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(Bloomberg) -- European industrial companies including Kuka AG and ABB Ltd. announced partnerships with software behemoths at the Hannover Industrial Fair, as the two once separate industries are realizing the benefits of working more closely together.

The theme at this year’s Hannover Messe, a giant annual gathering of machine makers and engineering companies, is how industrial businesses are connecting up their machines to software platforms, letting the hardware talk to each other to facilitate automation. 

German robotics maker Kuka, now owned by a Chinese consortium, announced Tuesday it’s partnering with German software maker SAP SE to provide Kuka’s robotic applications on SAP’s network. On the same day, Swiss power grids and robotics maker ABB announced it will integrate IBM’s Watson platform into its own Internet of Things offerings.

Guido Jouret, chief digital officer at ABB, said the relationship between the industrials and software companies is symbiotic. On the industrial side, the companies find they suddenly need software that can do everything from analyze data to manage repair tickets, and software companies have products readily available.

"There are others making these applications, and we don’t have them, so of course we’re going to talk," he said.

Digital Developments

The software companies on the other side need access to raw data to train their algorithms, which is something the industrial businesses have in great volume.

"They don’t have the domain expertise," Jouret said. "They don’t understand the business of running a chemical plant."

Industrial companies are facing increased pressure to offer software capabilities as customers are seeing innovations in consumer trends and expect similar developments from their suppliers.

"A lot of the innovations in machine learning and analytics is being driven by consumer trends," Jouret said. "If you want to tap into that, you have to kind of tap into those partnerships and say ‘how do we get access into the innovations you’ve done for advertising, and how to we use it to detect patterns in industrial data?’"

Better Margins

The industrial companies are also seeing the possibility of massive margin improvements if they’re able to effectively use what the software companies are offering, Jouret said.

"Industrials, we would be happy with like 2 percent or 3 percent, but in some cases it’s 10 percent. In the case of extending the life of our motors, it’s 30 percent," he said.

Although factory machines have long been networked with computerized controllers and central plant software, companies at the Hannover Messe are now pushing internet platforms that let equipment interface with widely used business software applications. This includes Siemens AG, Robert Bosch GmbH, General Electric Co., Kuka and ABB, which all offer cloud-computing services to manage data. 

While the term is broadly referred to as the Internet of Things, German companies use the term Industry 4.0, referring to the fourth industrial revolution that would see factories completely automated and computer-controlled.

"In Germany," said Mark Hutchinson, president and chief executive officer of GE Europe, "the way we talk about Industry 4.0, it almost sounds incremental. It’s not." 

--With assistance from Alice Baghdjian

To contact the reporters on this story: Oliver Sachgau in Munich at osachgau@bloomberg.net, Aaron Ricadela in Frankfurt at aricadela@bloomberg.net.

To contact the editors responsible for this story: Tom Giles at tgiles5@bloomberg.net, Giles Turner, Nate Lanxon

©2017 Bloomberg L.P.

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