The State of the PLM Market
Given the relative immaturity of the product lifecycle management (PLM) movement, PLM often means different things to different people. Namely, due to its deep engineering roots from the 1980s, it still often gets confused with computer aided design (CAD) and/or product data management (PDM) systems. While CAD involves the use of high-resolution graphics in a wide range of product design activities, allowing quick evaluation and modification of the designer's intent, PDM systems are merely vaults for storing and updating data, which replace paper-based processes and information storage with a single, centralized data repository that enables authorized users throughout a company to access and update current product information, while ensuring they follow specific procedures. Some might have even noticed the similarities between PDM and groupware or knowledge management (KM) technology appropriate to a range of other business environments, given that besides ensuring data integrity using relational database technology, both include workflow and Web-based applications that facilitate collaboration efforts.
PLM, which is an overarching strategy (concept) of guiding the product throughout its entire lifecycle, still includes PDM as one of its many subsystems (since a key feature nonetheless remains the ability to generate bills of materials (BOMs) and automate their changes to keep them perpetually up to date). However, it also entails much more, allowing collaboration amongst many constituents and successful planning and execution of new product development and introduction (NPDI) programs. A much broader mission of PLM would be to provide a panoramic "one version of the truth" in terms of data and business processes associated with the product from start to finish (i.e., from cradle-to-grave) to any involved party, such as design engineers, manufacturing engineers, production planners, purchasing, marketing, C-level executives, suppliers, and other trading partners. This still evolving category of software should help any manufacturing company deliver a product and continually enhance it by helping it manage and automate materials sourcing, design & visualization, engineering change orders (ECO), and product documentation, such as test results, product packaging, and post-sales data. It should also help companies manage through a mushrooming number of local, state, federal, and international regulations.
The raison d'tre for manufacturing companies is logically the delivery of products, and while these products can range from something as simple as a screw to something as complicated as an airplane or a transoceanic crude oil tanker, a great deal of effort and coordination must occur for the product to be designed, manufactured, delivered, and so on. The product development life cycle—conceptualize, plan, design, procure, produce, deliver, service, and retire—naturally includes multiple people, operating in multiple departments, and typically from multiple companies, each with locations in multiple countries around the world. Solving these inherent difficulties that result from managing this complexity are the raison d'tre for PLM solutions.
Hence, traditional PDM is not enough in a competitive and collaborative e-business environment, where manufacturers are required to deliver new products faster, cheaper, with increased quality and with immaculate after sale service. Customers, partner channels, and suppliers must be involved in a collaborative effort too, since the systems without enabling processes in place to coordinate product data for outsourcing, design, manufacturing, and maintenance are destined for failure. To be successful, systems require additional applications to manage the delivery of product data across the global supply chain. Leveraging the Internet as a collaboration vehicle, PLM solutions aim at enabling manufacturers, suppliers, and partner channels to collaborate at each and every stage of the life cycle. More comprehensive PLM solutions blending CAD, PDM, visualization technology, collaboration capabilities, program management, portfolio management and integration with existing enterprise applications have emerged only very recently to enable organizations to fully manage this lifecycle.
Thus, one PLM definition embraced by TEC would be that "PLM is the concept of managing the product (as well as the entire product portfolio) to drive profits, accelerate innovation, reduce costs, and ensure regulatory compliance, whereby the product record would include all the information required by the extended enterprise to conceptualize, design, source, build, sell, service, and dispose of products." Although much of the effort spent in PLM typically comes at the earlier stages (i.e., product design and rollout), PLM expands traditional engineering applications with business processes that stretch further into the enterprise and even further into the value chain. The multi-departmental, multi-company nature of PLM is changing the way that engineering-related systems are bought and sold, and has caught the attention of the CIO and corporate IT departments who apply enterprise application evaluation criteria and processes to PLM selections.
PLM Focuses on Specific Vertical Industries
Further,
most PLM vendors focus on specific vertical industries, and their solutions
have been developed to solve the specific needs of those industries (e.g., CPG
companies concentration on maintaining and extending the value and variety of
merchandise brands, pharmaceuticals, and life sciences concerned with ensuring
regulatory compliance, high-tech and fashion verticals focused on shorter time-to-market,
and automotive suppliers caring mostly about effectively managing the complex
supply chain). For more information on industry specific requirements, see PLM
Is An Industry Affair - Or Is It?.
This
problem of the inconsistent notion of PLM can be further compounded by users'
lack of understanding of their above-mentioned business needs and documentation
of the associated software requirements, as duly depicted in our article on
PLM selections (see Selecting
PLM Software Solutions). Given the optimal PLM strategy should contain a
layer of information and applications for executives, a layer for resource management
and budgets, a layer for overseeing projects, and a layer for tracking all product-related
business processes, there is no single vendor yet that can meet all of the varying
needs, and the market is still immature, so almost every product can be the
right solution provided a certain set of requirements.
Challenges to PLM Initiatives
The relative immaturity of most company's PLM initiatives and of the PLM software market provides additional challenges. Namely, ERP solutions for the most part cover the same, well-established basic functionality "footprint" of ERP functionality. Some have gone so far as to call ERP software a commodity, although that ignores the fact that there are still key differences between many solutions, particularly for different industries. The PLM market, on the other hand, covers a wide range of the above-mentioned previously unrelated software applications and the suites offered from different vendors can vary dramatically.
Applications
include product portfolio management, project management, resource management,
strategic sourcing, design collaboration, visualization, and others in addition
to traditional engineering applications like PDM and CAD. In other words, the
PLM market is still in its infancy compared to ERP, emerging from the traditional
PDM market, primarily due to expanded collaboration features and on the availability
of Web-based technology. Again, no vendor provides all of the required solutions
for a full PLM initiative at this stage, so almost all solutions will involve
best-of-breed components. Due to the number of components that are used to deliver
a PLM solution, there is still a plethora of niche providers that offer compelling
products yet fail to deliver on the breadth of the solution required. See The
PLM Program - An Incremental Approach to the Strategic Value of PLM for
more information on the components of a complete PLM solution.
There
are several dozen vendors that are offering suites of PLM functionality coming
from different worlds, based on their origins. A great part of these logically
hail from the engineering space and have since added to their design-focused
PDM applications to support additional manufacturing and operations-oriented
business processes. Companies in this space include EDS PLM Solutions
(based on EDS' acquisitions of UGS [formerly Unigraphics] and
SDRC products), Framework Technologies, MatrixOne,
and Dassault Systemes (being offered in partnership with IBM).
These vendors have deeply penetrated this market from selling PDM, CAD/CAM (computer
aided manufacturing—the use of computer technology to generate data to control
part or all of a manufacturing process), and related products such as engineering
workstations, mainly into the complex, discrete manufacturing industries like
automotive.
Other
heavyweights include companies with roots in CAD/CAM, such as Cadence
and PTC. All the above vendors' products tend to have a strong
engineering foundation and thus have gained a strong early following from product-oriented,
design-centric companies, which see PLM as a way to increase collaboration and
improve management of engineering-specific data.
On
the other hand, companies such as Agile Software, Eigner,
and Arena Solutions (formerly bom.com) were
created with the idea of providing an extended PLM platform that generally balances
design and collaborative manufacturing functionality. Agile initially expanded
its offering from traditional PDM in the opposite direction, first by adding
strategic sourcing capabilities, and recently a few other modules like product
service and improvement for after-sale information collection and for passing
feedback to a product development team.
PLM and the Process Manufacturers
The advent and growth of all the above vendors targeting the needs of discrete manufacturing industries proves that the PLM market in this sector has been hot. There are however, fewer experiences that reflect the PLM value available for process manufacturing enterprises, although the number of success stories is beginning to grow. In process, or formula-based industries, the product development processes require different functions. In process, for example, capabilities like least-cost formulation, specification management, nutritional analysis, test/analysis procedures, batch sheets, and packaging become very important. In addition, the link into manufacturing within a process company is complex with the role of PLM stretching into the plant environment. Process companies require a standard process specification (based upon S88 and S95 standards) in order to create consistent product worldwide.
The
process PLM market has a number of process-specific pure-play vendors with existing
and extensive solutions available today, including Formation Systems, OSIsoft
(through their acquisition of Sequencia), Prodika, Selerant, Siemens, QSA (and
their North American distributor MMI), ASD and Sopheon. With a release of its
Recipe Manager product, the ERP giant SAP has also joined the market with a
starter product and extensive vision. In addition, Oracle has applied some of
their process expertise to their new PLM solutions. For more info, see Product
Life Cycle Management (PLM) in Process; Part 1 Proven in Discrete, Ready to
Blossom in Process.
How ERP Vendors Penetrate the PLM Market
This
brings us to the fact that the ERP vendors are making their way into the PLM
market by bundling or partnering strategically to embed PLM functions within
their suites. Like in all other enterprise applications markets, albeit not
any time soon, the PLM market too will eventually come to a showdown between
the pure PLM vendors and the enterprise application vendors (e.g., Oracle,
SAP, IFS, SSA GT/Baan,
etc.), which have been striving to natively embed more PLM capability into their
products, in addition to the likes of PeopleSoft/J.D. Edwards
and QAD still filling their gaps through partnerships with
Agile and Arena Solutions respectively. Although their expertise is not yet
completely meeting innovative manufacturers' needs, they are making some dents,
given SAP garnered about $300 million in revenue from its PLM software sales
in 2002 and Oracle, which only recently introduced a full-fledged PLM product,
Advanced Product Catalog, boasts about earning nearly $30 million
in 2002.
As usual, the enterprise vendors will bet on leveraging existing customers who have deeply invested in the vendors, and have even reorganized operations around their ERP systems. The promise of PLM products from ERP vendors is the link to financial and manufacturing systems (albeit mostly the vendors' own, which is logical at this stage) and include supplier relationship management (SRM) capabilities and links to customer data in customer relationship management (CRM) systems. Still, since most PLM deployments begin by trying to solve engineering-oriented problems, these vendors' PLM offerings are not yet in widespread use.
However,
the PLM vendors' Holy Grail has become the ability to work with information
from heterogeneous sources, an order "du jour" within many large organizations,
which often have more than one ERP system or various legacy systems. The product
design techniques used by the most innovative manufacturers, however, are more
complex since they require that graphic renderings of products, usually created
by CAD tools, be passed back and forth between vendor and supplier, and that
customer feedback be incorporated in the process. Certain PLM specialty vendors
(e.g., EDS, IBM and PTC)
offer 3-D and graphic capabilities, along with decision-support tools that link
to ERP data, to manufacturers at the high end of this spectrum. This is analogous
to the enterprise application integration (EAI) market, since in larger corporation,
customers still may prefer integration vendors with renowned product strength,
vertical expertise, financial viability, and that are savvy in XML-based B2B
integration, multi-platform integration, and workflow management.
Finally,
a still clear ERP/PLM demarcation line would be that PLM solutions are oriented
around creative product innovation processes as opposed to the transaction-oriented
world in which ERP packages operate best, since the processes such as cost reporting,
procurement, sourcing and contract management, resource planning and monitoring
are best accomplished with control-oriented software, like ERP suites built
out from financial and analytics modules. Thus, ERP software can accommodate
product development that fits within an engineer-to-order (ETO) or configure-to-order
(CTO) framework. However, the ERP suites do not yet fully accommodate collaboration
as well as stand-alone PLM packages designed for that purpose. To remain competitive,
however, stand-alone vendors would do well to focus on easy integration with
ERP suites. For more information, see Can
ERP Speak PLM?
The
current PLM leaders' superiority, like in the case of the SCM and CRM markets,
will diminish as the ERP vendors continue to improve their PLM functionality,
collaborative capabilities and accessibility and add universal interfaces, including
the new Web service standards to facilitate access and integration of data outside
their own environment. Thus, the PLM vendors need to establish as strong a hold
on the market as possible before the enterprise and platform vendors catch up,
despite PLM's proven staying power within IT departments. Especially the remaining
tier two and three, point solution PLM vendors, if they can't gain significant
traction and distinctive differentiation, could find themselves in a position
of either being acquired or joining forces with a complementary functional or
platform technology vendor (such as IBM, Oracle, Microsoft,
Computer Associates).
PLM Market Still Expanding
The PLM market is still expanding despite some recent consolidation in the market, since vendors strive to deliver the functional breadth required to adequately address user needs. The market will only become more competitive as organizations see the benefit of PLM solutions. Because PLM is a relatively new market, there are still many small, innovative vendors that should be considered depending on the required functionality. Finding and evaluating these small, specialty vendors can be a challenge but can provide big returns in terms of increased product functionality. As a result, there is still quite a disparity in the breadth of functionality available but within the next few years, it will be easier to find more stable and standardized PLM solutions offering most traditional PDM functions, CAD/CAM drafting capabilities, project management, and support for sourcing. Again, for pure-play point solution vendors that decide not to build out this functionality, there will be increasing pressure to deliver better (and cheaper) integration to existing tools.
About
the Authors
Predrag
Jakovljevic is a research director with Technology Evaluation Centers,
Inc. (TEC), with a focus on the enterprise applications market. He has over
fifteen years of manufacturing industry experience, including several years
as a power user of IT/ERP, as well as being a consultant/implementer and market
analyst. He holds a bachelor's degree in mechanical engineering from the University
of Belgrade, Yugoslavia, and he has also been certified in production and inventory
management (CPIM) and in integrated resources management (CIRM) by APICS.
Jim
Brown has over fifteen years of experience in management consulting
and application software focused on the manufacturing industries. Jim
is a recognized expert in software solutions for manufacturing and has broad
experience in applying enterprise applications such as product lifecycle management,
supply chain management, ERP, and CRM to improve business performance. Jim
is a frequent author and speaker on applying software technology to achieve
tangible business benefits. Jim can be reached at jim.brown@tech-clarity.com.