What I learned: This will be the year of SaaS in PLM

What I learned this week… came from conversations with manufacturers and SaaS vendors over the past year. I believe the market is ripe for a SaaS approach to PLM. When it comes to product development, every organization strives for efficiency, flexibility, better collaboration (internally and externally), and easier upgrades. Yet, business models that could enable such benefits, such as Software-as-a-service (SaaS) have not been widely adopted to support product lifecycle management. The ongoing economic malaise, however, is driving manufacturers to rethink how they deploy PLM, and other enterprise software systems.

One consistent point of feedback I have heard is that green-field opportunities (where there is no incumbent PLM solution) are the low hanging fruit for SaaS – no surprise there. This is why for the most part, deployments are mostly at small to medium size businesses, or in a division within a large company, where easy deployment, management and upgrade are of paramount importance. Typically, it’s difficult for the division champion of a SaaS approach to sell the concept to executives of putting a company’s product crown jewels online. And the concern isn’t just security; in many cases it’s performance: does the system have the ability to scale and handle large CAD models, and enable real time collaboration across the globe?

Social Product Development can Drive SaaS
One reason why I think 2009 (and following years) will be the year of the SaaS PLM model are the pervasive trends of social networking and open innovation. Companies in markets as diverse as complex discrete and fast moving consumer goods recognize the power of collaborating quickly with each other, suppliers, and customers during the new product development and launch process. And social networking and open innovation – “social product development,” if you combine the two – is the perfect venue in which to do this; the ideal foundation for this open approach is SaaS.

Implications for Manufacturers?
I don’t believe that SaaS will replace “traditional” PLM; a hybrid approach will persist. There will still be the need for local CAD data management so small engineering and design workgroups can quickly iterate on an idea or design, and secure certain information behind the firewall, not in the cloud. Hybrid models, at least at large companies, will persist for the near future – for example local data, CAD design, and manufacturing process management within the four walls, and the “business layer” of PLM such as customer needs management, product portfolio management (PPM), direct materials sourcing, and collaborative design (assuming a strong authorization system is in place) in a web based, service oriented system. Regarding PPM, however, I think many manufacturers will likely want to maintain much of the information about their product portfolio locally, and make only appropriate segments of the information available via their web interface.

A hybrid approach can be beneficial because SaaS PLM vendors have strengths that can complement an existing PLM implementation. For example Arena Solutions excels at BOM management and offers portfolio and supplier management capabilities, brightidea.com and Arc90 (with their Kindling app) focus on CNM, Accept Software provides CNM and PPM in a SaaS model. In the apparel & footwear world, Zweave and World Fashion Exchange provide line planning, calendar management, and supplier collaboration in a modular, SaaS format.  A flexible, open approach such as this could help accelerate enterprise-wide adoption of PLM, particularly in fast moving markets that are newer to PLM, such as apparel and CPG.

So that is what I learned (or have been thinking about) this week. Let me know what you think: is it finally time for SaaS to make its mark in PLM?