German cars and machinery are world-class. But as everything everywhere goes digital, what will become of German industry? Answers can be found at the CeBIT computer fair in Hanover - where the focus is on Industry 4.0.
The buzz these days is about Industry 4.0 - the fourth industrial revolution, the Internet of Things, the digitization of the world. It's an attempt to find words to describe what's happening right now: in essence, the analog world is coming to an end.
The first industrial revolution centered on the invention of the steam engine. Next came the electricity revolution, and then the computer revolution. Each caused great upheaval. And now, we're told, everything is going to get networked and go online: the toothbrush with the smartphone, the machine with the product that it manufactures. We're in for another transformation that will cover every sector of the economy.
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Dieter Kempf, president of Germany's IT industry association Bitkom, sees good opportunities for Germany, because the country has "a very large advantage in the traditional industrial sectors, where we've done an excellent job of digitization - in the ways it's been understood so far."
German automotive and mechanical engineers are globally first-rate, he said. Now it was necessary to take the next steps towards Industry 4.0, "i.e. to digitize the value-creation networks in the production process, so that at the end of the day, our production systems will be even better and even faster," Kempf told DW.
Digital economic miracle?
But the next steps toward Industry 4.0 have to be taken, not just anticipated. The race to achieve new standards has already begun, and Germany risks being left behind by competing nations. Industry is aware of the threat, and the government has called for a "digital economic miracle." But that alone isn't enough; too much is still unclear.
Microsoft Germany took initiative and presented the Economics Ministry with a memorandum that describes how to accomplish this miracle. "Digitization is not for soloists," Microsoft manager Klaus von Rottkay told DW. "We really need a collaboration between business, science, politics and society."
In Rottkay's view, Germany is at a crossroads. As things currently stand, the country is playing in the upper middle league, "but of course we want to be at the top and not fall back into the lower middle ranks." He takes a pragmatic view: "We must do more and talk less." What's important is implementing innovative ideas - that means launching startups, generating a pioneer spirit, having the courage to forge ahead, and "simply going ahead and setting new standards instead of always just talking about it."
Everything is going digital
Some debates need to be had, of course, for example when it comes to dealing with huge amounts of data stored outside a company's own data centers, or the safety of trade secrets on a company's servers.
But there's not much time for delay. According to Klaus Leukert, chief technology officer at software giant SAP: "Anything that can be digitized will be digitized, sooner or later - and probably sooner rather than later."
That said, the user must always have a concrete advantage from digitization, otherwise it won't work. "Wherever technology gets the upper hand and complexity becomes unmanageable, technology will not prevail," Leukert said. Successful digitization is about "making technology as simple and user-friendly as possible for the end user."
To implement the Internet of Things, super-fast networks will be needed, since communication and coordination between things is supposed to happen with minimal latency. Here at CeBIT, Vodafone is showing an experimental mobile telephony standard they're calling 5G that's a thousand times faster than today's LTE standard. At Deutsche Telekom's huge CeBIT display, as well, the focus is on networking the components of "Economic Miracle 4.0".
Not everything digital comes from Silicon Valley
Echoing others, Deutsche Telekom CEO Tim Höttges pointed to Germany's strong industrial base as the core of the country's economic strength. He said the software industry was developing well as a component of that wider base.
"We're continually improving when it comes to digitization, and to standardization of protocols so that different applications can 'talk' to each other," Höttges told DW. But protocol standardization has only just begun, and "it's too early to say we're ahead, or we're behind. But we have a very good chance of success with this business model," he said.
Karl-Heinz Streibich agrees. He's head of Software AG, a company from Darmstadt which is among the top five in the European IT industry. The company's core business is the analysis of large amounts of data. At CeBIT this year, Software AG has introduced a digital business platform that enables custom-tailored data-mining solutions for corporate clients.
The era of one-size-fits-all software is over, Streibich said. He too sees digitization as a challenge for the entire German industry. "It's about what we create together," he said. Digitization is not an end in itself, but it will help industry remain competitive and prepare for the future - "and we have an excellent starting position in Germany, because we're an industrial nation."
It seems that not quite everything digital comes from Silicon Valley after all. Software that's "Made in Germany" has made some inroads in America. For example, more than a third of Software AG's sales last year were in the US. Only 15 percent were in Germany, the company's domestic market.
German industry knows it has to export to survive - and that means being globally competitive. The software business is no exception.