The future of PLM vendors differentiation?

The future of PLM vendors differentiation?

plm-vendors-differentitation

Differentiation. Competitive advantage. Value sales. I’m sure you’ve heard these buzzwords many times. Competition is part of everyday business life. Usually, I don’t speak about competition. I searched across my blog and founded only one reference to competition related writing – PLM Competition Toolbox. But I want to look in my crystal ball today. Here is the article that made me do so. Over the weekend, I’ve been reading Joe Barkai’s blog post – How To Win Without Differentiation. Article speaks about how to develop differentiation strategies and what to do when differentiation is not coming easy. I liked the following passage:

When value differentiation is too vague and difficult to demonstrate, price competitiveness does not work. Potential buyers seek other ways to drive their decisions, and, as Vermeulen points out, they rely on other factors, such as the seller’s brand, status in industry, and prior relationships. In other words, the buyer switches from assessing and comparing features and costs to differentiate based on the brand’s credibility and trustworthiness.

The article made me think about PLM vendors competition and differentiation. PLM industry is dominated by small number of large vendors (namely alphabetically – Autodesk, Dassault, Oracle, PTC, SAP and Siemens PLM). There are some specific competitive niches each of these companies were developed for the last 10-20 years. However, looking on websites and public marketing materials about PLM solutions, I can see less visible difference. These companies are targeting similar businesses and within time it is not simple to get value differentiation between brands.

Enterprise software is an interesting business. One of the characteristics of software for engineering and manufacturing is lifetime customers and legacy software. The lifecycle of customers in this domain is relatively long. It goes from extremely long in defense, aerospace programs to long in automotive and others. To get familiar with engineering software (such as CAD and PLM) takes time and effort. You need to cross educational barriers. So, when you already “in”, the entrance barrier for competitor is getting bigger. Overall investment and significant amount of customization play another role. This business is different from selling smartphones. After spending few millions of $$$ on a specific solution, it is very hard to justify the replacement of this solution with a competitor.

So, what will differentiate PLM vendors in coming 10 years?  What will become future competitive advantage? Technology will obviously play some role, but I mostly agree with Joe – “Don’t oversell technical wizardry. Buyers of enterprise software and services consider your product roadmap and long-term commitment to the space as much as they do to your product features and engineering skills. So, it is very hard to create sustainable technological advantages in this market. Very few companies succeeded to do it in the past and kept it for a long time.

However, there is one thing that getting more and more value points. I call it “vertical experience”. Sometimes vendors call it “industry practices”. However, it can go much more beyond what vendors are doing today in this space. I can see specific vertical solutions focused on design patterns, bill of material management, change management, services, suppliers related to particular segment or industry. The niche can be big enough to serve business of service providers as well as provide an impact on overall vendor business. This is a place where PLM vendors will be able to show big value to customers and fast implementation ROI. It is not simple and it takes time and dedication.

What is my conclusion? Vertical (or industry) specialization can become a future goldmine for PLM vendors and solution providers. To develop deeply integrated solution including specific behaviors in data and process management is not a simple task. Customer experience is something that very hard to gain. However, once achieved it can be leveraged for a long time. Industry verticals can become a future differentiation factor for large vendors and startup PLM companies. Just my thoughts…

Best, Oleg

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  • Scott Cleveland

    Early in my PLM experiences, I discovered that companies manufacturing similar products believe that their company and processes are unique. If I suggested ways to model their environment that I believed were best practices, they always changed it. So, I learned to listen carefully to what they had to say and would create a solution that matched their ‘unique’ vision. I think that demonstrating successful implementations are the key…

  • Vladimir

    Hello Scott, I absolutely agree with you and I can only add to this that even two companies are producing the same product, generally they have different processes and approach how they do “product lifecycle” (based on their history, manufacturing possibility, cooperation etc.) which makes them really unique.
    So approach to carefully listen has a huge potential to deliver successful solution.

  • Youhey

    I’m also absolutely agree with You!
    This is why flexibility/ customizability an important differentiation-factor can be! Especially if we consider the growing market-segments for PLM (like fashion-industry: plmjim.blogspot.de/2014/01/plm-in-fashion-industry-strike-pose.html ).

  • beyondplm

    Scott, Vladimir, Youhey, You are absolutely right about manufacturing companies developing unique processes even if company belongs to the same industry. Therefore, if I’d call it first attempt of PLM vendors back 5-6 years to provide OOTB (Out of the box) solutions for different industries almost failed. However, I think, companies learned that to speak “industry language” is key in order to sell PLM beyond management of CAD documents. As a result of that, you can see industry offering on every PLM vendor website. It is still not clear differentiation, since vendors took “broad scope” first. I’m expecting future development of more “specialized experience” and it won’t be OOTB as we know it now. Oleg

  • Stan Przybylinski

    Hi Oleg,

    Since it used to be my job to do this stuff, I thought I would comment. There has been some discussion about coming up with a new term “beyond PLM”, the prescient name of your blog. Of course, different companies have different ideas, as do the different analysts.

    In my opinion, the Big Three’s messages (DS, PLM and SPLM) are somewhat differentiated, at least at a high level. 3DExperience is a choice, an attempt to differentiate their overall offerings and message by focusing on helping DS’ customers (the people who purchase DS software and related services from DS or others) to help their clients (people who are buying the stuff they make or deliver) understand what they are buying in the context of its use. DS believes that their underlying technology gives them some advantage in delivering on this vision. This is consistent with DS’ self-image as an innovative company who leads the market into new paradigms. And they are in the process of delivering solutions into more industrial segments than the other two.

    SPLM and their Catalysts are about decreasing the time to value of PLM implementation in the targeted industries. This is more about changing the paradigm of how you reach your PLM vision. And, by the way, if you use the Catalysts and they work as planned, you should be in a position to buy more Teamcenter functionality and use it more readily. SPLM and PTC are somewhat similar in their focus on manufacturing industries.

    For a long time, PTC was the product development company, and that is still their focus. As we all know, products are getting smarter, and they have positioned themselves well by adding MKS and now Thingworx. They also focus on manufacturing companies.

    To me the bigger issue here is that many people do not understand how a “difference” may or many not be a differentiator. It is only a differentiator if someone will make a decision based on it.

    Stan

  • beyondplm

    @Stan, first I’m sorry – your comment went to spam for not clear reasons. Thanks for your insight! You are right about how top 3 vendors differentiate in terms of marketing and some product positions. But it mostly visible if you look on broad brand picture (you have it clear as an analyst). It is probably clear to large customers analyzing a complete brand offering. But for many companies comparing core product functionality it can be confusion. I believe this is what you say by “understanding differentiations”. Thanks, Oleg

  • Janet

    I would love to use the image found on this page http://beyondplm.com/2014/01/26/the-future-of-plm-vendors-differentiation/ for a slide show to librarians when referring to differentiation. Do you have the rights to this photo? If so, may I have permission to use it for a presentation?

  • beyondplm

    I’m taking pictures from free library. Depends on your presentation, it might be okay, but I’m not sure.

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