of such companies, each with rich on-site construction experience and boasting deep insight into the integration of PT, ET, AT, OT, and IT technologies. For example, Aspen's AIoT Hub solution integrates numerous applications such as data management, industrial AI, intelligent edge, and a cloud data platform.
These companies have a large customer bases from long-term operations. They can integrate various solutions and provide services to address the emerging digital transformation market, and thus become competitive players.
With the new trend of converging ICT and OT technologies, ICT companies and consumer-oriented companies are also competing in industrial software.
ICT companies
The rapid development of next-generation ICT has stimulated traditional industries and driven change among traditional industrial software companies. ICT companies, like Google, Microsoft, Amazon, Huawei, Alibaba, and Tencent, have a first-mover advantage in terms of technology.
They have a long-term focus on next-generation ICT like 5G, cloud computing, big data, and AI. They have actively built software application platforms for the industrial Internet and constantly increased efforts to develop networks, cloud infrastructure, AI algorithms, software, and application ecosystems to realize the maturity of various enablement tools.
Consumer-oriented companies
Thanks to the cloud-based industrial Internet, the PaaS provided through cloud platforms is facilitating a more convenient software development ecosystem. Today, industrial AI development, which has great prospects for application in industries, tends to be simplified and modularized. Therefore, in the future, industrial companies will become major players competing in new industrial software as third-party developers.
Homegrown industrial software has a promising future
Data from the Ministry of Industry and Information Technology (MIIT) shows that from January to July of 2021, the software service revenue of China's software industry was 5.14 trillion yuan (US$804 billion). Revenue from industrial software products has seen a 17.0% year-on-year increase, accounting for 9.5% of total software product revenue. This indicates that China's industrial software industry is starting to boom.
Driven by favorable national policies in smart manufacturing and the industrial Internet, China's industrial software industry is now integrating with ICT, and China's homegrown software has entered a crucial phase of development.
Currently, SUPCON and HollySys are two Chinese companies with considerable market share in the distributed control system (DCS) industry, reaching 27% and 16% respectively. In China's domestic market, 60% of supervisory control and data acquisition (SCADA) software is already homegrown. Companies like Yonyou and Kingdee are seeing robust growth in the business software market.
With more chips, operating systems, and smart devices in China being made with domestic technologies, a larger proportion of industrial software will also become homegrown, taking the development of the industrial Internet industry to a new level.