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Siemens Surging Into Services

Siemens's new Customer Service Division will enable it to reap the rewards of lucrative consulting and engineering services revenue streams.

Taking a page from IBM's wildly successful playbook in the information technology sector, Siemens will launch a services operation in October. The group will officially be called the Customer Service Division and will enable Siemens to reap the rewards of lucrative new consulting and engineering services revenue streams.

"We're intensifying our services business in the United States," says Raj Batra, president of the Industry Automation Division for Siemens Industry Inc. "It lets us expand our consultative skills and embed engineering expertise [at our customers]." Batra spoke about the plan to a small group of reporters at the 2011 Siemens Automation Summit in Orlando, Fla.

The new group will help industry verticals apply Siemens's automation and drive-train products. Though Customer Service won't formally begin business in the United States for four more months -- it's being rolled out first in Germany -- Siemens is already making the rounds of customers and partners to let them know that it will have its own dedicated staff. Siemens is also working to assure solutions providers that it doesn't intend to cut them out of the equation.

The official taxonomy of the new group is a little more complicated. Siemens tells me that customer service has always been a primary function within Siemens Industry USA. The new operation will emphasize what are called value services -- consulting and expertise -- and product lifecycle services. The division will support other Siemens units such as Industry Automation and Drive Technologies, as well as verticals within each.

In a recognition of industrial realities, the new group won't be restricted to recommending only Siemens products. Batra noted that many plants have a mix of vendor equipment. They obviously won't rip out their legacy equipment just because they're getting advice under the banner of one particular vendor.

In our reporters' roundtable chat, Batra wouldn't touch my question about revenue goals for the new group. That made me assume that they're large. The thought also struck me that for Siemens, as with IBM, services are a way to ensure steady growth in mature markets, such as the United States, where it's hard to propel year-over-year growth in hardware sales into the heavy double digits.

However, further analysis indicates that near-term revenue prospects are probably solid all around. Ongoing urbanization in China and India is going to send heavy demand Siemens's way for rail equipment and high-voltage power lines.

On US prospects, Batra was bullish. He pointed to the large cash pool held by many companies and the imperative to remain competitive as potential growth drivers. "When you look at manufacturing, from everything we see, it's leading the recovery," he said. "The second thing we have going for us is that US infrastructure is old and aging. Manufacturing is becoming much more strategic to the enterprise. People want to upgrade their plants." Batra sees Siemens playing a key role in that upgrade cycle.

Equally exciting is the realization that energy efficiency and sustainability are no longer topics for political debate but, rather, serious ways for factories to save money. "There are subtle adjustments that can be made in all industrial processes that can save a lot of energy overnight," Batra says.

As well, alternative energy has quietly become big business, with photovoltaics growing at an annual 30 percent clip. For its part, Siemens in January acquired a 16 percent stake in US photovoltaic developer Semprius.

I'll close by looping back to the IBM analogy with which I opened. Big Blue amped up its services play at a time when it was ailing. Siemens is already going great guns, so this move seems smart and farsighted.

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