SMB business is tough… and not only for PLM vendors

SMB business is tough… and not only for PLM vendors

small-is-big

PLM for small companies is long time debated topic. The origins of PLM business are going deep into businesses of large companies in defense, aerospace and automotive industries. Nevertheless, PLM companies for the last 10-15 years are trying to crack down “PLM for SMB” story with variable success. Sometimes PLM solutions for small companies are reminding me a fashion show in Paris – one season PLM for SMB is trending, next one is not. One of the most visible PLM SMB shutdowns was PTC retiring their Windchill ProductPoint.

Another interesting SMB-related retirement announcement just came few days ago from SAP. German ERP giant is retiring their cloud initiative focused on small businesses – SAP Business By Design. ZDNet announced about it here. Article provides some information about why Business By Design was halted. Here is a passage from the article:

ByDesign is intended to serve “mid-market” companies that are smaller than large enterprises but larger than small- and medium-sized businesses. At launch, executives projected that the $4 billion software suite would generate $1 billion in annual revenue. Yet it is expected to generate no more than $35 million this year, according to Wirtschaftswoche.

Nevertheless, SAP Business By Design rival NetSuite seems to be doing well. Recently NetSuite signed partnership agreement with Autodesk about combined sales of NetSuite and Autodesk PLM360. Other PLM vendors are also getting back to be more focused on SMB market. Few months ago, Siemens PLM announced future expanding of SolidEdge SP product. PTC is coming with new SMB initiative – Windchill PDM Essentials. Arena Solutions is keeping their specialty in cloud BOM and PLM, in my view, also focusing on small companies.

What is my conclusion? 60-80% of CAD seats in industry is not connected to any data management solution. That was true few years ago. My hunch is that CAD/PLM companies is doing everything possible to change that status. It came down as an aggressive SMB-marketing of existing “scaled down” PLM solutions as well as introducing of new opportunities by leveraging cloud and open source. The biggest competition in SMB space is “status quo”. At the end of the day, if a company can make things done by using Excel, Office and email, you need to provide a very attractive solution to change that. Small doesn’t mean simple. SMB business is a complicated and tough. Price and implementation efforts are still two key elements that every vendors struggle when trying to provide a viable solution for SMB. Just my thoughts…

Best, Oleg

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  • Matteo

    Good read! I would be curious what you think about TC Rapid Start… http://www.plm.automation.siemens.com/en_us/products/teamcenter/rapid-start/

  • beyondplm

    Matteo, from what I know, it is pre-packaged and pre-configured version of TeamCenter. First time, I’ve heard about it few months ago. It sounds like Siemens’ answer on Windchill PDM Essentials from PTC and Enovia Express from Dassault. For obvious reasons, I haven’t had a chance to try it out. I hope it helps. Best, Oleg

  • SMB is a puzzle to the established vendors, because it’s easy to think of SMB through their limited perspective: i.e. they must just be a smaller and simpler take on existing PLM. Hence the proliferation of all the OOTB template solutions designed to kickstart the budding enterprise. SMB in fact has its own complexity, but the key differentiator is that they are more organic and less regimented. Since PLM is driven from a very strict process foundation, the two don’t meet well in the middle. It will take a fundamental transformation to server this market… and at that point we may not even call it PLM anymore. More of my thoughts from an earlier article on this exact topic: http://eng-eng.com/?p=81

  • beyondplm

    Ed, I think, you are spot on. SMB has their own complexity. However, this level of complexity doesn’t fit well with level of effort and $$$ expected to be paid to vendors. So, vendors are trying to shortcut in functions and $$$. It is very much unsuccessful so far… Just my opinion, of course.

  • Bruce Robitaille

    The opportunity for market expansion for PLM vendors is in the SMB space. Oleg, a recent blog described PLM solutions for small and large enterprises. Are there any large enterprise companies left that are not already using PLM from any of the big 3 or SAP PLM? It seems to me that PTC, Siemens, and Dassault are occasionally trading clients while market share remains relatively the same. Expanding market to SMB with scaled down solutions seems to be the preferred approach but I have real questions about this strategy. What is happening in PLM is very similar to the market dynamic I lived through with CAD (many years ago, earlier in my career). Small companies didn’t need just limited capability CAD such as modeling and basic drafting. When Solidworks, SolidEdge, and even Autodesk finally offered 80% of the functionality of the big vendors (Computervision, Dassault, McAuto, etc.) for 20% of the price, the SMB market took off. PLM will become a commodity for SMB just as CAD did. The question is which company can deliver a broad solution, not a limited solution, and can they take advantage of latest technology and trends (cloud, mobile, etc.) to do it.

  • Bruce, you ought to read Clayton M. Christensen’s “The Innovator’s Dilemma” if you haven’t already – it has much relevance to the PLM market. Established PLM vendors aren’t going to innovate for the small business. Nor does it make financial sense for them to do so. In fact, it never will. Their focus will remain on stealing accounts from their competitors and welcoming new companies who have recently reached a certain scale – the same scale where the economics of PLM makes some sense.

    I do find the 80% functionality an entertaining thought – especially considering most PLM implementations are lucky to be using probably 10% of available functionality – check out Andreas Lindenthal’s excellent article on this: http://plmadvisors.com/plm-maturity-how-to-get-more-out-of-your-plm-system/

  • Bruce Robitaille

    Ed, I completely agree with your comments and will check out that book. To clarify, I didn’t mean to suggest that a SMB would use the 80% capabilities available in the product. More likely, given the availability of 80% functionality compared to 100% offered in a flagship app, a small company could then find more of what they needed as compared to a stripped version of the more costly application.

  • beyondplm

    Bruce, you are right. It is hard to find large enterprise that do nothing with PLM. However, for many of them the real question very often is how to scale up. So, these are two dimensions of PLM development these days – going down to smaller companies and scaling up with large enterprises. Interesting enough, I can see intersection of these two opportunities especially in supply chain.