On the 14th July 2020 Siemens and Sap simultaneously published a press release.

These market leaders in PLM and ERP software have announced a new partnership. In effect they have agreed to organise their activities to compliment rather than compete with each other.

The press release in full may be found here, but the summary (without the hyperbole) is as follows:

-Siemens and SAP will deliver integrated end-to-end software solutions across product lifecycle, supply chain and asset management.

-Partnership..to provide a true digital thread that helps enterprises eliminate process and information siloes, drives digitalization and delivers a comprehensive solution for the 4th industrial revolution (Industry 4.0).

-SAP will offer Siemens’ Teamcenter software as the core foundation for product lifecycle collaboration and product data management. Siemens will offer SAP® Intelligent Asset Management solutions and SAP Project and Portfolio Management applications…

Here are the statements from the executives outlining the official reasons for the alliance:

“Digital transformation will be critical for the manufacturing industries to increase productivity, flexibility and accelerate innovation, so companies must come together in new ways to enable the digital enterprise…This exciting collaboration between two industry leaders is about more than just interoperability and interfaces; it is about creating a truly integrated digital thread that unites product and asset lifecycle management with the business that enables customers to optimize production of products.”

Klaus Helmrich, Member of the Managing Board of Siemens AG and CEO of Siemens Digital Industries.

“As manufacturers design and deliver smarter products and assets, access to real- time business information across networks is critical to bring new and improved innovations to market faster…Bringing together expertise from SAP and Siemens to offer Industry 4.0-enabled business processes allows enterprises to create a digital thread for the entire product and asset lifecycle. With this end-to-end solution, teams across the business network can efficiently work together to design and deliver innovative products productively, profitably and sustainably.”

Thomas Saueressig, member of the Executive Board of SAP SE and responsible for SAP Product Engineering.

“Combining Siemens’ Teamcenter and SAP S/4HANA® software provides companies an end-to-end process capability from product design to decommission…The IT benefits of pre-integration of PLM, ERP, asset management and supply chain applications and the business benefits from having a more resilient response to changing market demand make this a compelling consideration for companies seeking a competitive advantage in the digital economy.”

Bob Parker, Senior VP of Industry Research at IDC

In the absence of any clearer indications of intent on the part of both sides of the partnership SAP users and PLM market analysts are obliged to infer the implications of this potentially seismic event through a close reading of the text.

The full ramifications of the reorganisation of the market structure and what it means in practice will remain speculative for the period of implementation of the changes and no suggestion of the time frame appears in the press release. However, some points may be inferred by the limited information available, and from past experience of alliances made by tech companies.

We can also gain some insight into these developments by seeing what Siemens and SAP did not do. 

This appears to be a strategic alliance resulting from complex negotiations. This can be seen from the care that is taken in the statement to partition aspects of each group, which are to be represented by the other party. This exchange is clearly defined so as not to diminish the reputation or value of either. So the statement is “SAP will offer Siemens’ Teamcenter software as the core foundation for product lifecycle collaboration and product data management. Siemens will offer SAP® Intelligent Asset Management solutions and SAP Project and Portfolio Management applications…” The reciprocal nature of the agreement is made explicit at the first opportunity, and is compartmentalised to avoid any ambiguity.

Another interpretation, given that there exists currently some overlap in the services offered by both groups, is that each will in fact be offering the counterpart service in preference to their own solution and as such is a tacit statement of withdrawal of that service.

The natural tendency of a large corporation is toward expansion and so at no point does a press release ever refer to a reduction in activities if at all possible, and generally will never express anything in negative terms. Consequently the material of the joint press release between SAP and Siemens is predominantly comprised of expressions of ambition and hope: not of the benefit to the corporations but for their customers, although in fact the primary motivations of both parties can only be to stabilise and increase their respective market shares.

So we know SAP will promote Siemens Teamcenter And Siemens will offer SAP products. Other than that there is a vague reference to “collaborate to develop applications from an end-to-end lifecycle perspective”.

We also know SAP PLM market share is roughly 1.48% and Siemens Teamcenter is 8.39% (according to Datanyze). So potentially, SAP loses revenue from a comparatively smaller subsection of their enterprise and this is compensated by more incoming traffic to the larger part of their business: analysing and regulating the physical products and processes as opposed to the digital life and assets of a product.

We can assume that Siemens have calculated the benefits of increased use of Teamcenter and, that in the process of integration of both software systems, customers of SAP and Siemens will be obliged to use the other partner’s products exclusively to achieve maximum efficiency and clarity of insight into their own activities.

Further than this, we can also see that this alliance will provide greater security to both businesses in the wider competition with many others such as Oracle, Upchain and Autodesk.

Now we have seen some of the implications for the companies themselves we can begin to ask what this means for the rest of us: for industrial companies for whom these information systems are their eyes and ears and central nervous systems; for chief executives and technical and finance officers, for the SAP professionals who implement these systems.

Where there are changes there is opportunity but there are also problems, unforeseen and probably unavoidable. We have all seen the avalanche of issues that fall with the introduction of a new version of a software package or operating system, and in its need to address all possible product development and  transactional situations the area of ERP and PLM is amongst the most complex of systems. There are questions that SAP and Siemens will need to answer. For example:

How long will the period of change and implementation last? Are they already at a point where SAP and Siemens can offer S4 Hana-ready full-functionality integrated seamlessly with Teamcenter. Or are they going to roll it out in instalments?

How long will the existing systems be provided for with backwards compatibility?

What other support for customers will be available?

How will the company educate its existing users in industry how to operate these complex informational systems? The burden of communication falls equally on users as on SAP and Siemens. This will require some time investment.

If I have already paid for the software should I pay again for the “upgrade”?

If I have paid an IT consultant to install and train my work force in the use of the existing SAP PLM system will I have to spend that much again in migrating to Teamcenter to continue using other SAP products without interruption?

We must all march in good faith toward Industry 4.0 although this market shuffle will cause a cascade of changes in the business software arms race, but we must be diligent in questioning the pioneers about the direction of travel.