Siemens to trim IT budget by $999M

IDG News Service - German electronics and engineering conglomerate Siemens AG has embarked on a program to standardize business applications and consolidate computing infrastructure across its worldwide operations in a move to cut IT costs and increase efficiency.
The Munich-based equipment manufacturer plans to cut its current IT budget of around $4.7 billion by $999 million over the next three years, Edmundo Ruiz, vice president of corporate information and operations groups at Siemens, said in an interview this week on the sidelines of the Strategic IT Management conference in Neuss, Germany.
Under the program, developed in part by The Boston Consulting Group, Siemens is studying which business applications and hardware devices have a level of "commonality" across the company and which retain a level of "uniqueness." The aim is to achieve a higher level of commonality in order to lower the number of different software applications and hardware devices used by the company and the vendors that supply them, Ruiz said.
Wireless LAN systems, for instance, have a low level of uniqueness, Ruiz said, noting that these systems are standardized and available at commodity prices. Many business applications, on the other hand, have a high level of uniqueness, requiring ERP standardization, which takes time and costs money, he said.
"We aim to drive process standardization, especially in the areas of CRM and SCM [supply chain management]," Ruiz said. "At the same time, we intend to consolidate the number of enterprise applications."
SAP AG, a key supplier of enterprise software to Siemens, will be a target of the consolidation, he said.
Outsourcing will also play an increasingly important role as Siemens moves to shift the distribution of its costs, according to Ruiz. "We want mostly variable costs, which give us greater flexibility, and fewer fixed costs," he said.
The Strategic IT Management conference was sponsored by the German business newspaper Handelsblatt and The Wall Street Journal.