PLM competition for the next 10 years

PLM competition for the next 10 years

Looking back on what happened for the last 10 years in PLM, the one thing is absolutely clear – the position of vendors didn’t change. The ruling top vendors in the PLM business in 2019 are the same vendors that ruled the market in 2009. As we are coming to 2020, the question I want to ask – what will be the PLM competition for the next 10 years. Will it be the same as in the last decade? Are we going to see the same 4-5 companies in the PLM business also in 2030?

Many years ago, when I was very naive and I asked the IT manager in a big automotive company, what will happen if a lower tier company won’t be ready to use the same PLM software. The answer was simple – they will find another supplier who will agree to use the same PLM. A decade long competition between PLM platforms didn’t change much. The PLM strategic play is still the same – you need to win a big account business and rule it down to supplier tiers.

The competition for big accounts in the PLM business is crazy. There are many reasons for that. Here are a few ideas about why it is so crazy.

Every single global enterprise manufacturing company already owns at least one (very often more than one PLM system). To get in, you need to be in the position to replace one of them or to prove the value in addition to the PLM system(s) already owned by OEM.

The timing to get into the PLM business is crazy as well. Once the manufacturing program is started, the company almost never replace PLM software used for the program. You can see examples in aerospace, defense, and automotive business.

Nobody was ever fired because he made business with “IBM”. This is still true. To qualify to compete, a new PLM vendor should prove its sustainability and it goes back to financial and corporate characteristics that often disqualifying new technologies and vendors.

One of my favorite speeches about competition is the following one from Peter Thiel’s. Watch the following video and draw your opinion.

Here is the first thought about the PLM competition in 2030. The competition will make you better rightfully said, Peter Thiel. But, you should ask a question if to win PLM competition in 2030, you need to pass the tiny door called global enterprise PLM. Is it still the only way to do so?

I don’t have an answer, but I can give you some ideas. Salesforce is my favorite one because it changed the CRM market in the last 20 years and also helped to create a 250 billion dollar market for public cloud services. Check the article – How Salesforce built a $13 billion empire from CRM.

My favorite part of the article is lessons you can learn from Salesforce’s success. Here are my favorite passages.

1- How can you improve a current tool or process? Break down your customer’s experience step-by-step. Some features that you’ve built probably didn’t turn out to have the utility or popularity you anticipated. It’s important to evaluate and remove any features that add more difficulty for your users—even if you are attached to them

2- What is your company’s brand, and how does that impact your products? Send out an NPS survey and focus on qualitative answers. In addition to asking users to provide a numerical score, leave an open-ended field for users to leave written feedback on their experience with your brand.

3- How can you make yourself more valuable as competition increases? Three enduring competitive advantages for SaaS companies are network effects, data network effects, and ecosystem creation. Salesforce created an ecosystem because that was the best fit for them in the emerging SaaS market at the time.

I want to come back to Peter Thiel’s speech. The timing is absolutely important. There is usually one more moment to create something big and change the trajectory in the market. Looking in the history of engineering software, we can clearly see it was only one moment in time to create CAD for PC (AutoCAD) and it was only one moment in time to create parametric design tool (Pro-Engineer), it was only one moment to create 3D MCAD for Windows (Solidworks).

In my view, there are a few important aspects of the PLM competition. The data platform is the main thing. PLM has very specific requirements to manage data – the complexity of the data, semantics of relationships and data transformation, seamless integrations. All these things together can easy disqualify foreign data platforms from becoming an efficient player in the PLM business. Another one is space to grow and acquire new customers. How to get out of a crowded competition space we’ve seen in PLM during the 2010s? Supply chain networks, small and mid-size companies can be a place to thrive. The last, but not least is a new business model enabling elasticity and not relying on data locking of existing PLM vendors.

What is my conclusion? SaaS PLM technologies and business models will play a fundamental role in PLM competition in the next decade. The market for SaaS PLM is open and the opportunity is huge. Multi-tenant data management technology is a differentiator and enabler for new functions and efficient business models. A combination of simplicity, user experience, and data intelligence are key elements. Who will get it right? This is a big question. According to G2 PLM Grid, the top performers in the PLM segment are these companies – Arena Solutions, OpenBOM (disclaimer-I’m co-founder and CEO) and Propel. All three are SaaS companies. The jury is out. Just my thoughts…

Best, Oleg

Disclaimer: I’m co-founder and CEO of OpenBOM developing cloud based bill of materials and inventory management tools for manufacturing companies, hardware startups, and supply chain. My opinion can be unintentionally biased.

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  • Those are the only cloud solutions getting any revenue. My prediction is that the status quo will continue for several years until the major customers push back on the PLM leaders to build real cloud offerings. Then it will take several years for them to bring solid products to market, possibly led by PTC, if they can leverage their Onshape investment quickly enough.

    Dominant paradigms often die slowly unless there is some huge leap that is hard to resist. I don’t see the current challengers as offering compelling enough value propositions to be that leap.

  • beyondplm

    @smprezbo:disqus thanks for sharing your thoughts and acknowledging achievements of Arena, OpenBOM and Propel!

    I agree with you prediction about current status quo. SaaS, Cloud or Multi-tenancy are not on the priority list of global enterprises. Existing PLM leaders are selling high tickets and unit economics of PLM solutions (cPDM according to CIMdata) is not so important. Scale is also not important because all these tickets are expensive enough and all customers are well know, so they can go direct. Existing vendors are concerned about multi-year PLM transition programs. Aras is one of the vendors trying to create a pressure on top PLM players and if global enterprises had any concerns about dominant paradigm, I’m sure we would see them in comments in the articles like these – SaaS PLM Debates (http://beyondplm.com/2019/12/26/saas-plm-debates-2020/). So, for Aras, cloud and SaaS is “one day to figure out”, which is fine. This is not on their priority list.

    Cloud revenues in PLM are still very small, but the same was with Salesforce CRM SaaS sales in 2000. Then it was too late. NetSuite was another example of strategic growth and investment done by Oracle. Until very late (after Oracle paid ~$10B to acquire NetSuite), NetSuite and Oracle markets almost never overlapped. So, I agree with your analysis about existing PLM market and current customers.

    At the same time, the presence of PLM (cPDM) solutions for companies with revenue size below $1B is insignificant (probably 15% of total PLM sold today). And for companies below $500M is even less. These are looking for solutions different from what players like Aras, DS, Oracle, PTC, SAP and Siemens can offer.

    Will event like “Solidworks 95” happen in PLM market niche? I’m biased, so my predication cannot be used because of my work at openbom.com. But I can confirm the demand based on OpenBOM organic growth. PTC’s Jim Heppleman made a strategic preemptive strike by acquiring Onshape (as he said – now PTC is 6 years ahead of main competition in development of SaaS PLM solution and he doesn’t want to be disrupted again like it happened back in days when Solidworks disrupted Pro-E). Indeed, Onshape technologies is a good contribution and acceleration to build PLM solution, but it is still not PLM.

    Autodesk can make a return into PLM for Manufacturing using Fusion platform. Although these days Autodesk focus is much more in AEC/BIM space, Autodesk has the longest experience to run cloud/SaaS/subscription solution in the industry for the last 7-9 years).

    Just my opinion.

    Oleg