How to Eat Big PLM Fishes

How to Eat Big PLM Fishes

plm-small-big-fish

Disruption is a lovey topic to speculate just before the weekend. Aras-Airbus story gave a context to PLM industry analysts and bloggers to speak about PLM disruption this week. Few articles to mention here – Airbus adopts Aras PLM platform by Engineering.com, Airbus flies with Aras Innovator by Develop3D; Airbus to acquire 30,000 Aras PLM seats. The last one by Graphic Speak was my favorite. The following passage is interesting:

Aras does not have a sales department because its basic software product is free to download. Aras waits for a potential partner to request support before it becomes a “customer.”  As Romare at Airbus said, “The unique SaaS subscription business model of Aras which eliminates up-front license costs and includes system upgrades with customizations is also quite compelling.”

Does it mean Aras nailed down the right combination of features and business model to compete with large PLM vendors? Well, not so fast…

Insight by Standford Business blog – In Technology, Small Fish (Almost Always) Eat Big Fish by Mark Leslie can give a good portion of food to think about how industry disruption usually happens. It brings examples from hardware and software industry –  how IBM computer business was disrupted by PDP, how Oracle CRM business was disrupted by Salesforce.com and even put some hints on how Android and iOS is disrupting Unix.

Oracle and Salesforce example is probably the most relevant comparison point for PLM. Here is the passage explaining historical case:

One sterling example is in the CRM (customer relationship management) space. For as long as anyone could remember, the market was owned by Siebel. It was big, offering an incredibly complex solution that had to be installed for customers on their servers, licensed in bulk, with tons of training and customer service attached. Sounds unwieldy, but it was the norm, and everyone needed it.

Then along came a company called Salesforce.com, offering just one capability of the many Siebel already provided. Only they offered it differently — instead of having to buy hundreds of licenses, customer companies could pay per employee using Salesforce.com, and use it in their web browsers hassle free. They became the automatic choice for the many young companies that couldn’t afford to do anything but start small with SaaS.

Let’s get back to CAD / PLM space. Do you think Leslie law of small fishes can be applied here. PTC might be an example of company that came out as startup and grew up to become a big fish. We can try to apply it to SolidWorks, but the last one became big only after acquisition by Dassault Systemes. In PDM/PLM domain, all “small fishes” were eaten by large vendors – Windchill, SmarTeam, Agile PLM, MatrixOne… Not many of them left. Is it an exception for the law claimed by Mark Leslie? The following passage can give you a hint how to disrupt large players.

Your rallying objective should be to build something truly great for the low end of the marketplace, solving an important problem with a simple, low-friction product in a segment of the market that’s underserved by the incumbents. Once you’ve achieved excellent market traction in this arena, you can nibble your way upward until you’re competitive with the heavyweights of your industry.

What is my conclusion? It is hard or almost impossible to disrupt CAD / PLM market from the top. Large industrial companies are moving slow and it takes them years to make decision about changing CAD / PLM software. SolidWorks disrupted small shops and becomes defacto standard. Aras created disruption by providing free version of Aras Innovator to smaller companies and now pushing to disrupt big companies.The question about competitiveness of Aras vs large players is the one industry will have to answer. Does Aras provide a better technology for lower price? The jury is out. Just my thoughts…

Best, Oleg

Image courtesy of vectorolie at FreeDigitalPhotos.net

 

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  • Stan Przybylinski

    Hi Oleg,

    This is the same type of argument made famous in the business press by Clayton Christensen at Harvard. It is based on some previous work in the innovation space. (There is a reasonable graphic here – http://innovationcrescendo.com/tag/consumer-research/). Market leaders are on the dominant paradigm line, and continue to add features that of interest to less and less of their customers. (How much of Microsoft Word does the average user use?) Eventually someone comes up with something cheaper, simpler, or some other -er that appeals to some segment of the market. In Christensen’s books, it is a market that cannot be well served by the big players. Economically it makes sense to ignore these upstarts and cede that part of the market. Sometimes this process repeats until the new player dominates the former leader(s). Christensen makes it sound like this is inevitable. My belief is that more often than not it expands the addressable market, bringing in new users that could not adopt the leaders for some reason (often cost). This is what is exciting about companies like Aras, and many cloud offerings, that is different from historical practice in enterprise software and PLM. They are changing the buying dynamics, making it easier to try before you commit.

    The bigger issue for the major players is that Aras is sucking a lot of potential revenue out of the market that those big players need to continue their business as usual. To me that is the bigger disruption.

    Stan Przybylinski
    VP of Research
    CIMdata, Inc.
    http://www.CIMdata.com

  • beyondplm

    Stan, thanks for sharing your insight! Yes, the fundamental argument is the same as we can see in Christensen’s book. However, your point about market expansion is interesting. Do you think Aras is expanding the market? How many of these are replacement of existing PLM deployments and how much of Aras’ business is coming from customers that never deployed PLM before?

    There is not much info about Airbus project, but some information I’ve seen online is related to TIM (test information management) – http://www.aras.com/papers/SLIDES-airbus-plm-test-management-aras-plm-ace-2014-europe.pdf. Was it core competence of PTC and Dassault Airbus programs? If the answer is no, then I can see it as “market expansion”. When/If Aras will be able to replace core Dassault, PTC or Siemens functionality for customers like Airbus?

    Oleg

  • Stan Przybylinski

    Yes, I think that solutions like I mentioned are additive. I also know from talking to some Aras customers that have Aras and another data management solution is that they often turn to Aras because it is difficult to expand their existing solution to cover some new use cases.

    As far as when, at present I am not sure it is a technical issue. (For example, Aras has done extensive scalability testing that shows they can handle very large implementations.) Yes, the majors may offer some functionality that Aras might lack, but as your article points out (and our research supports) many companies never get to implementing those advanced functions.

  • @beyondplm:disqus , @stanprzybylinski:disqus To your point, whether it’s additive or replacing:

    What we see very often: the company starts with a big PLM vision. Some years later the budget is gone and the company did implement 3D-M-CAD Data Management only (in some cases also BOM and some change management). Aras then often gets used to fill the caps and to complete the vision. In many cases, the PDM instance is still there and we expand on top with more and broader used PLM functionality. What’s attractive to the companies is the ‘easy to start with’ business model, the affordable cost structure to roll out to many thousand users and the unique technology with the required flexibility/scalability NOT to get stuck somewhere in the middle. In our view, PDM is a commodity. Either it’s already there (fine with us) or we solve it. But that’s not where the big PLM business benefits come from. And that’s exactly where we go with Aras: to where the real ROI of PLM is.

  • beyondplm

    Martin, thanks for your comment! I agree – Aras is clearly taking a different approach from large PLM vendors – Dassault, PTC and Siemens.

    I understand that affordable cost structure is one of the key reasons why customers are jumping towards Aras to “expand” their PLM implementations. I wonder how this model will scale with a growing customer base of Aras. What will allow to keep Aras subscription cost low enough to compete with large PLM vendors?

    I’m not sure agree with your take on PDM as a commodity, which means all vendors are offering the same software and compete on price only. I haven’t seen it in CAD/PDM business. The functionality of CAD-PDM bundles provided by CAD vendors is usually superior to integrations offered 3rd party partners. Also, CAD vendors are controlling APIs and potentially can control access to a specific subset of information.

    Best, Oleg

  • Aras has done well to land some respect at Airbus, and I don’t want to take away from that but this kind of announcement had to be tempered somewhat. The Big OEM’s are curious in that they end up collecting one of everything over time – this is likely not a displacement but an additional aspect to their existing solutions.

    We talk a lot about a federated future – that means many companies will be juggling two or three solutions for different internal purposes. That’s what I think you’re seeing here. Still, props to Aras for being relevant to a corporate juggernaut – that’s good news.

  • beyondplm

    Ed, completely agree. Aras clearly reached the level that can be accepted by enterprises and the result is Airbus deal. In many cases, enterprises are using multiple systems because of their internal complexity of decision making. The result is multiple systems and enterprise integration spaghetti.