SAP and Siemens to Cooperate in Industry Software

By David Humphrey

Summary

SAP and Siemens have agreed to cooperate by cross-selling parts of each company’s respective industry software portfolio. The goal is to deliver integrated end-to-end software solutions across product lifecycle, supply chain, and asset management. While the initial focus is on asset management and PLM software, if successful, the partnership could be expanded in the future.

Giants in their Respective Domains

industry softwareAs the market leader in enterprise software, industrial companies make wide use of SAP software solutions. In the industrial world, Siemens is recognized as a market leader in a wide variety of industries and technologies. As industrial companies embark on their respective digital transformation journeys, many use products and solutions from both suppliers. Typically, integrating software from multiple vendors is one of the greatest challenges companies face in digital transformation, so the cooperation between SAP and Siemens has the potential to help customers bridge the digital gap between the enterprise and the plant.

Digitalizing Processes

Most industrial companies have already started to implement digital technologies and digitalization to transform existing processes. On the enterprise side, companies implement enterprise resource planning (ERP) software to digitalize business processes. Led by SAP, the ERP wave of the 1990s not only eliminated outdated paper processes, it also helped companies modernize and standardize their ways of doing business, ultimately creating enormous efficiencies along the way.

In the factory, digitalization affects two areas: products and manufacturing processes. Manufacturers use sophisticated product lifecycle management (PLM) software to create a “digital twin” – a digital representation of a product or process. The digital twin allows these products and manufacturing processes to be designed, simulated and optimized before a product prototype is built or ground is broken for a new factory. The potential cost savings here are enormous. As one of the largest vendors of industry software, Siemens is recognized as a market leader in the PLM domain.

Serving Both Sides of the Industrial Enterprise

industry softwareIt’s no coincidence that SAP and Siemens, leading providers of digitalization tools for each side of the industrial enterprise, have recognized the value of pooling their respective strengths. SAP led the “ERP-ization” of industry in the 1990s when companies modernized and standardized their business processes. Through a series of strategic acquisitions over two decades, Siemens has assembled an expansive portfolio of industry software solutions and integrated it with its hardware business to form “Digital Enterprise Suites,” tailored to the needs of specific industries.

When two large software companies sell to the same customers, there is bound to be some portfolio overlap. SAP and Siemens both store data in transactional databases, both offer solutions for asset management, and both offer PLM software. For the customer, compatibility and ease of integration are key decision criteria. By cross-selling each other’s products, each partner can develop competence in integrating the products of the other.

From DMZ to Cooperation

It’s one thing to simply draw lines of demarcation and another to cooperate successfully in selling software. The new partners are developing unique go-to-market collateral that reinforces the value of the partnership, in addition to training sales and support personnel to resell each other’s products. Initially, SAP and Siemens plan to focus on discrete industries such as aerospace & defense, automotive, and machinery, which is increasingly digitalizing. Both companies are already well-established in these industries and the cooperation may help them further increase their presence by opening doors to new accounts.

ARC will observe with keen interest how the partnership develops and potentially expands.

Digital Dream Team?

Is this cooperation between SAP and Siemens the harbinger of a new “dream team?” At this early stage, the jury is still out. According to the companies, the collaboration has been “ten years in the making.” In ARC’s view, it will take time for customers to reap the benefits of a such as partnership. In fact, the real value add may come when the cooperation is extended to new areas. For example, by tapping into SAP’s reach along the supply chain, manufacturers could create greater real-time visibility into the manufacturing processes of suppliers and customers alike.

While the initial focus is on discrete industries, it is also easy to imagine Siemens and SAP expanding their cooperation to the process industries and smart infrastructure. Here, asset management takes on an even greater meaning as investment levels and lifecycles increase.

Conclusion

Industry alliances come and go and only those that offer tangible customer value typically survive the initial hype. When industry giants agree to cooperate, people take notice. A well-planned partnership can tap into synergies of a magnitude that can reshape the entire industry. The SAP-Siemens cooperation may do just that by exploiting the sweet spot between established enterprise software and the rapidly growing market for industry software  - a feat that few other suppliers currently are in a position to achieve.

 

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Keywords: Siemens, SAP, Cooperative Selling Agreement, Industry Software, PLM, Supply Chain, Asset Management, ARC Advisory Group.

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