German electrical engineering and electronics conglomerate Siemens AG is teaming up with China’s internet giant Alibaba Group Holding Ltd. in a deal that will see it use Alibaba’s public cloud computing platform to host its MindSphere operating system for the “internet of things.”

The deal was announced in Berlin under the watchful eyes of German Chancellor Angela Merkel and Chinese Premier Li Keqiang, who signed a raft of commercial contracts Monday worth some $23.51 billion, Reuters reported. The companies also signed a memorandum of understanding that will see them work together to create dozens of IoT products for China’s manufacturing industry.

Siemens said the deal would help to upgrade Chinese industry through its products, which have until now only been available via Amazon Web Services Inc. and Microsoft Corp.’s public cloud platforms.

Siemens is said to be stepping up its efforts in digital industries in order to offset the decline of its traditional businesses, which provides infrastructure for the gas and other industries. The company is hoping the deal with Alibaba will give it a stronger foothold in China, which is currently its third-biggest market.

“This cooperation is a landmark deal for bringing Industry 4.0-solutions to China as the world’s powerhouse of manufacturing,” Siemens Chief Executive Officer Joe Kaeser said in a statement.

MindSphere is an open and cloud-based operating system designed for IoT systems that works by connecting factories, machines and products and gathering data to boost production efficiency and decrease downtime at manufacturing facilities. The product is offered by Siemens’ Digital Factory business unit, which has seen substantial growth of late. Sales rose 13 percent and profits jumped 40 percent in the company’s latest quarter.

Holger Mueller, principal analyst and vice president of Constellation Research Inc., said the partnership makes sense as IoT is one of the most interesting use cases for next-generation software applications.

“IoT needs public cloud as many companies cannot size the use case they are automating, so they need cloud elasticity to make this real for their enterprises,” Mueller said. “Having a platform like Mindspring is another benefit, as enterprises need platforms to make their next-generation apps in IoT happen.”

The deal will see both firms collaborate immediately, with MindSphere expected to land on Alibaba Cloud sometime next year.

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