Engineering.com article PLM This Week: An All-Time High for Arena yesterday brings a news about another record quarter of Arena Solutions – cloud PLM vendors selling pure cloud based (SaaS) product lifecycle management software.
The article is short and basically says Arena is growing. Article shares only %% of growth without going into specifics about revenues, bookings and number of customers. I captured an interesting quote speaking about Arena’s shift towards enterprise deals.
…for the past two years the company has doubled down on the development of a number of new modules, including analytics, quality management and project management. This expanded portfolio has allowed Arena to go head-to-head with PLM industry leaders such as Dassault Systèmes, Siemens PLM Software and PTC. “With the significant investments we’ve made in our solutions over the past several years, this continued uptake validates our leadership position in the PLM space. Today we provide the functionality the enterprise needs, but with the flexibility, connectivity, ease-of-use and cost-savings of the cloud.
This is not a first time Arena is reporting about enterprise growth. The following article from 2015 says – Arena Solutions Grows New Enterprise Customer Count 75 Percent in Q2 2015 over Same Period in 2014.
Which made me think about inevitable situation that happened to many B2B software providers. The inevitable truth is to shift a balance to larger deals.
Few months ago, I was reading a book – From Impossible To Inevitable: How Hyper-Growth Companies Create Predictable Revenue. You can skim the most important points from the book in the following article – From Impossible to inevitable. Painful truth #3 from the article says – It’s hard to build a big business out of small deals. Here is the key passage:
If you’re selling your product for $10 per month, $100M ARR is a long, long way away. It’s possible, and some of the most well-known companies achieve high growth selling a low-priced tool, but there is a quicker, easier way to get to $100M: instead of selling companies your product for $10, sell them your solution for $100K
I found the following table interesting. It gives you a good visualization and comparison between sizes of deals, customers and revenues.
According to Arena website, an average price per month, per seat is 79$. Simple calculation can show that you need to sell ~100 seats to a company to achieve $100K annual deal size. I can imagine large company using 100 seats of PLM software subscription. Although, from my experience, it should be relatively large company. Which is consistent with the message coming from Arena Solution about developing of new enterprise-level modules addressing the strategic needs of larger companies.
As a result, Arena Solutions will be inevitable competing with top PLM providers of this world – Enovia, Teamcenter and Windchill. My hunch is that other candidates in this competitive race are Autodesk PLM360 and Aras Innovator.
What is my conclusion? Product Lifecycle management software model is build for enterprise deals. It focuses on business process transformation and process improvement. With such model, PLM vendors are inevitable to follow the path to increase the size of deals and focus on solving problems of entire company. The news from Arena Solutions is a confirmation of existing PLM enterprise model and inevitability of Arena to compete with largest PLM vendors for bigger enterprise deals. Just my thoughts…
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Disclaimer: I’m co-founder and CEO of openBoM developing cloud based bill of materials and inventory management tool for hardware startups and contract manufacturing.