In the world of digitalization, SAP and Siemens Digital Industries have been leaders providing enterprise platforms, digital twins and digital thread applications, from PLM to ERP, CRM, MES, SCM, SRM, ALM… that’s enough of three letter acronyms. Both were pioneers in their field and two of the very first players with software solutions that emerged from the early 1970s, growing and expanding their respective scope through countless mergers and acquisitions.

When two families arrange a marriage for their children, we can try to understand how they will frame the alliance and plan to benefit from it.

It will certainly affect their wider ecosystem and reseller networks, aiming to positively influence how their customers make business transformation and related investment decisions.

Reflecting on the announcement of this new partnership, it raises a number of questions as to how SAP and Siemens will collaborate and position new products or services to progress toward their common goals.

Are they uniting in a marriage of reason to:

• Create new opportunities for sustainable strategic advantage by filling specific market gaps?
• Consolidate their joint solution portfolio and build new out-of-the-box (OOTB) interfaces and bridges to accelerate digital thread adoption?
• Focus only on specific products and services, or will this partnership expand and cover their entire combined portfolio?
• Leverage each of their strengths to help the other learn or access new technology?
• Leverage the partnership to create new operating entities from which they will share profits?

Or, is it a marriage of convenience to:

• Mitigate business risks or respond to competitive threats?
• Continue to compete in some context and work together in others?
• Opportunistically join forces based on the client context and requirements?
• Make them more agile and aligned to outpace their mutual competition?
• Rationalize business development forces to create economies of scope and maximize join market opportunities?

Marriage of Reason: Filling a Market Gap or Consolidating Their Respective Product Portfolios?

Both SAP and Siemens built their portfolio of digital enterprise solutions over 50-plus years. Their strategic business scopes have grown significantly from their respective debuts, now presenting a number of commonalities and overlaps across the enterprise digital space.

• PLM as a discipline has outgrown the scope of traditional ERP. Their boundaries have also blurred, and ERP itself has widened significantly.
• (Almost) everyone now understands that “PLM can’t be bought” and effective product innovation relies on integration to realize business value (and breaking siloes) across the digital thread.
• Both ERP and PLM practices have grown into managing digital twins that are neither exclusively authored or consumed in a single enterprise platform.
• Digital transformation spans across all business functions as data gets democratized and widely integrated across the enterprise: new business models and digital twins are easily adopted, though some of the technical challenges reside with integrating them across the digital thread (upstream and downstream data feeds).

PLM is where Siemens historically excels with its flagship engineering-centered content management platform Teamcenter—enabling product design and innovation and CAD integration, feeding into downstream manufacturing and service lifecycle. In 2019, Siemens PLM rebranded into Siemens Digital Industries, which was perhaps more descriptive to its digital portfolio.

If one had to guess, the new SAP-Siemens partnership is unlikely to cover the entirety of their combined portfolio suites. On the contrary, it is likely to focus on complementary offerings, bridging integration gaps and providing more open collaboration opportunities across their combined customer bases.

Marriage of Convenience: Responding to Business Risks or Market Threats?

According to industry analyst Gartner, SAP has been dominating the ERP market with a 22 percent share of the global market in 2018, sharing a 51 percent share of the market among the top five ERP vendors—together with Oracle, Workday, Sage and Infor. Smaller ERP vendors are catching up in a number of industries and sectors where big players lack agility.

Similarly, Siemens is a market leader in PLM and digital twins, with a portfolio covering both upstream product design and innovation to downstream manufacturing automation. Most of the other players in this space, such as Dassault Systèmes, PTC, Oracle, ARAS and SAP, are not “pure-play PLM editors” either.

SAP has been growing toward covering the end-to-end enterprise scope for decades. It even ventured in the world of PLM software and previously branded one of its SAP offerings, SAP PLM, before it recently got consolidated back across the mainstream ERP portfolio. In SAP’s language, ERP drives “all the core processes needed to run a company: finance, HR, manufacturing, supply chain, services, procurement and others,” and SAP integrates these processes into a single platform.

The collaboration between SAP and Siemens is not new. For example, SAP has been embracing the JT format as the open CAD standard for 3D product data visualization and sharing in its core platform. The format is a lightweight representation initially developed by EAI but acquired and widely adopted by Siemens Digital Industries across its product range.

Additionally, there are already a number of SAP-Teamcenter integration bridges and connectors available on the market that provide workflow integration and data exchange mechanisms between EBOM and MBOM. This new alliance between Siemens and SAP will certainly open the door for new integration opportunities. Industrial manufacturers would actually benefit from a seamless “open integration digital” framework and ERP-PLM collaboration standards, reaching beyond SAP and Teamcenter point-to-point integration.

Marrying Up PLM and ERP with an Effective Digital Thread

By joining forces with SAP, Siemens is not only looking at competing in the ERP space but is also taking advantage of SAP’s established business product suite. Reselling each other’s products could be limited to commission plans and joint incentives based on customer opportunities. They also have the opportunity to leverage SAP’s existing HEC infrastructure-as-a-service and optionally combine it with Teamcenter Software-as-a-Service offering (SaaS).

Despite not being disclosed, their partnership clearly aims to reach beyond the ability to exchange 3D data or to achieve BOM data continuity between PLM and ERP. Let’s hope that the two giants will aim at unifying (and clarifying) the PLM and ERP landscapes. In order to provide better digital thread solutions, here is our wish list:

• Create OOTB SAP Hana and Teamcenter integration with clear EBOM (PLM) and MBOM (ERP) continuous alignment and two-way synchronization upstream with operating business analytics and downstream with Industrial Internet of Things (IIoT).
• Derive a BOM data exchange standard and CADBOM alignment across PLM and ERP with clear master data management principles between the two disciplines, reconnecting the design office to the shop floor and vice et versa. Hopefully, it will be a standard that is scalable and reusable beyond SAP and Teamcenter.
• Build new technical tools and middleware platforms for open integration of the digital thread.
• Combine the above in cloud-based infrastructures, starting from integration between SAP Hana Enterprise Cloud (HEC) and the recently announced Teamcenter X, potentially aiming toward a fully integrated end-to-end PLM-ERP SaaS backbone.
• Extend the above to a seamless and expandable PLM-ERP-MES-CRM integration platform.

Partnerships between two digital giants are likely to move slowly, especially if it already took a number of years for them to make the decision on an alliance. It would not be surprising to see a spin-off start-up company or joint venture be created for SAP and Siemens to leverage their new collaboration without the burden of legacy barriers and constraints. It could constitute a strategic laboratory for experimentation from which both organizations could contribute to and share benefits.