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18 Jan 05. IDG News Service, Düsseldorf Bureau, reported that attempts to modernize the communications infrastructure of Germany’s armed forces, the Bundeswehr, have gone nowhere so far. Now a consortium of industry powerhouses hopes to change that.

Next month, the TIS consortium, consisting of Deutsche Telekom AG, IBM Corp. and Siemens AG, plans to submit a new bid for a mammoth military IT project, appropriately called “Herkules,” a Siemens spokesman said Tuesday. Nearly three years have passed since the German Defense Ministry announced the project, which aims to modernize the German armed forces’ fixed and wireless communication networks and provide related maintenance and support services.It will be the second bid from the TIS consortium after the group conceded the first round to rival Isic 21, which includes CSC Ploenzke AG, Mobilcom AG and the European Aeronautic Defence and Space Co. EADS NV.Isic 21 ended negotiations for the €6.56bn (US$8.6bn) 10-year contract last year when it failed to agree on terms and conditions with the Defense Ministry last year. Money was the key sticking point.

After extensive negotiations with government officials, Isic 21 concluded that it would not be able to supply the Bundeswehr with all the equipment and services the military sought within its proposed budget, an EADS spokesman said at the time. Although the industry group was highly interested in the contract, he said, it wasn’t prepared to “subsidize it.” The new TIS bid is based on its former offer but “has been slightly amended,” the Siemens spokesman said. He declined to provide details. Several developments have occurred since Isic submitted its initial bid, however. For one, prices for hardware and software and for IT services have continued to fall. For another, the Defense Ministry has decided to close 100 bases, thus reducing IT upgrade costs. Asked, however, what the Defense Ministry will do if it fails to reach an agreement with TIS — the only group presently bidding on the contract — a ministry spokesman said, “We’ll have to wait and see how we will proceed.” The spokesman said the ministry expects to make a final decision this year. The Herkules project is also meant to serve as a basis for introducing ERP (enterprise resource planning) technology from SAP AG. The Bundeswehr project, dubbed SAPPF, aims to standardize the military’s administrative and logistics Whether TIS will make money from the military IT project is unlikely, according to analysts at London-based Ovum Ltd. In a report, Ovum research director Dan Bieler and Katharina Grimme, director of Ovum’s German operations, said they expect Herkules to generate low margins at best but even possibly a loss. They called Herkules a “prestige project,” which Deutsche Telekom, in particular, is eager to promote together with another of its big government projects, Germany’s truck road toll system.

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