Clarity on PLM

I had the chance to talk with … the PLM team at SAP recently to get an update on their plans and their progress to date. I have stayed in touch with them over the years, and have always been impressed by the opportunity they have to connect the business of manufacturing with the business of product development. As I reflected on the conversation, I struggled to understand why after all of the years of SAP getting too much credit for PLM, why they don’t seem to be getting as much credit for their recent efforts as I would expect. Today I hope to present both sides of the argument in the hopes to bring some clarity to the subject, and to start a conversation so we can all learn from each other.

Too Much Credit?

I have focused a lot of discussion on the complementary roles of ERP and PLM, and for many companies that translates to the roles of SAP and PLM. I have cautioned manufacturers in the past:

• Not to assume that an ERP provider that “checks the box” for PLM actually has a suitable PLM suite
• Don’t assume that any company offering both ERP and PLM have actually integrated them in a way that works for their particular business
• PLM suites vary significantly between vendors, even among the “best-of-breed” vendors
• PLM is not just another module of ERP, but a suite of solutions itself with some unique requirements

Those comments were typically in reaction to the “suite provider effect” where executives take a cursory look at a software requirement (such as PLM) and say “Doesn’t our ERP company have that? Let’s just use theirs.” While the ERP vendor’s solution deserves a review, if it doesn’t meet the business needs than the potential benefits of a single vendor and an integrated solution don’t add up to much. This conversation started way back in 2003 with my article Can ERP Speak PLM? in Technology Evaluation Centers (TEC) when I served as the analyst for the PLM Evaluation Center.

With all of those cautions in mind, my hope was that manufacturers that have an ERP (such as SAP) would do a thorough evaluation of their needs, and then select the solution (or solutions) that would work best for their business. In other words, they shouldn’t just take PLM from their ERP provider blindly.

Not Enough Credit?

With all of those cautions aside, the ERP provider should get a fair evaluation. There are benefits to integration and a single vendor solution. And SAP has clearly invested in PLM. I wrote about SAP’s PLM strategy and roadmap in the past on my Manufacturing Business Technology blog.* SAP has taken on a multi-year program to enhance their PLM offering, and they have made significant progress. Last year they introduced a new, web-focused interface that pulls together a product-centric dashboard for an item. The “PLM Object Navigator” as it was called offers information about a part from both ERP and PLM perspectives, including configurable sidebars. They have now extended that interface to the process PLM community, where SAP has a significant installed base.

But user interface isn’t all that SAP has focused on. They have integrated CAD management and visual communication capabilities to develop visual representations of the CAD models that all users can access. They have added functionality including labeling functionality for consumer packaged goods (CPG). They have also enhanced product compliance, collaboration, and requirements management.

SAP has remained consistent in their focus to support four PLM “value scenarios,” enabling business processes to help manufacturers in specific initiatives to establish “Product and Service Leadership“:

• Consumer-Driven, Sustainable Innovation
• Integrated Product Development
• Continuous Product and Service Integration
• Embedded Product Compliance

The names have changed slightly over time, but the needs SAP is trying to meet are well-planned, important, and have remained consistent. Clearly, SAP has a plan and has been hard at work to achieve it. 

The Confusion, and the Questions

When I talk to the SAP PLM team, I can feel the excitement and their sense of accomplishment. I hear about the progress on their plans and how they are fulfilling the needs of their customers. Yet from the manufacturers I speak with, I don’t feel the same enthusiasm. So here are my questions:

• Am I talking to the wrong companies, or the wrong people?
• Is it still too early?
• Did the down economy last year stall SAP’s ability to get the word out?
• Does SAP not have the ear of the product innovation, product development, and engineering staff?
• Are manufacturers tired of hearing what is coming?
• Is there just still more that needs to be done?
• Are the best-of-breed vendors too far ahead? Or too entrenched?
• Is there a slow revolution happening that I am just not in touch with?

So that’s what I hear from SAP, and my resulting confusion. I hope you found it interesting. What do you think? Can you help shed some light on my questions?

*Note: Sorry, no link to past posts on SAP PLM right now. Unfortunately the blog was taken offline by Reed Business when they closed the magazine. I hope to get that content back at some point to share with you.

A quick peek into some research on … the recovery of the software and hardware industry in this AP piece Analyst firm says tech sector to recover in 2010. The data has me thinking about what state the PLM market will be in this year. From all signs I can see, things are looking much better. I am looking forward to hearing from some of my peers in the analyst community that cover PLM directly, but for now here are some thoughts and – as always – my thoughts on how this will impact manufacturers.

The Research Findings

Here are some snipits from the AP release:

• Forrester Research Inc. … expects global spending on technology products and services to grow 8.1 percent in 2010, to more than $1.6 trillion
• Forrester also said U.S. spending is expected to rise 6.6 percent, to $568 billion
• Last fall Gartner Inc. forecast 3.3 percent growth in global technology spending
• IDC, said in December that worldwide tech spending would grow 3.2 percent in 2010

These are very good numbers. The fact that they don’t agree doesn’t bother me because it is not clear that the big gorillas in the analyst community have any standard definition of the market, they use different data sources, and as all manufacturers know a forecast by definition is wrong. But if you look at each of these, they are trending positive. With that in mind, we know several things:

• The software market is expected to recover
• PLM was growing rapidly (double digit growth) prior to the downturn
• The PLM value proposition is stronger than ever, and more companies have proven the value

I am not an economist, but I like the way this looks for 2010. I have also had the opportunity to talk to a number of manufacturers, and they are still very excited about PLM. I expect demand will be for core PLM, but also for other product innovation, product development, and engineering solutions as I mentioned in my post Mythbusting Product Innovation and PLM 2010 Predictions.

Implications for Manufacturers

Hopefully you and your vendor made it through the downturn. The past year saw many manufacturers take a survive and thrive approach to the market, leaning out to make it through the down market but innovating to be ready to capitalize on the recovery. This time was very though on software vendors as well. Although there were acquisitions, there was not a mass market consolidation as some might have predicted. If your vendor made it to see 2010, the chances are pretty good they will have a better year this year. Hopefully, all of us in the manufacturing and manufacturing software community will.

So that was a quick peek into some recent research on Product Lifecycle Management in 2010, I hope you found it interesting. I am looking forward to COFES (Congress for the Future of Engineering Software) where Cyon Research will report on the buying intentions of manufacturing and engineering companies. I had the opportunity to join Brad Holtz in conducting and presenting part of last year’s research on the impact of the economy on the engineering software market, and plan to do the same in Scottsdale this year.

Does the research reflect your experiences? Do you see it differently? Let us know what it looks like from your perspective. Please feel free to review more free research and white papers about PLM and other enterprise software for manufacturers from Tech-Clarity.

I had the chance to talk with … Sustainable Minds CEO Terry Swack late last year about their entry into the software world. The company introduced their on demand, green product design software to help manufacturers develop greener products. Sustainable Minds is furthering their ecodesign services by offering companies the ability to measure – and reduce – the environmental impact of their products early in the product lifecycle.

What do they Do?

The key to what Sustainable Minds offers is the ability to help companies make design trade-offs based on objective impact critera. Their product, Lifecycle Analyzer (LCA), allows companies to take a holistic look at the way their products affect our planet, including the energy used to produce it, logistics impact, energy to operate in use, packaging, and consummables. Their methodology, “Okala,” includes “impact factors” that allow designers to compare different options in systematic, repeatable, measurable way. I was impressed that the methodology is based on sound science and data from sources such as the EPA, giving the impact factors credibility. Okala is a single figure scoring system that includes 10 impact categories, over 550 impact factors, and CO2 equivalent values. Although there is no way to truly estimate how “green” a product is, the methodology and software provide a logical way to compare options in a meaningful way.

What do they Offer?

The LCA solution is made to work in conjunction with other solutions like CAD and PLM. For example, it can import a bill of material (BOM) from a CAD system to help engineers understand how “green” their products will perform. By wrapping LCA into the new product development (NPD) process, companies have the opportunity to make environmentally-friendly decision when they still have the flexibility to make decisions that won’t adversely impact product performance or cost, changing “green” from an afterthought to a design parameter that can be tracked.

Sustinable Minds also offers a Learning Center and a community to help companies adopt ecodesign strategies. They also leverage a database with impact factors and offer a process as well as tool. While most companies struggle today with just a process, this broad offering provides a way for companies to get started and makes analyzing design impacts realistically achievable.

Who do they Work With?

LCA is an early product, and Sustainable Minds has been running successful beta pilots. The goal is to work with manufacturers, consultants, and education to promote ecodesign. The company plans to roll out 12 industry modules, so they are thinking very big.

So that’s what I hear from Sustainable Minds, I hope you found it useful. What do you think? What else should I have asked them?

A quick peek into some research on … how the economy has impacted smaller companies in the engineering software market. This is a follow up to last my post on the impact of the economy on the engineering software market as a whole, with the detail I promised on smaller vendors. Last week I tipped my hand by saying that  smaller companies believe they will weather the storm, and some feel they will come out stronger on the other end. That generated some interesting discussion, so I thought I should hurry to post some detail, so here it is…

Research Background
My presentation at COFES indicated that the engineering software market is staying positive in challenging times. The research, conducted jointly by with Tech-Clarity, Cyon Research, and Design Insight, was presented at the annual “Congress for the Future of Engineering Software” and was the result of 1,000 survey responses. As I stated last week, the research was not intended to be an economic forecast, but instead an indication of the sentiment of the industry. The study was designed to guage respondents’ opinions about the market, and should be take as such.

Research Results – Smaller Vendors
The survey allowed respondents to classify themselves as customers (those that use engineering software), vendors, or channel (among others). Vendors were then broken down into the following two major categories:

• Broad Vendor – (broad suite) – a software company that offers a broad range of solutions
• Targeted Vendor – (targeted solutions) – a software company that offers one (or a few) best of breed tools

I was particularly interested in how the smaller vendors were weathering the financial storm. These smaller vendors play an important role in the PLM ecosystem, frequently pushing the boundaries of current functionally (I call these companies “innovators”) or serving a niche solution or population (I call these “specialty vendors”). These companies typically provide deeper capabilities for a specific industry, user population, or process that the larger vendors don’t support as well. These companies help to fill in the gaps for manufacturers while they wait for the larger vendors to address these needs (of which, some will probably remain unmet).

So what is happening to these vendors? The chart above shows that 75% felt that these companies would struggle, but survive. Given how drastic and unpredictable this economic downturn has been, I find that a surprising level of confidence. Still, 32% of respondents believed that smaller companies would go out of business, and 28% believed they would get acquired. Note that while this was supposed to be the “most likely” outcome, respondents could pick multiple outcomes. I believe this data is showing that respondents believe that some smaller companies will survive, and others will be acquired or go out of business. This is not an “either-or” situation, the scenario will be unique for each of the smaller vendors.These results are far away from the “doom and gloom” that are prevalent in some other industries.

My favorite view into this subject can be seen in the table below. When you analyze the opinions of what will happen to the smaller vendors based on who is commenting, you find a few interesting things:

• Targeted vendors don’t think they are going away
• Bigger vendors think they will be acquired (by them, I assume?)
• Bigger vendors are the most pessimistic about specialists, but interestingly the customers disagree

So the view from the smaller vendors’ perspective is not as bleak as some might thing. On the other hand, few believe it’s “business as usual.” These are tough times, and there have already been corporate casualties.

My Thoughts
What does all this mean? My opinion is that the engineering software market – as a whole – will struggle but survive.The smaller vendors, who are more nimble but also more vulnerable, believe they will stand the test of time. This is good for all of us, as they typically push the limits of the current solutions and help bring more innovation to the software market.

Implications for Manufacturers
For manufacturers, you should make sure to know how healthy your vendor is, but don’t panic. I don’t believe that a “rip and replace” strategy to save on software and maintenance costs will be easy to justify as a short-term reaction. Stick with your strategy, but update it based on the economic realities. If you are in the position to take advantage of it, this might even be a pretty good time to look for some deals from your vendors.

So that was a quick peek into some recent research on the impact of the economy on smaller vendors, I hope you found it interesting. Does the research reflect reality? Do you see it differently? Let us know what it looks like from your perspective.