Andre. You've got some seats on the back. Good morning, everyone. Very happy to have you here. It's, as you can see, we're at, almost full capacity.
But we're also webcasting the event. It's available live. Just wanted to say thank you for all of you for the interest in our company. Thank you for your investment. Most importantly, thank you for the time today that you've decided to spend with us.
I wanted to very quickly share what the agenda is, for today. Really the day is in two halves. So the first half here in this, in this auditorium in the morning session where we have a few presentations, of course, strategy and finance followed by presentations from our 2 businesses. We have slots also for services business and the ambition of growth on the services business. And an interesting sort of operations interaction as well, which is not normally that we've been having in the past.
So we put that in. We'll make sure that we have time for question and answers, but then we have a hard stop at about 12 o'clock. The second half of the day, and that's interesting, is a visit to Lovejoy about a little over an hour from here. So we'll I'll get back on the arrangements later. But really what we're going to showcase to you in our factory over there is 2 things.
1, our complete offer for the industrial end market that we have as a company And secondly, some of the EcoStruxure and digital technologies that we put in practice into our own factory in which we do that for customers as well. To drive efficiency. The presentations from today are going to be available towards sort of the end of this morning session on the website. I do have to get everyone's attention to the disclaimer regarding forward looking. Statements, but with that, I want to get the day started and we start with Chairman and CEO, Jean Pascal.
Thanks, Ravi.
Good morning to all of you. Well, thank you for making all the way to Paris, to tropical Paris, I have to say. I live in Hong Kong. I work in Paris, always under the tropics, and for the parisians for making it all over to Rodei, which is for Paris and very difficult to access to. Well, today, I'm going to be sharing the stage with many of my colleagues and hopefully it will give you a broader picture of Schneider's and the usual Tricoire on Babo show that you get normally.
It's a good opportunity to know more people of the team to exchange, ask questions and get answers. But in the 25 minutes or so, what I would like to do is to set the stage because when I look at our industry, which have been working for the past 33 years, I think there has been more repositioning, restructuring, transformation in the past 2 years than in the previous 20 or 30 years. On one could lazily says that all the company will keep all in our environment, but actually I think we are profoundly different company by company, which means that today some have to start a journey of repositioning and some others have to execute on the plan. That was fixed a long time ago. And what I want to do or try to do in the next 25 minutes is to make you come back and make you understand how we have positioned Schneider on what are the distinctive traits of our company in the industry, we are in.
Okay. So let's move straight into, the fundamentals with, we've positioned Schneider onto the 2 major transitions of the beginning of this century. The first one is energy transition, which we are all realizing with climate disorders climate change, And on the big headline of all this is more energy efficiency, but it goes with subtitles. And the first subtitle is an accelerated electrification. We see a proportion in the energy consumption of the world, a consumption that offer electricity that will in proportion doubled in the next coming 20 years.
Today electricity is just 20% of energy consumption. It's going to be 40% in 2040 on the base of consumption, which is increasing. Think about IT, think about eating, on cooling, going electrical everywhere. Think of course about electric mobility, think about generation we choose to be remote on the way on which is getting on this is the 2nd headline of energy transition decentralized on decarbonize. Today, prediction says that 50% of the installed power generation in 2050 will be based on renewable and storage.
That's a massive shift of paradigm. And all of this would be only possible because of digitization to manage intermittency of generation on the volatility of a modulated consumption. That's the first transition. 2nd transition we have been addressing, which is the other part of the equation of efficiency of our customers, is industry, 4.0. Headline is process efficiency.
If all of our customers are putting those 2 efficiencies together. And this will be accelerated boosted by IoT, 8 times more objects connected to the web in 2025,000 people, Massive acceleration of big data and AI in quantity on in spending multiplied by 5 to multiplied by 6 in the next coming 5 years. Acceleration due to 5G, of which 35% at least of the application are speaking to our business. Are speaking about energy or industrial automation, plus 75% of our customers come in to us on their already deployed the digital twin while working hard to deploy it in the very near future. So all of this is happening now.
And our customers are not asking about this or that. They are asking about one thing, which is all solution of efficiency. And we from the beginning made no difference between the 2 because if you want to manage the efficiency and energy of your customers, you have to understand and tweak the process And if you want to operate efficiently your process, you have to get an impeccable and very reliable and every. So what we have been doing is put together those 2 worlds on converged energy and automation in one solution of efficiency with the benefits of energy efficiency on the collateral benefits of productivity, safety, reliability, unsustainability. And we've defined, 15 years ago, our mission as a following: to provide energy and automation digital solutions for efficiency and sustainability.
This is what we have been pursuing for the past 15 years. So I'd like to come back on the journey because it's been a journey, which has been incremental, rewarding, and sometimes painful. And I thank you for having accompanied the journey, but I see 3 phases in the journey. First one was build, Second one was integrate on the third one where we are in is about scaling. So If you go into the detail of that build was 10 years going from 2003 to 2013.
And if you remember, we are are very acquisitive at the time with the purpose to build 2 things: a world leading power distribution capability medium voltage, low voltage, secure power, we're leading in all categories, coupled with a digital clear solutions for each of the 4 markets we are addressing. That was 10 years of intense building. Then we actually decided to be very, very selective on any kind of new acquisition that we do. And actually, 2018 was a time where a few of our projects landed together. And they are a good example of what we want to do: software, Aviva, IGXAO.
We have a pleasure to have Craig with Craig Eamon, the CEO of Avila, and very, very targeted on value accretive bolt ons to what we do in the company. So the example of FASCO or last September, phase 1, phase 2, integrate We want to simplify the life of our customers. And our customers are facing a huge complexity in their installations and they need to integrate that whole equation of efficiency. So that phase of integration started with the launch of EcoStruxure V1 in 2008 that's 10 more than 10 years ago. And there is no better example of what we do in integration, connected endpoints, connected products, going into edge control, going to a set up of digital services analytics on software, which are serving our 4 markets building IT Industry Infrastructure based on 6 domains on all of this completely integrated and completely consistent, I shouldn't forget here massive effort done on cybersecurity.
What is important if one to be cybersecurity have a clear platform. Therefore, there you can be the monitoring on the defense. So those were the years of integration. There again, sometimes painful because those were a lot of costs that we had to assume on the top of improving or bettering our results. Phase 3, this is where we are today, On that phase 3, it's very simple.
It's about focusing. When we did acquisition, they were part of those acquisitions, which were less core, when we are trying new innovations, some didn't work. So what we've done in the past 3 years is to divest 1,500,000,000 of revenue to focus on prune the portfolio. We have announced that we were upping the review to 1,500,000,000 to 2000000000 more of revenue in our portfolio so that the focus part with what we have built, focus on integrated, We are scaling out and growing and you saw momentum building in 2017, 2018, confirmed in Q1 2019. Those are the priorities that we have in front of us.
So what was somewhere the mission or the the target of this journey. It was to serve a unique mission with our customers, which is the following. To do what we call the Triple integration. And actually, I'm going to go from Triple to quadruple, but let's make it very simple. First integration is energy and automation.
And I spoke already about it. I won't detail that more. The second one is what I call the vertical integration, what we call the vertical integration, going in a total transparency from the endpoint up to the cloud, which is the journey we started as a company, much ahead of any other company with Transplant Factory in 97. On EcoStruxure, is just the evolution or the next evolution of this architecture, making sure that it's complete digital transparency on the same digital model to the service of the operator on the shop floor to the CXO in the control room. And actually, the notion of Control Room is reductive because at the time of the cloud, you can get access to everything on your tablet on a remote point on the VFO point on the cloud.
3rd integration, which we have ambition on, we are delivering now with Aveda is what I call the horizontal, integration, the threat, the digital threat integration, a full digital journey from design to commissioning and from operation to maintenance so that there is no drop of your digital model all across the lifecycle of an installation. And the best example, of course, is what we've built with Aviva last year by building a unique company, completely dedicated to the digitization of manufacturing ongoing in an integrated manner from the design into the maintenance of operation. Let me now speak probably of a false dimension of integration, which is very often underestimated. When you look at companies today, very often they are managed side by side. On the list of companies you see Corineer, the forefront thinker companies, which have decided to escape or to get outside this old notion of side by side management and have decided to integrate, thanks to digitization, their whole company on a full scale.
When you connect the connected sites together, you get a lot of, a lot of advantages like sharing the data of your whole company in real time, being able to negotiate with your suppliers, energy, ways on a complete global scale, sharing better your competency, putting your sharpest and rarest competencies in one place with service of all the sites, benchmarking your sites to make sure that all the sites get to the same, to the same competency, articulating the flows of good between your sites in real time, you start really to get to the next level of efficiency. So tripled to quadruple integration that we are doing with EcoStruxure and with our set of software. Now this is a strategy of integration, integration of efficiency, integration of complexity for our customers. And to do that, we have built the all company on 4 strategic pillars, 4 strategic distinctive features which support this mission of delivering integrated solution. The first one is that we are the integrated company.
And if I detail, it's in all aspects of what we do. We are integrated in sales to start with, when I look at the sales we do, we are using the same distribution network, which is more than 50% of our sales for energy and automation, Integrators and machine builders are putting together bundles of technologies to equip their machines, equip their equipment, automation and energy together, And when you go to end users, they buy roughly fifty-fifty ALF ALF automation on ALF Energy Management. Which means we have integrated our commercial organization at Schneider's. There is a country president who is in charge to deliver sales synergies, maximize growth, maximize sales, always in charge also of leverage costs all across our business on the major costs. And when we went to 1 Schneider, because before it was all silos in a country, we gained three points of structure cost because there are a lot of duplication of cost on the ground when you've got separate entities.
So integrated in sales, integrated in supply chain, actually under the roof of Murat Tamout who is here in the room and will lead you this afternoon in NovoDoyle. We are a unique case in our industry where the whole supply chain is on the one person. And why did we do that? Because there is no point to be a large company who can't flex the muscle of the scale. So it's good for cost is good for purchasing.
We do more than $12,000,000,000 of purchasing with suppliers, and we've been developing since we globalized the supply chain a much more strategic and efficient relationship with a bit more than 1000 suppliers. It allows you to have more resources, shared resources to the service of quality and digitization of factories, I'll tell you the most important 2, one sales organization in the country, 1 supply chain in the region makes that the jobs you have to propose to people who join the company is much bigger than the jobs that competitors would be able to propose. Therefore, it's very attractive for the best talents in the industry. The third point is one digital because when customers come to us, again, thinking about the complexity, They want to benefit from the integration, the plug and play integration we've realized. So it's about 1 EcoStruxure, 1 cloud, One exchange that I'm going to talk about later, which is putting on the digital platform, the exchanges of our ecosystem, on 1 IT, that drives to higher corporate costs in what we declared because we decided to put it at the corporate center because it's more simple and it's a better reflection for of reality, but it makes it much more efficient.
And finally, one marketing, and I'm going to scroll through that quite fast, but 1 world innovation tour, 30,000 customers last year, 50 in cities, 1 unified brand portfolio, more than 70% of sales from the Schneider brand name, 1 PRM and CRM, and more important for the customer experience, one website on one call center because our customers don't want to talk to several Schneider. When We started this journey. 15 years ago, we started. I started with one thing pulling a lot of people on the market, a lot of customers, by far, their biggest ask was to say, we want 1 Schneider because you guys are too complicated, and we need a simple interface for us, a simple architecture for us. This is what we've built by integrating those.
And by the way, it has also streamlined the organization because at least things are very clear. Our countries are in charge of the P and L, our business are in charge of innovation on innovation is accelerating as we speak, so it needs a full focus. Our supply chain is in charge of quality, of course, delivery on cost, on how functions are global and they are in charge of cutting the costs and ensuring the circulation of resources around the company, but very defined and very key roles for each of us. On all of this, being supported by a management system, the Schneider Electric performance that we have presented to you by small touches at times, especially in supply chain, but we have the same system that we deploy in the company in all major trades of the company. One company program and we keep you informed every 3 years or every 5 years according to the frequency of those programs of what's happening there.
What management cadence whereby while we are global and connected, we have regular meetings with different circle of management in a very military organized cadence and then leadership, which is organized globally on the one roof so that we all the same language and are all aligned on the way we train and scale our people. So principle number 1 of our strategy integrated organization to serve a strategy of delivering integrated solution. Second one, which is really important, is multi local. I've never believed personally in full globalization, maybe because I worked in different countries in the past or maybe because it's easier in our business because standards are not even the same. Between the U.
S, between Europe, between China, the products we sell are not the same. The business models are a bit different and I believe in speed, maybe because I live in a very speedy part of the world, but at the end of the day, you beat your competition, you serve better your customers on speed. And we believe that the major articulation of speed is at the level of the local. We want to be the most local of other companies on the ground. And it has worked for us because when you look at where we're in 2003, eight percent of our business was transatlantic.
While 15 years after, 45% of our business is done in emerging countries or in the rest of the world, especially Asia Pac, which has grown very fast and has taken the pole position in terms of business size, but this rebalancing has been very efficient. And maybe one distinctive point also on that goes If you want to be local, you have to empower locally the people. And what is striking today is that the balance of people, sorry, I went too fast on that one, The balance of people that we have around the world is exactly in sync with the business we do. And it's a fair proxy of what we do in R&D on what we do in supply chain on the way we have organized our suppliers. So if you look at the way we work, what we call our multi hub organization, is the following the capacity to go fast in the major hubs of the world, North America, EMEA and Asia, inclusive of R&D, of supply chain, of suppliers, of the whole commercial network.
Well, things which are loosely connected for speed but tightly aligned by our business and functions. On this, it's served by a model of leadership, which is quite original, whereby not everybody is in the same center, but we've spread out our resources around the world closer to the largest customers and closer to the largest centers of talents so that we can develop people in global missions from wherever in the world, and served by a board now that I would argue is one of the most diverse and the most international in our industry. So multi local as a second base. Third point on 3rd key elements of our strategy is our focus on sustainability. That has been extremely Important for Schneider, we started, I think, earlier than many other companies.
On the first thing it has fixed, is our mission. While if I look where we were 20 years ago, our mission was to deliver electrons or to deliver energy to our customers. We focus helping people and empower all in the world to do more while using less other resources. Ensuring that life is on everywhere for everyone on that every moment. When we say that life is on, we provide energy, which is a passport to all to a decent life, and we provide digital, which is a passport to all for inclusion, economic inclusion and progress.
That's what we do at China. But for us, sustainability is not on your mission. It's also the way to drive the company and lead the company. And you remember, every 3 years, we come with a new step up in our sustainability impact defining areas for progress measuring the progress. That's part of our performance that's fixing a part of the incentive that's audited, by, auditors.
So that we make sure it's as important for the people of Schneider as a financial. When we do that, while we also get recognition, which we are very proud of. It's good for the attractiveness of the company. Also it's good for the retention. It's good for the pride of the customer to work for us.
And frankly, I've been working 10 years on that. I'm feeling very low about it because I didn't get many questions on that. I'm curious if you don't seem to be interested. Investors might be interested times, this has turned, this has really changed, and you see that at the top of the agenda everywhere, with people when they want to join you, they ask you very precise question about that with customers because they want to progress in sustainability And we are part of their supply chain, so they need sustainable company. And of course, since dialogue, we are with you, recent turning point, but good turning point.
And we are also very attentive with the people that we embark on board of Schneider, because We believe that great people make a great company, and we want the people who onboard Schneider to be motivated by working for the company with the meaningful mission in our industry on working in the most inclusive and empowered environment, which our multi year organization is allowing on enabling. So I like to come to the 4th, distinctive pillar of our strategy it's openness. In our industry, it starts with the way we do business. We are the companies that does the most business with partners. 100 of 1000 of integrators, system developers, software developers.
That's the first one. And this is being put on steroids and accelerated by the launch of exchange that we launched in Hanover this year, where we have already 45,000 customers, exchanging tips, working in communities, 200 apps are already on exchange, on being traded between our ecosystem. It was also in the direction of innovation. We've been 20 years with a venture capital fund that we just rebooted on on reinforced, but it goes also in other parts like the partnership we signed with Carly, where we aligned in the U. S.
To revamp the U. S. Infrastructure, allowing the force in project and finance of carlight together to the capacity of engineering, in green infrastructure of Schneider. On strategic technology partners, it's something that you know, we are very attentive not to develop what others have already developed, and we've kept building more alliances with other technology partners with whom we build on develop EcoStruxure. So when we look at the results of that strategy.
While we've delivered performance, we've multiplied by 3 outsized in the past 15 years with multiply by 4, our EPS on our adjusted EBITA, multiply by 4, our enterprise value, By the way, when I was looking at the growth, we've grown the number of people inside the company at ALFA PACE. When we are growing 100, number of people was growing by 50 if you take a cut around the year. So gaining productivity on leveraging our scale as we are progressing. We have delivered a consistent return for shareholders. Frankly, I think we suffered at a point in time when we were learning painfully solutions, The good news that we have been delivering for several years now, progressing result from that side, which shows that we are on the top of the base, but it has been learning on that learning has been complicated.
We have a very simple strategy that we have told you, that we are reporting on, which is more products. We develop solutions directly with the most advanced customer. We productize it and we scale it through our network of partners. More services, and we're going to speak about that today, more digital, we're going to speak a lot about that today on better systems, which is that we are focusing our system capability where we are truly able to create value. At the same time, we've been attentive to make our company more resilient.
I mean, we went through a crisis of 2008 and keep some vivid memories of that time. And we've worked in many aspects in making sure that we would be more resilient in case there would be a downturn, making sure that the business is more diversified geographically, and I already spoke about that, making sure that the people footprint would be more close to the business and in more flexible countries, on West Europe, which used to be 58% of our headcount in 2003 is today only 27% of our headcount, making the business as cyclical, let's early cycle on the 40% of our portfolio today, growing recurrent business around services and software, up to 16% of our business, and making sure that our cost base is as externalized as possible. We've taken new commitments in February, We are committed to grow our adjusted EBITA margin to 200 bps. That's our new objective and keeping the growth across the cycle of 3 to 6 points. And we do that with 3 priorities, portfolio optimization, growth in high margin business, the best example being software and internal productivity that we have always delivered even when we were in a relatively slow growth times.
To sum up and to conclude, just want to leave you with those 4 elements of distinction on those 4 pillars of our strategy, being integrated to serve a strategy of integrated solution by product or integrated directly to a customer, mostly by product today, multi hub sustainability as a core objective, open and with a clear mission to empower all to do more with less on making sure that life is on everywhere for everybody at every moment Visa insight has been a long speech and as my marketing team would say, it's been far too long. So we tried a summary of that long speech into a video that I would like to share with you this morning. Thank you.
Well, we thought we'd tell you who we're not. Let's start here. We're not in shipping. We don't make lists, seriously, no less. We do this.
We're good at this. And we make all of these. And even though you'll find us here, and here, we don't make energy. We make you statement. And you'll be saving the environment too.
Are we an internet company? Well, We connect and power just about everything around you, helping machines talk to each other and to you, making your world more personal. We're seeking out the big questions and answering them, honestly, like how can we do more with less, or can we make access to energy and digital basic human rights. We're real people, employees, developers, partners, investors and inventors. All passionate about doing what's right.
We're open. Humans of all sorts from all over learning from each other and about each other. We're not here to save the world. It'll go on with or without us. We're here to help power and connect what you do every day.
To ensure that life is on, every week for everyone at every moment.
Good morning, everybody. Thank you very much for being with us today. Great to have you, and I hope you are going to have a fantastic day this morning and then later this afternoon at La Vodari. Great introduction from Jean Pascal on our strategy where we stand and the great that we have taken and obviously now it's time to talk about finance. And what I really want to do with you in the next 20 minutes is to share about our ambition to deliver a very strong performance, financial performance but sustainable and which has been quite consistent in the past years.
But before doing that and, I may surprise with the start of my presentation, I want to start with something which is not precisely what you would call a strong financial performance KPI. Although I believe that it's going to be absolutely instrumental in our future success. And I want to speak, of course, about our principle of responsibility Those are the principles that are going to guide our action in the coming years, setting the very high ethical standard that we want to follow, defining the impeccable way, we want to deal with CSR matters. And of course, they are not new at Schneider Electric. We actually started almost 20 years ago in 2002.
But of course, we keep improving them, putting more granularity, being more comprehensive in the field they are covering. And we are now reorganizing them around 5 pillars, which are going to be extremely exhaustive in the way they are covering all aspects of the company. The first one, human rights, people development, Of course, it's about respect of the people. It's about inclusiveness. Jean Pascal mentioned that.
It's about diversity and it's about health and safety. The second one, Ethical Business Conduct. We want, of course, to have a very fierce fight against corruption, We want to make sure that we fully respect all the rule in term of trade. We want to make sure that we are in a fair competition everywhere and of course, we want to protect our asset. 3rd one, probably one which has been growing, the digitally trusted and secure partner that we want to be for our customer very clearly here, it's about bringing a best in class cyber security solution for our customer and making sure as well that we take care of privacy of the data and we are fully compliant with regulation.
4th one, acting for the environment, Jean Pascal, of course, already alluded to that, we want to make sure that we limit the impact of our business on the planet. We go for full recycling. We limit the carbon emission. And we go for a sustainable world. 5th, a responsible corporate citizenship We want of course to go for responsible lobbying.
But here, we're really talking about all the impact that we can have among a community we're dealing with and make sure that we have a positive impact, including for the less favored community. Our customer, our partner, our people, our shareholders are asking us to be very strict in implementing those principle of responsibility. And as I said, we are absolutely convinced that they're going to be key for our future success. All right. Now let's move to more traditional way of looking at financial performance.
We have one strong conviction, you know, sustainable financial performance will come from a combo, a combo between dynamic top line growth, and margin expansion. And let's start with top line growth, of course, here. When you look at the past, we've been doing quite well, quite consistently, better than our peers. We've been seeing in the previous presentation that we are indeed riding 2 of the most powerful and positive megatrend of the century. So we are fundamentally on a positive market.
But on top of that, we have selected the battle we want to fight, and we think we're going to win them. We are clearly positioned with a lot of competitive advantage in term of capacity to innovate, in term of breadth and depth of the portfolio, in terms of geographical coverage. For all those reasons, we believe that we are able to deliver a superior growth versus the market, And as you can see, we've done that on a systematic basis in the past. Now when we look at the future, roadmap is very clear We want more product and of course more connected product. We want more services.
We want of course more digital services. We want more software. And I would say globally, we want a more digital experience for our customer that goes through the growth of what we call layer 2 and layer 3 of our EcoStructure architecture, they represent today 15% of our sales, and we want them to grow significantly faster than the average of the company. We're not against selling system. Don't get us wrong.
We are very pleased with selling system. We just want to sell system with a good margin. And we've been doing quite a good road in that respect. Last 4 years improving by 400 basis points of margin on system. We just want to continue in that direction.
Strong top line growth, GDP plus company, beating the market and our competition average. And this is going to come with an improvement, a regular improvement on the margin. We are 100% convinced that the more we're going to go for innovation, technology, and digital content in our offering, differentiation. The more we're going to be able to gradually increase the margin in the future, And we are just, you know, at one step in the journey and we have many, many positive steps ahead of us in that direction. And that starts with a gross margin.
The added value that you deliver to your customer is visible at the level of the gross margin. And look at the journey that we have had in the last 3 years, growing the gross margin by 200 basis points, not only in an organic manner, but largely in an organic manner, and our ambition is, of course, to continue, and we have clear roadmap to do that. First of all, the priority, I described that we want to go for more product more software, more system, they're going to come with a higher gross margin and therefore, a positive mix. We're going to increase the price and make sure that we bring more value to the customer and this is reflected in the pricing policy that we can implement. We're going to go for more productivity.
And we're going to also work on better system margin. We also are enabling us, allowing us to go for inorganic improvement of the gross margin. I'm going to talk later about what we intend to, I would say, prune in the portfolio. Quite obviously, there will be lovely businesses with lower gross margins. So that should contribute as well to the overall performance.
Rapidly just digging on 2 of the driver for the gross margin on price. I would say the logic on price is the one I've been describing. If you come with the innovation, if you come with a strong technology and digital content, the differentiation, which is absolutely key, Then the customer will recognize the value you are bringing to the, to his business and you will be able to price for it. So this is a strategy that we intend to continue in the coming years. If you look at the past, we've been quite nicely beating the raw material inflation, which is just, I would say, a mark or reference, you know, we want to make sure that we are above that over the last 10 years.
And if you look more recently, 2017, 2018, well, remember 2017 there was a burst in the raw material inflation And despite that, we very quickly managed to start moving up on making sure that we were increasing price and we intend to continue in the coming quarters. 2nd element, very strong productivity. We have, I think, a fantastic track record in that respect And once again, for the 2019, 2021 period, it is our intention to deliver a very strong productivity around 1,000,000,000 of productivity. You know what are the driver of productivity? It starts with excellence in procurement, of course.
First thing second, it's re engineering of product third, improving the logistics 4th, of course, using our full manufacturing footprint to keep optimizing our cost and force elements to have productivity on what we call manufacturing best cost. Below of the gross margin, you're going to find the support function cost and here again, We believe that in the future, as we did by the way, in the past years, to keep growing sales at a faster pace than our SFCs. Look at the last years since 2015, we did that pretty nicely, a 130 basis point difference between top line growth and SFC growth. The road map is clear, the journey is clear. We want to continue to do that in the coming years.
And as I said, we believe that we have already the platform. We have the model and we have the critical mass to do that successfully. So a clear path towards this 200 basis points improvement and toward the 17% and we want already to be very clear. This is not the end of the journey. This is a milestone.
It's an important one. We'll need to work very diligently to delivery, but it's only one step and our ambition is to go beyond that in the future. You've understood that the driver to deliver the 200 basis points are well defined. It's about the right priority for the top line. It's about price, productivity, It's about simplification and efficiency on our support function cost.
And as I said, we are also Looking at our portfolio and we're going to put this 1,500,000,000 to 2,000,000,000 under review, we certainly some help on the margin but that should come only as a marginal point, a part of the 200 basis point. So one could say, well, that looks very ambitious, it's 200 basis points of margin improvement. Actually, some of you have said that. Well, actually, that's what we delivered in the last years. So if you look at the last 3 years, We've actually delivered a bit more than 200 basis point organic improvement and together with nice top line growth that has enabled us to deliver this very nice growth of our adjusted EBITA and organic growth of 8% over the last 3 years.
Nice growth in our profit, nice cash flow generation as well. As you can see, we've been over the last years above the 100% target that we have and that we continue to keep in the future of conversion of our net profit into free cash flow. Generation. And that has been done despite the growth. You know that growth is generating working capital, a need, and we've been absorbing that generate this strong cash flow and our ambition is to continue to be a very strong cash flow generative company.
Strong cash flow generation, and that has been enabling us despite some targeted acquisition, despite strong cash return to shareholder, to stay with a very solid balance sheet. We will want to keep some leverage in the balance sheet but we also clearly retain the ambition to have strong rating on the
long term.
Strong growth for the top line margin expansion, good cash flow generation. That is explaining why we did manage to put our return on capital employed on a good trajectory look at the 3 years. And even in 2018, when we've been, closing the Aviva deal with some capital deployed, We did manage organically to improve by 40 bps, so before Forex, the return on capital employed, which is quite an achievement, you know, when you invest to keep improving the ROCE and just show the efficiency of the model that we have here. We wanted to show as well because I think it's a very important element, what we call the return on operating assets. And you see that we have been crossing the 40% mark when it comes to return on operating asset.
What does this criteria about, it's simple. It's a return on assets, or the return capital employed less the goodwill. So that gives you a vision of how profitable is the growth when it is an organic growth. So now that we have put together what we think is a very powerful portfolio, set for a very nice ride in term of organic growth. You can see that any growth is going to have a fantastic return and of course, that bodes very well for our performance in the coming years.
Strongfinancialperformance in term of growth terms of expanding the margin, in term of cash flow generation and also very disciplined capital deployment. We've been doing targeted deal and, Bolton size and really on our priority. Digital, I mean, AVEVA is a fantastic success, great to have you Craig with us today since the announcement of the deal, the AVEVA share price has been growing by more than 200%. And today, as you know, AVEVA has been joining the FTSE 100 Index, I think illustrating the success. IGXO is a great success.
It's slightly smaller size, but it's a great success, as well. And ASCO and the last set and turbo did are just highlighting our ambition to keep building our leadership in energy management and on the low voltage a bit more precisely. As you know, we've been quite active as well on pruning the portfolio We have, today, of course, a lot of work going on. I will elaborate on that in a second, but look at the past, I mean, we've been selling for a cash amount of $2,300,000,000 of non core business in the past. So we've been quite active already on managing our portfolio and making sure that are becoming a more focused company.
All that has made possible a great cash return for the shareholder. 80 percent of the cash generated over the last 4 years have been returned to our shoulder whether through buyback and you've seen that we've been accelerating $1,000,000,000 buyback, which was supposed to end in 2019, we concluded it in 2018, so with some kind of anticipation. And we've been immediately launching a new EUR 1,500,000,000 to EUR 2,000,000,000 buyback program that will conclude in 2021. And the dividend has been growing very nicely with a 5% CAGR, a nice growth over this 5 year period. On portfolio optimization, $1,500,000,000 to $2,000,000,000, you know the number now we've been announcing PayCo I can tell you, we are working on many, many files.
We believe we're going to take the 3 years to go for the full program, but nevertheless, we do expect to be able to come with more move in 2019. So, bear with us, but in the coming months, we think we're going to come with more announcement on this 1,000,000,000 to 2,000,000,000 business, which is under review. Now So roadmap is clear for the 200 basis points and, we know what have the priority for the next 3 years. At the same time, as I said, it is just a step in the journey, not the end of the journey and we believe that we need to repair already today, what's going to be the next growth generation, or are we going to generate the next growth wave, if you want? And of course, that's going to take some time, but the idea is certainly beyond 2021 and beyond the 200 basis points on which we have already set the plan.
To prepare more top line growth and more margin expansion. And to do that, we need to invest on the core driver of our performance on the long term, innovation, of course, R&D. It's, of course, about digital where we need to keep investing up, even if, we've been quite active already in the past. Working on the Salesforce, we need new size, new priority, new skills as well, and we need to work on that. And of course, we need to keep increasing our impact among our customer.
We need to keep building the brand and that's the marketing and communication effort. No surprise, of course, we want to do that, but having no impact on the short term on the bottom line. The impact on the long term will be positive, but to have no impact on the short term. It has to be a redeployment from what we would call a nonproductive cost, back office, middle office, global function towards this priority. And we target a size of redeployment that could be up to 10% of our current, support function cost that gives you a magnitude.
And the way we're going to do it is by increased productivity on our support function cost. It's going to have a moderate impact, on our restructuring cost. We were guiding for a bracket of 150,000,000 to 200,000,000 where we think that integrating that move, we could be in the next 4 years between EUR 202,550,000,000 And last, but probably not least, it gives us also some capacity to use this, saving and the efficiencies, the simplification gain in case of a downturn. So, that is giving us here some leeway. Conclusion, we are today a high quality company.
I think that we can say that we are clearly focused, simpler and with all the strengths of a pure player, we've been delivering a very consistent and strong financial performance in the past year. We are well positioned today and with clear path and clear plan to deliver in the coming years, a continued success and strong financial performance clear objective already for 2019, 2021, and we are already preparing the growth beyond 2021 and future success beyond 2021. That together with a strong discipline on capital deployment will ensure a strong return for our shareholder And of course, we are confirming our guidance for 2019 and our midterm objective. Thank you very much. I'm going now to hand over to Peter.
Well, good morning also from my side. It's a pleasure to be here and talk about how we digitize industries. Of course, digitization is at the heart of the industrial automation. And, if I could have the first slide, it would be fantastic.
Have something to say, but I
also have some slides. The, the digital transformation, as I say, is at the heart of what's going on. And you can read about this very much also in the social media and by to all of you to come and in the discussion rooms and so forth was going on. It's heavily discussed out there. It's one of the largest transformations I've been in the business for 28 years in automation.
Is probably the most exciting years in the last 3 years that, that I've seen in this industry. Now the industrial automation business is, say as the group is a very geographically, nicely distributed business. Meanwhile, our strongest foothold is in Asia Pacific, but of course, also in Europe, there's a strong industrial base and with it, that's our 2nd largest, market. But also strong in North America and in the rest of the world. Now, what is very important and unique about us is the distribution of our portfolio in early, mid and late cycle, or if you wish the discrete business and more the hybrid and the process business.
So roughly fifty-fifty, the split in 2018. Now that that's pretty good. And you'll see later on as we're moving more in towards a software company with our industrial automation portfolio, also the R and D spend as a percent of our revenue, is growing with 8%. I think we have a healthy spend at the moment that helps us to have our portfolio, at the top of what's, what's out there delivering. Number 1 positions of some of our portfolio for example, in safety, we're very well known for safety in our HMI offering in control and signaling, of course, motor protection and control that are relevant throughout all markets.
Now, with 6 point 2,000,000,000, you may say in the market, we're a little bit small, but you will see how laser focused we are. And it's important to be laser focused in this market because that allows you for superior margins. And currently, at an adjusted EBITDA margin of 18% in, in our business. Now to build a little bit on what Jean Pascal has said, how have we grown this business? I think it's important understand.
And if we start off in 2013, where the automation business was roughly 1,000,000,000 in sales, the main focus at that time was really on the discrete and the hybrid space with a very strong offering also in motion control where we're very much focused on certain applications where we are able to be the world market leader. And I'll show you some of those applications later, also resulting in a comprehensive PLC family that we use throughout those different end markets. And then a comprehensive family of drives. Now with the acquisition of Invensys in 2014, we were able to supplement our portfolio into the process markets and become even stronger in the hybrid markets, hybrid meaning, food and beverage, pharma, biotech, water, wastewater, metals, mining, mineral, where we already had a strong foothold. But then we also moved into continuous process industries, being a chemical refining or the whole streams of oil and gas in downstream midstream and also upstream.
And of course, also in power generation where we already had a good foothold on the energy management side. And that's very relevant as we will see as we go into a little bit more detail here. Now, with the Invensys acquisition and a couple other acquisitions that we have done, we also started to have pretty significant software portfolio, extremely strong in the area of monitoring and control in planning and operations and also asset performance management, a couple of packages that came together. And we said, why don't we build a complete software company that can have an end to end portfolio from the design to the building of a plant to the operation and maintenance. And that's what we did with a reverse takeover of AVEVA in, which we closed last year in March.
And we added kind of the engineering design suite software to it and created a unique listed software company, and we're going to be talking about this in a minute because in the past, you've had quite a few questions to that. So that's allowed us to really be, what I say, a full liner in automation, very dedicated, but a full liner throughout all segments, and it is very relevant because it allows us to live through the cyclicality of, of that market. It also allowed us to move more from, you know, a couple of, we would say, electromechanical products that we have into soft where if you look at our PLC offerings, if you look at our motion offering, if you look at our process control offering, that's all extremely heavy software already with 75%, as I mentioned, the last and 75% of our R and D investment going in software. It's just nicely packaged with a little bit, of hardware. And then of course, our software offering in total, that's 100% R and D in software.
That allowed us, a very nice growth of 7.6% over a period of 5 years as you can see here. And we are moving up the value chain. You will see later on also that even in our, you know, I would say most electromechanical products that we have, We are now moving in the direction of integrating software in it and it will disrupt parts of, of the market where we and some of our competitors are active. Now, we're talking a little bit about software. Of course, you know, who better can explain than Craig Hammond, CEO of Aviva.
So, Craig, it's good to be. So usually we do this in front of customers together. So this is the this is a premier one, in front of the investor community but I'm I'm looking forward is, Craig, do you want to talk a little bit about the journey of the last 18 months?
Yeah, it's been 18 months, as Peter said, since Peter first called me with Twinkle in his eye saying, hey, we have this idea for Aviva, a company that's listed on the London Stock Exchange, has 60% ownership, by Schneider Electric, and so this combination. And as we spent time working together, with investors and with customers around the world, it's actually been quite amazing. We've moved very, very rapidly. The company, Aviva, is listed on the London Stock Exchange. It is three times larger that it was just too short years ago.
It is twice the size in terms of market cap than it was 12 months ago. We're moving unbelievably quickly. We have about 150 scrum teams around the world focused on software development of there about 8 to 12 people and every 90 days reprioritize their work around what we learn out with our customers around the world. It's an amazing model. We've that's generated some good results.
In the last trailing 12 months, we generated our revenue grew by 12%. Our adjusted EBIT margins grew by almost 20 4% and what we call is recurring software. Recurring software is software that's available for a subscription or a rental model that customer renews it each year. And what's great about that type of that model is it creates a lot of free cash flow in the out years. So as a percent of our overall business, that recurring software is 54%.
So we now we have these metrics aligned. We have our engineering team aligned. And now we're off driving this digital transformation across the asset and operations life cycle of our customers across the industries that Peter just mentioned. And I'll also have to say it's quite rewarding to go talk to some customers and very rapidly be able to show them how we can very quickly. We also recently committed a medium term roadmap purely for the Aviva business to grow our grow our top line revenue at or above the market growth rate, grow our adjusted EBIT margins to 30% and grow that recurring revenue line as a percent of
our overall business to 60%. The future ahead is quite bright. So people ask is why is it important to own the software and not just be in alliances? And I go back to the to the 3 transformations or 3+1. So the, quadruple.
The, because it's also, you know, it explains the journey of the company. It also explains very well the journey of our customers. That many times come to us and ask us, you know, how can how can I reduce my carbon footprint? How can I reduce my energy cost and can you get, and help us to do that? And with it, of course, we need the full integration of, of energy and automation.
Now in order to do that, one needs to have all the data and bring up all the data that's available in their operations. And as I go from a sensor or actuator, from the ground floor, from the power distribution from a sensor that takes a temperature to more sophisticated, a piece of equipment, or a drive that's there. We bring up data 2, and I say cloud. This may be in the cloud. This may be in a private cloud or it may be in a hybrid solution.
And that's unique for every customer. Now if you have this data, of course, you want to use all the engineering models that, that were built, all the design that was done of the plan, to bring this data together with this end to end software, and we'll demonstrate this to you in a second. Because that allows you to holistically, improve the performance and reduce the cost of the plant. Basically, there are 3 elements of, improvement. It's about safety.
It's about the efficiency and there's also about the cost or the raw material that we're bringing into those factories. And that's why it's important to own the software and have a joint development roadmap to make sure that the data that comes up and the control systems and the software is aligned to each other. And that's what we're working on as one major work stream, together. Now if we have this discussion with our customers and if they go from, you know, the, the, the, the ground floor to the control room and further into, multi location setups, they say, what, what about cybersecurity? And there's been a constant discussion as every the second discussion we have with the customer.
And there are 3 elements to it. There is the element that we protect our company and the assets that we have from our customers, that's taken care of by our Chief Digital Officer Secondly, we need to develop products that are absolutely cyber secure, and that's done by our development departments. And there is, of course, the product security officer that takes care. But then we thought, well, why don't we do a business out of that? And we go out and we help our customers to make their facilities more cyber secure I'm going to be talking about that because it's a quite exciting business that we have.
Now, since we are edge neither. I've got to talk about EcoStruxure obviously because it's our it's our architecture and people ask us, you know, how does AVEVA fit into the EcoStruxure, stack. And, of course, with what I said earlier, having aligned roadmaps and and so forth. It is very clear that, our people can go out and also sell the software. If I say our people, I'm not talking necessarily about the Aviva people, which I also think are our people, but also our Schneider people and people say, how is that working?
I think we have a pretty mature, developed a pretty mature go to market model that has been, of course, originated in the in the heritage Schneider Electric, software. And we brought it to Aviva and have refined it. So maybe we start off how the model works in AVEVA and then I compliment to Schneider and if you see how this works together in the field.
Yes. So, just all the way back where we started, we have this commercial alignment on how the company is set up structurally. Then we have the technical alignment around EcoStruxure being powered by Aviva software. And now we have the go to market alignment. And so let's just put a stop with the channel, for example, about 30% of Aviva's business comes through the channel About 10% of our total business is footprint on this digital transformation.
Right. So if you what's channel?
I mean, channel are people like industrial automation distributors or system integrators. By accident, we have yesterday and today, our 400 largest system integrators and industrial automation distributors and also technology partners here in Paris. They come to us to discuss, how we can move business forward together. And so yesterday, Craig and I, we were there jointly together, 400 partners there, 200, more than 200 of those already selling software and automation today. So those are our partners.
And bringing those networks together has really helped on this level,
right, right? And then we have, if you think we were engaging with these customers and we learn from them about these great best practices to unlock productivity, drive productivity improvements. And so that we put this into a specialty sales team. One of those are an example is asset performance management. These will be our regional specialty sales teams.
And they work together with the Schneider team to go off
So sometimes you would, you would see us together, at customers, Jean Pascal and, and Craig or others. And those are the top customers that we're really worried about. It's a couple of handful of customers, 60 plus strategic accounts that were driving this forward together because on their agenda at the CEO level is the digital transformation. And they want to talk to one company in order to make this happen. So, to come from the theory, maybe to an example, let's talk about North American International Oil And Gas company.
Not everybody wants to be named.
I leave this to your,
to your fantasy who it is. There are not so many out there. And I want to, I want to guide you through the journey that we have gone with this customer so that you understand how we're functioning also And if we're saying, we are bringing the whole company together at one account. Now in 2013, and you know, this is prior to, to invent this. We really had a transactional, if you wish, a relationship to this customer.
So if you wanted to find somebody at the customer who knew Schneider Electric, you would need to go deeply into the purchasing department and with that invisible to the top floor of the customer. Now with the acquisition of Invensys, we became and I need to read this because these are the words that our customer use. We became an industrial automation and software partner And with that, you start engaging in what is called, in main automation contracting. So if they do a plant, You do the complete automation solution with them. With this is safety system, process control system, it is the instrumentation.
Sometimes it it is also the analytics that goes with it. So you move into the control room at the customer. Now since we had that, we said, and we're strong in energy management. Obviously, why don't we bring this together to the customer? And there is value, of course, for him And then we became in addition to that the main electrical contractor.
That means you bring in things like medium ball low voltage transformers, motor control centers that, that go with it. And, then, of course, since this year, we've became the strategic relationship management partner category, SRM, is abbreviated in the company And, that allows us now if you look at the cycles 2010 to 2013, 15000000 in average, and then 2014 to 2018, 50,000,000 revenue in average per year. So you can see how we've grown the customer by an integrated approach with our complete offering. Now, of course, that looks a little bit, theoretical still That's why we've brought a little bit of a demonstration that I'm trying to guide you through with Craig in 2 or 3 minutes.
So I'll go over there. So, we're in a process industry here. And when this area of, a de Ethinizer, which is a step after where you take ethane and propane out of a natural gas. So that's the scenario we're looking at over here.
So I'm I'm here. You see me on the screen. I hope in a second, yes. So you can look straightforward. I'm really in the machine room of the plan the machine room is where the power distribution is.
So you need to imagine, you know, hundreds of cabinets of this site where you have power distribution, medium voltage, low voltage. And then what you see here is a motor control center. The motor control center is connected usually to a motor, of course, not of the size that we have here, but these are pretty large pieces of equipment, sometimes they go into the range of megawatts. So they, you know, they can fill half a room here and they operate pumps, they operate fans, they're close to a compressor and so forth. And they are, of course, connected to the DCS system that you see up here that may be in the same or maybe in an adjacent room.
Now, what's totally relevant and what people haven't believed in the past that we can go all the way from the electrical equipment and the motors into the DCS system and the DCS system you would see in the control room here. And that's where the people operate the plant. Now, in case we would have an error on one of those motors, then usually this is where the panic breaks out and people want to make sure that they keep the planned under control. And this has been, extremely simplified with the integration of we're coming from power through the DCS system or the process control system now to the soft because if they look at the error here, they can see the error is at a pump. And then one could immediately look at the 3 d model of the plant.
And that's where Abeva comes in.
Yes. And so, we're in a defonizer. We're in a pump that's involved in the flow of the feedstock into and out of that deethanizer. And so now we want to go from this operational view. We know there's a problem with the pump.
So now look at the how that looks to the capital view. So maybe if we can just look to the 3 d display at the top ahead of just slightly to the right of Peter there. You'll see this 3 d view and that is the asset view. You're now looking at that same pump that you saw in a 2 d schematic you're now seeing it in the context of the electrical control system, you're now seeing it in the 3 d context. So now you're able to switch from the the design view to the operated view, which would be really important if now you need to do something with that pump director.
Right.
And what you need what you need to imagine is that this is all happening context sensitive, and that's the change to the past. And that's the clear advantage of being totally integrated. So on the process control system, you go with your cursor to the pump and then on the 3 d model, automatically you see where that pump is located. Now you see that here in such a plant, you would have a certain redundancy. That means if one pump fails, you have another pump there.
So before you go out and get this pump fixed, you want to understand what's the performance of the second pump here, is that going to be potentially failing in the future? And that's where you would call in larger plant, the so called Reliability Center. And in the Reliability Center, we have quite a bit of, Aviva software running, For example, here, our asset performance management suite of products, and Craig will explain what we can do with that.
So this idea of asset performance management, when you have downtime, it's okay as long as it was planned. You don't want it to be unplanned. That's very expensive. So in this situation, we had, we know that there's a pump, we know it has an issue, we're about to switch over to a second pump. Now of course, we want to look at the information around that second pump to be sure that is it going to be reliable.
Well, it turns out we've been capturing all of the operational data of that pump over a long period of time. And based on that, we can predict when it would fail or not fail in the future using some artificial intelligence and some machine learning. And so we're able to look at that before we actually activate the switch over to the backup.
Right. And then with the same asset performance management suite, you would actually send out the service engineer he, he will get his work order. He will look at his mobile device. He will have all the data plus the 3 d model, everything on his mobile device as he main as he does the service on-site. Now, what you also could do prior or after the service, you can calculate with our profit advisor automatically What's the profit impact for the company or for the plant that you would have?
Now I understand, of course, this is only a model So, let's see how that could look like at the customer side.
Yes, we've talked before about Abu Dhabi National Oil Company or ADNOC and we've talked before about how in 8 weeks we were able to deliver Schneider Electric And Innoviva Software together. Fifty meter wall, visually breathtaking 100,000 data points across over a dozen different operating companies rendered in real time into this digital view of into Abu Dhabi National Oil Company. This was the foundation of our work together. So they're very proud of it. We're very proud of it.
This formed what ADNOC now call it oil and gas point 0 as part of their digital transformation. Now I want to come back to now, the customer says, well, this is great. Now how can I drive productivity improvement? And we've gone in with the account team, that coverage model we described earlier, and we've worked with them around 2 scenarios: 1st, asset performance management, we just talked about. So looking at a certain asset class, predicting when it's going to fail before it fails, dramatic improvement in productivity.
And secondly, is optimizing the feedstock. So looking at the sulfur content of oil coming out of the ground, optimizing where that gets routed to the refinery capacity, to the storage facility, to the vessels at sea, to the spot market prices. Every optimization in this end to end point by ADNOC's words is over $50,000,000 of economic value generated. And we're just getting started with ADNOC.
Right. It's, you know, it's up sell, down sell, cross sell, all over the place here at the customer. But we don't want to leave the impression that this is only oil and gas. So let's let's move, so to say, from the most heavy process industry all the way to Discrete with a couple of examples.
So BlackRock Mining operations in South Africa They produced 3,700,000 tons of manganese. Manganese is an important material. It's used for fertilizer is used for steel production. It's one of the 3 major materials in electric batteries, for example. So what we did with work with them is over less than 90 days, bring together all of that operational data, this time in the context of a mining facility.
And something very interesting happened there. Now the operational team have this data at their fingertips and they're better able to collaborate and work through areas such as improving reliability, improving asset utilization, very, very compelling. And the customer is really excited about this as part of their own digital transformation. Yeah. But why don't we listen to
the customer as opposed to just showing slides? Great. Thanks very much, Greg, for joining me. Can we have the video, or do I need to press here something? Yeah.
I guess so.
BlackRock Mine Operations is situated in South Africa, about 600 Kilometers Southeast of Johannesburg. Currently at BlackRock, we produced 3,700,000 tons of manganese ore. The BlackRock project was mainly aimed around 2 objectives. One was to replace and to upgrade the existing infrastructure. And the second phase was to install additional capacity for us to be able to expand our production from just about 3,000,000 tons to 4,600,000 tons.
In three year stuff.
The Roku Modernization, and technologies that we've applied at the RMO at a number of, enablers. And one of them was the visualization, the video wall, and the OMI, which I believe was the 1st in South Africa to be deployed. The video will also needed to facilitate a single communication platform for the multi disciplines across the operations. A place that's easily accessible and, speaks of 1 version of luxury.
So you can hear them talking about the integrations that we're talking about in one room. So that's what the customer tells And if we can help them, that's that's happening, not only in oil and gas and metals or mining here, but also if you go to a food and beverage customer that we have in North America. And I guess in the background, they're producing a little bit of chocolate bars here, The we started off in 2013 and you see the different aspects of cross selling that we have in these examples. We started off with the with an installed base of automation. And then through again, the acquisition of Invensys, we brought in the first software packages that allowed us to establish a larger footprint at the customer and then also moved into energy management contracting.
And with that, as we are moving forward into a more recurring revenue, with the with our customers. In 2019, we've engaged into a 5 year contract that allows us to retrieve recurring revenue with that customer. Over this period of time, 5 years, 18% growth, this is one of the large food companies on the, on the planet. So, again, triple integration at this customer here. Now if we were to go one step further and we move into a discrete environment and I steal a little bit of the show of Murad this afternoon and maybe for those who don't have a chance to join, but only on one slide, because our factories are, are discrete operations.
And in 60 of our factories, we have heavily deployed our automation and software offering to make them what we call smart factories. And some of you may seen this in Wuhan. Now that's a fairly new facility. This afternoon you have the chance to see it in a facility that's fifty years old. And also the average age of folks is of course different in China than it is in France.
And I don't need to talk about the unionization. But all of that has not stopped us in driving that forward and deploying our automation technology, our combined offering of automation and energy management to bring down the energy bill of that facility. But then within a short period of time of implementation, 3 to 4 weeks reduce improve the overall equipment efficiency by 5% to 15% pending on the machine that you will see this afternoon. And we're deploying latest technology, like augmented reality, for example, in those plans, artificial intelligence, all deployed there, in 60 of our factories and growing, together with AVEVA And Energy Management, complete suite of products. Now let me go one level further down.
I go into a machine automation. As I said earlier, in the machine automation, we are world leading. Why are we world leading? Because we are focusing on certain specific segments,
as I
will tell you in a minute. Now this is a cabinet of a pumping station, for example, and we're pretty good at pumping stations. And of course, this has only Schneider equipment in it. I'm not showing competition here, but you could imagine that at many of our customers, there is also a variety of different equipment. In there.
So whatever I have marked here in red with our new technology is going away. We're just replacing it and integrating it into software in our new offer. So we take out all the IOs that come with the PLC. Now, you know, our PLC market share, who are not targeting to take away our IOs, we will we take away the IOs of others. That's a pretty nice business to integrate IOs into our contact us because our contact us now have software integrated and we're eliminating, so to say, one step.
We're taking away 15% of the relays. Out of this cabinet. We eliminate auxiliary wiring. Of course, the wiring has no cost. It has cost to put it in actually significant if you're pending where you are.
And it reduces also the amount of failures. There's just one cable that goes from the PLC that is, over here, this, this blue box, you see one of those cables that is connected to the contactor. That's the only connection we need. And then, we drive the power in this application. And the power is not going to go away because it moves the physics.
It moves the, the pieces of the machine. So that's something that we'll need to stay. But the IOs, our history, and I told you the PLC anyway, 75%, 80% software content, today, So it's just a question of time where and how the software will run. Of course, we also got rid of the network switches. We integrated those in our PLC and also protection delays.
Now people have asked me, well, that's a that's bad news for for Schneider. If it's 20% cheaper for the customer, No, it's good news for us because it's 20% cheaper for the customer and it increases our content by 33%. Given what the overall market shares are in the company. Of course, if I go from 100% Schneider solution to 100% Schneider solution, then it's 20% less for us, but that's, probably a small fraction of the, of the pieces, installations that we, that we have out there. And is an additional, you know, proof point of moving from electromechanics to a software based IOT solution that, that we're moving up the letter.
Now, you've seen this curve before for those that follow us for a longer period of time. That's very important for us in our machine business in our motion business, the number of machines we are converting. Converting means somebody builds a new machine. They started off with our own equipment. Or they have built it with somebody else and we convert this machine to our equipment.
And that's a kind of an early indicator for us how, a growth may develop in the future. So it's very important to follow. We believe we've been growing three times faster than the market because we are very much focused. We are focused on packaging. We are number 1 in the world in packaging.
We are extremely good in material handling Material handling extremely important these days. If you look at all the packages that are sent around the world, those need to be handled. So large distribution center packages automated with us. Then, hoisting cranes is one of our favorite solutions where we are also extremely strong in the market. HVAC, we're number 1 in the market.
So we're picking segments where we bring all capabilities together and then laser focused go after those customers to establish scale, not do everything, but be very focused to it. And then, you've asked me before, while you go in and sell those advisors that Schneider has to offer, how much automation equipment are you pulling? Well, the we can say with pretty good confidence these days that with 1 euro of software advisor that we sell to the customer, we can pull a of automation equipment. So there is a correlation to it And it helps us, of course, driving growth to some of those customers. And of course, as we go in with the software, It's much more sticky and there's much more long term and there's a much higher level relationship that we have with the customers.
That's true for the OEM customers. That's true for the end users and that's, of course, also true for our partners. They have understood this very, very well. Now, we've come all the way to the discrete example and then let me come to our number 4 topic, which is cybersecurity as a business. And so what are we doing in cybersecurity?
And we're not competing against the IBMs of the world. We are competing against people who understand the OT environment. The OT environment is what you see over there. When you're on the plant floor, when you're in the control room, where you have a PLCs, where you have process control systems, all of which have IP addresses today, and they're extremely difficult to understand. So we've a couple of years ago, and that's how it really started.
We had a customer where the IT cybersecurity team went in, changed the Windows version on the process control system and the plant was down. And the downtime unplanned of a large plant cost 40,000,000, if this is an oil and gas plant. So there was, it was burning. And they they called us. So we went in and helped them fairly quickly because we understand the process control systems that are, established at those plants, not only our stuff, but also the stuff from others.
And that's very important because you face a very heterogeneous environment. So what we started then in 2015 is that we need to have a process where we can go to our customers, consult them about technology, consult them about processes and consult them about their people because it's not only a technology problem, cyber security. It's usually a process problem. It's a people problem that you have. So you need to have a holistic approach, to it, to make, to make the the the plant a safe one.
And usually you start off with the assessment So our people go into the plans. They look at the OT environment. They assess what is the situation. And then they come up with a report and say this is our gap analysis. This is what you need to do to make this plant a safe one.
This assessment is paid of course, you know, this is not free of charge and we do this quite regular. Now in 70% of the cases after the assessment, we are also invited to do the design and the implementation to mitigate the gap right? So this is a one time project that you would do. And then comes the beauty of trying to move this into monitoring where we use a third party monitoring software. We don't have a monitoring software on this one at the moment and then try to maintain the cyber security at this level.
And once you gain once you get into those contracts, they become very beautiful because it's recurring. Right? So unfortunately, we're not at the 70% yet, but you can see we've grown this business by the factor of 10 And to give you an indication of scale in 2019 is going to be, so, so god will high in the double digit million, range. So it's a size, it has become a sizable business in 4 years And if people say you can not incubate a business newly in a large corporation, I think this is proving them wrong. And to give you an example of, of a case that we've done and nobody wants to have his name mentioned on cybersecurity, So, this is a Middle East National Oil company.
This contract is in the neighborhood of, is a larger one of, 5 1,000,000, U. S. I think of 1,000,000. And so we're looking at, as I said earlier, we have IT and OT convergence So they want us to worry about IT OT and then also as it migrates with a site oversight visibility into the IT space the DMZ means demilitarized zone implementation, so to make sure that it cannot be penetrated, then go into the a design and that the deployment of the architecture, you see this in this wonderful circle on the left hand side and, you know, assuring remote access, assuring device control Device control means that every single piece that has an IP address is controlled in this facility. And then, of course, worry about the asset that are out there.
This was done on an installed base, not only of Schneider, but also third party and other manufacturers that we see and sometimes don't see anymore in, in the market, but there is, of course, a huge installed base out there that needs to be worried about. So with the triple integration plus cybersecurity and I think we've built a very balanced, again, what I say, full liner in automation, meaning from discrete all the way to process, very heavy on electronics and software, very little and no equipment like motors or heavy machining equipment. So it's an asset light model where we move further into software that has well positioned us for strong growth through the cycle. If and from 13 to 18, we also had cycles in there, if you remember, in particular, in the in the process industries that were heavy with a 7.6% CAGA And I think it's also delivering superior value by the convergence to software. So we've improved the margin from 16 to 18 by 100 and 30 bps.
And of course, we'll participate actively in the 200 bps we want to continue to deliver a forward in respect to a portfolio. We've just, closed the sale of our cabinet business in the U. S. That was highly margin dilutive. So that's that's been closed before the half year ends.
We are in all the efficiency programs. We are working on our supply chain quite actively and have quite some good plans here. So I'm very confident that we will contribute with it and then also, of course, in respect to portfolio, because we are very unique. We are unique because we have the approach we have chosen with owning 60% of AVEVA having it integrated in, EcoStruxure, have a joint development roadmap, have a mature go to market model, that is functioning and delivering a double digit growth, of EcoStruxure, since we since we closed the acquisition. So I think we're a good company to invest in.
Thank you very much. And with that,
Philippe?
Thank you, Peter. It was very impressive and very exciting to see the strength of our Industrial Automation Portfolio. So we're going to move on to our 2nd business, which is Energy Management. When preparing with Amit, we were trying to collect your feedback on your question. There were many questions about, okay, what's your What's your recipe, in energy management to build your leadership to sustain your leadership?
So in the coming 45 minutes, we're going to go through this. Trying to be as practical and transparent as we can to explain you what has brought us here in term of building our leadership, but I would say probably more importantly, what are our plans to strengthen our leadership going forwards to keep delivering superior financial to our shareholders. So my name is Philippe Durham for the one who don't know me. I've been 23 years with the company, and I lead today the Energy Management business globally and based in Hong Kong, close to where Jean Pascal is, traveling quite a bit as our business is very, very global. So for the one who were in this room, 18 months ago when we last did our Investor Day, You probably remember that we kicked off the concept of energy management.
We started to share with you what was our growth strategy, what what was our portfolio, what would be the benefit of the combination. At that time, if you remember, there were many questions about data centers. Many of you were saying, is it a good market? Are you going to grow there and so on? And actually since then, the story has been pretty good.
We've delivered beyond expectation. I would say, more importantly, we've delivered better than competition On the energy management side, this business represents for Schneider, 1,000,000,000. We've been growing in 2018 by 7% organically, while growing the bottom line by 60 bps, reaching close to 18% EBITA margin. And the data center story has been also very strong. And clearly contributing to what's on the left part of your screen.
Today for Schneider Electric Data Center is our biggest segment, It's a place where we grow double digits where we sell the whole portfolio of Schneider, a lot of secure power for sure, a lot of low voltage, medium voltage, building management, actually some industrial automation and we see a trend here that's very exciting. So really the full portfolio and building the future with the biggest name, you know those names and we have mean, Peter was mentioning those C level relationship. We've built very similar relationship with those customers, actually learning a lot, learning with them and making sure that we will raise the bar with these customers. So our ambition is very simple. We want to continue to strengthen that leadership, keep growing faster than the market, beating competition, while being very disciplined on value creation.
And the recipe behind relines on innovation and digital, and I would say the 2 are very, very connected and you will see that through a different example we're going to take. Having an end user led approach to a segment focus and we'll take a few example about that, being obsessed by cross selling, Peter was mentioning a lot of the opportunities of selling together, and that is something that we are very disciplined across the board. There is one Schneider. We have Salesforce who are incentivized to sell the whole portfolio because it makes sense for our customers. And Emmanuel was talking about the discipline on the value creation on the efficiency, making sure that every time we invest in costs, we are very frugal about that and very disciplined on the return on this investment.
Very disciplined on pricing. We delivered very well in the past years on that, but there is still opportunity. I would say on we use more and more marketing automation analytics to be even better in the quality of our pricing and portfolio optimization. We are mentioning PELCO. We are very precise in all our business, Peteris, I am, Freddy's on Looking at our portfolio and making sure by country, by product line, we scroll places where we believe Schneider would not be the best owner because we wouldn't have the scale, we don't have the strategic positioning, we wouldn't have the right portfolio, and there will be a better owner elsewhere, to drive that.
So we have indeed very precise plan to drive these value creation levers to make sure that we deliver the commitment, we've been exposing to you guys and sharing in the past months. We talked about data center 18 months ago. We are very happy to have a very close customer to us which is penmed. So slightly later in the presentation, we'll welcome Steve on stage to share his experience about working with Schneider. To build a very, very innovative hospital and will take a bit more time later in the presentation.
So before that, let's take maybe some helicopter view and understand from a market standpoint, an outstanding standpoint in which market to operate, what are the key trends that are driving our business to then come into what make our differentiation and what our plan going forward. So Jean Pascal mentioned 2 very important trends, and I probably no surprise for you. The things related to a more electrical world, the thing related to the more digital world. So let's dive into a few specific figures here. So we've been very clear in the past years about the fact that the world is becoming more electric, the whole electric world.
By 2040, the electrical consumption was double. By 2040, the electrical consumption will double, which is very good for Schneider Electric because our business is about electricity. Now if you go one level down into what it means, it means a lot of change. Everything, or let's say, a lot on the generation side is going to go towards electricity because it's more efficient. 50% of the renewable of the Power generation will be coming from renewable energy by 2040.
This is a massive change, which will drive more micro grids. On the demand side, the loads are going towards more electric because more electric means more efficient. More electric vehicle, more electricity usage in building, more electricity usage in industry, which are driving more low voltage and more medium voltage. And all of this is also driving more dependency on electricity. Life is on when energy is on.
Now the reverse is true. She has no power. Your whole business is is in trouble, and people, therefore, consider uptime is an absolute must, which is great for Secure Power. So that's the first thing that's really driving our business in our direction and in really more micro grid more power distribution, more secure power. 2nd trend on the all digital world, we are all addicted to our phone, our teenagers, even more than us.
Now, The other the new phenomenon or the acceleration phenomenon is that all machines are getting connected and the pace of that connectivity is actually a 8x to 10x to what it is for all of us to think about it. That means more connected products. All that traffic on top of that, which was very centralized, is moving to the edge to help with the performance of this application. There is more 5G, and that's moving toward more secure power more at the edge with smaller data center, which fits very well with a business model of Schneider. And last but not least, IT and OT are very connected and we see more and more, and we'll give some example on the fact that there is no efficiency in the OT space without IT.
So IT and OT are connected, and that means more EcoStruxure for Schneider Electric. So all of it goes into very favorable direction for our business. Now, let's sit in the shoes of a customer. I'm a customer and I'm confronted to that more digital and more electric world. And actually, I have to run 2 things in parallel.
On one side, I have to manage my energy. Because if I have no energy, I have no business and have to manage my process. And actually, I need someone who can bring your solution to combine together the energy management on automation to be future ready and deliver on the promise that I want to deliver for my customers. And that's what we do for a living to deliver smart buildings, smart data centers, smart infrastructure, smart plans, And that's the whole logic of the portfolio, optional electric. So we wrap it up There is an all electric world, there is an all digital world, there is a second parameter that's very important and that's really, really important in electrical world.
Which is a multi local world, which actually goes with a lot of specificities in the electoral in the electrical space in terms of standards, in terms of product, I mean, the plugs in the UK are different from the one in France, are different from the one in the U. S. And that drives, that's coming from very different standards, and that requires a very multi local approach to the business. And in front of this, we build with Schneider, and we build with our energy management business, 4 key ingredients of differentiation, around our size and our scale and our innovation portfolio, 0.1,0.2 and getting inspired a lot by what has been very well done supported number 3 by a full enterprise architecture that you know by HEARF, which is EcoStruxure, and a unique multi local reach, thanks to our scale, thanks to our history, that allows us to be with our customers everywhere in the world. All of it allow us to have the means to invent the new electric coil.
Now, let's go in detail on those 4 bullet points to understand with some example what it means. Size and innovation, something that you are pretty familiar with. You know, we're number 1 in Low Voltage. We are number 1 in Medium Voltage, we are number 1 in Secure Power, and we've done a lot of work in the past 18 months with the creation of Energy Management to build synergies across portfolio. Cost synergies, but I would say even more importantly, go to market synergies to make sure that every sales force will be fully incentivized to sell the full portfolio of Schneider in Energy Management and also with automation.
And coupling that with a full focus on innovation, for simplicity, we'll talk about a lot of things related to digital. There were many questions from many of you on the fact that some of our partners are being afraid of that digital transformation. One angle of our innovation is really to make things simple for our customers and for our partners. Now let's take a few example of that and let's call back in time in the past 40 years on a few of our iconic products. Number 1, everybody talks about IoT and has been, let's say, more of a discussion in the past 5 years.
We launched our first IoT device in the power distribution world 40 years ago in the U. S. With Credit. 40 years ago. So IoT for us is no new news.
Now, there are many things that have been moving, moving more to the cloud, but the whole reality of making power distribution digital started in Nashville, Tennessee in 1978. Since then, we've been, going further with more values, UPS and legendary reliability with APC, more efficiency with our circuit breakers, making our circuit breakers smart, wanted to illustrate two points of innovation, which I find very interesting and that are, let's say, more accelerating going forward. The first one is sustainability. So this equipment is a medium voltage cubicle that's green and digital. So maybe not all of you are that's a specialist of Medium Voltage, but in Medium Voltage and High Voltage actually for years, we've been using a gas called SF6 to let's say, isolate the conductors to make sure that those equipment would be rather compact.
The problem with SF 6, it's a fantastic gas for electromechanical, especially is the problem is that 1 kilogram of SF 6 as the equivalent environment impacts as 20 tonne of CO2, 1 kilogram of SF6, 20 tonne of CO2. So that's not a very good gas let's say, for environment. And we launched a month ago, a products that can get rid of SSX. That cut the arc into the air, which is an unparalleled innovation in the industry which is raising a lot of questions from our competitors. And I would say more importantly, a lot of excitement from our customers.
So with that product, we are the forefront of innovation in power distribution to make power distribution green and digital. The second thing where we are really, really obsessed is driving digital and connectivity to deliver more value for our customers. That's something that actually we see a lot coming with, EcoStruxion that we'll talk about that. The point number 2 is getting inspired with what's happening in industry where we clearly see in the industrial space probably some advance compared to the building space on thinking, let's say the whole cycle from the whole cycle, we were historically with our power distribution, very intensely positioned in the build. And actually, we see that all this installation start to live at the design phase and then have a real life in the operate and maintain.
And the all work we are doing is to expand to the design phase through M and A and alliances. So, that was the meaning of the recent acquisition we did in IG, XAO and LP, to help our customers, in this case, a lot of design firm contractors to make designs simple and more efficient. And then in operate and maintain, building suites of software that help our customers in that case, facility managers and users to deliver energy efficiency, sustainability, asset optimization, comfort and so on. We today rely on $1,300,000 asset under management, 18 months before it was $700,000. So we've double that pool of assets under management in 18 months.
So that gives you a trend of how fast that business is growing. Which is growing recurring revenue, digital services, which in itself are very interesting business, but which are also a very good pull through opportunity because once you leave with your customer in a recurring revenue and a recurring digital relationship when there are optimization to be done in that facility, the first company to be called the Schneider Electric. This relies on point number 3, our enterprise architecture that's equals structure. You know it by heart. You know the 3 level.
Peter talk about it. Emmanuel you talk about it. Jean Pascal talked about it. Just wanted to give a slight twist to make you understand how this work with our customer. The backbone of our solution is coming with power distribution.
Peter, we're mentioning that in most of your example. We have a power distribution footprint that span across all our end markets and we make it digital, thanks to EcoStruxure Power, which is, let's say, the base of helping our customer manage their energy. And actually what we do on top is to stitch, let's say, the process application that our customer require to bring together the energy and the automation, which was the example I was going right before. So in a building, the process will be the building management, In a data center, the process will be the data center infrastructure management, the DCIN, EcoStruity, in a grid that will be the ADMS, and in industrial application that would be either the machine or the DCS, which is actually the example that Peter was giving before. And here, We are truly unique by bringing the 2 together, the Energy And Automation, with a specific focus by segment and that's being recognized very strongly, in the outside world by people like Gartner and Verdontics that very often put us in their quadrant 4, which is the sort of place of leadership of in the world of software.
The last point, and that's very, very important in a multi local world, we have the capacity to respond global, regional, and local. Our industry is driven by local standards. So When you talk to companies like, for instance, Marriott And Hilton, we can engage with them at the global level, for instance, to provide a full energy dashboard or sustainability dashboard, which actually we do with both Merit and Hilton, which means thousands of site connected that was the example of Jean Pascal, of the integrated company. But when we talk to these people and we are working with them on deploying, a new hotel in Dubai or in Auckland or in California, we will be confronted to different standard and the power optionality comes with the fact that everywhere in the world, we can accompany those global customer globally, but also locally with a full network of partners. Which is really hard to beat because with partners and decades of investment into multi standards, electrical equipment, which allows us to go now bottom up with a lot of partners.
So here you have an example of a contractor in the state of California, The U. S. Has an electrical code, which is nationwide, but there are decrease of application of that electrical code that differs by states. So even at the size of the U S, products would have to fulfill different standard depending on different states in the U S. That's our local, our businesses, which come with some level of complexity to manage for our customers, which actually is a business we love because that comes with some level of popularity and presence with our partners.
So pretty simple equation of why do we get that leadership and where we are going? Now We wanted to go one level down into sharing with you our 2 main business model. Schneider goes to market typically direct when our customers are asking us to do so or indirect through partners. So we're going to take a practical example here with Spend Mebb, I'll be help with Steve who will testify about that. But before Steve coming on stage, Let me share a video of what this project is all about and what we've been working on together with Steve and his team.
Currently, at the hospital University of Pennsylvania, we are in several buildings. For designing a hospital for the future, the pavilion at Penn Medicine, this is a way for us to move into the future.
We wanted this hospital be a hospital that would be at the forefront of medicine for the next 100 years and had the flexibility in its design construction so that as technology changes, as medical practices change, the building could adjust to those changes.
The planning is probably 75% of the effort. Planning here really centered around at a big room concept, how that basically is in an IPD environment is pulling on the parties together, collaborating in an environment side by side.
Recognized that we needed to bring on an expert in low voltage, of voltage technology, integration, collaboration. Schneider's been involved in this project as a partner within the first 6 to 9 months of the project.
Because we are a part of it so early, we are able to form very close relationships not only with the Penn Med folks, but also with other key contributors on the IPD, and that's been extremely invaluable.
We basically have offered 3 major divisions of our company to come in and work with Penn Medicine And Shafer Electric and the other entities for the project with our Schneider Building division, our square d by Schneider Electric and Asco by Schneider Electric.
I think what Schneider does typically, well, the willingness to work through problems and come up with solutions that look to the greater good. And people need a certain amount of courage to be able to work in that environment and do that.
In 2021, we are gonna put people into this building. Patients, and they're gonna get better care than they get today. They're gonna be in better facilities than they are today. We will have completed what we set out to do, which was provide a world class facility for patients and family.
So Steve, let's hear from you about that fantastic project.
Good morning. I just want to start out by saying I've only been to Paris a few times, and every time it's been really hot. Maybe it's me. I don't know. And I'll stop coming if you want me.
Actually, I'm not going to stop coming. So you just saw a short video, a little bit of real quick background on Penn Medicine. We, are an $8,000,000,000 U. S. Dollar healthcare system in Philadelphia and in that region.
We Penn Pennsylvania hospital was the 1st hospital in the United States, more than 250 years ago. Today, we have 6 hospitals. We see, about 6,000,000 patients every year, and have over 40,000 employees, so a pretty substantial enterprise. We also were the 1st school of medicine in the United States, and so we've been teaching, doctors and nurses and also researchers. And so on the research side, we, led in X-ray diagnostics development a long time ago, and today are leading the fight to cure cancer.
So It's a pretty it's old in U. S. Standards, not in, in, maybe European standards, but we are very old in U. S. Standards.
But have always been innovative and always looking to the future. And so when we back in 2014, when we took on the, direction to design and build a $1,500,000,000 new facility, new hospital facility, the basic emphasis was this has to be the best hospital that we can build in the United States and we're going to open it in mid-twenty 21, but we don't want to build a hospital that is a 2021 hospital. We're looking to the future. And so some of the big emphasis really is on for us is patient care. Clearly, and that is, 1st and foremost, what's most important But secondly is, we have to have facility that will, allow for us to have the best patient care So there's really 2 parts to that.
Jean Pascal talked about it. If Philippe talked about it a lot, that's electrical or power and digital, or IoT. And so I'm going to talk about both of those things from our projects requirements perspective and how Schneider and the Schneider team, has worked with that. So You can see here the, so our Penn Medicine requirements for energy management, and this is really the second part of that, which is the building and the facilities. And the facilities needs to support the patient care.
So power reliability, early on, we said, we made a decision to go with Square D, to go with ASCO, and a number of other, Schneider products on the reliability side. And then on So that's sort of the, the initial sort of capital side of it, but almost more importantly is the sustainability and how that works throughout the life of the project. Again, we're going to open this hospital in 2021, but it is, it is designed to be a 1 100 year building. So how do we do that? You heard a lot about EcoStruxure.
Obviously, you know a lot about EcoStruxure. The different modules, we are in the process of implementing all of those into the design and construction of the building so that we can, constantly manage our, monitor, diagnose and then manage our energy usage for the building. I don't know much about hospitals in other parts of the world, but it is really expensive to run a hospital in the United States. We have lots and lots of requirements Jean Francois just said he thought France was complicated, but the U. S.
Is really complicated. And each state is different. We have only requirements, but we can't, we have many operating theaters in this new building. We can never afford for power to be out. We can never afford to lose, connectivity and integration.
And so, The thing that, that Peter and, Craig went through, we're not going to have a screen that's quite as large as, as that, that takes up a whole wall. But our central plant, our facility in this hospital, is the heart and soul of what goes on in the building. And we can afford for an unplanned outage. And we don't, it's not necessarily lost profit, but it is people's lives could be at stake quite honestly, or we may be losing patience. So the power reliability and sustainability are foremost for us.
The second part or really first part is people, And people is 2 things for us, patients and visitors, and then our staff. And, so how do we And that really comes down to process management for this new building. On the patient and visitor side, You saw in the video, I don't know if you could really tell, but, we built a, we built what we called the, the lab, I think 2, two and a half years ago. So very early on in the process and tested out all different parts and pieces of the infrastructure. So lighting in a patient room, shades, air conditioning, how that interacted with our clinical systems, so that patients and family would have some level of control, and they felt like, that they were actually not in a hotel, but really, it wasn't that they were in the sterile environment.
Schneider, electric set this up. You saw some of the folks in the, in the video. And we've worked through, many different products. Many are Schneider products. Some are not Schneider products.
We really, there are just some places where we don't even have an opportunity. And some places where, especially clinically, those are not the best solutions. So, but integrating them is a Schneider role. And, again, we worked through that with the lab. We got, we, as Peter was going through, we we've spent a lot of time over the last year and a half getting rid of some of those, cables and things in the box, in those boxes.
I don't know a lot about this stuff, right? But getting rid of a lot of those cables and things and using modules, whether they were a Schneider product or not, So those saved us money on the capital side, and more importantly, a lot of flexibility in the future. On the staff side, We have many clinical systems. Again, Schneider, this is really sort of outside of the Schneider realm, but there's things like Epic and Hill Rom and things that you probably heard about, but or, or thing out there. But, again, it's all about the integration for the clinical side and that the staff feels comfortable that if their, if their nurse call system doesn't function well, with, the tracking of the nursing, that's that can affect our patient care.
So, huge amount of that. And The last bullet here is really important again. We, we have, again, we, I said this before, but we're opening in 2021. But we, we are looking to the future. And we know that things change in your guys, in most of your businesses, but in healthcare, they change all the time.
And so we have to be able to evolve. And Schneider has helped us, over the past couple of years, be flexible and, understand what we, what we don't, what we think we don't know. So So how did we do this? This, again, this project started way back in 2014. And we knew from the very beginning that we were going to need to bring on a, what we called a low voltage integrator, something we had never done on any of our projects before, and we were looking for someone who would be able to help us integrate all of these different parts and pieces.
So we bought, Schneider on about 9 months or a year into the process, and they've been with us on that integration side, through the whole process, people there working with our engineers, our architects, our doctors and surgeons all the way through. We then made the selection to go with the Schneider for the building automation system, and some security integration, but then All that's really important on building the building, designing the building. But, as I'm sure you know, it costs a lot more to maintain the building over the life of its building. So we will spend much more, maintaining this building for over 100 years and we do spending building it. So again, it kind of goes back to sustainability, and service and maintenance.
Today, and into the future. So we're already planning, for those systems, again, using ecostructure,
So
we, as many of your businesses, do we do a strategic plan, a 5 year strategic plan, Penn Medicine? And back in 2012, which was a really long time ago, We had 6 priorities in our strategic plan, and we hadn't yet decided to build this hospital. But we did that, we that decision was made about in the middle of that 5 year plan. And what we've what I've highlighted here are the 6 priorities and really with, how those priorities have aligned, and we've used those through the design and construction of this building, but how they've aligned with Schneider's priorities. So you can see there, talked about flexibility, innovation, reliability, all of those things have been really important to us, leading and, but again, optimizing for the future I think if I had to pick 1, that was, that's really where I would focus, and then optimizing on the future and how we design the building today so that we get the most out of it, for the life.
So, Bik, thank you for your business, for your trust. And for your time, and for taking the time to stop here and share with us, share with our our the representative of shareholders how we've been working together and partnering together. But thanks first for your trust. Over those long period of time, we are really excited to be on the side of penet folks, to build such a hospital and very, we feel, very proud and very happy with that. Now, That was an example of one segment, which is Healthcare, which is a very important segment for us, but there are many others.
And you have the list here, you know that list, and the recipe is pretty much always the same. We bring together energy and process We customize this by end market. We make sure that everywhere we can, we bring together the energy and the industrial automation, which is especially true in more electro intensive and critical application, and we deliver to market with global teams and with partners. And then back to your question, the question we're asking, what is at the core of Schneider Performance? Things like this?
And doing them very consistent across segment to our partnership as we do receive in other health facilities in other place in the world and with other segments. Now to complement the view, there were also a lot of questions on, let's say, some new energy landscape type of examples, and we wanted to pick the example of Lidl, which is a customer that for sure wants to keep the light on, but who wants to get use of all the new technologies of solar EV, energy storage, transfer switch and these kind of things, coupling connected products and software to run and let's say in that case, the logistics center of the future, which is what we did, in that case, really using the all power of EcoStruxure, on the three layers and also the all know how we have in the field of energy and processing that case, which is a building automation, to make the full combo that will be future ready for Lido. We do that with many more customers. And actually, we see a lot more requests like this coming, when Manuel was mentioning ALFA structure and our engagement with Carla in GfK, we have a lot of similar conversation with that customer.
Which is really exciting, which make us very proud and actually, very future driven towards sustainable and digital innovation. So that was a deep dive on, let's say, the end user led. So we wanted now we want to switch gear and move to the partner led approach, which has been very core to Schneider, very, very central to our business, leveraging 2 things, a very wide partner network on one side, second point amplified with a stronger digital engagement. So Let's have a look at a couple of those ingredients out of that partner led business for all. First of all, I was mentioning scale, for sure scale is important.
We are blessed, to be operating with 600 1000 ecosystem partners, 600,000 ecosystem partners, which are an extension of Schneider Electric, and we really work in an orchestrated way and I'll give some example about that. I think what we were seeing in the case of PenMed was a very good example of that. And are not only distributors and distributors are very important. They are system integrators, our IT resellers, they are panel builders, electricians, electrical suppliers, all our e commerce partners, which starts to be a very sizable business, All that business partner led means 70% of Schneider Business of Schneider Business of Schneider Sales. So a very, very important part of our business operating out of that base of 600,000 partners.
We have many questions on are these partners really embracing digital? And is it really moving? How is that working and so on? So on that one, First of all, it's important that when we work with partners, we usually, on project, don't work with them 1 by 1. It starts with a life cycle of design, then build, then operate and maintain, and we very often adds up orchestration between specifiers, panel builders, contractor system integrators, which actually are needed so that we would deliver a full solution to an end user.
So it's a full lifecycle and we see really a big opportunity with exchange which is a collaborative platform, a digital platform that helps orchestrate the interaction with all of those partners. And the figures are already pretty big. We have 40,000, 45,000 users of exchange. So it's not a pilot. It's already a large scale deployment, and we see an acceleration of adoption because it brings value for our partners.
And scale matters. And when we are 100 of 1000 of partners, if we can get more efficient together, working on projects, that makes a big difference. Next point is our popularity, our presence at the point of sales. There are many point sales in the world from, let's say, incredible India on the left to online platform on the right. We believe we have we are presented one point of sale out of 2 in the world.
From again, on the left side, a small shop in Incredible, India, to a Rexel or Sunnypark point of sales in Developed Economies to E Commerce platform, which often actually are run by the same rectal and Sonipa or by others depends. And you see here the magnitude of the figures 350,350,000 traditional point of sales, 400 online platforms. And when you look at the dynamic, We've gained in the past 4 years 150,000 point of sales because we, I wouldn't say religiously, but meticulously follow our point of sale conquest and our presence in point of sales. And we do the same work on the right side with our online platform to expand our presence through online platforms, so really to grow and digitize on all cylinders of the partner machine we have, which is extremely powerful. Extremely powerful.
Brands are important. Schneider is a very strong brand, very strong, let's say, on the project side, but the more we go to a more capital presence with small electrician contractors, might be crazy, but those guys identify themselves with brands that we acquired that, again, are the results of decades of strong relationship with a clip sold in Australia, PDL in New Zealand, Squared in the U. S, of course, Merten in Germany, feller, in Switzerland, Elko, in Denmark and Sweden, sorry, Elco in Sweden, LK in Denmark, stake in Brazil, Guinsa in Turkey, Lumenas, in India and Dalishi in China. This represents more than 30% of our sales, what we call associated brands, and it might represent some very immaterial value and linkage, but for especially the small electrical contractor, this is extremely important. Down to, they would associate that with the Klipsold Families, the Square D family, because They've been trusting those names and those products for such a long time.
So the products are important. And the products and the offers and the innovation for these electrical contractors are important. These people are very emotional with our brands. And what we try to do with those products is to bring simplicity so that when people go on job site, when the small electrical contractors goes on the job site, Eework with SquareD, Ework with Clipsold or Schneider, and he knows there will be no surprise. The product will be easy to use, will be fast to deploy, because time on-site means money.
So when we have a plug on neutral with a very easy installation, it makes a big difference for this type of guys. When Clipsol brings a new wiring device, which is very modular, so that there is less talk for electrician, that means a lot for them. And those people are digital. And more and more and the new generation that comes with, that comes to us, asking us to have better digital interaction apps on their phone to be able to select and configure our product and we see a fast expansion of those tools, which are actually a great way to stay in touch with those communities. And when you are in touch with tens of 1000 of electrician that makes a big difference going forward.
This innovation is recognized externally we are very proud to have a very strong ramp up of design award with new products that can be more consumer led or more professionally led. We take a lot of care of on that design, we've worked in the past 10 years on really improving the brand design so that our product look distinctly the same so that we code our innovation And we also get very strong recognition out of the channel award we get, which is really recognizing what we do with our system integrators, we are electrician partners, our distribution partners, and we are very proud and very happy with those recognition. So as a wrap up, the question was, what is really your equation to lead the market and lead the business in energy management well. It's a pretty simple equation, which is it starts from a more electric and the digital world The pillar and the foundation is sources of leadership that we build over time around a very wide portfolio a portfolio that bring together energy and process that relies on leading brands with a very strong reach that multi local with multiple partners, batteries, the foundation of our business in Energy Management, that we want to That leadership we want to strengthen and build the future, a lot being fueled by digital, making sure that we innovate for simplicity that we keep developing EcoStruxure, EcoStruxure, Jean Pascal was saying, is ten year old is true, but we accelerate actually our pace of innovation there.
We digitize our partner network and really do it across a full lifecycle of our assets and our customers. And in the background, we want to stay extremely disciplined on execution, so that we drive productivity, we drive pricing, as a team, we drive efficiency and we drive our portfolio management. And the result is what you're asking for, which is growing faster than the market and focus on value creation, which is what we've been doing in 2018, which is what we'll be doing in 2019 and for the 4th built future per the commitment we've made with Emmanuel and Jean Pascal, in February for the coming years. And we take that commitment very, very seriously. So that's it for Energy Management.
We thank you for your time. We thank the people who are also attending online because we understand there are many of them. So We appreciate your time and your trust. I think now it's time for 15 minutes. 15 minutes break.
And we are back in this room
My father was actually involved in sugar. And as a young boy, I used to get to the sugar most with him. And as time passed, I ended up in the sugar industry. My name is Alan Williamson. I'm the manufacturing executive at RCL Foods, Fongalu Sugarmal.
Ascalpongary sugar mold specializes in 2 types of sugar, mainly the refined sugar, the brown sugar for direct consumption, as well as for the industrial market. The biggest challenge faced by RCO when they took over, Pongoda Sugar Mill was that the plant is very old and in desperate need of modernization. There was lots of downtime breakages, stoppages, In the power station, we used to have roughly 33 to 40 blackouts in a season. So obviously with the modernization and putting in the Schneider system, we were able to troubleshoot much quicker. And therefore, our uptime was increased and our downtime was obviously decreased.
And we're actually able to control up and optimize our process. The Schneider Electric Eco structure allows us to remotely diagnose and view the plant we could never do before. This allows us the flexibility and that we're able to access the plant at any time from any location via our laptop, smartphone, or tablet. I think the most important thing that we've achieved with Schneider Electric is that we have become more competitive in the industry. Over the period of implementation, this larger electric system has substantially contributed towards our 20% in recent throughput in the pot.
Our vision for the future is to continue modernizing the plant and partnership with Schneider Electric. And to achieve a mission of more food to more people, more often.
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Engineering is not boring and bland as people perceive it to me. It's actually a problem solving role. My name is Tasnim Abdulrezk, and I'm the network control manager at SMPO network. SMPO network is the sole electricity distributor in South Australia. We basically have 2 peak seasons.
1 is the summer season, which is when you push fire, event creep up. The other component is around autumn. So that's storm events, lightning, rain, wind activity. We have a lot of, transient faults, which are basically due to vegetation or animals. And we have hundreds of longitives of line over 1,500,000 customers.
So when we do dispatch crew, they can spend hours traveling to the location and patrolling the line. The ADMS and the state automation scheme is going to give us better visibility of the network because it smarter reporting capability, and it has allowed us to capture a lot of our network structure to have a centralized source of truth. To be able to restore power to majority of customers on a feeder in under a minute is something that has never been done in FFO Networks history. Without Schneider Electric, we probably wouldn't have been able to progress as far as we have in as quickly as we have. It is a very powerful tool.
It's a fantastic platform for us just to develop in the future and be the leading edge in the distribution sector.
Luxury And Energy Efficiency integrated system you have, the more efficiency you can get. Hi. I'm Michael Way, Marriott Global Design, Asia Pacific, Hot and head. We, with Schneider Electric's help, conduct regular training and workshop with all of the consultants and owners so that they are aware of our goal. So the experience we want the guest to have is really that they're able to have a very comfortable requirements, heating requirements, and at the same time that they are very aware that Marriott is a company that is very focused on sustainability and with Schneider's help, it will help us achieve that faster and quicker.
The use of Schneider Electric Systems And Services, like resource advisor, power distribution, building automation, lighting, guest room solutions, and UPS has given us a great 10 to 15% in energy efficiency savings. Kinda really wants to promote internal tourism. They are now building 100 of resorts within China, which has never been done before. It's a huge market for us. Marriott and Snyder's shared the same vision.
And I think that's why it becomes much easier for us to reach the same goal, and partner course that sustainability and, energy efficiency for all of our hotels.
The rise of digital demand is affecting the way the entire industry operates. We all have development expectation that if we order a widget on Friday, that it should be on our doorstep, Saturday Sunday. I'm Joel Stinson, vice president of corporate plan Engineering at UPS. The importance of on time delivery is paramount. The process rates and the speed at which we were once able to perform have been outmatched and what we
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smart facility is a new 104,000 pieces hour rated facility. It's the 4th largest facility we have in the world, from medium voltage power distribution to all of the miles of conveyors in by, it brings the wealth of technologies, the wealth of opportunities, the wealth of capacity to our organization. With the growth of the industrial internet of things, understanding the technologies that are available and understanding how to deploy, that's key to us. Our application of EcoStruxure was really organic. Open architecture just makes it so much easier for us to realize real time communication from Plant IV devices all the way up to the control system.
The technologies that we have deployed will help us achieve great efficiency to how we service our customers. Customer packages represent our life we are here to ensure that those packages are treated just like our very own packages.
Via by ARBOS. 1000 Conan in Deutschland owned expoaterin in Fimbron Fimmtze Hlender. Visits now of Avu Control, The EcoStrux figuring a house fight site in their car's steamer. So Wake Kite EBITDA. Dametz in FeelFIDI have asked for the wrong Wejidas internet at Dhingham Mitsig Brinked, best in South Christet.
This link is Melbourne's largest tool week, and it connects the Eastern Vonage and Frank's Syncrubies. These links are vital connection. In Melbourne's optical network. My name is Doug Spencer Roy. I'm the Corporate Affairs And Marketing Manager at Eastlink.
Up to 115,000 Bakers a day drive through these tunnels. So the ventilation system is critically important to ensure that the air quality is maintained. This link has 21.6 times, and they run under the modern, modern value, which is a sensitive area. We are very conscious of our environmental responsibilities. The original ventilation system involved the ventilation plants being switched on and off at a fully on or fully off based on time of day free program parameters.
This was inefficient, and we've got access to.
My name is Ian Oksutth. I'm the project directed with Eastlink. The existing system was a direct online. It was high operational and maintenance costs. It had a relatively short lot, but we needed a solution that would overcome all those issues.
Snyder Electric brought together a number of special skills, and we're able to help us develop a solution with Snyder Electric EcoStruxure platform, which includes Saitec Scarber, M580 PLCs, and also cultivar drives, but the outcome exceeded our expectations, which meant reduced power consumption reduced carbon footprint, reduced noise emissions, and the ability to go into the future without the system system. It's huge proof.
This collaboration between Schneider Electric and this link has implemented Australia's first ventilation on the 9 system for our Ludwig. This link has reduced our electricity usage for the tunnels by nearly 78% and we've also reduced the tunnel ventilation system noise and oil community by half connected autonomous vehicles are starting to arrive where it's now. This project is an example of infrastructure and vehicles communicating which will help make our roads safer and more efficient
I grabbed in the industry as my father was actually involved in sugar. And as a young boy, I used to go to the sugar with him. And as time passed, I ended up in the sugar industry. My name is Alan Williamson. I'm the manufacturing executive at RCL Foods, Pongalu Sugarmo.
RCLPongalu Sugarmo specializes in 2 types of sugar, mainly the refined sugar and the brown for direct consumption as well as for the industrial market. The biggest challenge faced by RCO when they over, Pangaea to Sugar Mill was that the plant is very old and in desperate need of modernization There was lots of downtime breakages, stoppages, and the power station. We used to have roughly 33 to 40 blackouts in the season. Obviously, with the modernization and putting in the Schneider system, we were able to troubleshoot much quicker. And therefore, our uptime was increased and our downtime has obviously decreased and we're actually able to control it up and optimize our process.
Schneider Electric Eco struck share allows us to remotely diagnose and view the plant like we could never do before. This allows us the flexibility and that we're able to access the plant at any time from any location via a laptop, smartphone or tablet. I think that most important that we've achieved with Schneider Electric is that we have become more competitive in the industry. Over the period of implementation, the Schneider Electric System substantially contributed towards a 20% increase in throughput in the plant. Our vision for the future is to continue modernizing the plant and partnership with Schneider Electric and to achieve a mission of more food to more people more.
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Engineering is not boring and bland as people see that today. It's actually a problem solving role. My name is Tasnim Abdulrezk, and I'm the Net control manager at S And Power Networks. S And Power Networks is the sole electricity distributor in South Australia. We basically have 2 peak seasons One is the summer season, which is when you bush fire, event, creep up.
The other component is around autumn. Is that storm event, lightning, grain wind activity. We have a lot of, transient faults, which are basically due to vegetation or animals. And we have hundreds of kilometers of line over 1,500,000 customers. So when we do dispatch crew, they can spend hours traveling to the location and patrolling the line.
The ADMS and the feed automation scheme is going to give us better visibility of the network because it has smarter reporting capability, and it has allowed us to capture a lot of our network structure to have essential life sources through. To be able to restore power to majority of customers on a feeder in under a minute is something that has never been done in Epic Analytics history. Without Schneider Electric, we probably wouldn't have been able to progress as far as we haven't as quickly as we have. It is a very powerful tool. It's a fantastic platform for us just to develop in the future and be the leading edge in the distribution sector.
Luxury
and energy efficiency can definitely work together because the better system design, the better integrated system you have, the more efficiency you can get. Hi. I'm Michael Way, Marriott Global Design Asia Pacific, Hotland Head. We, with Schneider help conduct regular training and workshop with all of the consultants and owners so that they're aware of our goal So the experience that we want the guest to have is really that they're able to have a very comfortable stake with all of the control and lighting, air conditioning requirements, heating requirements, and at the same time that they are very aware that Marriott is a company that is very focused on sustainability and with Schneider's help, it will help us achieve that faster and quicker. The use of Schneider Electric Systems And Services, like resource advisor, power distribution, building automation, lighting, guest room solutions and UPS has given us a great ten to 15% energy efficiency savings.
China really wants to promote internal tourism. They are now building hundreds of resort within China, which has never been done before. It's a huge market for us. Marriott and Schneider share the same And I think that's why it becomes much easier for us to reach the same goal, and partner for us that sustainability and, energy efficiency for all of our hotels.
Well, if we just, I just request everyone to get the take the seats. I think we've I'm glad we all got a chance to have a little bit of a coffee. And, I must thank the people on the webcast who had, who had to wait a little bit longer for us to start. So we're getting into sort of the second part of the morning just to be mindful of time, we do have a hard stop at 12 o'clock because we need to move to the factory after So what we're going to do here, and we started off with, Frederick Cabal. So Frederick is heading, services business, maybe a 20 minute presentation around the ambition on services, yes?
Yes. I understand. Thank you. It's not going to be 21. I understand this one.
Thank you, Amit. Well, very nice to meet you again. So I'm Freda Balam, in charge of the service organization, the service business that we have created actually since 1st Jan, Previously, we had many time occasion to meet together. I just want to tell you about the Well, the story of the services and how this is a high level of opportunity for us and our customers. Number 1, the customer needs are evolving.
We speak about the main 4 disruption that we are witnessing today. And it means that the customer needs are moving towards a new dimension and towards new needs. The good news is that the technologies are available. We have now more and more technology capable to connect, capable to develop AI into our software So those are the good news. And even better news is about the fact that we have in Schneider a unique position to tackle this one.
Number 1, because of our EcoStruxure digital platform. Peter and, Philip has been speaking about how we are positioned in this Eco structure and digital platform. That's a unique positioning. The second point is about the domain expert. Expertise we have.
We have an expertise in Energy Management Industrial Automation that's for sure in the sustainability also. We have a lot of capabilities across the board, a lot of asset management capabilities, cyber securities, all has been presented already by the Peter and Philippe. We have an unparalleled installed base, with a local presence and a local knowledge. That's the story where we are. So how big is services today.
We are 3,000,000,000 business today in the group. We have been having a growth of 6% during the last 4 years as CHGR It's about 15,000 people, and you see the split, in terms of geographies. I would say, rather, good split area where we can go, most probably in the rest of the world and in the Asia Pacific region. The split in terms of end market is very close to the one we have, in Schneider. Is building data center Industry And Infrastructure as a market.
So how the ambition is. The ambition is starting from a part of share of services in the turnover of Schneider, which was in 20 14 9%. We were last year, 12%, as Jean Pascal said, and we want to grow to us as fast as the group grows average. And this will help us to contribute to one of the target of the group, which is to reach software and services around 20% of the total turnover of the group. That's the ambition that the ambition now we have 2 model to achieve those disambition.
The number one model is field services. We have an installed base. We are going to see that. We have offers what we call business lines. And we have a service, a possibility along the life cycle.
That's the number one opportunity with the service, the field service approach. The second approach is digital services. Digital Services, it's a new system, it's a new era. Of course, it's connect will see how it's moving, it's moving extremely fast. And it's, as we, can understand very well, connected to our product, to our installed base.
So let's move and let's focus on 1 on the first topic, which is the field service approach. On the field service approach, Well, we have a real unique position today in the market. Why? Number 1, our installed base. We are number 1 in what we call the powertrain, low voltage, medium voltage, secure power.
Number 1, since many years. That's created a huge installed base. 2nd, we are addressing the critical application of our customers. This is the second point that we are having today in terms of criticality that's unique So let's imagine, in oil and gas, an unplanned shutdown could cost, in average, $40,000,000 In mining, we have $3000 per hour or downtime, etcetera, etcetera. We had, of course, in data center of the same issue, while you see here, an example, in 2016, with 2000 flights canceled, I mean, actually 2 days of, operation in Israel not so long ago.
So that's one thing which is very important, which is we are addressing being installed base and we are addressing the critical application of our customers and parallel installed base. So the installed base is the key to develop the services business, we have we had in 2018 16,000,000 of critical assets. So the topic is very simple. We need to know where are those critical assets. And it's not a given.
So we need to use as much as we can the all the touch points that we have with the customers, by the way, most of them could be also digitized and move from 5% in 2014, which you see very low to 50%, which is our main target. Number 1, tracking. Number 2, coverage. And to cover this, installed base here, we use AI based tools. We need those tools to enable us to make the to make the, to sort the real critical asset, to understand where those assets are in terms of sites, how do we rank them and move from 4% of the covered asset in 2014, which is extremely low to 35%, which is the ambition that we want to aim for.
So Well, when we have this asset parked, when we have those assets covered and understood, then we can go with our usual way of doing business, whether we go direct, whether we go through our partners, And in both cases, we are going to cover massively this critical installed base. So you understand where we want to go, in terms of ambition. Again, 16,000,000 critical assets move and improve our tracking of the installed base. 2nd, cover the installed base with whether direct approach, whether partner approach and of course leverage our AI and our digital tools and software in order to address this. It has been a long journey, we have been preparing that since many years.
We have developed a lot of tools, a lot of digital tools that are now launched on the market in our market and enable us to go to this ambition. So this is the first topic, which is field services. The second approach is about the digital services. Digital services, that's That's something which is coming from the assets. So the assets, and here, we connect with the EcoStruxure architecture that we have.
Assets are connected more and more through IoT technology that we have developed. Those assets are going to be which are softwares. Those software have been developed and built across what we call customer practices. Customer practices, what does it mean? Asset Performance Management, where the demonstration in Peter Presentation, cyber security, same, energy efficiency, sustainability consulting.
So this is a way somewhere the only way to monetize the digital services going through the customer journey, customer pain points and capabilities. And that creates a lot of value. That creates the value of the 20 fourseven customer connection that create the stickiness with our customers that create also innovation, and we will see that later on. In terms of R&D. You understand that that's something which is extremely, creating value to the customers.
So I mean, if we go and if we enter in the customer cases or the customer example, Let's speak about 3 practices: first one, energy efficient efficiency. Sodexo, we communicate together in newspaper. We can communicate. All of them have been actually Publix. And we have been actually supporting Sodexo with our apps, with our advisors to create savings 20% of energy saving.
It's this is a technological provider we are to this customer, which is a facility manager. So we are a tech provider to facility manager somewhere to understand it better. VASF, sensing, it's a asset management practice, forty years old installed base, we manage, we help them to manage putting our adviser, asset adviser to own their system and digitizing, in fact, our installed base in order to support them and give them a predictive and preventive maintenance 20 fourseven connected to our service goal. Berto Asset Performance Management as well is a solid example. But there is one practice that I would like to focus on, which is the sustainability consulting offer that we have.
We have today one leader worldwide leader in this, in this aspect, which is a trusted advisor somewhere to our customers in terms of sustainability transformation. The sustainability transformation means that this entity is capable to manage 1,000,000,000 of invoices of spendings of our cost of those customers. So we manage by doing this 500,000 invoices digitized invoices in order to make them understand whether they are, rightly, purchasing energy and rightly purchasing energy in terms of mix, whether green or not green. It's equivalent to 80 gigawatt, in terms of power, generation. 80 gigawatt to give you an idea that's the generation, almost the generation we have installed in France, which is 100 gigawatt, just to give you an idea of the magnitude of that one.
So this is 1800 people in, across the board, very, very connected and the customer to the customer to drive them to this journey and to this transformation. So we have, on that one, two examples First one is about wire pull. We, Samsung had an energy and sustainability strategy. We help them to define how they want to move first save money, which is in terms of, in terms of sustainability, they save like 1,000,000 of saving from recycled waste. They are ongoing and achieving their 0 waste goal, this year in Brazil.
And they have, just to give you an idea, the largest on-site wind pour in the Fortune 500 field. So that's first, customer where we have given some, we are working with, very closely. The second part is Albera Albea, the same thing that's an enterprise efficiency around carbon free efficiency, actually, where we have been capable to generate 1,300,000 of savings and 20% of, savings achieved across the board. Of their total cost. So long story short on the, on the on the service journey, service journey is resilient, resilient because going through the economical cycle, with the right continuous course and speed.
This is recurrent because this is a very strong connection on the customer side every day we have, to implement. That's a growth engine for the group to reach software and services as a 20% of the mix. And there is a huge customer stickiness, which enable us to develop innovative solutions, whether they are from, hardware point of view where they are in the digital standpoint of view. Again, 2 areas: 1 is about the installed base installed base knowledge, installed base coverage, developing how AI tools and of course, leveraging our partner capabilities And the second point is about the digital offer, which is innovative. It's about connecting the customer's assets and generating revenue out of those datas, taking into account the customer outcome journey, which is what we call the customer practices that are the way to monetize it and of course, developing across the different portfolio of the company, synergies and revenue.
I mean, I'm looking at track because on the asset performance management, we are having a very, very strong relationship and using a lot of the software across the board to manage this to manage this synergy. That's going to be faster than it's a service for you. But, I mean, that's the level of ambition we have. It's a very fast growing engine and we are very happy to call now Amit on stage. Thank you very much.
Well, thank you Fred. I think as we set up the stage, just to let you know, so the next, maybe 20 minutes or so We thought as we were planning the day to day that it might be useful to have a slightly different perspective, which is based on the operations, the regional operations. So We have, okay, that's, well appreciated already. So, but may I just invite our colleagues to come by All right. So just let me introduce who we have on the panel here with us.
So we have 3 of the operations leaders course, we have more operations leaders, but, you know, the others are running the operations working at the moment.
You are the lazy ones.
But, just, you know, Thanks for making the time to be here today and almost at a short ish kind of a notice, but I've had it was important So just to introduce Barbara Fry, she's, she had been with the company for a few years, still continue to be based in Switzerland.
Switzerland. Yeah.
And running Europe operations. Umir Paul, country president head of operations for our largest market, which is of course the U. S. And Crystal Herman running France. So that's the only country in Europe that Barbara doesn't lead, but is led by Cristel.
So Thanks, thanks all for making it. So what I've done is, I've tried to put together some questions and what I've done and I'm going to just them on at random, but the idea has been that, we've been, we've been hearing from the investors on several questions over a period of time, just try to put them together. Maybe, Barbara, start with yourself. And I think one of the key questions, of course, is that different companies have different sort of operational structures which are applied. More recently, we've seen some companies in our as well, which are moving away from regional structures, etcetera, we continue to have the structure that we have.
So maybe you can explain to the audience as to what is unique around our structure and why we believe it's the right structure for us.
So look, John Pascal explained it very well also in the morning in his presentation. We are very an integrated organization, and, we are really done an organization which is aligned to our customers. So it's the panel builders, it's the distributors, it's the machine builders, And in the market, we try to make or, do one face to the customer. So a sales, person who is fronting a machine builder is not only selling the industry portfolio, he's selling the whole portfolio. And if the machine builder wants to, build a new building for his factory, So we can also provide him the building management system and all these kinds of things.
We also have gained a lot of cost synergies out of this. So we have a common customer care center, which is taking care of the customer's needs. And we really believe this is the right way then to be very strong in front of the customer itself. And it's also a good way for people to develop within the company. So you only you do not only focus on one portfolio.
You have the whole bus that you can push through our channels and to saturate them, and which is an attractive value proposition as an employer. Furthermore, and this has also been mentioned this morning, the county president represents the number one person of Schneider Electric in the country. So if there is a quality issue, if there is a customer issue, it's his or her duty to really go after it and make things work. And I think this is really powerful.
That's an interesting point point you bring. So you're saying that, you know, you've got the 1 phase, for Schneider in the country level led by the operations. Mentioned quality. Jean Pascal mentioned in the morning, qualities with global supply chain. For instance, maybe, Ami, if I come to you, is there any practical confusion in terms of, you know, role of operations, role of business, the various functions, in keeping with, what we just discussed.
Look, I think our system requires a degree of collaboration, but if you go back to what we talked about today, and building, as Barbara said, the role of the operation is to enable the customer. We designed the go to market for our and they're not exactly the same, but they're built on common structures. Our opportunity is to position the entire portfolio and ultimately own the P and L to deliver profitable growth, which means real time trade offs between cost and investment and our pricing strategy. So all of that is very clearly with the operation. Now what we do as we get feedback from our customers is we feed in the business strategy, which owns innovation.
So the business drives the roadmap, the R And D investments, long term technology, really understanding the micro trends as well as the major trends. And then global functions are about expertise. This is where we hire best in class experts whether it's in market strategies, supply chain strategy, HR and they create a transversal capability that we all access. So yes, there's a degree of collaboration required, but actually on the ground, the roles and responsibilities that are quite clear. Yeah.
That's good. That's good to hear. That's that's not only the answer we're giving to, to the community here. Okay. Crystal, maybe, maybe bring you in, I think, I think another topic, which is, which is quite central to what we've been discussing this morning, which is really around the 2 businesses in the cross selling, right?
So the fact that synergetic portfolio, it's cross sells into the end markets. Can you tell us from sort of from the ground level, how much of this is actually playing out? How does this really differentiate us and help the customers on the ground?
So cross selling is really an everyday reality for us. And actually, we don't call it cross selling. We call it saturating customers with whatever we can sell to them. And obviously, I mean, we have a lot of what we would call here, cross selling, across our energy management portfolio. I mean, low voltage and medium voltage.
I mean, it's a no brainer.
This is
massive saturation of customers with those technologies. But beyond, beyond the energy management portfolio, and I think Peter mentioned that and Jean Pascal's presentation this morning, I mean, our industrial customers, they need our help. They are moving toward the world that's more digital and that's more efficient and more with less carbon impact. So our energy management capabilities and our industrial and process understanding are critical. So it's really about energy and process efficiency, as we've said this morning.
And so this is very true. And more and more because of that digital transformation, they need more data, they have more data, that they need to So they also need more second power. So there's a lot of opportunities as well to continue to saturate customers with the entire, the entire portfolio. I mean, Automity, we also have our segment approach and especially for large, electro intensive customers. I mean, oil and gas, mining, water, wastewater treatment, etcetera.
I mean, those customers, they consume our entire portfolio. So again, we are really trying to saturate them. And last but not least, and that's been mentioned this morning are distributors. I mean, they want, they have one relationship with us, and we maximize what we can offer through them, and they want to maximize what they do with us, across the entire portfolio.
And would that resonate in your zone, for instance, as well? Same comments around
the cross selling?
Absolutely. Absolutely. So besides going then to machine builder and selling in principle, whatever is in in the in the drivetrain, we now can also talk with him about services. What can we provide you if additional services by providing your machine advisor. And that, of course, is a very powerful weapon and a clear differentiator in the market.
Interesting. And that's I think that's a good segue to, maybe to the next question. You mentioned advisor in the context of machine advisor, but take it broadly and the question around digital. Digital transformation is probably high on the minds of most customers. We've spoken a lot about EcoStruxure from an operational level, how is EcoStruxure really embedded within your operational teams on the ground to the people see it as a key differentiator to add value to customers?
Absolutely. So in the last few years, we spend a lot of time with our Salesforce to upskill them to bring them up to speed. What is the values we can sell through the EcoStruxure platform? It took some time, so to be really able to pitch this, but what is really the big advantage, it's a clear differentiator also. To get to the C level.
So before we were talking to the technical director, we were talking to the engineering team about the contactor, Now we talk with them about digitization and the CEO is very much interested to meet us and the Chief Digital Officer or the CFO, depending on the structure of the company, And this gives us a much better access to the, let's say, wallet of those customers, which is clearly an advantage to our competition.
So a new sort of go to market approach, with thanks, thanks to EcoStruxure as well.
Absolutely.
And the ability to, you know, to cross sell more, business
as well. And our sales force is very much motivated by this So it's something very attractive to sell.
Interesting. Krystal, maybe come back to you. I think maybe linking back to the point around the sales force and the topic of digitization. I think one of the big challenges around running the operations, I practically is around getting the right talent, retaining the right talent in a digital world. That's the question we get from the, from the investors as well that, you know, do we have the set up for for the new digital world?
Tell us that practically on the ground? How is how is how is Schneider thinking about this and how are you preparing for it?
Sure. So I mean, first, we have our global function, I mean, Schneider Digital, who really owns, our digital transformation and all our digital program. And so we really rely and work with them on a day to day basis, and they hire people. And obviously, they are a great pool of talents that then we can pull into other parts of the company. So that's the first one.
2nd, I mean, to attract talent, and I believe this is, it's been said this morning, but we really have a strong and unique differentiation in the market thanks to our sustainability commitments. And most, and that's even stronger, I would say, with younger generation. They want to know that they're working for a company that cares about the future, that cares about the next generations. And this is something that we've been doing not just as all the companies recently. We've been doing that consistently over the past years, and that's really we see that to attract people that's unique.
Now when it comes to innovation and making sure that we're equipped with technology skills, I mean, there, I would also insist on what, again, we said this morning, our multi hub and our regional setup because this is key speed in a digital world is the essence. And so leveraging our multi hub approach to really work closely close to customers. And with this agile setup, that's key. And again, that's very important for our future moving into a more digital world.
That's interesting. So the angle of the multi hub also being a structure which helps to attract the right talent going forward. I mean, maybe on that very topic of multi hub, maybe not from the purpose of, from the context of hiring talent, but really again, in terms differentiating back to the operations, you're running North America in the U. S, obviously lots of geopolitical. So the fact the way that we are on a multi local basis as John Pascal was mentioning this morning, what does that really mean on the ground, for, from an operational standpoint?
Yeah. Look, I think the fundamental design point is what Christophe just said. The underlying thing we're solving for is agility. And, as someone who's, dealt with tariffs on a reasonably regular basis, agility is becoming a really super important element of how we operate. And I think the underlying thesis is simply this.
If the geography is big enough, the role of the organization is to push as much of the resources as close to the customer as possible because as the speed of things change, the adaptability and responsiveness has to happen close to the customer. Now The balancing equation in that is leverage of cost and scale and talent. If we hire the right type of engineering talent, we can create these hubs You heard about R&D hubs. In North America, and in the US in particular, we have federal standards We have state standards and we have city standards. And I would love to sit here and tell you they all are incredibly well coordinated.
They're not. So we have this incredible requirement to adapt really quickly. California and sustainability, for example, in general, will lead the rest of the country by a decade. But because of the fires that happened last year at PG And E, they're now adopting an entirely new protocol for how to deal with the summer issues that they're having, but how are we gonna respond to that? The ability to be local, to be a local expert with global technology capability is what these hubs afford us to do.
Right. And and trying to put a sort of financial angle to that, I guess, then if if each of the big operations are looking to be almost multi local, that requires resources, allocation of resources, don't tell us what you can't, but the idea would be that how is that process internally in terms of allocation of resources between the different operations work. Is that a challenge? Is that, how do you
there's no challenge this way? There's constructive input in other directions. But look, I mean, our our stakeholders are here. Right? We have 3 businesses we work with.
Our job is to build bottom up operating plans that look at the cycles of the business, the customers, the segments we're strong in, and say, look, this is this is what we believe is understanding macro, understanding micro. Then the job of the businesses is to look at that globally and allocate capital, to the geographies that can best utilize it. And that optimization is iterative. It has a degree of constructive tension in it, but but it's the best way to make sure in a world where the cycles are changing faster that the right resources go to the right markets. I think internally in the operations, the goal is simply to make sure that that North Star profitable growth is always sort of centered to those strategies.
So sort of at a micro sort of level, your 2 shareholders are the 2 businesses. My the 3 businesses.
3 businesses. Correct.
Yes. All right. Thanks. Maybe another element around the financial part, and Barbara, I'm just reflecting on the first answer you gave on in terms of the structure that we have. And of course, we talk about everything being more efficient and how we we gain continue to gain efficiency.
And in the first part, you mentioned that the structure is quite focused on the customer and it's quite lean. But if we were to think about what could be the next level of efficiencies or are there are there specific areas within the operations where we can drive even further efficiency?
It's a very good point. In principle, specifically in the mature markets and we're all fitting in mature markets when you look Western Europe, France, and, and, U. S, we look continuously at efficiency gains. So our salary level are high. There is inflation we have to adapt and be agile to the structure.
So on the last few years, we were focusing a lot on delayering to become simpler to become leaner in this area. The next step from my point of view is now that we digitize more than we automate more. We have started this to do it in certain areas, but we can do even more and also working on a strong digital experience for the customer. And I think that will bring us even more efficiency, but on the other side, also a greater customer experience. This SSE has a next great step in operations.
Good. So it's evolving, Janine, sort of
Evolving journey.
A continuous one. Okay. I'm sort of just getting mindful of time. And I, and I think I want to make sure there's enough time for Q And A, for everybody. But I think before we end, maybe one question, and I can probably give it to all three of you.
And really to understand that what is it that, for instance, success means to you in operations? And maybe we we go the other way. So Krystel, if you want to just say, okay, what do you think is success for you in operations?
I mean, so mean, there's not one criteria, ultimately, but and we have to take a very balanced view because we're managing we have different stakeholders and responsibility. Now I mean, being in this room, ultimately, it's financial performance, and we need to make sure, and our primary role is to deliver growth I mean, absolute value growth and to make it profitably and sustainably?
Think in addition to owning the P and L and being accountable for profitable growth, I'd say we talk a lot about customer saturation and customer breadth. And I think those 2 matter a lot. Going deeper with customers we have, understanding their business, understand their challenges, and evolving with them, and then using our access to continually get no new customers. So if we're constantly expanding the number of customers and going deeper with the ones we have, I think that's a great barometer of success.
Yeah. For me, it's people. So, people at customer. So we are dealing with people on a daily base and one of the success of course, there's the customer net promoter score. That's a good key measure.
How are they perceiving the relationship with us? And then the other aspect is, of course, our people. How do we develop our talents? How do we bring them up in our company? How do they talk about us?
So that's only another big success factor. Which makes Schneider Electric.
Well, that's interesting. So hopefully, these, success factors are all not mutually exclusive and you
have to say
it once, but Yeah.
It's just complementing the other.
Yeah. But what I what I'm hearing is, is is P and L financial performance. You mentioned around saturating customers.
So we
take that as market share, I could say. And you're talking about very important aspect of people and these structures. All right. So I think I'll probably stop it at that, but thank you very, very much for your time. And may I just call upon the speakers from earlier today to kick off the Q and A session?
Might be a bit cozy.
More to more. It's going
to be very cozy.
All right. So we're, we're all here. I think we have we have at least 30 minutes, I would say, in order to just to make it fair for everyone. Let's keep it to one question and we come back, with the questions in the room. So why don't we start from right from here, Andre?
You want to take the first question.
Thank you. You've added, the, comment to your margin target that, you can go beyond 200 now longer term and laid out a plan, what you're going to do to invest into it. Maybe you could lift a little bit of cover and tell us what do you think the full potential is for Schneider in terms of profitability?
It's a
very good first question. To clarify, the ambition, you know, above the 200 basis points that we've been sharing with you guys, is beyond 2021. Nothing has changed for the 3 year ambition that we've been sharing with you. And yes, indeed, as I said, the ambition is to say no glass ceiling, you know, to get to 17% is at the end of the journey. It's one step in the journey.
And as we see us as a more and more you know, I take content, digital companies, yeah, we target to keep increasing the margin So I'm not saying that any time soon we're going to be on the full software type of P and L, and I think that, Craig nicely shared with us the ambition of Aviva to get to 30% one day. But there is still a nice, leeway of progression in the future beyond 2021. So I'm not going to be more explicit, sorry for that, but I think that the ambition and the way we are phrasing it and the way we are showing the vision with you, I think, shows the kind of direction that we want to follow in the coming years.
Thank you.
Maybe I can ask a follow-up in Guillermo Penier from UBS. More looking into what's going to happen from now until 2021, I guess we heard today transformation, increased solutions, increased services, increased software content, but yet when we do the numbers on the 200 basis points and allowing for your divestments and potential improvement, we get to a very similar the leverage on the group, on the organic growth. Is that the way, the right way to look at it? Or so we'd see how operating leverage actually changes as your transformation takes place.
Well, I think we're sharing a lot of detail already on the mechanics and how it's going to articulate and the drivers. Then I let you make your assumption on what's going to be the weight of the various driver and what's going to be the operational efficiencies, a drop through and so on. It's just
some of 3 factors, right? Or through optimization? Then growth of higher value or higher margin business. And that goes with technology. Productivity as we always add, probably pushing to a new level because, I was describing the 3 phases.
The phase of build, which was not distracted, but it takes some energy of the company on sort of losses of energies and integration generated a lot of costs, which are one of costs, not saying that we are not keeping on integrating, but that was cost. Now we are in skating, so we can get more traction behind So it's a combination of those 3 and frankly, they're all linked together also. When you launch more technology, you have to invest together with it. It generates some costs. So it's, it's, it's difficult to spread it exactly.
We don't, you know, on
the way ultimately going to deliver on to be agile because we don't know what exactly what the world of tomorrow will be, but being much closer to the market around our hubs allows us to tweak or to adjust in a faster manner.
Thank you.
Thanks, Guillermo. Andreas? It's on the other side. Yeah.
Thank you. Andreas Billy from JP Morgan. I have a question for Philippe on Energy Man It was a good example with PanMed, which chose a low voltage integrator early on in a big project. And they said they've never done it before. I guess a lot of customers historically haven't done it that way.
What part of your business today is kind of driven by a decision like that where somebody says from a top down perspective, I'm going to choose somebody relatively early on for some of the key level, ditch, medium voltage, full secure power, part of the project rather than the traditional way where this is kind of put together later on in the process with lots of people having an influence on a system integrator, specifiers, and so on. And maybe where that ratio was in the past, I
would say the more we go in cost structure, the more there is value in the earlier discussion, which can be with design firms, which can be with end users, And frankly, we see that pretty much across all segments. So there is no, we do it in data center we do it in Healthcare. I think you had a good example here. We do it in hotel. We do it with Peter in, more industrial infrastructure application.
So and on that one, I would say Sky is a limit or the limit we have today, to go faster is probably our people and the capacity to deploy fast enough, people who can drives those discussion because when we are in front of either design firms or end users, with this combo of energy and process or energy and automation together, we are very unique and that's very exciting. The size of the business?
That's a
rough proxy. How big is that to kind of top down?
I would say a lot of our end user driven business is like this. I think I was giving the magnitude of what the partner business is. So by difference, you can probably guess what it is and it's growing. But sorry, and one thing important, which is we have an end user led business where we go direct, but what we see that so Early in the stage, we talk with those end users, we talk with all design firms more and more. In many case, actually, we choose to go with partners.
And then we transact. We might invoice less, but actually, we invoice, say, better because we have a better mix of margin. And a lot of the work we've been doing around better system is on the, we call it, the transactionalization of our business, which is we drive an end user led discussion, and then we orchestrate partners, which by the way, we did with SpanMed, going through partners, but being the orchestrator in the back. So in that regard, it's more than, let's say, the straight 30% of the end user led business we will have. Bigger than this.
Yeah, with, just to dissipate any kind of misunderstanding as we are in those, I think it's the vast majority of lip business. When, when you look at that partner, when we go through partners, very often, there is a discussion happening at the level of the end user on the project is completely specified, because it's complicated, right? So would say most of
the countries, it's certainly Somewhat what's getting more intense is as we go, and I think Peter was showing it very well you know that, that pyramid where we started from products, let's say, 10, 15 years ago, and the more we go high in the food chain with ecostructure value proposition with the best combo, the more meaningful we are for C level, and I'm very we have very deep discussion with all CEOs more and more.
Okay. Let's take one of the backdrops.
It's James Moore from Redburn. My one question is on the central line, which I think you renamed from corporate and holding cost to central functions and digital cost. And I know on top of the shared services, the marketing that has always sat in that line, you've put the digital central global cost base. My question is really whether that line item is going to grow faster than group revenue growth over time as digital is a faster growing part of the company, as opposed to something might think it's a flat line item.
So the answer is yes. You should expect our investment in digital to grow faster than probably even our sales. I think I've been talking about what we intend to do in terms of redeployment, of our, SFCs and, therefore, clearly, Digital investment is going to be a big beneficiary of this redeployment and that's going to grow faster than the average SFC, but probably faster than the top line as well, and being itself a big driver of the top line. So we should, that's something you should expect for the future. And we hear the questioning on, you know, is it relevant to have that amount here as a kind of central investment that we are making.
So we'll look at the future, you know, whether if it was becoming too big, probably at certain time, we'll have to make some kind our file location, but really most of it is really servicing the full business of Schneider. So to start to split it is to some extent a kind of fictitious exercise, but maybe we have to do that, not to give the feeling that we have a very fat corporate, you know, with very heavy cost, which doesn't I told with the reality.
If I can just follow-up, I don't know the split of that cost item, but I guess the digital might be something like a third, but the remaining part of things like marketing and the global shared services, is that something that can stay more stable than revenue growth or would that part of it grow with revenue growth?
Well, I think you have area where we would intend to generate extra productivity or increase productivity that I mentioned, so that should grow at a much lower pace. Than the advent of SFC, probably the marketing 1, for what is central spending on building the brand and, and building the franchise around Schneider, that is probably something that should grow on average faster. So I would say, I would say, probably not fast as digital, but, yes, I would expect us to continue investing on that line because it makes sense. It create value. Thank you.
Let's go with the Ben.
Ben, you go to Morgan Stanley. I'm not sure if question for Peter or for Craig, but, there were some brands that were acquired as part of the Invensys transaction. Avantis, SIMC Wonderware, very well known and famous brands in kind of factory software, We don't hear a lot about how those brands are doing. How are they managed within AVEVA and how is the growth of of that original factory software base? So,
we had very little bit of time here today. So we wise in skipping a lot of detail. So monitoring and control would be the category that we would break out in the Aviva business which would cover Wonderware and some of the other products that you discussed. That business is about 30% of our total business, and is growing mid single digits. In fact, we've accelerated the growth rate of that business.
Now in terms of going to market to get scale, you have to simplify go to market. So that's what we've done. So some of the, you know, we had a hodgepodge of names and we'd simplify it. So wonder where has some Aviva branding associated with it, and that's how we connect it. And then, and of course, we're were cross selling.
So wonderware fits within monitoring and control. And then we talked earlier about asset performance management. You heard earlier about massive productivity boost to that. There's some products in there called PRISM. There's others, around dispatch.
There are some heritage brands We've simplified that into asset performance management. That's the fastest growing segment. That's over GBP 100,000,000,000 growing at 20%. Lotta focus.
Alright. Take the next question.
Maybe one additional point to that is, since we've brought all of this together, we we can use the beautiful franchise of the distribution that we have built on the software side where now other software packages go through the same distribution channel. So that's also accelerating some of the growth that, Craig has mentioned.
Thank you. Good morning. Gayeldebre from Deutsche Bank. I have two questions. So I guess one for Philippe and the other one for Peter.
So for Philip, first, I mean, we've talked in the past few years, we've talked a lot about cloud and that sort of things and hyperscale data centers. And the likes. And now it seems that we are talking more and more about Edge Computing. So we're getting back closer to the data source and we're closing again talking again much more about perhaps smaller data centers. And I guess 5G, the deployment of 5G, we'd probably accelerate that trend.
So the question is, how do you see this basically transforming, perhaps the demand for take your power, low voltage and medium voltage going forward. The second question is for Peter, I guess, you've talked about TESC Island. Seems that with this kind of product, you don't see a great future, really, for PLCs in the longer term. So I was wondering, beyond Tesis, do you see other sort of products devices in the factory floors that could also be used to further displace the importance of Plc's in factories.
So on, let's say the broader picture of Secure Power So number 1, on the web giants on the large data center, we assisted a pretty strong market dynamic with the web giant and with what we call the co location, which are actually maybe a smaller type of players, which by the way, work very closely with Web Giants. So we see a strong dynamism here on that part of the business, which, by the way, is supporting some of our growth. Now indeed, as we see that 50% of the traffic goes to the edge, we see an opportunity of secure power application close to the lows, which actually is a fantastic opportunity to reinvent what we call our HBM franchise, which are our smaller UPS type of business. And the way we do that is we go after vertical application where, as you say, there's an opportunity to get the secure power, but actually to combo that with other stuff. Very good example would be retail, retail chains where you ever need more and more to secure a lot of power usage in the shops, luckily in those shops, you also need to monitor your energy.
You need to control the heating or the cooling, in many cases, the cooling of the fridge and these kind of things. And we are working on combos of Secure Power plus other application, which are made of, a reference design that's standardized that then goes with one cloud application that allows to have a multi usage type, secure power plus other application, giving a lot of feature and a very unique positioning for Schneider because we come with multiple applications. So all of this is early stage, So we see some edge application in banks and you kind of think where we used to sell UPS where we now sell more cloud application, and we see an opportunity to expand to more segments in a very capital way which then comes very close to our lower touch business. Early stage, very exciting, a few verticals that are growing very well, with the opportunities in industry in that field too because some of the, let's say, compute power has to be secured. So we're working hard on that.
Will come probably soon with a couple example by vertical, but we see a very good traction here.
Peter on PLCs? Yeah. So the so
the second question, you know, you're well understood what we're doing with the contactor family, TSYS Island. So it's the idea to move some of the components in the cabinet into the contactor with the software. That will not be good for any application out there, but it's good for many, many applications. So I always will move into the contact. If you look in my example, what was left over as a PLC is really 2 or 3 components.
1 component is a piece of industrialized hardware. And on this industrial is called PLC, the higher value, however, is in the software that runs on this industrial piece of hardware, the PLC. And I'm saying these 2 are not necessarily need to be combined in the PLC hardware and the PLC software. So if you think of that, maybe the PLC will be virtualized, that's the the tech term that we're using virtualized mean it can run anywhere, right? And and with that, maybe that piece of hardware also goes away.
So stay tuned on that one.
Hi, it's, it's John Mancy from Exane BNP Paribas. Maybe one for Jean Pascal. Obviously, it's now over a decade since you launched EcoStruxure. You've mentioned that, been investing in it, building it almost a life's work to create it and I guess that's ongoing. In more recent years, we start to see maybe some competitors launch strategies which look quite similar, I might point to ABB, ability perhaps, but how easy do you think it is for some of your competitors replicate this strategy now if it is the right way to go forward, which obviously you believe it must be.
I won't speak about them. I just know it was custy and painful for us. That's all. And you just need time, right? We had the demanding vision that if you wanted to go to digital, you needed to have one clear platform for each domain and ensuring backward compatibility with the past.
And every company faces it. Nobody was grown completely green roots as only one platform. So you have to do that effort. It's huge in software particularly. A good rule of thumb is that you start the project with 1 budget, one unit of time, just multiplied at least by 2, because it's more complicated than people think and for us, it's done.
So what does it mean for a customer? That means they can integrate their installed base, going back in the past 5 years, 10 years, integrate them in our software platform. They can develop applications that will for all of the applications. They don't have five platforms on which, of which deploy applications, and it's an IP based architecture at every level. Therefore, it's future proof.
It's ready for the future. And they can start exchanging on benefit from the ecosystem of developers that is now existing on exchange. So it multiplies the possibility simplifies life because you can integrate the past, prepare for the future, on leverage or ecosystem of other people in the world who work on the same things. But now it takes my world. It took us 10 years
All right. Wase And they showed up. At the back there, Wasey,
Hi. Yeah. It's Wasi Risty from RBC. Just one on understanding the 3 year framework in the in the long in the the longer term. So you've given us revenue and margin targets for 3 years, but then we're talking about investments and changes to your cost structure over the next 4 to 5 years.
So an almost building on an earlier question, should I think about the next 3 years as kind of continuation of some of the operating leverage and some of the mix trends that we've seen but then the real kicker to come from these investments that you're talking about. And I imagine changing 10% of your support function cost takes time for the benefits to come through. Does a real kicker come after that? And then is that how she thinks about it?
No, I think that that's exactly the way you describe it, for the next 3 years and really to deliver 100 basis points improvement and the overall objective that we've been sharing with you, I mean, to a large extent, we've been launching what is going to deliver that and we are working on the driver. We have a pretty good idea of what we want to do with each of them as hopefully, you know, you've seen today Then beyond 2021, it takes time. I mean, 1st of all, you know, to, create the resources to reinvest. So first, you know, you need to generate the productivity, then you start reinvesting. Hence, you know, we are going for something beyond 2021.
We some impact in term of restructuring. As we explained, in term of redeployment, it will be neutral. And then, you know, hopefully with some impact on, you know, more top line growth acceleration coming from all the investment that we're going to make from more margin improvement given evolution of the mix of the business. That will start to kick in in 2022 and beyond. So I think the plan for 2019, 2021 is pretty clear, and I think we've been describing it.
We're going to work in a kind of underlying manner, if you want, for you to start seeing the benefit of the new investments beyond 2021. Alright.
Let me take, let's take one for me, Simon.
So I've got one question on ROCE. When I look at your targets overall, I think the ability for you to take share has been quite well understood. And you've shown it over the past past years. Your 200 basis point margin improvement, there's quite a lot in your own hands as well. But if I look at your returns, I mean, we're still on average more towards the bottom end of your 11% to 15% range.
Is it fair to assume that the margin goes up 200 bps and you kind of build an integrate phase is done and you're not trying to scale and focus, shouldn't the returns also start moving more towards, let's say, the upper end of that range, or do you think that's that's unrealistic?
So Simon, you won't bring me, to a guidance on that, but I would certainly, by the direction that you've just been giving, I obviously disambition to improve the margin. We're going to stay very cash generative and, you know, we certainly target to improve cash generation as an absolute amount, that's going to mean certainly that the ROCE is going to keep going up. That's an ambition that is going to a company if you want the margin improvement. The margin, improvement together with, of course, sustained strong cash generation is ultimately one of the big, if not the biggest driver for the rookie improvement, to be very clear.
I think you bought from ODDHF, you are targeting 20% of sales in services and software midterm. And what part of the growth behind will be organic and what part will be M and A. And if M and A what could be the role of AVEVA.
On services, on services, it's going to be mainly organic growth. As I was explaining during my presentation, the installed base knowledge and coverage we have today is extremely far. From what we should be having. So we have a huge opportunity on that one, and it's more it's mainly, an augmenting goals and for the software, maybe the fraud.
You know, as you've seen, our view has a wonderful company that's listed in the FTSE 100. And, when we did the call after the closing, we said, you know, number one focus is on is on integration and materializing on the synergies and the team has reported on that, on their capital market days. Those have been following a little bit closer. We've added the first acquisition, just very recent a very small tech acquisition in the area of asset performance management. And, that's going well.
And we've built the company for, for profitable growth as Craig has mentioned earlier.
All right, Peter.
Good good morning. It's Peter Ronnie from Jefferies. You had an interesting chart showing organic growth versus your peers over the last 2 years. I'm sure you've grown materially or over the last 5 or 6 quarters. If you roll that chart further back in time another 5 years or so, I think the chart would look less impressive.
It was a long period of quite of growth being very close to peers or even underperforming. So what changed in late 2017, 2018? Was it cyclical because you had oil and gas coming back? China is doing better? Or is it just taking you a long time to integrate all the acquisitions, get everything performing properly?
Because long term, the strategic narrative hasn't really changed in the last 5 or 10 years to be very consistent. You had this sudden acceleration in growth about five quarters ago. So maybe you can help us understand what's driven that, how structured is and help us understand where it's going from here?
There were some elements of cyclicality. You mentioned a few, but frankly, the biggest thing was what we call selectivity. I know that it was some sometimes question on by being that blew lots of So it was really disengaging from parts of the market that we thought were not strategically relevant for the future. On why we are doing that, it took a toll on, on, on the top line of the company. On those were also, I think you said it all, there was selectivity extracting ourselves from many markets.
At the end of the day, it was several 100,000,000 that we had to take down, plus in the cost because we are 1st on the mobile working on profitability, all the cost of the integration that we mentioned on the digital platform on creating a cost structure. So the delicate balance of integrating, of refocusing on still delivering a correct performance. But what 2 ks on the top line has been really more about, about selectivity that we had in several subjects. Learning the solutions, right? If you are if I spoke about the 3 phases, but we are just a product company I was personally, and I'm still convinced that the future is digital, because I was coming from facing the customer, And I would say in the future where everything should be connected.
When you go into digital, you can't make it just with products anymore. You have to understand the application in our field. You have to be deep with the application of a customer. And so for us learning the solution was to bring onboard people of services, segment, architects, software development integration, 20,000 people that we didn't have in the me. When we started to do that, really, that with a certain level of optimism that, those guys would manage executive solutions as we expected on some of that optimism was too optimistic.
So we learn We really learned who was doing it well, who was not doing it well, which segment was promising for the future, which one was not, On that learning curve lasted 5 years, and it was a combination selectivity, learning the solution on creating our digital platforms, which costed on our top line. When you do all of this, there are that number of things that you can do in a company. At the same time, and we've done quite a lot, but that moment has been really a moment of intense internal works, right?
Okay. I think another sort of 5 minutes of, Daniela.
Thank you. Good morning. Actually very quick question just in terms of financial reporting on, I wonder why do you exclude on your definition of margin, the restructuring expenses. I guess they've been there for a few years under and you increase the guidance because you want to grow, have more ambitions for productivity. Wondering if at some point they will fall and then they are really exceptional or should we consider them ongoing for executing your plans?
Well, I think Daniel, for the very reason that we want to give a reference that is really comparable year on year. And as you rightly said, we have some important variation on the restructuring So we want to make sure that people understand the underlying performance. Then depending on the environment, the ambition that we are following we may accelerate in restructuring. There is a kind of underlying amount of restructuring, and I think we said it, which is be around 150,000,000 corresponding to productivity and the necessity of adapting our company to a fast changing world. And that's going to stay.
And then you have some kind of investment if you want on the long term to further improve the profile of the company. The number is clear. You have it and you treat it the way you want to deal with it. But I think certainly given the variability of the amount, it's important take it below the adjusted EBITDA, which we think is a relevant, reference giving visibility and understanding of how things are moving, in an underlying way?
Managerial, you can't have a disconnect between what we report externally and internally. And want people to be today restructuring. So there is no hesitation, right? So that's putting it there. Make that we isolate it, but there is we discuss it.
Of course, we budgeted, but it's part of a different plan.
All right. I think we'll take one last question. I think the second one for Simon, but, that'll be the last one.
I've got one more on the cross selling. You've been obviously talking about this for many years way more than your competitors. And obviously, if you're looking at your growth profile, it seems to be seems to be working. I've got a question how you track and measure this actually internally. So just irrelevant of the growth per se, we can all see that.
But how do you make sure internally you track and measure it? And And how do you incentivize your sales on this? I believe historically you have not directly incentivized your sales on cross selling would that be a right way of looking at it and how could we could you optimize this further?
Yesterday, I met, we were one of the earliest adopters of Salesforce, here in, Europometry. We are probably one of the biggest deployments. And that's to follow opportunities. And that's the key tool to follow what you call cross selling since saturation serving the customer opportunities. That gives place to, regular meetings, regular vein, very regular, in the regions on solution.
It's called the solution committee where people are meeting on there. They are just saying how they can play together. How they can really bring the solutions together. It served by, delivery centers people who are able I was speaking about the solution people, people who are able to take over a project, which is a bit more complicated on project manage it. If we want to drive it to partners, or deliver it by ourselves for the few cases that we want to serve by ourselves and we incentivize people on it.
Yes. On if you are smart anyway on salespeople are smart. They know where their interest is. If they can be differentiated by bringing the whole breath of offer that would do it. And if they can help each other, if they understand pretty fast that they can help each other, right?
You're helping one day I have to use an X-ray that works. I mean, it's a simple system. There is no system, actually. It's just it works, right? But it's really tracked by tools organized in terms of local teams, followed up more centrally or regionally for the most important opportunities.
Plus, we have an organization in charge of strategic customers of segments, which is led according to the segments by by Peter and Philippe. They organize a much more systematic approach of some segments. We saw you, pen medical, but there are plenty of other examples.
All right.
I think
Look, I mean, this is the way we built the company, not because there is a dog known and an ideology, but speak to the customers. Okay. I am setting up a new factory Before it was pretty simple, it was a bunch of power, a bunch of automation, maybe. Now it's all IoT integrated, or maybe it has to be connected to Aviva to a cockpit of control in their company. Life is complicated.
So you want to take those modules, which are integrated by themselves. Again, when you go to a customer, this is our first request. I understand that to manage a company, frankly, for me, much more complicated because we are taking over the complexity of the customer inside the company to solve the problem. We partners mostly. But at the end of the day, this is what the customer wants, some simple principle for me, what the customer wants with better delivery.
Does that answer?
All right. I think we'll have to stop it at that. I believe we have several questions on through the webcast as well. We'll make sure to get back to each one of them through the IR team. And of course, all of you know that you can reach us as well.
But with that, I think we close the webcast and thank you all for the morning session. I'll just spend minute or 2, once we disperse from the stage on the logistics and what needs to happen next. But that's the conclusion of the morning session. Just so that I don't I don't miss anything, I've gotta little checklist. So just to be sure, what what we're gonna do is, now we're gonna there is a lunch, which is actually, catered in the bus.
We wanna just maximize the time.