Part 1 of this blog series started with the assertion that product lifecycle management (PLM) solutions are becoming increasingly important to enterprises, to a strategic degree. However, not all PLM products are created equal, especially in light of their different origins.
My post then explored the strengths and weaknesses of the first group of PLM solutions: those coming from stalwart computer-aided design (CAD)/computer-aided manufacturing (CAM) providers including Siemens PLM Software, Dassault Systemes, and PTC, with Autodesk and Gerber Technology only lately joining the PLM fray. Then I analyzed the advantages of the second PLM group: the Big Three enterprise resource planning (ERP) vendors, who are SAP, Oracle, and Infor. NGC Software would be an ERP and PLM combination in the fashion/apparel industry.
One advantage that ERP providers have over PLM vendors with a CAD background is that their vast suites of business applications allow users to integrate product development with program management/product portfolio management (PPM), supply chain management (SCM), manufacturing execution, and customer relationship management (CRM). ERP players have the ability to intersperse data about financial results, resources, products, and workflows throughout their product intelligence capabilities, thereby enabling key product strategy and execution decisions. SAP, Oracle, and Infor’s goal with their PLM software, based on their respective SAP NetWeaver, Oracle Fusion Middleware (OFM), and Infor10 business process platforms, is to improve efficiency across the entire supply chain, create more visibility for new product development stakeholders, and enable easier collaboration through centralized data management.
IT managers see ERP-based PLM offerings as an opportunity to reduce costs and improve data transparency across product development, sourcing, manufacturing operations, the back-office, and customer-facing activities. In the case of SAP, customers that purchase the SAP Business Suite and SAP ERP get a free SAP PLM license and can add new users at a low cost. Moreover, companies don’t have to support additional technologies and have full integration to ERP data, which should be a big order winner. This is all music to a CIO’s ears, right?
Not So Fast . . . the Cons of ERP-based PLM Solutions
But ERP providers do not offer their own CAD solutions: rather, they provide basic integration to these product authoring tools. Experience has shown that the research and development (R&D), engineering departments, and related users are not exactly big proponents of ERP systems. Although ERP providers have many capabilities in their PLM portfolios, not all are best-in-class. If a vendor doesn’t have its own computer-aided technology (CAx) offerings, fully understanding the real needs of engineering departments, especially with regards to interdisciplinary systems engineering, can be very difficult.
CAD and PLM systems are independent systems that are often acquired and installed at different times by different groups of users. Product designers in different parts of the same company may even choose different CAD desktop software packages. There are many, for example, PTC Creo Elements (formerly Pro/E or Co-Create) design customers who don’t necessarily use Windchill PLM and, vice versa. This situation also persists with Siemens and Dassault Systemes’ respective CAD and PLM offerings.
When a company decides that it needs to manage the entire product lifecycle, it will likely need to support multiple CAD tools, a PLM system, and an ERP system to boot. While buying CAD and PLM software from the same supplier has its benefits in theory (i.e., best integration, contract volume discounts, one source of support, etc.), there are other important considerations to take into account, including the best PLM capabilities, the best ERP integration, specific industry support and savvy, etc.
Ironically, a “whole enchilada” system by a single ERP-PLM provider might require higher costs and time to implement or upgrade as compared to implementing separate enterprise pieces. Limited (or non-existent) digital product and manufacturing simulation capabilities by ERP providers mean that at least a computer aided engineering (CAE) and CAM solutions at least will have to come from another supplier.
In cases of environments with multiple ERP systems or multiple customized instances of the same ERP brand, the question of a single provider becomes immediately moot. At the end of the day, the lack of knowledge of product design will really keep the ERP providers out of the PLM business in some industries, as the core modules in PLM suites should support the engineering processes first.
SAP and Oracle’s visualization capabilities (see Part 1) will certainly help with the non-engineering PLM users (who don’t necessarily need the data-intensive CAD models). In SAP’s experience, most customers who want to integrate their third-party PLM solution with ERP start by generating the manufacturing bills of materials (MBOM) directly. With that they lose the control over an end-to-end change management process.
This is why many design decisions are not reflected in manufacturing processes and, conversely, ad-hoc changes from manufacturing operations are not told to engineering. This combination is a nightmare when it comes to product variant configuration processes as the engineer to order (ETO), configure to order (CTO), or assembly to order (ATO) process gets broken when “as designed” is not same as “as manufactured.”
Current (Sad) State of Affairs of PLM Implementations
Indications are, and recent user surveys show, that PLM systems (including CAD, CAM, CAE, and MES) rarely meet all of their touted expectations. Instead of arguing about systems and their origins, many PLM constituents would prefer to discuss how to help customers solve the major problems of bringing products to the market faster, more efficiently, and compliant.
The reality is that a PLM implementation often means a product data management (PDM) implementation in an engineering department without implementation of very many collaborative PLM processes with other departments and trading partners. See Kurt Chen’s blog post on the differing scopes of PDM and PLM.
Another reality is that most of CAD-based PLM vendors’ revenues still come from their CAD businesses (over two thirds of revenue). On the other hand, SAP’s 8,000 PLM customers on paper make it the PLM market leader. Some PLM market-sizing firms such as CIMdata put SAP and Oracle amid the Top 5 PLM providers (based on their PLM revenues). But the skeptic in us asks how many total active (maintenance) PLM seats does SAP have and how many PLM seats are bundled with ERP seats and therefore not necessarily in use, i.e., in the “bought but not implemented” category?
This is where the PLM math gets a bit fuzzy: do PPM and ideation, both modules of PLM, count as a full-fledged PLM user? SAP’s PLM revenue includes much PPM revenue: as many as 500 or so customers in our estimates that use PPM in their IT, R&D, and marketing departments. Moreover, SAP PLM is a part of SAP ERP—the best example is the SAP PLM 7.01 version, which is also called SAP Enhancement Pack 5 for SAP ERP 6.0. SAP likely allocates a percentage of its ERP deals, as well as a percentage of the maintenance revenue, to PLM licenses.
To bump up the PLM revenue numbers, some of the PLM vendors might be using the old trick of presenting mere CAD integration as PLM. Until recently, most PLM users were engineering change order (ECO) management users or just PDM users. In this scenario, a CAD system would dump flat files into a PDM system, and a workflow engine would then push the PDM data into an ERP system. ERP vendors have low-cost document-based integration to CAD, which may pull a large number of users, but this is not necessarily a real PLM implementation.
In spite of the potential benefits from PLM collaboration, switching from one PLM system to another (regardless of its CAD or ERP origin) in a rip-and-replace manner will not necessarily solve most of the aforementioned issues for the following reasons:
As in the case of rigid and monolithic old ERP replacements (see Workday’s recent ongoing success), the fact is that some companies are switching PLM systems too when they have a failure condition. Not everyone will keep what they have forever no matter how bad it is – if that were the case, the technology industry would be void of innovation and customers would not be looking for new solutions.
The final part of this series will introduce the third group of PLM providers, a new crop of so-called organic PLM/PDM products, such as those by Arena Solutions, Aras Corp., Omnify Software, Tradestone Software, etc. The next challenge for all PLM providers is process simplification. By solving this problem, this new generation of PLM vendors strives to decrease the complexity and cost of PLM implementations.
In the meantime, your views, comments, opinions, etc. about the PLM, CAD, and ERP software are welcome as usual. We would also be interested in your experiences with these software categories if you are an existing user or with your current and possibly ineffective product development practices. What PLM solution have you selected and why?
It seems to be the fashion of the day to blog about what is, or what is not PLM. These definitions vary by solution provider, analyst, and blogger.
If we want to move the industry and it’s solutions forward, I think we would be better served by focusing on the problems that need to be addressed vs. the definition.
For example, above it is stated that: “When a company decides that it needs to manage the entire product lifecycle, it will likely need to support multiple CAD tools, a PLM system, and an ERP system to boot.” This is only true in industries for which CAD is an important tool in the product development process. Many industries could care less about CAD and are adopting PLM.
You mention CIMdata’s measurement of the market and definition of PLM, which has been pretty consistent over the 12 years I have been involved with the firm. But there are some inaccuracies here: “On the other hand, SAP’s 8,000 PLM customers on paper make it the PLM market leader.” Other providers claim many more customers and a lot more revenue.
“Some PLM market-sizing firms such as CIMdata put SAP and Oracle amid the Top 5 PLM providers (based on their PLM revenues).” Yes, they are in the top 5 in what we call collaborative Product Definition management (cPDm) (an unfortunate definition, I know, but some people were positing PDM II at the time), but trail by a lot when we consider the full suite of solutions that are included in our PLM definition”
One more thing: “…the skeptic in us asks how many total active (maintenance) PLM seats does SAP have and how many PLM seats are bundled with ERP seats and therefore not necessarily in use, i.e., in the “bought but not implemented” category?” All solution providers have shelfware to one extent or another.
The post concludes by offering some fresh insight on “a new crop of so-called organic PLM/PDM products, such as those by Arena Solutions, Aras Corp., Omnify Software, Tradestone Software, etc.” Most of these firms have been around for a while, in one case a decade. Granted, some of their delivery models are innovative for this space, like Aras and open source, or are getting more traction because the market has shifted, like Arena.
There are some good issues cited above, like process simplification. As I said to start my comment, only a focus on what problems need to be solved will help the market, solution providers, and end users move forward.
Director of Research
Thanks for your great insights and comments, Stan.
Please stay tuned for Part 3, which might address most of your suggestions, such as to make high-level recommendations based on the end-user problems and requirements.
Best regards, PJ
PS - salesforce.com is older than a decade, but is still considered as a new crop of CRM solutions, as compared to Oracle Siebel and Saleslogix :-)
In ERP (Enterprise Resource Planning) Microsoft Dynamics NAV (Navision) ERP is one of the most renowned and trusted ERP software worldwide, it gives your organization better visibility to control over what is going on in your business. The ERP enables you and your people to make business decisions with greater confidence.
Thanks to start this discussion and thanks to Stan to clarify some points related to PLM market, solution and vendors.
In my personal opinion, we shouldn’t discuss about “tool” centric PLM but process centric PLM solutions.
A named PLM solution based on tools like CAD, ERP, or any other is not a real PLM solution. Processs along product lifecycle are dependent on what we take as product and related characteristics.
Differences in the variety of PLM solutions are based on the kind of assets managed along process, from conception to end of life, and how they are managed.
When the product assets are mainly Intellectual assets, the related process are managing the maturity stages of these assets. Too many changes must be managed from too many sources and there are multiple links between information belonging from these sources. ERP solutions are not fitted to address this kind of process management.
Once product reach advanced maturity stages related process are more linked to physical assets (production, delivery, operation & maintenance, dismanmtling, retire).
The nature of process and the assets managed by them define in each time the best solution. To address these needs a PLM solution must fit producs process management needs in combinatioon with other solutions (ERP, CRM, SCM) for all the process managing mainly intellectual assets. When process are mainly transactional managing physical assets, ERP gets the control in combination with PLM to track the history of process maturity steps.
Each company should analyze what kind of process they manage, what kind of assets are related, to decide the best solution/s combination weigting.
Also it’s critical to assess the ROI taking in account implementation cost based on deviation from solution OOTB and customer process and, no less important, the adoption cost (enterprice culture change).
PLM assessment goes beyond “tool” centric to “customer process” centric discussion.
PJ, Good points. I’m looking forward towards something I call - PLM centric PLM :-). Maybe it is what you call “organic PLM”. Thanks, oleg
Perhaps “PLM-centric PLM” is a safer term, given that some folks might be lead to believe that “organic PLM” is edible :-)
Thanks and regards, PJ