Why dont we start with a bit of background on your current infrastructure project and its first steps.
The way we have structured it is we want to have a higher level of focus on process and process internalization, to get a better IT infrastructure from a top-down approach. So, in the top-down approach [the first steps are] how [we] can ... address from a process, application, infrastructure point of view the major building blocks.
Where are you now with this effort?
There are a lot of contracts in place today that have to be restructured. We are building a portfolio. We are identifying those services that we can commoditize—there are 40 all related to infrastructure—then well try to transform those contracts that align with that portfolio.
Where does IT come in?
Its very much related to how we streamline processes—without one, you cannot do the other. Ten years ago [we decided] we needed to select best of breed. We chose to integrate [systems and applications] and make it work. Today, I tell you, its too complex. With acquisitions, its how cost centers are structured, materials defined, information assigned about business partners, customers, suppliers. Before you know it, you have a complete, dispersed way of information.
What about the process framework you are developing?
Its a continuous battle. If you look at the process framework, there is a comprehensive tool set we are bringing to the table and a process house we are defining in different [terms]. Further down, to the transactional level, we are not completely standardized. Its based on region to region or company to company. The process framework has provided us a common language and common understanding of how we should do things. How it is structured within Siemens is support for implementation with our application architecture fits within the process framework.
What was the impetus for the template approach?
A lot was driven by cost. What we realized is we were having so many different SAP [AG] implementations and spent so much money to keep things running—what we spent on maintenance versus what we spent on new projects, the ratio was not correct. That was the onset [of realizing] we needed to do something different. [That is] from the top down standardize processes—that was kind of a more longer-term approach. Shorter term, work on infrastructure and commoditize so we can change the ratio of 80 percent of IT spent on maintenance and 20 percent spent on innovation.
Whats your biggest challenge in this process?
From our point of view its that service delivery units are also moving into the direction of seeing infrastructure as a commodity, so we can drive down cost—its all economies of scale. You can establish better economy of scale if service providers would try to work with us, to define [their product] as more of a commodity service.
What will it take to have service providers respond to you?
Were just in the beginning. Last [month] we had a big discussion with [Dell Inc. Chairman] Michael Dell. His company is one I feel would be a prime example. It grew tremendously, offering a commodity product—the PC—and still made a profit. Its very different than other [service providers]. If they would say, I would bring a service based on, say, Dells business model, if they would do the same in terms of delivering a service, that means commodity—and not customized.
What was Michael Dells response to your conversation?
Michael thinks the [software] industry is not necessarily ready for [commoditization]. And a lot of CIOs are not ready for it. If you buy a service, you lose a lot of control. The service provider is responsible for all these components, and that is a fundamental [shift]. Its very difficult to let go. This could be driven down further, and it fits into an initiative we have in other areas—horizontal functions, financial functions or fixed asset management—that we can make the same no matter what we are talking about. And therefore we can do with a shared service. This is where we are going.
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