One of the popular discussions in PLM implementations is Total Cost of Ownership (TCO). The debates about PLM TCO intensified for the last several years with introduction of new business models – open source, subscriptions and SaaS. Aras is company that first introduced unique enterprise open source model in PLM. Aras PLM is getting lot of attention these days, especially since recent investment round ($40M) made by Silver Lake and GE.
“We invest in breakout companies that accelerate industrial transformation through a combination of technology innovation and disruptive business models,” said Martin Fichtner, Managing Director of Silver Lake Kraftwerk. “Aras embodies this strategy with a game changing platform and ‘SaaS Anywhere’ approach that have proven very compelling to customers, and we are excited about Aras’ next stage of growth.”
I wrote many article about Aras in my blog. You can check one of them – What is different in Aras PLM? One of my oldest articles about Aras (2011) – Aras PLM lines up against Windchill, Enovia and Teamcenter outlines initial Aras strategy, which I have to admit didn’t change much. Already back in 2011, question about TCO of Aras PLM compared to traditional PLM was one of the most interesting.
Aras put a significant focus on their support of Software Customization. Customization of PLM software (and not only PLM), is an important factor impacting PLM implementation TCO. Aras is focusing on how to support customization, and it relates to the Aras Innovator platform capabilities.
Here is an interesting exchange of comments between me and David Sherburne (Carestream) – Aras long time customer and supporter.
@dgsherburne • 7 years ago
In my opinion Aras has the right combination of integration, configuration flexibility and scalability to beat the other major players in small to mid size companies. PLM has to be ubiquitous to be widely adopted across internal sites and it must include connection to global the supply chain resources to drive significant ROI. The only business model to float for us was Aras subscription. We have internal expertise being used for deployment and configuration but we are also using using 3rd party implementation services to move more rapidly. So we are taking on some risk with the platform, but this is offset by large upside benefits once the system is in place and we want to expand its use broadly
@beyondplm @dgsherburne • 7 years ago
David, thanks for your insight! I think you are right and there is a segment of companies that consider price point as a very important element. At the same time, they have enough knowledge, skills and resources to handle PLM implementation internally on top of Aras. As you move to smaller companies, resources won’t be there. As you move towards big OEMs, the overall price point will become more important. If I can imagine Aras’ implementation for large OEM, the TCO will be almost identical compared to large PLM players. Maybe I’m wrong… However, I’m not sure we have numbers to prove it.
Fast forward, Aras’ min subscription is 250 users, which is different from mid-size companies.
Few weeks ago, my attention was caught by LinkedIn article written by Sanjay Talekar Directror of Flexur Systems Inc. – Total Cost of PLM Ownership – Comparative for ARAS PLM vs Traditional PLM and Ways to Reduce TCO. Article shares numbers showing difference between Aras and traditional PLM TCO. Read the article, check numbers and make your conclusion.
Summary is presented by this diagram, which shows predictions of 15% difference in TCO for 10 years between Aras and typical licensed PLM system.
I hoped to get some numbers to support this conclusion of prove what is wrong here. In a nutshell, the difference is coming from $3M license and upgrade cost.
Aras article from 2011 speaks about advantages of Aras business model – Understanding the Economic Advantages of Enterprise Open Source in PLM .
The only number I found in Aras article is the notion of eliminating of PLM licenses and the number (15-38%) difference in TCO. On the low end it is about the same number -15%. Here are few passages.
Eliminates PLM License Expenses – Removes the up-front capital expense for PLM licenses and the incremental license costs associated with roll-out.
Fixed Cost Predictability – The optional enterprise subscription cost is fixed over the term providing budget certainty, and does not limit user access so companies can add as many users as needed without restriction or additional cost.
Cuts Total Cost of Ownership – Eliminating PLM license fees can reduce TCO from 15-38%. The initial start-up costs are decreased and the expansion costs are reduced, substantially for larger scale deployments.
What is my conclusion? All equal article states 15% and possible more difference in TCO between Aras and another “traditional” PLM. Is it a lot? or not so much? In absolute numbers, savings are significant. However, knowing manufacturing companies spending and PLM implementation specifics, 15% won’t be a key decision factor. So, what is wrong here? Does Aras provide a bigger saving in TCO over long period of time? What role plays technical and product related factors. Aras made significant progress for the last 10 years since first introduction of enterprise open source strategy. I wonder if Aras will be able to publish numbers demonstrating what is really different in economics of traditional PLM and Aras PLM. Just my thoughts…
Disclaimer: I’m co-founder and CEO of OpenBOM developing cloud based bill of materials and inventory management tool for manufacturing companies, hardware startups and supply chain. My opinion can be unintentionally biased