SAP’s Journey to Dresden, East Germany’s Answer to Silicon Valley

After the Berlin Wall came down in November 1989, many West German companies, including SAP, rushed to open offices in Berlin.

In 1990, the SAP Executive Board decided that the fastest way to gain a foothold in East Germany would be a joint venture with ROBOTRON-Projekt Dresden (RPD), a leading software enterprise in the German Democratic Republic, and the data and IT division of Siemens, already a strategic SAP partner.

It was not about turning a quick profit, though: Dresden would go on to become an important base for SAP’s business and remains so today, 30 years after German reunification.

Dresden was home to a software industry before 1989. “RPD was founded in 1984 because East Germany had realized that software was vital to running enterprises successfully. This also paved the way for joint East-West IT projects,” says Hans-Jürgen Lodahl, who was managing director of RPD at the time and later became one of the three founding managers of the joint venture.

In 1985, RPD had begun building software for West German companies, such as Siemens. “Under what was called import-export coordination, we would procure products from a partner company in the West, and it would order software from us,” says Lodahl. “That way, instead of paying for those products in precious hard currency, we provided software in return.”

Plans Firm Up

Back then, RPD was an East German software company that employed 1,200 people. It was part of Robotron, a state-owned electronics manufacturer with 68,000 employees. “When the Wall came down, we knew that Robotron had little chance of surviving as a whole. So we set about trying to save as many jobs as we could,” says Lodahl.

Joachim Singer, who after the Wall fell changed careers to become HR director of RPD, recalls another problem: “In East Germany, we had tried to imitate, as closely as we could, the operating systems, database management systems, and mathematical programs of the West. We had essentially reproduced its software programs. So, when the Wall came down, at RPD we were worried we’d face claims for royalties. It was clear that it could not continue to exist as it was.”

In mid-March 1990, SAP, RPD, and the Data and Information Technology division of Siemens AG announced their plan to set up SRS (Software-und Systemhaus Dresden). A few days later, in Hannover, West Germany, the SAP Executive Board and RPD’s management continued their talks and firmed up their plans.

In those early days, there was no joint economic strategy for the two Germanys. SAP had, however, made certain assumptions about how East Germany’s economic system would change. An internal position paper on doing business there forecasted a real opportunity for SAP R/2, the company’s standard software: “Splitting up the huge state enterprises into smaller, clearly-defined businesses will result in an array of firms faced with the task of completely reorganizing and restructuring their operations.”

SAP wanted to gain reference customers rapidly to be able to demonstrate the benefits of its software in the real world, and especially how it could help companies meet new legislation. The first pilot customer was a major steel plant on the border with Poland. At that time, the plant was one of many state enterprises being privatized following the collapse of communism, and in 1990 it became EKO Stahl. Today, it is owned by ArcelorMittal and is still an SAP customer.

New Opportunities  

In the meantime, news of the firms’ plans had reached staff at RPD. “My client came into the office brandishing an SAP R/2 brochure and said, ‘You can stop what you are doing. We’ll be working on this software from now on,’” says Rainer Dittrich, who went on to lead the HR consulting unit at SRS and later at SAP.

SRS took on about 300 former RPD employees. Of them, 85 were put on SAP projects. Singer recalls that restructuring the business was not all smooth sailing: “The managers from SAP and Siemens-Nixdorf charged with setting up SRS had selected a number of Robotron employees to create a layer of management at the departmental level. In some cases, the new structure reversed old roles, with former managers becoming employees and vice versa. That caused some tension.”

After some initial difficulties, things soon settled down at SRS and the framework was in place for a new organizational structure.

Next Stop: SAP Headquarters

Just before Easter in April 1990, Singer received a telex telling him that the following Wednesday morning a bus would be waiting in the Robotron car park in Dresden to take employees to Walldorf for training.

“It wasn’t as simple as just telling staff; I knew I would have to persuade them to go. Hardly anyone here had heard of SAP. But we did have business dealings with Siemens, so many employees wanted to work for them. Besides, the operating system RPD’s workforce was used to was more like that of Siemens,” says Singer.

Many people at RPD had not yet been to West Germany on business, and SRS offered an opportunity. “When we got on the bus, all we knew was that we were heading to Walldorf. We arrived in a completely new world,” says Dittrich.

The new arrivals from the East were allocated to particular subject matters. After a general course on business administration, they were sent off in small groups to learn from the developers working on their respective subjects. Eva Rebitzer, who is still an HR consultant at SAP, recounts how, in the early days when everyone knew everyone in Walldorf, she first encountered co-founder Klaus Tschira: “‘Who are you?’ he asked, ‘I haven’t seen you before.’ When I told him that I was part of the delegation from Dresden, he was surprised to learn that we were not all men in dark suits.”

The RPD team traveled to Walldorf for training every week for three months. “Everyone really welcomed the new arrivals from the East. They had the technical expertise. Now they needed to get up to speed on the latest advances in western IT,” says Wolfgang Kemna, managing director of the joint venture.

Trust In the Future

Right from the start, the team from Dresden had great faith in SAP. “Because we worked so closely with the colleagues in Walldorf, we built trust very quickly,” says Dittrich. “There were about 100 employees working on HR, who were joined by 10 new people from the East. Working together gave us a sense of security. We also met up after work, had roundtable talks, and went sight-seeing. We learned fast what it really means to be an SAP consultant, and we weren’t left on our own.”

In July 1990, their three months in Walldorf were over. To mark the end of their time there, co-founder and CEO Dietmar Hopp addressed them at a large farewell event. It was time to return home, he said, and wait for SRS to be founded. “Dietmar Hopp turned to us and asked that anyone with the slightest doubt about the plans to found the new company raise their hand, and added that if anyone did, SAP would set up its own subsidiary in Dresden. That was a clear signal, and no one raised their hand,” Dittrich says.

East Meets West

Around the same time, in October 1990, Siemens acquired Nixdorf, the struggling computer company. “SRS’s founding was delayed, since we had to wait for the new Siemens-Nixdorf to come into being first,” says Singer. “And the Treuhand, the government agency overseeing East German privatization, still needed to give its go-ahead to Robotron-Projekt GmbH’s stake.”

Finally, on October 15, 1990, less than two weeks after German reunification, SRS was officially founded in Munich, and opened for business on November 1, 1990.

“When the company was founded, 325 employment contracts had to be signed all at once. By the end, I wasn’t even sure I could write my name correctly,” remembers Peter Hutzelmann, who was responsible for commercial management at SRS and later become its managing director.

Pursuing Goals Together

SAP did what it said it would do as part of its East Germany strategy: It primarily hired employees from the former German Democratic Republic. But as Singer tells it, it wasn’t easy at first for the SRS colleagues who were assigned as consultants on SAP projects: “The companies didn’t like having Robotron employees advising them. The IT equipment in East Germany was never sufficient. It was allocated or not ordered, which is why the Robotron technicians who were known at the companies weren’t very highly regarded.”

This made it very important for the RPD consultants to have experienced SAP lead consultants by their side. One of these lead consultants from Walldorf in the early days was Joachim Prawitz, responsible for the human resources area.

Kemna remembers him with great respect: “The lead consultants from Walldorf helped to increase acceptance of the East German consultants. For SRS, it was much more important to have good, experienced SAP consultants than good salespeople or developers. There wasn’t much to sell, after all; the projects were ordered and paid for in the West, while the technical expertise was in Dresden. It became clear how important it was for the East German consultants to have assignments on projects in West Germany to learn how projects are executed at SAP and to build their own networks within the company.”

As Kemna tells it, Lodahl was also an important player during this time. “He was one of the leading people in the east – and not only in Dresden – with regard to IT, hardware, and software, and had a huge network that helped us repeatedly. Sometimes we didn’t even know what strings he had pulled.”

Kemna explains how SRS managed to produce a profit from its first year in operation: “The majority of the initial consulting revenue, in fact, came from projects with customers in the West since much of the industry in the East had been phased out. 1990 was too early for East German startups and, even so, they would have been too small for our R/2 product.”

Nonetheless, SAP customer numbers in the East grew steadily from 1991, primarily from government-funded orders. The municipal transport services in Dresden and Leipzig chose to implement SAP software, for example, and have remained customers to this day.

SRS benefited from the advantages of a joint venture: the contacts of all three investor companies and the possibility of offering the equipment, business software, and support from a single source.

Safe Haven

Employees like Dittrich recognized the opportunity at SRS, as rapid deindustrialization resulted in the loss of millions of jobs in the former East Germany. The government responded with job-creation schemes, cuts in working hours, and early retirement options, among other schemes.

“The only contact we had with reduced working hours, which so many former German Democratic Republic citizens were forced to endure after reunification, was a new development for our RP system – because reduced working hours were unheard of in the West in the 1990s,” Dittrich explains.

But SRS colleagues still faced a wide variety of career challenges. The working methods at the SAP office were ahead of their time even compared with West German standards at the time. The new colleagues in the East had to make this leap too, in addition to gaining expertise in SAP products and processes and in general market economy topics.

Petra Röber, now a senior business support specialist at SAP in Dresden, was Hutzelmann’s assistant at the time. A young parent then, Röber was hired by RPD in 1990 and, after Hutzelmann left the company, she continued to work as an executive assistant at SRS before taking on new challenges at SAP. “In the 30 years that I’ve worked for SRS and then SAP, there wasn’t a single year that I didn’t learn an awful lot of new things or develop as a person,” Röber says.

At the same time, SAP employees were used to dealing with one another as equals and with goals in mind. “I was surprised that I could turn to my manager when I had problems with our IT initially, and he was very helpful and straightforward,” Singer remembers.

Ultimately, the strategy of establishing two business hubs proved to be a sturdy foundation for business in the East. What’s more, SAP offered former German Democratic Republic experts in Berlin and Dresden a new place to live and work. This also meant that everything they had achieved in their careers before the Wall fell still counted, which was often not the case for people in eastern Germany.

What Happened Next?

SRS was privatized in 1993 and the Treuhand’s 10% was distributed equally to SAP and Siemens. Ten years later, SRS had become one of the most important employers in the region. The SAP share of SRS consulting business grew steadily. “SAP experienced an amazing rise, while Siemens-Nixdorf faced its liquidation in 1998,” says Hutzelmann, who joined Siemens in 1996. “As a consequence, SAP took over 100% of SRS.”

In 1997, SRS, SAP System Integration (SAP SI) in Alsbach-Hähnlein, and SAP Solutions in Freiberg am Neckar were all merged to form the new SAP SI. In this form, it was fully absorbed in the parent company in 2008 and moved into the new SAP office building on Dresden’s Postplatz.

Today, Dresden is an important location in the SAP universe, and celebrates its 30th birthday this month. Hans-Matthias Fischer, Technical Financial Management lead in the Global Cloud Services organization of SAP, sees its broad portfolio as one of the key reasons: “The mix of consulting, sales, application management, customer support, IT support, global cloud services, and research makes Dresden strong and attractive. The entire region benefits from SAP in Dresden.”