IBM & Siemens in Germany Take Up the Labours of HERKULES
In late December 2006, the German Federal Armed Forces commissioned a consortium consisting of Siemens Business Services (SBS) and IBM to modernize and manage its non-military information and communications technology under the HERKULES project. A company called BWI Informationstechnik GmbH (BWI IT) has been formed in Meckenheim near Bonn, Germany to supply the relevant IT services. Siemens and IBM hold 50.1% of the shares in a 25.05%/ 25.05% split, while the German Federal Government holds 49.9%. The Bundeswehr is represented on the board of directors, and the consortium is open to audit by the military, the German Defense Ministry and the General Accountants Office.
The 10-year contract is now worth approximately EUR 7.1 billion (currently about $9.3 billion), including value added tax. This is touted as the largest current public-private partnership (PPP) in Europe, and up to 2,950 German Federal Armed Forces IT employees will be working within the project. After 10 years, BWI will revert to 100% Bundeswehr control. The project is underway, but rising costs are leading to rumbles about cancellation:
- From the Hydra to the Stables: Bids, and Responsibilities
- Grabbing the Bull by the Horns: Controversies
- Boaring Execution: Updates
- Chiron’s Picks: Additional Readings & Sources
From the Hydra to the Stables: Bids, and Responsibilities
The road to the project was a long one. Herkules was announced in 2002, and IBM and Siemens submitted their first bid as part of the TIS consortium with Deutsche Telekom AG. TIS lost the competition to the ISIC 21 consortium, which included EADS, CSC Ploenzke AG, and Mobilcom AG. Despite ISIC’s status as preferred bidder, they could not close the deal. Negotiations ended in 2004. As IT equipment prices continued to fall, however, and Germany began closing bases, it became more thinkable to supply all of the requested services to all of the desired locations within the requested budget. A 2nd TIS consortium bid was submitted in January 2005, but Deutsche Telekom dropped out and a 3rd IBM-Siemens bid became necessary in March 2005. On December 28/06, Siemens and IBM announced that a contract had been signed.
Under the HERKULES project the German Federal Armed Forces will bring their data centers, software and applications, PCs, telephones, and voice and data networks up to date. This includes maintenance and support of desktop software, SAP software as the large-scale back end, web-based applications belonging to the intranet of the German Federal Armed Forces, and communication programs such as Lotus Notes. In addition, there will be a PKI (Public Key Infrastructure), so that documents sent electronically can comply with signature and encryption regulations.
On the hardware front, Siemens will be responsible for operating and modernizing the decentralized systems at more than 1,500 locations in Germany. These will include some 140,000 PCs, 7,000 servers, 300,000 fixed-network telephones and 15,000 mobile phones. Managing local and inter-regional data networks and voice networks will also be part of their responsibilities.
Grabbing the Bull by the Horns: Controversies
Unsurprisingly, an April 2008 Deutsche Welle article notes that Paul Schaefer, the defense spokesman for the opposition Left Party’s parliamentary group, is opposed to the initiative. Beyond a general tenor of opposition to privatization sui generis, the concerns appear to fall into 2 clear areas: loss of control, and the potential blurring of civilian and military boundaries.
“The private sector can play a role, but the question is who is ultimately responsible for the decision-making… IBM and Siemens will want to recoup their money, and there no telling right now whether the project will actually yield savings… There’s definitely more supervisory administration in Germany than in the US… But the question of brain-drain remains. Will the know-how really return to or remain with the Bundeswehr once the contract expires?”
BWI’s CEO Peter Blaschke counters that Project Herkules is nothing less than “a mandate for the military to build up its own IT company,” and adds that servers will remain at Bundeswehr centers, not IBM.
The second area is bleed-over of contractor responsibilities. In the USA, military contractors have been known to take front line roles. While “security contractors” like DynCorp and Blackwater figure prominently in that debate, readers should also take note of the ScanEagle UAV system, which is maintained and operated on the front lines by civilian contractors through Boeing. Britain has also engaged in a number of public-private partnerships in the defense sector, up to and including and its aerial tankers that refuel its fighter and transport planes.
In a similar vein, Left Party spokesman Schafer observes that “…the vehicle maintenance company has already been in Bosnia. And it may probably be just a matter of time until logistics specialists become active in Afghanistan as well.”
HERKULES tries to keep that dividing line sharp by distinguishing between “green” (military) and “white” (non-military) information technology, with BWI restricted to non-military technologies and avoiding weapon guidance systems, IT for military command centers, et. al. The Bundeswehr will also be able to assume total responsibility under the agreement, if the civilian/military line blurs.
Time will tell if those dividing safeguards prove sufficient.
Boaring Execution: Updates
Nov 26/09: Deutsche Welle reports that Herkules may be headed toward cancellation, following ballooning costs:
“According to the Handelsblatt daily newspaper, a confidential report drawn up by government auditors suggests that the costs of the “Herkules” communications modernization project are spinning out of control… The price tag of the project was originally appraised at about 6.8 billion euros, but by mid-2008 that figure had climbed to about 7.1 billion euros. With much of the work still incomplete, costs have climbed to the point where many government officials are reconsidering the feasibility of the project.
A BWI-IT spokesman told Handelsblatt that the delays and cost overruns were justified because much of the project’s budgetary planning had been based on broad estimates, not real costs…”
Chiron’s Picks: Additional Readings & Sources
- Deutsche Welle (April 4/08) – German Army’s IT Project Raises Military Privatization Issues
- Siemens (July 6/07) – Herkules Press Workshop.
- BWI (July 6/07) – Presentation: Herkules – The Road to Success [PDF]
- Siemens (July 6/07) – Presentation: Herkules – A Successful Role Model for Europe [PDF]
- Bundeswehr (July 6/07) – Presentation: Transformation and Modernization
- Initial Announcement & Coverage (December 28/06) – IBM release | Siemens release | Seeking Alpha
- IT World (March 30/05) – IBM, Siemens bid again on German IT project