A blog by Oleg Shilovitsky
Information & Comments about Engineering and Manufacturing Software

The future battle for PLM upfront cost

The future battle for PLM upfront cost
Oleg
Oleg
4 November, 2013 | 3 min for reading

PLM-zero-upfront-cost

Transformation of business models is one of the most important trends that happens today in the industry. Take a deep breath… it doesn’t mean companies don’t want to be compensated for the work they do. These days it is just about how to define the right business model that reflecting the relationships between all participants in the business.

The last tsunami related to the software price happened after recent announcement of Apple to make lot of their software including their OSX free. Over the weekend, I’ve been reading Forbes article – The Upfront Software Price is Now Free. Read the article and draw your conclusion. Even if the majority of the focus is related to what happens between major software giants – Microsoft, Apple and Google, in my view, it will have an impact on enterprise software too. The following passage is important.

With software being distributed either as web applications or through models that required a connection to the internet, software gained the ability to be distributed on a subscription basis or subsidized through advertising. Over the past few years, application software has increasingly moved to an initial price point that edges closer to zero on a consistent basis.

It made me think that changes of distribution model can be an additional driver to transform them way PLM (and other enterprise software) will be distributed and licensed.

The discussion about PLM software price, licenses and total cost of ownership is not new. First time I raised the question about coming business model transformation on my blog back in 2009 – Is Free the future of PLM? Since that time, the discussion went in different directions. You probably remember the Future PLM business models panel discussion I moderated during PLM Innovation 2012 in Munich. Another post, which is actually very co-sound with the idea of transformation as a result of changes in distribution model – PLM Cloud and Software licensing transformation.

However, in addition to cloud, SaaS and Web, there is another driving force behind changing PLM software business model. It is open source. Take a look here – PLM: Open Source vs. Free. In my view, open source is another powerful opportunity to change PLM business model status quo. In PLM business, Aras Corp. is driving this change since 2007 by promoting a very unique “Enterprise Open Source” model. Navigate to another article just published on Aras website – PLM Licensing is so Old School. Here is an interesting passage:

If your PLM software deployment gains wide-spread adoption (a goal of every successful PLM implementation), you will need to purchase more licenses. PLM license expenses can be huge up-front, but broad, global roll-outs are where the costs absolutely skyrocket. Effectively, the PLM project becomes a victim of its own success.

The last point about PLM upfront licenses preventing wider adoption of PLM software in the organization is interesting. PLM vendors are looking towards how to make PLM products available downstream in manufacturing organizations as well as in the supply chain. The high end-user cost is clearly not helping to make this dream come true.

What is my conclusion? In my view, PLM cost future trajectory is going towards “usage” and not “upfront cost”. It is true in other places, but for PLM it can be a significant change that energize future increase in PLM software adoption and… consumption. It will be driven by major factors such as internet distribution channels as well as open source and service engagements. I don’t see big difference here – both strategies basically removes upfront cost and focus on usage. The changes are unavoidable. Business transformation train left the station. It is just a question of time. In my view, all PLM vendors are actively researching what does it mean for their current businesses and how to act (or react). Just my thoughts…

Best, Oleg

Recent Posts

Also on BeyondPLM

4 6
4 August, 2024

Running a demo is a strategic task that can significantly influence stakeholders’ perceptions and decisions. When it comes to management...

28 May, 2023

The last two weeks were very busy for me and I’m still digesting what I learned last week at PTC...

30 December, 2016

Few days ago, I my attention was caught by Allan Behrens’ tweet  with a very provoking question about what changed...

20 July, 2009

Short prompt – I’m looking on definition of Product Lifecycle Management (PLM) and Product Information Management (PIM). Product lifecycle management...

19 August, 2015

Integrations. Enterprise software implementations are heavy depending on the ability to integrate different pieces of software. Each and every PLM...

21 July, 2013

There is a chasm between old and new schoolers these days in many places and industries. I wonder if PLM...

3 May, 2025

Let’s talk about PLM architecture. A recent post and comments by Andreas Lindenthal triggered a fresh wave of discussion around...

28 January, 2015

Cloud is trending and it is hard to find a company who is not thinking how to leverage new cloud...

21 February, 2021

The data is a new oil. This is a mantra of modern business, products, and technologies. Big tech companies built...

Blogroll

To the top