Government // Enterprise Architecture
11:19 PM
Bob Evans
Bob Evans

Global CIO: SAP Jilted Again By Siemens: Isolated Case Or Deep Problem?

Unhappy with the value it was getting in return for its 17% annual fees, and looking to innovate with SaaS, Siemens has bypassed strategic customer/partner SAP twice in the past few months.

Some cracks have appeared recently in the lengthy and deep strategic relationship between SAP and Siemens, which is not only one of SAP's largest global customers but also a reseller/integrator of SAP software in certain industries. Are these cracks just superficial and shallow and barely worth the time it takes to read the headlines about them? Is the SAP-Siemens relationship/partnership, based on long-standing and mutually beneficial interdependence plus shared German heritage, more solid than ever before?

Or do these fissures run more deeply than SAP would like to acknowledge? Do they reflect a growing unease within Siemens that SAP and its products as well as its business models are not all evolving as rapidly as those of Siemens, one of SAP's largest global customers? Is it fair to question whether other global corporations are scrutinizing the same issues and factors and that have led Siemens to go strongly against the wishes of its longtime customer/partner on two very significant decisions within just the past 100 days?

Or is it all just coincidence? The regular ebb and flow of buyer-seller interactions? Nothing more than business as usual among big global companies and the enterprise software companies whose products run those global organizations?

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NEWS ITEM: June 8, 2009: Looking to buy a new global HR application, Siemens rejects SAP's human-capital management product and instead gives a 420,000-seat license to a SaaS vendor called SuccessFactors that is less than 1/100th the size of SAP. InformationWeek's Mary Hayes reported that Siemens made a "strategic board-level decision" to go with SuccessFactors, believing it was a better "for Siemens to focus on its strengths in key industries, foster a performance-based and ethics-minded culture, and innovate by linking technology and business ideas, in order to increase revenue, profitability, and improve cash flow."

NEWS ITEM: Sept. 12, 2009: A German business magazine's website reports that Siemens is dropping SAP as the provider of maintenance and support for the widespread SAP applications that will continue to power Siemens global operations. Instead, Siemens will look at a range of alternative providers to handle the maintenance and support of its SAP apps, with potential prospects ranging from huge providers such as HCL and IBM Global Services to upstart Rimini Street. In response, SAP issues a statement that does not deny that Siemens has cancelled its SAP maintenance contracts, but does say that "SAP is currently working with Siemens to deepen the relationship in a multitude of areas."

So let's take a quick look at the premise that says these SAP-Siemens cracks are merely superficial and don't signify anything. If that's true, then that would mean that among the large number of global corporations using SAP enterprise applications, Siemens is unique in its belief that it is no longer receiving fair value from SAP for the 17% annual maintenance fees it pays.

But we know that's not the case—big companies in all types of industries are chafing (to put it politely) at the annual maintenance fees charged by not only SAP but also Oracle.

In addition, the isolated/superficial premise would also mean that Siemens is the only big multinational that has switched to or is evaluating SaaS-based global applications, and that almost all other big global firms will stick with big traditional enterprise HR apps.

But we also know that's not the case, either. And while these additional companies going the SaaS route might not be the size of Siemens (very, very few companies are), they sure do use enterprise apps and they have decided not to go with HR from SAP: Flextronics, Merrill Lynch, Disney, Sony, Chiquita Brands, Domino's, Kodak, H.B. Fuller, and more.

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