Siemens this week moved to substantially accelerate its transition into becoming a software company by acquiring Mendix, a provider of low-code application development tools, for $730 million in cash.
Mendix CEO Derek Roos said Mendix will operate as a business unit of Siemens, which has poured more than $10 billion over the last decade to software development as part of an ongoing digital transformation to a multibillion-dollar conglomerate.
Siemens over the last year determined that Mendix was now a strategic component of that initiative, Roos said, as more applications are shifted to and developed in the cloud. Many Siemens employees already use Mendix tools to develop custom applications with limited to no programming skills. That capability is especially critical in line of business (LOB) organizations that are starting to deploy their internet of things (IoT) applications, he noted. Mendix also recently revealed it is starting to infuse its low-code application development platform with artificial intelligence (AI) capabilities.
Roos said the $730 million investment Siemens is making to acquire Mendix is larger than all the venture capital investments made in rival companies delivering low-code platforms combined. As low-code tools have gained mainstream adoption, however, Mendix increasingly finds itself competing directly with larger rivals such as Microsoft and Salesforce, he noted.
The Siemens decision to acquire Mendix comes at a time when archrival GE is throttling back on digital process transformation efforts. Roos said GE’s decision is unique to structural issues within GE versus being a decision that reflects loss of faith in digital process transformation driven by custom application development. Software is now the fastest growing segment of the Siemens conglomerate, he said.
A recent survey conducted by Mendix in collaboration with ASUG, an end user association for organizations that have deployed software from SAP, finds 64 percent of respondents are experiencing increased demand for custom applications within their organizations. The primary problem is that same survey finds the average custom application development backlog is 24 months. Primary issues cited by survey respondents include high development costs (50 percent), difficulty integrating with existing systems (47 percent) and lack of skilled development resources (45 percent).
Of course, as Siemens becomes a larger software force, some organizations will start will take into consideration how much they may compete with the company before selecting an application development platform. Mendix is betting that as application development expands well beyond internal IT organizations, its status as an independent business unit of Siemens will provide enough distance between Mendix and Siemens business units that a Mendix customer might compete against.
In the meantime, organizations that are embracing low-code platforms are simultaneously increasing their investments in DevOps processes. As the number of applications being developed using low-code tools increases, there is a corresponding increase in application release management that requires them to modernize those processes. As Mendix plays the role in enabling applications that can be deployed from the cloud to the network edge, it’s now only a matter of time before the Mendix low-code platform becomes a more significant element of a larger set of DevOps processes driving digital process transformation projects as unprecedented levels of scale.