PLM (SAP + Siemens) = Winners, Losers and Questions

The original article was published on my Beyond PLM blog

The big news came yesterday - Siemens and SAP announced a new partnership. Here is the link to SAP announcement - Siemens and SAP accelerate Industrial Transformation. The same press release was published on both SAP and Siemens website. Both companies will deliver an integrated end to end software across the product lifecycle, supply chain, and asset management. More specifically -

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 Portfolio and Project Management applications to maximize business value for customers over the entire product and service lifecycle and enable new collaborative processes between manufacturers and operators.

I captured a few reactions from CAD and PLM media. Al Dean of Develop3D wrote - Siemens and SAP announced new PLM-ERP partnership.

While there’s always been connectivity at the hand off from PLM to ERP, having the integration ready to go before the integration consultants show up on site might be a benefit to the customer. There’s an indication that the two companies will look to develop applications from an ‘end-to-end lifecycle perspective’ to help customers achieve a seamless digital thread to improve business performance.

Engineering.com review wrote by Verdi Ogewell is much more dramatic - BREAKING NEWS: SAP Phases Out PLM to Become Reseller of Siemens Teamcenter in Surprising Alliance. In my view, this is a key passage from an Engineering.com article.

This has always been a tough, competitive situation where a number of players from the product development and PLM side have cast bright eyes on the manufacturing area. This is because, as former Siemens PLM manager Chuck Grindstaff once said in an interview with engineering.com, "it would be natural for" manufacturing BOM’s to be developed within the framework of the system that created the products, i.e. the PLM system."

Per H?gberg, SAP digitalization evangelist for PLM strategy and implementation, commented on this aspect in a LinkedIn statement where he said, “That SAP would stop others like Dassault is unreasonable. The strategy that has described this step (which has now been going on intensively for a while) is to generally build ERP and PLM together and have TC as the basis there. Some parts are more ERP close and others PLM close, which is why the intersection point is not easy, not least because TC works with other ERPs and SAP with other PLMs. But now to stop trying to compete with PLM systems enables SAP's important investment in the PLM area, which is the basis for Experience Economy (XO), which SAP has invested over $10 billion in recently.”

The following CIMdata chart shows the 2018 cPDM revenues breakdown. I didn't find a publicly provided chart, but I found it published here and it is most probably an original CIMdata chart. In my view, this is the right angle to see Siemens and SAP PLM businesses. (CIMdata, if you have an updated chart, please contact me- I'd be happy to replace it)

Does it mean SAP is going to give up on $1.5B+ revenue? Reading Engineering.com's article, you might think that SAP is going to phase out an entire PLM revenue and pass it to Siemens. To be honest, I doubt. I have never seen a company that can give up such an amount of revenue. And it is also not clear how Teamcenter will be displacing the SAP portfolio. My hunch is that the deal will put Teamcenter PDM in place to complement the SAP-based environment in a discrete industry. it boils down to the function of Teamcenter PDM, which Siemens is going to offer to SAP customers and common deals. I'd be very much interested to have a briefing with SAP to clarify these and many other points (dear SAP media and analysts relation, please contact me).

Both announcements and publications are very high level and provide little specific information about how the partnership will work and what elements of portfolios will be combined and what elements of SAP or Teamcenter portfolios will be eliminated. I think the major portfolio overlap can come in the functions of PDM/PLM collaboration and the battle of EBOM and MBOM functions. The last one is the most interesting because it is a foundation of PLM+ERP integrations.

Even though it is still too early, I want to put some thoughts about natural winners and losers of the deal as well as some questions I'm looking for answers for.

1- Potential Winners

SAP and Siemens' common customers are obvious winners of the deal. If you already run both Teamcenter and SAP, your life as a customer will be much easier because both Teamcenter and SAP will invest in better integrations. And PLM + ERP integrations are always hard to build.

Pure SAP and Siemens resellers and system houses is another group of winners. The business will be simpler and stuff will be more aligned in the future.

Teamcenter PDM software is a clear winner. It will be much easier to sell now once big Siemens + SAP alliance stands behind.

2- Potential Losers

PLM companies and products competing with Teamcenter PDM and PLM. I think Aras can be the most vulnerable based on the assessment of Engineering.com because Aras is a pure PLM technology with not much CAD software. It might be harder to sell Aras to large companies using SAP for the moment. Companies developing CAD integrations for SAP. Teamcenter will be a priority line for many existing and new customers.

3- Open Questions

There are many questions, I'd love to ask. Here are some of them - 1/ how integration will be done between products? 2/ What will happen with new Teamcenter X products? 3/ Will be TCX integrated with SAP out of the box? What industry will be targeted by the partnership? What will happen with SAP process products? Will SAP continue to provide IPD and other products focusing on product development collaboration or it will be replaced by Siemens PLM portfolio? What will happen to many partners' products integrated with SAP PLM products? What will be SAP partnership policy for companies and products competing with Teamcenter PDM/PLM? These and many other questions are demanding the answer.

What is my conclusion?

The two biggest ships in ERP and PLM software are moving closer. It is interesting to watch and to understand the strategy better. The amount of PLM gravitation both Siemens and SAP can create is enormous. The details of the synergy between products are important. The nature of such partnerships is usually to focus on obvious strengths and weaknesses from both sides. Don't expect something to be phased out or at least to be phased out immediately. I expect to see some turbulence in sales and services among people and players naturally competing today until the strategy, positioning and details will be clarified. Both companies are very conservative, so it will take time to understand the details and plans behind the announcements. Just my thoughts…

Best, Oleg

Disclaimer: I’m co-founder and CEO of OpenBOM developing cloud based bill of materials and inventory management tool for manufacturing companies, hardware startups, and supply chain. My opinion can be unintentionally biased.