Siemens to Keep but Overhaul IT Services Unit

Although on a spree to unload unprofitable units, including its traditional telecommunications manufacturing business, Siemens has decided to keep—but completely overhaul—its money-losing IT services and software operations.

In January, Siemens Business Services (SBS) will make way for a new entity, Siemens IT Solutions and Services (SIS), Siemens said Thursday in a statement.

The new group will bundle all of Siemens’ worldwide IT services and software activities, including the four software development entities: Program and System Engineering, Siemens Information Systems, Development Innovation and Projects, and Business Innovation Center.

Christoph Kollatz, currently group president of SBS, will take over as president of the new entity. He has been given the mandate to slash costs by 1.5 billion euros (US$1.9 billion) by mid-2007.

SIS is expected to generate annual sales of about 5 billion euros. It will have approximately 43,000 employees, of whom 33,000 will come from SBS, 7,000 from the Program and System Engineering group in Vienna and 2,000 from the Indian Siemens Information Systems subsidiary. An additional 400 employees will come from the Development Innovation and Projects unit in Greece and Switzerland’s Business Innovation Center.

Speculation had been rife that Siemens would unload SBS, following the sale of its unprofitable mobile phone business to Taiwan’s BenQ and the decision to fold its telecommunications networks business into a new company with Finland’s Nokia.

Since taking over as chief executive officer (CEO), Klaus Kleinfeld has shifted the focus of the German engineering giant away from low-margin manufacturing areas such as telecommunications equipment, computers and chips, to areas he views as potentially more profitable, including factory automation, power generation and automotive systems.

IT know-how is essential to the success of Siemens—the main reason for retaining SBS, the company said.

By combining all software development and IT services across Siemens, the new unit will be in a stronger position to provide comprehensive and complex systems and services from a single source, not only internally but also externally, the Munich manufacturer said.

In its fiscal year ending Sept. 30, 2005, SBS posted sales of 5.4 billion euros, of which 75 percent were generated outside of the Siemens organization.

-John Blau, IDG News Service (Dusseldorf Bureau)

Related Links:

• Intel, Siemens Team on Secure VoIP for Enterprises

• BenQ Mobile to File for Bankruptcy in Germany

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