Global Development Strategy of Siemens AG - Case Study Example

 I. Introduction This paper aims to analyze the case about the Global Development Strategy of Siemens AG. The case revolves around the company's newest project, NetManager and its current problems in line with project management, structure and organizational culture. This paper aims to look at the case from a strategic perspective, with which recommendations are given in the end. II. Body A. Situation After years of building a reliable telecommunications system, Siemens AG is facing some serious forces within its macro-environment, signaling some changes in its strategy. With the advent of the Internet, the once flagship product of the company, the EWSD, is facing some threats with the emergence of new technology. In order to address these issues—both to capitalize on the strength of the systems that the company has produced over the years as well as opportunities with the advancement of information technology, the company has come up with the “EWSD NetManager project.” This project aims to integrate the EWSD network nodes and networks into a user-friendly and graphics based software product to telecoms customers. This integration aims to provide the customers a complete range of facilities in order for them to operate, administer, and maintain the functions in their customers' EWSD network nodes and networks. This project requires the expertise in the EWSD technology as well as expertise in desktop computing languages. Siemens over the years has developed distinct specializations in its independently running RDCs. The company's RDC in Florida for example has developed a significant technical expertise on handling EWSD. However, because the Boca Raton RDC in Florida has been given much independence in their operations, their expertise are usually tailored to those of the needs of the local customers. Thus, the expertise that they have developed has been different from those of the main office in Munich, Germany. Siemens' another RDC in Bangalore, India, however, has the technical expertise when it comes to desktop computing languages. These RDCs provide different advantages when it comes to the decision of which one should handle the NetManager project. B. Complications In pursuing this project, Horst Eberl and Karl-Friedrich Hunke, the two subdivisional co-heads of Siemens' Information and Communications Network, have unearthed several hindrances to the implementation and commencement of the NetManager project. When the company has decided to give the task to its Bangalore RDCs because of its technical expertise on desktop computing languages as well the lower costs of operations, the difference in the RDCs way of doing things has lead to a major crisis in Siemens. The first release of the NetManager has a lot of serious glitches that programmers in Bangalore have ignored at first. The difference in approach to systems management has been apparent in this situation. For one, while the Munich programmers are being very meticulous, where these programmers have to document a hundred faults for four minutes in order to trace the system glitches, the Indian programmers' approach is to solve the glitches immediately without regard to the report. However, in the case of NetManager, the huge number of glitches cannot just be solved right away because of system dependencies. This crisis, however is not totally the fault of the programmers in Bangalore. Because of the differences in work schedules, during the time Indian programmers have been working on the NetManager project, most of the engineers in Munich are out for their long-planned vacations, with no other ways to contact them for consultation. When the NetManager has been demonstrated to Siemens ICN's largest customer, Deutsche Telekom, the system has failed miserably that the customer has to stop testing it. It has to address the concern of Deutsche Telekom by continuing on the development of NetManager until the company has come up with a stable release. C. Analysis The case of Siemens AG is about the a problem of integration; the clash between the company's major organizational variables—the company's strategy, its structure, and its culture. Because the company's approach to strategy is only reactive—the EWSD is a product of addressing the forces in the company's macro environment, and does not include being proactive, the company's structure, at least for the organization of Siemens ICN has been a pain instead of a support to its strategy. Or maybe, it is the company's lack of a coherent strategy that leads to its cluttered structure, which gives it problems in integration for the current. Siemens has developed the most advanced and reliable telecommunications system in the world, and in its desire to expand globally, it has expanded its organizational structure. This leads to the Boca Raton RDC to gain independence in order to suit the needs of the local customers. However, in doing so, the expertise that the RDC has developed is not the same as those of the expertise of engineers in Munich. The Bangalore RDC has the expertise that the Munich engineers do not have in terms of desktop computing skills. Where the company fails, is that these vast technical knowledge from its talents have not been managed well, in such a way that it becomes a learning organization. The problem of integration in terms of the NetManager is because of the dispersion of the talents that are needed to handle it. If all the knowledge are pooled and managed by a function within the company, then irregardless of RDCs, the NetManager can be commenced any where because the technical know-hows are available and can be passed on in a given geographical region. Because the talents are dispersed among some of its larger RDCs—Boca Raton, Bangalore, Munich, the integration due to international socio-cultural differences becomes even more difficult. III. Alternative courses of actions In order to continue with NetManager, the company is faced with alternatives for the shorter-term, at least in order to address the issue with Deutsche Telekom. These alternative courses of actions include: a) to move the development of NetManager to Europe, such as in Austria, Belgium or Portugal; b) changing the Bangalore RDC from a software development outpost for Munich into an equal status with the Boca Raton RDC; c) to move the major project responsibility and accountability to Munich but leaving the development activities in Bangalore. Moving the development of NetManager to Europe has its share of advantages—Siemen's major customers are in Europe, and by moving it back, both inter-company coordination and coordination with its customers will be easier. However, the major disadvantage of it is that 50% of NetManager's resources are in Bangalore. If the company moves the development to Europe, the time lag before the project completes will be much longer when moving the resources. Also, moving it will strain the relations of the company in its Bangalore RDC. If the company chooses to change Bangalore from a software development outpost into an equal status with the Boca Raton, Siemens will be able to capitalize on the low cost but productive talents in the city. Also, because Bangalore is more independent, it becomes more flexible when it comes to dealing with hardware systems, such as the company's EWSD system. While Bangalore possesses the desktop computing talents, if its stature becomes equal of Boca Raton, the RDC will be able to have greater productivity due to flexibility. However, the major disadvantage of this alternative is that it requires major investments and significant expansion of hardware-design facilities and system-testing. As for the third alternative, moving the accountability and major responsibility to Munich will be good in order to ensure stricter quality inspections. Because the EWSD NetManager project requires deeper understanding of the EWSD system, in which Munich engineers have more knowledge, they will know what is essentially needed in order for the system to run correctly and adequately. Moving the accountability and major responsibility will make Munich engineers more participative in the process. However, apart from huge increase in costs, issues in terms of coordination and managing the project well in the span of thousand miles in terms of geographical distance is a disadvantage. IV. Recommendation The third alternative, moving the accountability and major responsibility to Munich but retaining the development activities in Bangalore is the one that could address the concern of Deutsche Telekom as regards quality issues. Management of the project between the two distant RDCs in terms of proper coordination and communication should be given priority—how people will coordinate over such a huge and complex project just with the help of technology will determine the success of the project. This includes some human resource strategy and policies are to be incorporated in the ways the two RDCs of Siemens operate, in order to ensure smooth coordination and communication between Bangalore and Munich. In the longer run, however, Siemens should adopt a knowledge management strategy where the company will have an access to the technical expertise that all its RDCs have developed, being integrated to a standard system of quality management across the company. The RDCs then will be parallel in terms of the company's structure—one is not better or more specialized than the other. This will provide integration for Siemens, and will enable it to globally expand further because it can replicate the level of quality in any of its RDC for different customers across the globe, thus delivering the promise of the Siemens brand. Also, by this way, when projects like NetManager is done, inter-company trainings through the knowledge management system will enable one RDC to handle the project effectively, without the additional costs that are incurred because of geographical distance. Also, inter-cultural conflicts will be minimized because a project can be taken by one RDC where the quality standards are uniform with the other RDCs, knowledge is accessible, and the only concern is which choice could increase the company's profitability. Read More