 Live from Boston, Massachusetts, it's theCUBE, covering IFS World Conference 2019, brought to you by IFS. Welcome back to IFS World, everybody. This is Dave Vellante with Paul Gillan, and you're watching theCUBE, the leader in live tech coverage. We're here for the Heinz Auditorium. Nick Ward is here. He's the head of OEM Digital Solutions for Rolls-Royce and Scott Helmers, president of IFS Aerospace and Defense. Gentlemen, welcome to theCUBE. Thanks for coming on. Thank you. Scott, I want to start with you. We've heard a lot about digital transformation. You guys are in the heart of that. Defense and Aerospace is one of those industries that hasn't been dramatically disrupted, like publishing or you're seeing taxis is being disrupted. It's a high-risk business. It's one that's highly entrenched, but it's not safe from disruption. What are the major trends that you're seeing in your space and sort of paint a picture for us, if you would? So that's a very good question. You're right, the same level of disruption related to digital transformation has not yet come to Aerospace and Defense as it has come to some of the other leading industries. But this is a, whether it's land-based operations, naval operations, or aircraft operations, this is an asset-intensive industry that's characterized by a very connected network of organizations, be they manufacturers, operators, subsystem and parts suppliers or just maintainers. They stay connected throughout the asset lifecycle in its entirety. IFS has a portfolio of capability that is for a purpose, underpinning the critical business processes of those organizations that enables us to be the digital thread to continue the connection of those organizations throughout that asset lifecycle. If you will, that sees this fall come to be at the heart of asset lifecycle management and provides us with the opportunity to inform information insights for our customers, like return on experienced data on aircraft engines where an OEM like Rolls Royce, for example, can harvest that data to analyze the performance of those assets and ultimately optimize their after-service offerings. Who are the customers? I mean, there's a limited number of companies that make aircraft engines, so you don't have a huge domain in numbers of those kinds of companies, but are the customers your channel, their partners, the supply chain network? Well, the ecosystem is actually large in extensive. There are very recognizable names, and it's certainly an industry that's characterized by significant growth. On the commercial side, MRO is in the midst of a boom and is likely to continue to grow, or expected to continue to grow for at least another decade. And on the defense side, we see military budgets continuously or increasingly moving towards sustainment and servitization on a performance basis. So the number of organizations that are participating in that value chain, whether they are just the upstream OEMs, or I shouldn't say just the upstream, but the Austrian OEMs, participating in the design and development, are moving into the after-market sustainment and service support, parts and subsystem supply, or ultimately third-par repair organizations. It's actually quite an extensive network participating in that asset lifecycle. So Nick, people here at Rolls Royce, they think the iconic brand, we're going to talk about cars, but talk about your role at Rolls Royce and what's going on in your business. So my role, I lead our product management function, our digitally enabled services. So for 20 years, we've been running a service we call Total Care. Total Care is like a fixed dollar rate. Every time an aircraft flies, we're paid a dollar rate for it flying. And what's really great about that is, we're incentivized as an OEM in exactly the same way as an airline is incentivized. Keep the aircraft flying. It earns revenue for the airline, it earns revenue for us. And that revolutionized relationship between OEM and operator. So within my role, it's about taking forward a vision we call the intelligent engine. So the intelligent engine is recognizing the way that digital is starting to pervade the way we think about services. So we've talked about the physical engine, you know, the big rotating piece of metal that people see, the services that wrap around that and the digital brain that sits behind all of those services. That's what we call the intelligent engine. Yeah, so people sometimes think the mission critical piece of air travel is the reservation system. It's not, right? It's the maintenance of the engines, right? It's going to be available. That is the mission critical system, right? So you, I mean, look at it, if you don't get your reservation, oh, well, somebody else will get it, not the end of the world. But for the maintenance piece, that's, you know, a job work, right? So, you know, our fundamental mission is every Rolls Royce powered aircraft flies on time every time, right? There's no disruption, there's no delay. That works for the operator, for the airline sort of owner of the aircraft. It works for us. And this is why the confluence of our incentives comes together and it really works well. So what role has technology played in terms of evolving that experience? I mean, I'm sure, you know, years ago, it used to be a lot of tribal knowledge, gut feel, Joe the mechanic really knew his stuff, et cetera, et cetera. How has technology evolved and changed your business? So you have to go back to the business model, right? So technology should follow the business model. The business model is fundamentally a risk transfer. So we take the risk of cost fluctuation, availability, whatever it is, away from the airline, and we take it onto us as the OEM as Rolls Royce. So to manage that risk, you've got to get really good at forecasting. Forecasting becomes your core skill, almost, because you've got to understand all the risk drivers, understand how to optimize them, understand how to work around that in order to have successful business. And you can't forecast without data, without digital twins, without all IoT and cloud, and all the enablers allow you to sort of new generations of capability. So you're forecasting what? The probability of a component failure, the life of a failure, how long it takes to bring stuff back online? We forecast really on three different levels. So we do an engine forecast, which is looking at the health of the life of the components in the engine, looking for any reasons why the engine might be forced off the wing. We're looking at a fleet level, so we're looking at all of the things that might affect the global fleet in terms of maintenance demands, need for overhaul, all of those sorts of things. And we forecast that out after 30 years, really accurately, as an engine leaves the factory, we know pretty much within 90-something percent, everything that engine is going to require from a maintenance point of view, 30 years out. And then at a network level, we're forecasting the capacity demand that we then need to meet within our maintenance shops globally. Well, there's obviously, Paul, been progress, right? We used to fly with very common four-engine planes across the pond, right? Now, two engines. In fact, you don't want to fly on the four-engine. Two engines more reliable. You've been at Rolls Royce for over 15 years. What have you seen as a result of all this technology, this predictive maintenance technology? What impact has that had on equipment reliability, on lifecycle, on fuel efficiency? Huge, huge. I think if you don't have the data and you don't have the digital twin kind of capability behind you, you have to treat every engine like it's the worst engine in the fleet because you don't have the data to tell you that it isn't, right? So everything is treated extremely, extreme conservatism. If you have the data and you have the models and you have everything else around you, you treat engines individuals. They have individual histories, individual configuration, individual experiences. And because they're individuals, you tailor your maintenance intervention to keep that engine flying as long as you can and you don't have to be as conservative. You can weed that conservatism out of the process. And that means it stays on the wing 45% longer. It's flying for the airline that much longer. Revenues passengers are flying. There's less disruption. So what are you doing with IFS? What's the relationship there? So because we've created this intelligent engine kind of next generation leap forwards in that capability, we need data. So we have a program we call the Blue Data Thread. The Blue Data Thread is a global initiative that we're rolling through all of our 200 plus airline customers. How do we form a win-win transaction with the airlines? Give us better data. We'll make smarter decisions. You'll see less disruption, more availability. And we'll share our data back with you as an operator. So this is a very simple, very nice cashless transaction. So with Maintenix, because we share a number of customers, Scott has got a number of airline customers, big airline customers who are operating the Maintenix system. What we do together is we form a plug-in. It's like for us, we can go to an airline and we can say you have total care inside to borrow an Intel phrase, right? So we can plug into the Rolls-Royce services seamlessly, automated. The data can flow very little burden or effort onto the IT group of the airline. The data flows into our organization. We do what we do and we can push our data again back into the airline systems without data maintenance. To form their availability. So key to that value chain is obviously that common customer base, but critical to the work that Rolls-Royce does is the accuracy and reliability of the data they get to inform their own performance analysis and maintenance availability information. And the IFS Maintenix install base leverages a very rich data from the return on experience of those engine utilization that Nick is able to use as part of the blue data thread offering back to their customers. And together we're able to deliver unprecedented levels of value to airline customers and optimizing the availability of their assets. Nick, are you finding new ways to monetize this data beyond just improving the customer experience of bond with your customers? Are there new revenue avenues for you? So I think within this is absolutely key that everybody within this transaction recognizes this is not a revenue opportunity for Rolls-Royce. This is a cashless transaction because there's a lot of sensitivity. The data belongs to the airline, right? So you have to be very clear and open that data is driving Rolls-Royce to make internal improvements. So we will save a little bit on our bottom line of delivering the services they've already bought in order to get better outcomes of those services. So it's a little bit like- They've already bought the service. We're making it better. It's a little bit like security in that sense. You know, the bad guys are trying to get there. So the good guys share data. It's a cashless transaction and everybody wins. We believe as a market collaboration on data is going to be the way forward. Absolutely. Scott, can you double click on the ecosystem in A and D? Obviously different from the sort of core traditional, you know, ERP world. Sure. The importance of the ecosystem, maybe what it looks like described the- No, that's an insightful question, Dave. Certainly the partner ecosystem in aerospace and defense is somewhat differentiated. I don't want to go so far as to say that it's unique, but it's somewhat differentiated from core ERP as you duly noted. Our four-purpose capability around the critical processes for manufacturers, maintainers, and parts and subsystems, supply organizations is all the potential and it's a promise, but that value can only be realized through the collaboration with partners who do more in aerospace and defense than just support delivery and implementation capability. They provide value-added services around business process re-engineering, change enablement, as well as their partners in co-innovation as well. Certainly the collaboration we have with Rolls-Royce is certainly a new level of collaboration around innovation that hasn't been seen before. So those partners are critical to our ability to deliver that value to our customers. Secondarily, our partners are actually a route to market. In the traditional sense of a referral system, like you would see in core ERP, but more importantly as an indirect route to market as channels to their end customers, almost ISVing our capability to support the delivery of services to their customers. So it's the manufacturers of the planes, for example, it's the airlines themselves, it's the component manufacturer, the engine. It's the maintainers, so the MRO organizations that do the work around repair and it's the entire ecosystem of organizations that support the supply chain. Our partners are both then themselves as well as partners in delivering the capability to those organizations. And it's a data pipeline throughout that value chain. A digital thread. That you guys actually have visibility on. Correct. We have the opportunity to play a vital role within that ecosystem in allowing and enabling the connectivity of that network between the OEMs and their customers, between the operators and their maintainers, for example. We've got a collaboration with an airline right now where we're going to connect them directly with the third party organizations that they rely on for airframe repair, for example. I want to ask you about the aerospace business. It used to be, that used to be a very small market in terms of the number of customers. Now we've got SpaceX. We've got the private aerospace companies. We've got different countries now, India, China getting involved. What impact is that having on your business? Certainly we're seeing the emergence of spatial programs, playing a, taking up a larger share of government or public sector budgets. And people are beginning to think about how to leverage or harvest the value from the utilization of those spatial assets. And again, our enabling capability to be a collector of that data and supply it back as an information insight to those who are reliant on the data that is collected is a vital role that we play in that ecosystem. So when you were describing the ecosystem value chain, it sort of strikes me that there's clearly a whole lot of metrics going on. Are there new levers, new metrics emerging, new levers that you can pull to really drive a flywheel effect in the industry? What are the key performance indicators that you're really trying to optimize? This is certainly an industry that's characterized as asset intensive, complex, mobile. And in this case, complex and mobile are suited in for very expensive assets. So everything around availability, reliability are all key drivers, are key performance indicators of our customer's ability to realize the value from those assets. And our role in that is to provide them with the information insight to be able to make optimal decisions to maximize that availability. Anything you'd add to that? I think in this day and age, things like technical dispatch reliability of engines is so high, a high 99 sort of percentage. You have to start focusing on things like the maintenance cost to achieve that. So driving your maintenance costs down but still retaining your really high availability. That becomes a really interesting balance. You could have 100% availability but it's going to cost a fortune. You don't want that. Well gentlemen, thanks so much for coming on theCUBE. Really fascinating discussion. Thank you. Thank you for having us. Thanks very much. All right, you're welcome. And keep it right there, everybody. Paul Gill and Dave Vellante from IFS World in Boston. You're watching theCUBE. We're right back, right after this short break.