Siemens Invests $US868 Million in E-Business Centers

Siemens AG is planning an initial investment of 1 billion euros (US$868 million) in transforming itself into an electronically-driven company, Siemens announced Tuesday.

The company said in a statement that all of its processes, from procurement to marketing, from development to controlling, will be coordinated via a series of so called Centers of E-Excellence, the first of which opened Tuesday at Munich airport.

The company said all of its 440,000 employees, in over 190 countries, will have Internet access within a year, allowing the pooling of knowledge between the company's various divisions. To that end, terminals will be installed in manufacturing facilities.

Siemens added that around 70 percent of its activities are already networked electronically, and that with the use of Internet procurement, the 10 percent of its total procurement volume of 35 billion euros that is now processed electronically will rise to 50 percent.

Stating its goal to "nurture new ideas," Siemens announced that four young high-tech companies have taken up residence in the Munich airport facility.

In an online chat with reporters, Siemens' president and chief executive officer Heinrich von Pierer said the company generated revenue of about 5 billion euros from electronic commerce in the last year, adding, "that will grow quickly."

Asked whether Siemens is behind the times in announcing an online strategy, von Pierer said, "We've already been working on this for two years. But we didn't want to go public with any empty announcements. That's why the press conference comes so late."

Albert Goller, head of Siemens' Center of E-Excellence, said the company had chosen i2 Technologies Inc. to provide the backbone of its business-to-business e-commerce infrastructure.

"After intensive evaluation, we decided for the market leader. In addition, we've already had experience with i2 in various areas of our business," he said.

"That will be a very big contract for i2," said Jaap Favier, senior analyst at Forrester Research BV in Amsterdam, which has been advising Siemens on its e-commerce strategy.

"I2 is one of the leading companies in supply chain automation in the world, if not the leading company ... and supply chain automation, which they want to do, can bring up to 10-percent cost reductions in your entire production of your company, which is for a big company like Siemens a big deal."

He added that even a huge, diversified corporation like Siemens can benefit from an e-commerce strategy. "It is possible, but you can't do it top-down, you have to do it bottom-up; you have to give your various business units a lot of autonomy to do what's best for them."

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