If you thought Siemens’ $730 million purchase of Boston-based business app developer Mendix would have locked the digital company’s focus onto the factory floor, CEO Derek Roos wants you to know you’re wrong.
The reality, Roos claims, is that the Mendix deal is more about transforming Siemens.
“Why would Siemens buy a horizontal, industry-agnostic cloud platform? They want to be a cloud platform. They want to be a software company,” Roos (pictured above) tells Xconomy. “They want to be broad, and that, I think, probably tells the story best how this world is changing, and everyone is getting out of their comfort zone.”
“In a way we were helping Siemens transform themselves,” he adds.
The cloud-based software Mendix created lets business users develop applications in a drag-and-drop manner with little or no development experience required. Mendix and its competitors, such as OutSystems and Appian, call this “low-code” software development. The idea is to hand the app tools to the people in a business who know best what applications need to be made, rather than lock up app development in an IT department.
When European industrial giant Siemens bought the Netherlands-born, now-Boston-headquartered Mendix in a deal that closed last month, the move triggered a lot of interest in how Siemens would harness the app platform to push technology into its industrial businesses. A well-known manufacturer of trains, power turbines, and medical equipment, Siemens has in recent years invested heavily to acquire software companies and build its connected devices platform. Siemens put Mendix into its “digital factory” business. But Mendix—which this year plans to add 200 employees to its current 460—says it is so far being left to its own devices.
Of course, there are no guarantees Mendix will be allowed such independence within the parent company forever. But Siemens seems to be sticking to its pitch. Roos says the hands-off approach is “the reason why I decided to say yes [to the acquisition], because if they said, ‘We want to buy you and make you part of our Industry X, Y, Z,’ that’s not us. That’s not why we founded the company. It’s not what I want for my customers.”
Roos says when the Siemens inquiry came in, Mendix was not for sale. His plan for the business was to eventually file an initial public offering. The promise of autonomy within Siemens and access to its network and assets, was a combined value that sweetened the offer.
“I said, ‘Wow, that’s exciting and not a scenario that we will ever get in an IPO scenario, where we’re on our own and where we’re going to battle and fight against other billion-dollar companies,’” Roos says. “That’s a harder battle which I think we could have won. But this is much more strategic, much larger scale.”
Opening a new 30,000-square-foot headquarters in Boston’s Seaport neighborhood Thursday, Roos sat down with Xconomy earlier in the week to talk about Mendix’s future and what it’s been like operating under the Siemens umbrella. (The interview has been condensed and edited for clarity.)
Xconomy: Why is low-code an important tool for enterprises?
Derek Roos: There’s usually no shortage of ideas, but at most organizations people stop bringing ideas to their manager or IT because they can only do so much, like the top-five priorities in the company, on an annual basis. You’re creating this giant friction in between the people with the ideas and the people turning these ideas into actual business value.
If you turn that paradigm on its head and say, “Let’s give the people with the ideas the tools to actually turn them into something new, something of real value, and, for example, use data that’s everywhere as a starting point to see what can we do with this” … you unleash this creativity and innovation power that is just locked up.
What you see in this digital world is that startups don’t have that legacy. They are tech savvy and cloud native. They start to operate like that from day one, and they start to compete with some of these big companies that are just not able to operate at that level and with that kind of philosophy and agility. That’s what we saw. We help big companies and small companies, but mostly big companies, operate like startups.
X: What’s an example of a Mendix application out in the wild?
DR: Zurich Insurance, a very traditional, large insurance company, they came up with this app; they call it the FaceQuote app, I believe. It’s a very cool app. … You take a selfie, it recognizes your age, and based on that, it can give you a quote for life insurance.
It’s a super simple experience. But if you think about it, the amount of technology that’s required to enable such a simple, elegant experience and a whole new revenue stream and market opportunity for Zurich—that’s a hard thing to do. And I think that they built in 10 days, the whole thing.
X: What’s Mendix’s number one technological priority going forward?
DR: A.I.-assisted development. Right now, low-code is just a visual way to build apps, but you’re still kind of programming, except instead of writing code, you’re dragging and dropping [visual elements of an app]. If you add A.I. to it, you can actually have the machine make recommendations and do part of the work for you—a complete paradigm shift.
The good thing for us is that to do A.I. you need data to tell you what to do to teach you how to train the model. And because we’re model-driven—low-code or model-driven, same thing—in our repository in the Mendix cloud we have metadata of about, I think, 5 million apps. We have all these patterns that we can analyze.
We launched what we call Mendix Assist, which is our A.I. bot, a couple months ago. … If you’re building a piece of workflow, a piece of logic, for example, based on what you’re doing, your previous action, we can predict with 90 percent accuracy what your next action is going to be. It’s kind of what we do today, but we kind of know already what you want to do. The next step is we’re not going to ask you, we’re just going to do it for you.
X: Where is this low-code and app-focused technology heading?
DR: If you think about technology and how companies use technology, it’s again part of this digital transformation, where technology is going to be very pervasive and ubiquitous, in a way, and that changes how I think about apps. What you think of as apps is going to be much more of an integrated part of how we consume technology in every possible way.
Think about the phone. I mean, is this a phone, or is this something else? Is this software or hardware? This room is another way to consume technology because the [heating, ventilation, and air conditioning system] is hooked up to the cloud, and this room should know I’m in this room and I prefer 72 degrees or whatever.
This has such a profound impact on how we think about integrating all the different technologies, including hardware, which is I think [the] exciting part of what we can do. [Siemens understands] the hardware piece, and we understand the software piece and the cloud piece. There’s no company in the world except the Siemens-Mendix combo that has a leadership in both worlds and is now being brought together. That’s the vision. What this will mean, time will tell.