Cloud PLM license cost and lessons from Uber

Cloud PLM license cost and lessons from Uber

cost-does-matter

It became a cliche for the last few years to compare everything with Uber and Airbnb. I have to admit that I’m guilty and I’ve fallen in that trap last year too. If you feel like Uber-for-X, read the following article – Why there won’t be Uber in every industry. Uber’s business model isn’t unique, but it also isn’t ubiquitous.

Uber one click car ride order is fascinating. I’m sure it inspires many people to apply similar ideas to manufacturing. For example, One-click-manufacturing (OCM) might sounds very much Uber-like. Cloud PLM is eliminating IT services and installation is also very much on the way of thinking how to bring PLM faster and… maybe cheaper?

The challenge is that many took the wrong lesson from Uber.

I’m convinced industry can learn a lot from what Uber does. My attention was caught by the the article – Taking the wrong lesson from Uber. It speaks about some fundamental economics of Uber. Here is my favorite passage:

The challenge is that many took the wrong lesson from Uber. Yes, convenience is huge, but it was only part of the picture. The magic of Uber is that it used mobile to create a 10x better product than the incumbent (taxis), and did so at a lower price. The “and” is everything.

It took three years for Uber to execute this. Uber, as we all know, launched as an on-demand black car service. They nailed convenience from the beginning, but the service was a luxury. Then in July 2012, Uber took a cue from Lyft’s ride sharing service, and launched uberX. UberX was 10x better than taxis — but more expensive. It wasn’t until June 2013 that Uber did something important: it re-launched uberX in California with cheaper prices. The headline: “The New uberX: Better, Faster, and Cheaper than a Taxi” (emphasis added).

You can ask how is that connected to engineering, manufacturing and even more specific to product lifecycle management? PLM industry is not about commodity like taxi sharing rides that will pick the cheapest ride in most of the cases. PLM industry was always about selling value to customers and when you sell value, price is less important.

Here is the thing and might be totally wrong. But, this is one of the lessons I learned it from my (now) already seven years of daily blogging about PLM and speaking to many users.

License price does matter and PLM is not an exclusion from that rule

Everything customers will tell you about the fact price is not important and manufacturing companies have money to pay is a biggest illusion. Typically, you are talking to engineering IT and these people are interested how PLM technology and products can solve their problems. But, it will come down to price and must be prepared for tough license cost related discussions.

While in most of the cases perpetual license cost of PLM systems is hidden from public, cloud PLM license cost information is available online. As an example, I grabbed information from PLM vendors websites selling SaaS only PLM cloud services – Arena Solutions, Autodesk PLM360. I also picked information about new cloud PLM offering on top of Salesforce.com – PropelPLM.

Arena PLM license price:

arena-solutions-plm-price

Autodesk PLM360 license price:

plm-360-pricing

PropelPLM license price:

priopelplm-price

Surprisingly enough cloud PLM license cost was in the same price range for all these vendors. With the average cost 80-100$ / user / month, billed annually, medium size manufacturing company that will be interested to put PLM system in front of 500 users, will have to pay $480,000-600,000 annually for cloud PLM licenses. In addition to that, there is a chance PLM implementation cost and additional services will be needed too.

I’m sure some on-premise PLM systems can cost more, but that is not my point. With the license price tag of six figures, cloud PLM software is not a cheap project for a manufacturing company. I’m sure companies would like to explore alternatives before signing $1M deal.

What is my conclusion? In my view, high cost is one of the biggest reasons of PLM low adoption among wide range of manufacturing companies. Clearly one size doesn’t fit all, but when it come to $1M price tag, engineering IT will try to explore alternatives or just slam breaks and postpone the decision to acquire PLM systems. In other words, if uber cloud PLM taxi is so expensive, I can take a bus. Just my thoughts…

Best, Oleg

Share

Share This Post

  • There is also a hybrid purchasing model which is to use leasing to acquire perpetual licences. The benefits of spreading the cost on a per month and/or per user basis are still felt but at the end of a 2 or 3 year term the right to use continues but the monthly payment doesnt.

    The most advanced software authors now offer all 3 alternatives; upfront perpetual licence; continuous cloud / SAAS schemes and leasing or other payment services. Customers get the ability to juggle flexibility and cost certainty depending on which is the most important factor to them at the time of the purchase.

  • beyondplm

    Matt, thanks for your comment and explaining options! Indeed, these are options. In PLM industry, customers are looking for alternative business models. But in a nutshell, in many situations, all they look is how to make PLM less expensive. This is an ugly truth…

  • It’s a tough challenge, 10x better and significantly less expensive… simply unprecedented in the PLM space. But to achieve dramatic cost savings, what will get squeezed? Uber achieves this chiefly by squeezing the workforce – not having employees per se and exploitable contractors instead. Of all the full time Uber drivers I know most of them can’t earn even a meager living. That might seem problematic for Uber’s long term health as the grumbling gets louder, until you realize that their long term play is likely displacing those grumbly drivers with autonomy. Hence the astronomical valuation – they will make an entire industry both cheaper and far more convenient essentially by eliminating the need for its workforce.

    This is not a criticism, for technology is constantly displacing jobs in the name of efficiency. The question with respect to PLM, is what will get displaced? It’s a much harder question for PLM, I think.

  • beyondplm

    Ed,

    Thanks for sharing your insight! I think, engineering software industry had some history of similar displacements. But it didn’t happen many times. Solidworks formula back into 1995 was to provide 80% of Pro-E function for 20% of price. I’m not sure they follow exact numbers, but in general, it was the case.

    A case study is available on HBR https://hbr.org/product/jon-hirschtick-s-new-venture/an/BAB061-PDF-ENG and it is part of many entrepreneurial studies. You can find them online. It is also included in the following book – http://www.amazon.com/Technology-Ventures-From-Idea-Enterprise/dp/0073523429

    Getting back to your Uber example, I’m not 100% convinced that Uber trick is only about how to screw up drivers. I think, it is also about how to exclude middle-men from an overall supply chain. Again, I’m not as familiar with Uber unit economics.

    I wish I’d know what should be be displaced in PLM to get to a similar formula :). Autodesk certainly took the path of reinventing PLM with cloud. The jury is still out.

    Thanks again for your comments!
    Oleg.

  • Pingback: Beyond PLM (Product Lifecycle Management) Blog Did Autodesk & Siemens just started PLM competition? - Beyond PLM (Product Lifecycle Management) Blog()

  • Pingback: How Much Should PLM Software Cost? | SolidPartners()

  • Pingback: Beyond PLM (Product Lifecycle Management) Blog What can make PLM systems more affordable? - Beyond PLM (Product Lifecycle Management) Blog()

  • Pingback: Beyond PLM (Product Lifecycle Management) Blog Does it worth to pay for on-prem PLM? - Beyond PLM (Product Lifecycle Management) Blog()