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February 10, 1999


By CBR Staff Writer

The IT and telecoms equipment arm of German industrial conglomerate Siemens AG currently derives around 25% of its business from services, and its aim is for that figure to increase to around 50% over the next five years. With that in mind, one of the three divisions in the Information and Communications (I&C) group emerging from the major reorganization announced late last year is dedicated exclusively to this segment, bearing the name Siemens Business Services (SBS). Rather confusingly, to the outside observer, however, both the other divisions, namely Information and Communication Products (ICP) and Information and Communication Networks (ICN) have within them entities called, respectively IT Services and Network Services. Nothing more logical, perhaps, than to have people dealing with services related to the company’s offering in IT with the product division, and one dealing with networking services within the network division. But then, in that case, what is SBS for? Evidently quite a lot, as it is expected to generate revenues of DM7bn ($4bn) this year and, according to the overall head of the I&C group Volker Jung, is the smallest of the three divisions, but with the fastest growth rate. It also reckons to be the largest implementer of SAP’s R/3 enterprise resource planning software in Europe. Paul Stodden, president and CEO of Siemens IT Services GmbH, the services arm of ICP, explains his company’s function as working in the gap between the latter, which provides the hardware platforms, and SBS, which comes up with the broader IT solutions. On a schematic diagram he uses in presentations there is a pyramid, at whose base are the platforms which he calls the domain of IT manufacturers like ICP. At the top there are business processes (the domain of consultancies like Andersen), with IT solutions (the realm of integrators like SBS) directly below it. Below them and above the platforms is a layer he calls IT infrastructure, which is where IT Service fits. Or in other words, when it’s a case of systems integration or management, Stodden’s company handles it, but when the client needs something more ambitious, say a full-blown outsourcing contract, that is the stuff of SBS. Not that IT Services is a negligible niche player, by any means, its annual revenues amounting to almost half those of SBS right now, at DM3.2bn ($1.86bn). As if to underline its place in the greater scheme of things, Stodden also reveals that it is owned 75% by ICP and 25% by SBS. The network services arm of ICN is in an analogous position, carrying out the network integration and management activities of its parent, while SBS provides the broader services. That all sounds dangerously like duplication, or indeed triplication, of effort, however. One wonders whether there are ever occasions when sales people from IT Services are in conversation with a potential customer, only to have to refer them to a counterpart at SBS when they discover the type or dimension of their requirements. Is there ever any bumping into representatives of one of the other businesses competing for the same contract? A spokesperson for the group says that with the overall service sector growing at rates of up to 70% per annum in Europe we don’t tend to run into that problem. That said, both Rudi Lamprecht, head of ICP, and Stodden admit that the current structure is a temporary one. While balking at the term ‘transitional’ for the present state of things, the spokesperson adds that observers should not be surprised if the present state of things is not the same in a couple of years time. In other words, expect further changes and, hopefully, a degree of simplification from Siemens in the services arena.

This article is part of ComputerWire’s European Computer Services information service. Some articles from the service are being provided to ComputerGram subscribers for a trial period only.

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