by Thomas Wailgum

Siemens and SAP Flap: Much Ado About Nothing–Yet

Sep 15, 2009
Enterprise Applications

What's just unconfirmed news and what are signs of a larger ERP software trend is critical to understand.

The blog world and Twittersphere lit up over this past weekend with the news* that Siemens, the German electronics and engineering giant and long (repeat: LONG)-time customer of SAP, was ditching SAP’s ERP maintenance and support service.

Or so said the Babelfish-translated Wirtschaftswoche article on “Siemens quit servicing contract with SAP to the end of the year.” (That stilted English version can be read here.)

Now the breaking news* was the news* (with asterisk attached) because the news* had yet to be confirmed with any of the principals involved, chiefly Siemens and SAP. Cited in the article were numerous anonymous sources. (Jim Dever, director of SAP Americas media relations, says via e-mail to that “the reports create an inaccurate portrayal about the SAP Siemens relationship. SAP has, and will continue to have, a long-standing and very strong strategic relationship with Siemens. In fact, SAP is currently working with Siemens to deepen the relationship in a multitude of areas. Siemens continues to leverage SAP solutions to manage its businesses around the world.”)

Of course, it is the many facets to this piece of business and technology news* that make it all the more intriguing to speculate about—and to be clear, at this point, it’s all unconfirmed speculation.

Siemens is a rather large going concern: 430,000 employees worldwide and revenues of $113 billion in fiscal year 2008. According to the Wirtschaftswoche article, 160,000 of those employees use SAP software. Siemens has been in business for more than 160 years, and SAP executives have historically pointed to long-time customers such as Siemens as evidence of their software’s value and how they craft customer-vendor relationships.

Which is why industry watchers and analysts pounced on the news*. These blogs needed no translation: News Analysis: Siemens Cancels SAP Maintenance Contract, and Siemens Cans SAP Support, and Don’t Cry for Me, Germany.

This is not the first crack in the storied Siemens-SAP relationship. In June 2009, SuccessFactors, a HR and talent management SaaS vendor, announced a huge and somewhat surprising victory in SAP’s own backyard: A 420,000 seat win at Siemens, a deal on which SAP and roughly 30 other vendors had been competing.

I recently asked Paul Albright, SuccessFactors’ CMO, if he thought his company really had a chance to win this. “We did,” he said. “As you can imagine, it’s a tough deal to win because of where it is.” And, he added, “It’s a serious and significant partnership for us.” You can say that again.

All of this proves, of course, that goliath Siemens is open to alternative software delivery methods—and is clearly not overzealous about the sanctity of traditional, on-premise deployments or those relationships. Much like General Electric and Chiquita Brands and many others have decided.

Which leads us back to the news*. If Siemens does indeed move away from SAP’s maintenance program, what are its alternatives? IBM, HCL and Rimini Streetwere noted in the news* report as possible contenders for Siemens’ third-party maintenance dollars. We shall see on that one.

My take on this news*: First, many companies have grown dissatisfied with ERP maintenance and support costs, so, perhaps, Siemens was (on purpose) making its displeasure publicly known, to see SAP’s reaction.

These types of vendor negotiation tactics happen all the time—some public, some private—and the dust usually settles to reveal minor, mollifying vendor concessions.

Second, if Siemens has as much of a technological history with SAP as we are lead to believe, then you can rest assured that Siemens has got plenty of legacy issues to go along with that history. And a wholesale rip and replace of SAP by IT is not in the cards. Not now, anyway.

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