Linda Tsai Interview
President Industrial IoT at Advantech

Global Presence, Regional Approach, Local Touch

BtoB Rail caught up with Linda Tsai, President, Industrial IoT, Group Advantech…

What developments/business opportunities is Advantech seeing in the railway industry?

For the railways and all transport modes we are seeing plenty. Two areas specific to rail are safety and the user experience.

Another trend we have identified is improving the user experience. Passengers today don’t want to waste time queuing for tickets, information, and other related services. Here a business opportunity is using artificial intelligence [AI] for facial recognition for payment and ticketing. To enable this, either governments introduce the technology or you need to obtain customer opt-in – it depends on the country in question.

Opting in means customers allow their data to be used in exchange for travel benefits, e.g. not having to queue for tickets, immediate billing. They agree to provide an ID photo and their credit card details in exchange for these kinds of fast-track services.

A further user experience area that is growing is connectivity. Some passengers still want to use Wi-Fi on trains because their 4G phone packages are expensive. So many rail operators today are looking to improve the travel experience by providing web access and content, which also gives them an edge over their competitors.

The Industrial Internet of Things (IIoT) describes sophisticated software and machines that communicate with each other to optimise production and operations. Applied to rail and public transport, it involves the rolling stock and infrastructure. It helps build ‘intelligent’ transportation systems, i.e. systems that ‘talk to each other’ so are more efficient.

Advantech’s IIoT branch is divided into three main business segments:

- manufacturing, industrial equipment, transport, power & energy, and the environment;

- general embedded, i.e. gaming, signage, kiosks, medical;

- intelligent retail, warehouses, digital logistics, and hospitals.

In 2019, in line with its strategy to ‘enable an intelligent planet,’ Advantech will host 60+ industry-focused co-creation partner conferences around the world. Could you explain this co-creation approach please?

Through our co-creation events, which kicked off in China in 2018, we are looking to provide our customers, system integrators (SIs), with local support and build partnerships with them create our Solution Ready Packages (SRPs).

Local support for SIs. For all industry automation projects our customers are also SIs, which tend to be region based. We work with them to deliver products for the end user. It’s not easy for these SIs to do the projects in other countries unless they have local offices because system integration requires intensive support, equipment and infrastructure. In a nutshell, SIs need to be physically close to their end customers. In Europe there are many valuable software companies that want to go global, but even they are a big company with say 300 engineers, to win sales projects they still need to hire a lot of people. This is where Advantech can help by provide support, since we have partners in every region.

Solution Ready Packages. The other driver for Co-Creation is developing our SRPs, whereby we add software on top of our hardware to provide SIs with a bundle. Why are we keen to diversify into this SRP business segment? Because although most of Advantech’s revenue comes from our hardware, and we have a very healthy project portfolio and growth is stable, our CEO [KC Liu] is looking to the future. He believes that over next 30 years, by 2040, in addition to hardware we need to be able to offer value added services.

What is the business model behind your SRPs?

Right now, Advantech only sells hardware to SIs, who must then build a lot of software themselves before selling to final user customers. This is extremely resource intensive for SIs. Our thinking is that if we provide them with SRPs that already include around 70% of the software, they then only have to do last-mile customisation, which is less resource intensive. Using just our hardware, SIs can maybe take more project than before. With our SRPs, they can do more.

Another reason behind this SRP drive and Co-Creation business model is that Advantech cannot develop all the software in house. We are reaching out to software partners and develop SRP together because we are competing with time. If we wanted to do the software ourselves, it would require huge investment in terms of both time and human resources.

“If Advantech can make the product solution modular so it is 70% percent standardised, SIs can then take on more projects.stems.”

Are SIs seeing your SRP strategy as a business opportunity or threat?

Through the SRPs, we want to make the job easier for SIs so they can make money, and yes of course this means we make money too! Our message is clear: by developing SRPs, both Advantech and SIs can do more business in the years to come.

Most SIs see this approach as an opportunity rather than a threat, because the SRPs are not turnkey. In the field of rail, for example, each operator still wants a different look and feel. So the customisation of the end product is where the greatest added value lies.

Right now, we are in the discussion phase because we need to make sure the SRPs are good. This involves developing our relationships with SIs, since they are really close to the ground, to ensure our SRP offering meets the demands and expectations of the SI end customers, e.g. rail operators amongst others.

In Europe, some solutions are already quite advanced. Consequently, some SIs want to know if and how what we are proposing is better before committing to work together. I’m not saying Advantech’s solutions are the best in the world. It’s more a question of ‘do they fit your needs, nor not?’

What are the key strengths of Advantech?

Our product portfolio is well established and reliable. Advantech is essentially a hardware company, at least for the time being, and everyone can copy what we do. But we actually see ourselves as selling services with products being just one of the services we offer. Customers (SIs) come to us because our products are reliable and they know the company will still be there to provide support in 10, 20 years. This is important because newcomers to the market, who spot a niche where the short-term profits look good, may drop out after just few years.

Good local support and a global presence. Since the company invests significantly in its teams outside of Taiwan, it has good coverage for providing local support in our industry. For instance, we have between 400 and 500 employees in Europe. Some customers doing international business, especially big OEMS, may want support in both Europe and China, for example, so really appreciate Advantech’s global presence and local touch.

Knowing the customer. Having been in business for 36 years, we know our customers’ pain point, i.e. the different moments of impact they have engaging with our brand and products so everything we do is designed to anticipate and understand these moments.

For 2019, Advantech’s transport business plan is structured around four segments:

- Rolling stock manufacturers (OEMs), with passenger needs and expectations a priority;

- Rail signalling solutions and monitoring solutions for public transport, with a focus on security, service reliability, surveillance, and big data analytics (using AI to predict and analyse future needs);

- Security / Safety Solutions for Railway – Rolling stock on-board networks, rail stations and infrastructure solutions

- Development of Co-Creation partners and joint projects – building the solutions (SRP’s) which can be offer to the market as ready-to-go products (hardware + software)

What is Advantech’s strategy for 2019 and beyond in the transport business?

We believe our co-creation strategy, which applies to the whole of Advantech’s business, not just transport, is the best way ahead for industry. We have been in the market for over three decades and the IoT has not taken off as expected. Hence the need to make IoT projects easier. Each one is unique and it’s not easy to duplicate them. This means our SI customers have to deal with them on a one-by-one basis, which in turns depends on their resources. If Advantech can make the product solution modular so it is 70% percent standardised, SIs can then take on more projects.

In addition to the technologies and capabilities we already have, as well as co-creation, we are also open to potential acquisitions and merger opportunities with software companies. These can help boost our strengths in software or specific fields in the railway sector, and gain more products, technologies, and customers. But we are not aggressively seeking these kinds of opportunities. The overarching strategy is more about growing our business organically.

We are working in the customer market so it’s important to bear in mind that everything we are talking about today is not for the business we currently have, but maybe for two years down the line.

“We’re looking forward to talk with you about your needs.”

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