Mid-market PLM: Smashed Or Transformed?

I’m following PLM for mid-market trends Jos Voskuil’s virtualdutchman blog. This weekend, I had chance to read his PLM for mid-market mission impossible post: PLM for the mid-market – mission impossible. Jos figured out two main characteristics of PLM:

[… 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…]

I found the combination of these characteristics interesting. Because they are presenting how orthogonal is everything in mid-market to the successful PLM implementations made for large enterprises. Mid-market journey for PLM companies was important for two obvious points- (1) to expand market; (2) to establish the strategy for supply chain – place where FTP and USB drive is leading. However, vendors tried to push PLM in a very straightforward way. Costly direct sales were replaced by optimized indirect channel (VARs) and costly customization, implementation and services were replaced by optimized out-of-the-box solutions. It seems to me the results are pretty much smashed. It doesn’t work.

What is my take on Product Lifecycle Management for smaller companies? There are two important words I want to think about – granularity and transformation.

Transformation
The history of successful software is a history of transformation. If you remember CAD history or PDM history, you will understand that at the time when a significant failure or dissatisfaction happened, new technologies and solutions came and presented their capabilities and values. 15-20 years ago 3D CAD systems moved from big workstations to PC – we know what happened then. 10-15 years ago PDM projects moved from the state when they required compilation and build to manage customer data to more flexible SQL-based data modeling running on Windows and later Web solution. Clearly current PLM state of the art systems requires re-thinking and change.

Granularity
I like this word. For me, it means first of all precision and understanding. As I mentioned few months ago, large monolithic PLM implementations are a thing in the past. To find PLM solution for smaller customers will require to go and understand what these customers are doing on the very granular level. The best demonstration of granularity for me is the web. Combined from a huge amount of granular data pieces it represents a solid and well functioning system.

What is my conclusion today? Trying to replicate big ideas sometimes requires more than a company financial interests. The distance between racing cars and mass-production is huge. Technology is a tricky issue in the enterprise and when you are trying to scale it down might become broken. I think, last 3-5 years presented a very interesting try in implementing PLM solution for a smaller organizations. Today is a time to analyze results and think about future transformations.

PS. So, how PLM for mid-market story should end? The following video is just one idea…

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  • Oleg, fully agree with you and the viewpoint you add to the discussion.

    BTW Can you make more of these kind of movies. They are good ….

    Regards

    Jos

  • Jos, Thanks! You can consider YouTube as “transformed” video publishing technologies. If you remember, the tradition “video” was pretty much expensive and non-granular. Almost like PLM :).. Best, Oleg

  • Granular is the key. The lack of a granular approach creates a situation where the customer pays to much in consulting and in the end receives reduced value because what they try to accomplish is simply too large and complicated. When/If PLM was delivered as a set of WEB services that could be combined as needed the customer could start with things that provide value and increase what they do over time. To some extent this is what has happened with PDM. Now there are so many ways to manage files and many are very simple and some are really a WEB service. You could go as far as saying DS is even attempting to Google Doc CAD files in V6, but you cannot say the approach is simple.

    Oleg it would be interesting to hear what makes something granular or not. It would also be interesting to hear how important is the cloud with respect to delivering a granular solution. For example I’ve recently seen a demo of PLM Plus (Very poor name) and I would say this is very granular. The focus of PLM Plus is BOM management without CAD file management. Certainly BOM management is a granular function that exists within the clients environment. I suppose you could say the same about file management.

    I would also put Vuuch in a category of providing a granular solution. Vuuch can be applied without any other PLM tools being deployed or Vuuch can be applied in parallel or in conjunction with a PLM tool. As a granular component Vuuch provides different levels of value based on what the customer requires. For example Vuuch improves project execution, compliance, security, business intelligence and IP reuse and the customer decides which of these values to utilize.

    Following on with the idea of granular solutions. You can say CAD and FEA are granular solutions and I expect you could argue this is part of what has made them successful. They address a very specific need. What other functions could be targeted with a granular approach?

  • Chris, I also believe a PLM solution should be granular, it gives you the flexibility to choose and prioritize without being locked in by a single product. The main skeptic impression I have, is that granular solutions do not change the way people work. You find perhaps more optimized solutions for a certain activity, but you will not change the cross-departmental processes, which I believe are key to call it PLM. Who or what is going to initiate this change ?

  • Chris, Thank you for your insight! To explain what is granular for me, I’d like to put the story about how to fill a jar with stones, pebbles and sand. I’m sure you know the story. It comes very often in the context of priority management. You need to put stones first, then pebbles and only in the end – sand. I’d like to provide my translation, of how I see it in the context of PLM and granularity. You need to prioritize everything. To put fundamental things first (data management, flexibility, identification, collaboration, …). Then think about functional pieces (bill of material, change management, …). And only in the end to fill gaps with best practices of how to use it (processes…). The biggest complexity is that you don’t have a single jar :), when you build your PLM solution. Customers are not buying technologies – they are buying solutions. However, this is still not a reason to put sand before stones :). PLM solutions that were built bottom up are pretty stable even these days. Solutions that contain enough “flexibility” in their architecture can be transformed (it cost $$$, of course) to functioning on the appropriated level for customer. Just my thoughts! Best, Oleg

  • Jos, Thanks for your comment! Flexibility is a key. As I mentioned, PLM solutions today are not flexible enough, even if it sounds weird. Your point about “change the way people work” is more complicated. I believe that in order to change how people work, solution needs to support how they work today. Then a solution has a power to change existing processes. However, most of PLM solutions came with an idea to change business processes without understanding how organization work. For mid-sized companies it was a key, since they have a unique perception on how to organize company business. As opposite, large OEM had enough money , resources and time to customize their PLM solution to the acceptance level. Just my thought… Best, Oleg

  • Frank

    Oleg, I like your granularity idea. Besides that, I think Jos’ analysis ignores the fact that dozens of smaller vendors and service providers are successfully implementing PLM in hundreds and thousands of mid-market companies. Their strength and differentiator is their ability to listen to those customers. There is a long tail in this market. Most analysts just don’t look at it.

  • Frank, Agree with you on the “long tail in PLM implementations”. The idea of OOTB PLM implementations for SMB tried to solve this problem in the way of “one big shoot gun”. It was a nice try, but today is the time to learn from results. And, this is the place where I’m coming with the idea of granular transformation – to find a way to implement it differently for a variety of customers with a high level of diversification in their needs. Great discussion! Thanks, Oleg

  • Frank hi,

    I am curious to learn which vendors and service providers are really implementing PLM in thousands of mid-market companies. This would mean they have been able to work below the radar of all analysts.

    In my post, I am also mentioning that I consider PLM as a business change, where both marketing/sales, engineering,manufacturing and after sales collaborate and share a single product definition with perhaps different views as eBOM, mBOM, sBOM including the integrated development and change processes.

    PDM, having a single repository for product data is often labelled as PLM by vendors, but as I mentioned in my post too, there are many definitions, often vendor related.

    As always I am curious to learn, can you elaborate ?

    Thanks

    Jos

  • Frank

    Jos, I am not an analyst. I happen to work for one such “smaller” vendor in Germany. Together with our top few “smaller” competitors I’d guess we have at least five to six hundred mid-market customers in the german speaking market alone. And there are dozens of other smaller vendors world wide.

    Granted, the question is, what all those vendors sell and what all those customers really implement. Most don’t have a top-level PLM vision, but, as an example, integration with ERP (incl. BOM) is quite standard among our customers — we even haven ERP adaptors for SAP and other ERP systems as standard OOTB products.

    I can tell you that the customers I work with, take their processes quite seriously and spend a lot of money to support them. What those customers really dislike are vendors that do not listen — CAD-driven vendors easily fall in this category, BTW.

    Regarding “PLM vs PDM”: PLM *is* a business change, that *must* be driven by the customer. Not a vendor. There is no such thing as a “PLM system”. Not even a PLM vision you can buy and re-use. PDM is one tool. Combine it with E/MCAD, parts of ERP, and probably dozens of other tools and you get your best of breed collection of technology to put your PLM on it.

    Regarding big vendors: big visions, lala offerings, if you ask me. Just look at how they borked PLM at some of the big shops. Their market view is still driven by what they have been before PLM (CAD vendors, say), selling a lot of “3D” and such. Difficulties to adapt to the needs of mid-market customers.

  • Thanks Frank, and I agree with most of your statements. That is why I stated, PLM for the mid-market – mission impossible.

    What I tried to explain in my post is that none of the vendors likes to address the PLM mid-market as a global business. Typical mid-market companies like Microsoft and Autodesk try not to talk about PLM.

    If you look to the German market, they were the first to embrace PDM, due to the fact that there is a huge mid-market of small and mid-sized manufacturing companies. Products like Eigner and Compass were very complete at that time.

    But after being bought by some major global vendors (Oracle / Autodesk), they became invisible, obsolete and phased out, instead of being the platform for a global mid-market offering. A lot of knowledge disappeared here.

    I believe, thanks to the DIN-standards, a lot of standardization was done for the German market. Sachmerkmal-Leiste is a typical example, which is typical to the German market but unknown elsewhere around the world, although it is a common best practice.

    A connection to ERP is for me not a proof point that the company is doing PLM. In many cases I have observed, it is just an automatic transfer of BOM data to the manufacturing department and there they manipulate not connected to engineering the BOM further. So replacing the manual type work by automation.

    In one of my previous posts: http://virtualdutchman.com/2008/07/03/where-is-the-mbom I wrote about this.

    Interesting to learn from your company is, how do you handle the dominance of SAP for sure in Germany, as they also claim to have the PLM extension, so why introducing another PLM system ?

    I think, and here we come back to Oleg’s post, it is all about granularity – as PLM is not a product and it is not a standard implementation. Question for me is, will this ever exist in a global mid-market ?

  • Frank, Thank you for comment! I think, to see PLM as vision (or initiative) driven by customers is an interesting approach. For mid-market space, where no one is similar, it may come as a game changer. However, to make it happen, you need to provide a system to support it. Today, the most reliable (but still not efficient) system for such implementations is MS Excel. About vendors — in the end, they are organizations for profit. PLM comes bundled into ERP or CAD- this is how it works for many years. Best, Oleg

  • Jos, Agree with you. Since lots of systems (like you mentioned) dissolved into large software vendors, this is the exact time to think and analyze the results and analyze how to deliver a solution for mid-sized companies. Thanks for your comments! Best, Oleg.

  • Frank

    Jos, I see your point and agree: PLM for the mid-market as a single vendor’s product offering is impossible (if not absurd). PLM is by far more business initiative and services than software products, and a lot of mid-market companies may not have the resources to create an effective PLM iniative. And while larger companies have and spend those resources, their PLM programs are also not based on a single vendors software products.

    I do not see a fundamental difference between “PLM” and the combination of building blocks like C-tools, PDM, ERP, services and a product centric vision. Therefore my “ERP integration” example. Don’t know if you read german, in case you do, here is a short piece I wrote about PLM strategy in 2008: http://www.contact.de/news/archive/news2008/VA11-01-08/

    Regarding SAP, their success with PLM is not so overwhelming that there is no room for competitors. It perfectly makes sense to combine SAP’s strength in standard processes with a PDM “frontend” to support engineering processes.

    In my view, granularity is just an other word for combining best-of-breed/best-fit components to support a companies needs. The granules may be CAD-tools, PDM, ERP and other enterprise systems, lots of Excel sheets, home grown apps and databases and even today still paper forms. This is more prevalent with PLM than with other problem domains, and therefore the openness of all those PLM components is the key to success.

  • Frank, A very interesting observation about SAP and “front-end”. In my view, it is a very typical situation when the proposed straightforward solution related to SAP is to have “client” or “front-end” or “yet another user interface”. Microsoft largely promoted this approach in SAP-Duet (Office Business Apps). In this case Office is a front-end for SAP business data. However, in my view, engineering processes require some business logic too and not only “front-end”. Maybe I didn’t get right your definition of “engineering processes”? Thanks for your comments! Best, Oleg

  • Frank

    Oleg, I meant front-end process-wise, not as a client for SAP. Engineering (i.e. the product development process) works inside their tools (PDM, CAD, …) & passes its results to “the rest of the company”. PLM is the organization’s overall information and process architecture.

    This, in fact, is a granular approach: a multitude of systems, well integrated, and federated data. It requires open systems and vendors willing to co-ooperate. The benefit is a much more flexible system landscape and the availability of best-in-class solutions for the tasks at hand. May sound like “SOA” blurb, but it even worked before that tech buzz took IT by storm … 😉

    We see a lot of “mid-market” customers doing just that: assembling their toolset, optimizing their systems and processes to gain and keep their competitive position. Those companies are PLM champions, regardless of their size.

  • Frank, Thanks for commenting! My take is very pessimistic any time it comes to the point that “vendors willing to cooperate”. And this is not because vendors are bad by definition. This is because, vendors are companies for profit. To handle “standards” is not profitable. Otherwise, community / industry will be interested to pay for that. In my view, “mid-market” customers are assembling their solution using tools available and mostly replies on MS technologies. MS Excel is THE KING of the mid-market… Don’t you think so? Best, Oleg

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