What impact does the pandemic have on Dassault Systèmes and your customers, Mr. Löckel?
A conversation about winners and losers of SARS-CoV-2
Interview with Klaus Löckel, managing director Dassault Systèmes Eurocentral, in Munich-Riem, July 22, 2020
Ulrich Sendler: The Corona pandemic has drastically shown the industry how important digital transformation is. What were the experiences of Dassault Systèmes?
Klaus Löckel (pictures Sendler): Companies that were already on the digital road had a great chance of being among the winners, and quite a few took advantage of this opportunity. The impact of the pandemic varies greatly from region to region. Companies that are digitally connected worldwide can exploit these differences better and more efficiently. For example, a supplier to the automotive industry, which was particularly hard hit at the beginning, has increasingly relied on the development capacities in Korea and China after the first wave subsided. Companies that still have strong local ties had it harder.
It became clear that remote usage, i.e. working from anywhere and on a single digital truth, is not only important for home office. It provides the necessary flexibility to use and shift resources and capacities in a completely different way. Those who use digitalization only to continue old processes have little of it. The use of a digital platform is above all crucial for developing new business models.
The winners were companies like CLAAS, for example, that have a well-functioning supply chain. The most important KPI was the number of missing parts. And these companies noticed almost nothing of the pandemic.
Ulrich Sendler: What were the most important construction sites in terms of digitalization?
Klaus Löckel: The cloud has taken on an extreme dynamic. Without it, the infrastructure for everything is missing. It starts with the home office. Without a cloud connection, how would you organize this for 18,000 employees, as we have done?
But at the same time, globally distributed cloud connectivity means increased localization requirements. The services in Poland must work in Polish, English is not enough.
Another important issue also takes top priority for cloud-based work: government and agency regulations must now be fully met with the cloud. There is no funding for a clinical study if data protection is not secure, if it is not clear that no data can be accessed outside the respective project. And certainly not in other countries. So, in addition to Amazon Web Services, AWS for short, and Huawei, we have additional host providers on offer. And the majority stake we acquired in Outscale three years ago provides us and our customers if needed with a private cloud to meet these requirements.
The importance of the cloud has increased so dramatically that we no longer offer just parts of the portfolio, but now everything in the cloud. At the same time, we need to integrate established cloud platforms seamlessly into the existing IT landscape.
Dassault Systèmes is therefore also actively involved in projects such as the European GAIA-X. And we have the TISAX certification for our cloud, which has been required by the automotive industry since 2017.
Ulrich Sendler: It is often said that Corona is leading to a veritable surge in digitalization. Can you confirm this?
Klaus Löckel: I see a very heterogeneous picture. In terms of width, there is rather no push. On the contrary. Budgets are being cut and shrunk everywhere, and that also applies to digital transformation projects. However, the opposite is also true: companies that are experiencing particularly hard times, for example in the automotive industry or in aircraft construction, have decided in individual cases to remove digitalization projects from all priority lists. So-called "Prio-Zero" projects are being pushed forward with all their might. In order not to be up against or even in the wall when the economy picks up again, but to be optimally prepared. Electric powertrain, autonomous driving, digitalization of drug development and test cycles are among the topics of such projects. And, of course, government subsidies are preferentially provided for digitalization tasks, which has a positive effect for us. At Dassault Systèmes, there were no redundancies and no short-time work. The service was and is fully needed.
A general boost for digitalization will probably only come when the funds are released again in the companies.
Ulrich Sendler: What concrete effects did the pandemic have for Dassault Systèmes: economic, technical, organizational?
Klaus Löckel: Economically: Our business model is shifting very much towards subscription instead of license sales. We already saw this in the first quarter of 2020. Financing models are also taking on a whole new significance. In almost every major investment, financing is currently part of the negotiations. Before the pandemic this was hardly an issue.
Technically: Some of our products are becoming more important than others. Younger brands such as MEDIDATA or BIOVIA are suddenly the focus of attention. Because the cloud is now set for even very small companies, for example because of home offices, we now also offer SOLIDWORKS in the cloud. Solutions such as "Try and Buy" via one click are new. And localization and integration have generally taken a leap forward.
Organizationally: First, all employees have gone to the home office. Then we defined three phases of returning. First, all managers were brought back. In the second phase, which is already largely complete, we selected 25 percent of the workforce that we wanted to bring back to their workplaces, exceptions were of course possible. Above all, however, a great many volunteered who were eager to return to their normal working environment. Contrary to our expectations, we were literally overwhelmed with such requests. We have just started the third phase. After that, 50 percent should be present again. To a certain extent, we have set up corona task forces at all levels for this purpose. The global one talks to each other once a week, the local one twice a week, and those responsible for these measures also meet twice at each location.
At Dassault Systèmes, we have developed an overarching recovery plan. The frequency of communication has also changed completely. Every second Tuesday at noon there are now virtual "All Hands Calls", in which an average of 800 employees from the Central Europe sales region, for which I am responsible, participate for around one and a half hours. Previously, such arrangements took place once a quarter. We offer video information about a specific division and the opportunity to ask questions directly to the responsible persons. In return, we receive good feedback from the employees. Since the beginning of the pandemic, we have been using our 3DEXPERIENCE platform internally much more than before. As far as handling in the branches is concerned, we are essentially following the official recommendations of the German government.
Ulrich Sendler: Recently a press release from your company talked about a new service that you and one of your customers are now offering. What is it about?
Klaus Löckel: The engineering company TECOSIM has been working with our software SIMULIA for a long time. Now the specialists there had the idea to find a solution to improve the furnishing of the workstations by simulating their own premises with regard to the air flow in it. A 3D model allows the analysis of the aerosol density and its distribution and through its analysis the 3D model can be optimized to minimize the risk of infection for all employees. The solution was ready in a few days. Now it is available - from TECOSIM as well as from Dassault Systèmes - as Software as a Service. Experts build the 3D model of the rooms and the entire simulation context for interested parties and implement the solution. The potential is great. You can do something like this for a canteen, a concert hall, production facilities, trade fairs and much more. At the moment we have 300 interested parties.
Ulrich Sendler: Has the pandemic changed your target markets? What role does the pharmaceutical industry play now, for example? What is the future for SMEs?
Klaus Löckel: Of course, our software products for design, simulation, data analysis and data management also play an increasing role in the search for vaccines and in clinical trials. But in fact, the discrete manufacturing industry will remain our most important target market in the coming years. In medicine, too, it is medical equipment engineering rather than the traditional process industry that is seeking our support.
We are gradually penetrating new domains within the existing customer base and are diversifying our domain portfolio. Winning new customers, for example in the process industry, some of whom have never had anything to do with PLM and 3D simulation, is certainly not trivial in the pandemic. However, regulation will help here too, as guidelines are now being laid down on how data is to be handled. In the life sciences sector, which we divide into the patient care, medical equipment, and pharmaceutical/biotech segments, we saw a lot of potential even before Corona. It is still a young but growing market for us.
Corona has made deep cuts in the SME sector. We do not expect the real impact on the economy to become apparent until the third quarter of 2020. But there will certainly be insolvencies here. Especially if the flow of subsidies is not as lavish as it has been in recent months.
Ulrich Sendler: Only recently it was announced that SAP and Siemens are now marketing their software portfolios for industry together. What does that mean for you?
Klaus Löckel: I see this development as an opportunity for Dassault Systèmes, since most companies are looking for fast, flexible and above all scalable and feasible solutions. All this speaks for us. So I suspect that we will be even more in demand now than before to support companies in implementing their digitalization strategy.