Global manufacturer Siemens AG, which plies its trade across a diverse array of industries, from manufacturing technology, to healthcare IT, to energy products, today announced that by 2012 it would invest €500 million in its IT Solutions and Services (SIS) business, which will be realigned to deliver IT expertise to complement Siemens’ business divisions.

As part of the restructuring, Siemens will cut 4,200 jobs at the SIS unit, out of a workforce of 35,000. The revamped organization, which will become a wholly owned, independent entity, will comprise two units rather than the current seven, with IT Solutions and IT Outsourcing surviving the realignment.

The solutions division will offer customers systems integration expertise as well as tailored IT solutions that complement Siemens’ three main business units of Energy, Healthcare, and Industry. Currently, SIS earns 40% of its revenue from this type of work, with the balance of sales coming from its work managing customers’ IT infrastructures in an outsourcing capacity.

“The IT division is closely cooperating with our sectors, which means it’s a very attractive growth area,” said Siemens CFO Joe Kaeser in a press conference Thursday. Kaeser called SIS an “important backbone of Siemens’ IT,” and offered examples of the synergies he sees between the restructured SIS and the larger company.

SIS, for instance, will complement the factory-to-enterprise integration expertise within the Industry division, helping to create for customers what Kaeser called the real-time factory. This integration work between factory floor technology and business systems will help produce “‘the next major step in industrial productivity increases,” he said. Specifically, the SIS unit would help manufacturers link PLM and factory floor technology with, for example, SAP ERP systems.

“Managing these two worlds, integrating them … is a very attractive proposition for an IT company that knows the industrial sector,” he said.

In the Energy sector, the reconstituted SIS division would help implement smart grid technology, while in the Healthcare sector, Kaeser said, “knowledge-based medicine will not be possible without IT.”

The effort to bolster Siemens’ IT consulting chops will take some time to implement, officials said. The investment of a half-billion euros will be targeted, at least in part, at developing SIS staff expertise. Christian Oecking, acting CEO of the IT business, said the company will hire and redistribute to SIS individuals who boast a combined competency in IT consulting and Siemens’ business sectors.

Even as they revealed plans to add staff with specific consulting expertise, Siemens officials said they need to trim the workforce at the outset. With sales down 13% in 2009, said Chief Human Resources Officer Siegfried Russwurm, the SIS business “has to be adapted to the lower business volume.”

Kaeser said the recent global recession caught the IT consulting business in its tentacles, and he conceded that competitor IT consultants fared better than SIS did during the downturn. He said Siemens needs to catch up, and that “the market environment for SIS could brighten up by 2011 at latest.”

Of the headcount reductions, 2,000 are expected to come from Siemens’ home country of Germany. Officials said they informed the country’s powerful works councils of the plan today, and will work with the labor group on the details of the reduction in force. The €500 million figure does not include restructuring costs, which for now are indeterminate, officials said.

“Inclusive of restructuring costs, this will create losses,” Kaeser admitted. But he also said the restructuring will create cost efficiencies in the triple-digit millions of euros.

Part of the capital investment could be directed at acquisitions of “certain small software companies that can be links between IT and software competence in [Siemens’] industries,” Kaeser said.

The SIS unit will become a discrete business as a wholly owned subsidiary at latest on Oct. 1, the beginning of Siemens’ next fiscal year. Asked by reporters today whether SIS will eventually become a public company, Kaeser said this is an option, but such discussions are “still for the future.”

Source:http://www.managingautomation.com/maonline/news/read/Siemens_Reorganizes_IT_Consulting_Division_Cuts_Jobs_33338