German conglomerate Siemens AG has taken a strategic decision to consolidate its software development and infotech businesses spread across 35 centres globally into two group companies, one of which is its Indian arm, Siemens Information Systems.

The other is Siemens Austria.

The decision on the consolidation was taken at the company's global headquarters last week. Siemens' global operations in software and infotech, structured under Siemens Business Services, reported a combined revenue of around 5.77 billion euros (Rs 29,000 crore).

H Gelis, executive director of Siemens Ltd, the Indian arm, said, "The decision to consolidate the Siemens group's software development business in the two units was taken last week."

"The decision was based purely on operational cost, as software development in India can be undertaken at 80 per cent lower costs than elsewhere. Also, India's infotech prowess is now globally accepted."

Siemens Information Systems was turned into a wholly owned subsidiary only earlier this year.

The company, which has a revenue of Rs 380 crore (Rs 3.80 billion), will be a major beneficiary of the decision. The modalities of the consolidation move are yet to be spelt out.

"Siemens Information Systems will gain in terms of the flow of investment and business, and will clearly be the growth engine. We will look at increasing manpower now as the operations grow," Gelis said.

In software development, Siemens Information Systems has a presence across the value chain. It has worked out a three-pronged growth strategy with just 15 per cent of the turnover coming from the domestic market and the rest from exports.

India calling

• Siemens will consolidate software and IT globally into two group firms.
• One firm will be Siemens Information Systems in India and the other Siemens Austria.
• Software development in India can be undertaken at 80% lower costs.
• Siemens' global operations in software and IT are around 5.77 billion euros.