In 2008 and 2009 several analysts predicted that the mid-market was now ready for PLM and that most of the PLM vendors were building a targeted offering for the mid-market. I was, and still am, a believer that mid-market companies will benefit from PLM in case ………… they implement it.
When you review my observations in my blog from the past two years, apparently this does not seem to happen. Therefore in the past months, I have been analyzing posts and discussions around the ‘old’ and ‘new’ PLM, I have been talking with representatives from various PLM and PDM vendors, and last but not least analyzed what was the implementation process of a PLM system in companies, where I could get these insights.
This all lead to this post, perhaps too big for a blog, too small for a report.
First the definitions
Before giving my opinion, first my definitions of PLM and mid-market (as everyone has their own definition):
PLM means for me the management of all product related data and processes, from the initial concept phase, through planning, development, production planning and after sales/service. When talking about PLM, I have always a circular process in mind. Experiences from products in the market are again inputs for new product development. Instead of a linear process where every department manages their own data, the challenge is that every discipline contributes and collaborates around the product data. This implies that a PLM implementation always requires a business change process for a customer
Mid-market companies are for those companies where there is no strategic layer available plus a minimized investment in IT-resources. This leads to organizations where most changes are happening inside departments and cross-departmental changes are hard to implement. The IT-department might be a facilitator here but usually IT people focus on architecture and infrastructure instead of business change. This implies that a PLM changed should come from external people.
And who are doing PLM?
On the enterprise level, there is a battle between the big three (Dassault Systems, Siemens and PTC) and they are challenged mostly by the two big ERP vendors (SAP and Oracle) and on the PLM front by Aras, competing through its Open Source model. Of course there are many other vendors. These observations come from the area where I am active.
There are various ways to group these PLM vendors; one is from the CAD engine point of view: DS-CATIA / Siemens-NX / PTC-Pro/E. Although all claim to support a multi-CAD environment, the main focus in these companies is around the PLM integration with their primary CAD engine.
Where in the past, CAD independent PDM systems existed (Metaphase, MatrixOne), they could only survive in the major PLM industries by being integrated with CAD tools and were acquired for that reason. It will be interesting to see if Aras can play a major role in the PLM only domain, where others failed in the past due to lack of integration capabilities.
SAP and Oracle took a different path; they have understood that PLM cannot be neglected in an enterprise, so they need to address it. SAP did this by developing a PLM module as a logical extension on their infrastructure. Oracle has chosen to add PLM to their portfolio by the acquisition of two different PLM vendors. Where SAP does not have the challenge to explain to customers a full integrated story, Oracle has to spend more time on marketing to make it look like a single platform, which will come in the future. Big question however for both companies: do they really understand PLM? Is it in their veins and core strategy or does it remain an extension to gain market share, especially as you have no connections to the design world? (Try to find PLM on their corporate website).
Interesting to see how Aras will evolve. In their business model, the initial purchase of software is not needed, but once working with Aras you pay also for maintenance like with other PLM vendors. Their advantage is that switching from an existing legacy PLM vendor is less painful, as there are no initial software costs, which can be huge for an enterprise. I believe they have a good chance to succeed in industries where there is less a dependency on the CAD engine.So on the enterprise level the need for PLM is justified. Resources exist and are budgeted both at the customer level as at the supplier level. The PLM suppliers are either the PLM vendors themselves with service teams, or big, global service providers specialized in implementing the PLM software. They can do strategic PLM projects and support the required business change.
So why does it look like a mission impossible in the mid-market ?
The big enterprise vendors (PLM/ERP) believe that you can just strip down your enterprise software in a kind of prepackaged mode – PLM Out of the Box is a common heard expression. Also the analysts praise in their reports the mid-market approach from some of these vendors.
But do they really address the mid-market or only the high-end mid-market? Again it is all about the definition of where is the mid-market and in this post I stay with my definition of mid-market.
There are two main characteristics for this mid-market:
- Sales and implementation of software is done through Value Added Resellers and not through the vendors or big service companies. The software revenue per customer does not justify high expenses for global consultants with additional high expenses due to travel costs (and sometimes the local language issue). The local VAR is supposed to be the point of contact.
- Mid-market companies do not change their main company processes. Depending on the type of core process, let’s assume ETO or BTO, they have sales and engineering working close together on product/solution definition and they have manufacturing planning and production working close together on product/solution delivery. In term of functionality a PDM focus for sales/engineering and an ERP focus for manufacturing.
A mid-market company can be characterized as a two pillar company :
Who are successful in the mid-market ?
There are two software vendors, touching our PLM prospects , that really understand the mid-market, Autodesk and Microsoft.
Autodesk has a huge range of products and when we focus on the area of manufacturing, Autodesk does not talk about PLM. And I believe for several reasons.
Autodesk has never been a front-runner in making new technology and concepts available for the mainstream. They are more a company providing functionality for mainstream concepts, as compared to a company pushing new concepts and technology for premium pricing.
And this is what their customers like, as they also do not have internal strategic resources to push the company to new directions and surely no one wants to take the risk.
Thus risk avoidance and understandable concepts are key targets for mid-market companies.
Autodesk tries to avoid reaching beyond their engineering domain, the maximum they cover is presented in their Digital Prototyping solution. With their Vault product range they stay close to PDM, but do not go into the concepts of PLM, like mBOM handling. PLM is not established enough in the mid-market, so a no-go area for Autodesk.
Microsoft addresses the mid-market more from the IT-infrastructure. Slowly SharePoint has reached a certain status of an infrastructure component for content management – so why not for all the engineering data? SharePoint is the most relevant component related to PDM or PLM in my review and what I observed here is that the IT-manager often is the person who supports and enables a cross-departmental implementation of SharePoint. So not pushed from a strategic business level but from a strategic IT architecture approach.
PLM providers and implementers jumped on this opening in the mid-market by providing PLM capabilities on top of SharePoint. This to get their software used in the mid-market. It does not mean they do PLM, it means they expand the visibility of engineering data across the organization. Microsoft apparently does not want to enter the area of managing CAD or engineering data. You see mainly investments in the Microsoft Dynamics software, where ERP and CRM are targeted. Again PLM is not established enough in the mid-market to provide common functionality, so a no-go area for Microsoft.
And the impact of a indirect sales channel….
VARs are the next challenge for PLM in the mid-market. The PLM Vendors, who work with VARs, expect that these VARs are an extension of their sales organization. And sales means here selling software . PLM means however also selling services and I learned in the hard way in my past that companies selling products and services within the same group of people are constant in internal conflict how to balance software and service budgets
Selling and implementing PLM software is also difficult in mid-market companies as these companies buy software because they want to solve a pain in one of their departments. It is not common that they have a holistic approach. So VARs trying to sell PLM are engineering centric – often with their roots in CAD Selling. And as their nature comes from product selling, they feel comfortable in selling data management and PDM as this remains close to product features easy to justify. PLM requires different people, who can guide a business change across departments at the customer.
It is very rare for VARs to have these skilled people in place due to lack of scale. You need to act local to be cost efficient and close to your customer. As a VAR has only visibility of a limited group of implementations, the consultancy practices often are not based on global experience and best practices, but defined on their own best practices, sometimes bring their ‘magic’ to be even more different than required, to differentiate from other VARs.
The companies implementing PLM for enterprises can afford to share global knowledge; VARs need to build up the knowledge locally, which leads to an extreme dependency on the person who is available. And to be affordable on the payroll a VAR, the consultant often is an experienced application engineer, who knows to satisfy his customer by providing services on top of the product.
And as PLM is not established enough in the mid-market, they will not invest and push for PLM which requires a long term experience build-up, so almost a no-go area for VARs
So no PLM in the mid-market?
I believe real PLM in my mid-market will be a rarity, based on a lucky coincidence of the right people, the right company and the right product at a certain time. It will not become a main stream solution in the mid-market as there is the design world and the ERP world.
PLM SaaS (Software As A Service) delivered by Arena or PLMplus will not bring the solution either for the mid-market. You might remove the IT complexity, but you are missing the resources (internal and external) for business change – who will be there to initiate and guide the change . PLM SaaS probably will be implemented as a PDM environment.
I give more credits for Social PLM (Facebook alike collaboration, Google Wave). This approach might bypass the classical way of working in companies and lead to new concepts, which probably will not be tagged PLM – will the new trigram be SPC (Social Product Collaboration) ?
Still it will not happen fast I believe. It requires a change of the management in mid-market companies. Most of the managers are representative of the older generation, not wanting to take the risk to jump on a new hype they haven’t made themselves familiar yet
Conclusion: PLM in the mid-market seems like a mission impossible and although PLM concepts are valuable for the mid-market as analysts report, the typical mid-market characteristics block PLM to become a common practice there.
I am looking forward to learn from your comments