The complexity of PLM business models

I’ve been blogging about future of PLM licensing earlier this month. It sparked few interesting discussions online and offline. One of the topic I captured out of these discussion was related to relationships between different players in a business model. In some situations, relationships are simple and easy. You have suppliers and consumers. Consumers are paying to suppliers for products or services. Simple… However, the real life is much more complicated. In many cases, there is no direct connection between suppliers and consumers. Even more, modern business models can have more than one level of relationships. Simple example – Google. As a customer of “search” product, we use Google for free. However, companies and individuals are paying Google for advertising. Even more, Google is in business to sell advertising to companies using Google sales channel.

It made me think about complexity of PLM business models. I ended up drawing a following diagram, which contains “players” involved into typical PLM business.

Here is a  question – do you think I missed any player? Originally, I put 3 main groups – Customer, Partners and Vendors. After some additional thoughts, I added Community. The importance of communities is growing these days and, often plays a significant role in overall business schema.  Here are some  explanations about each group:

1. Customers. If you think about typical manufacturing company, you can figure out multiple players – engineers (end users of PLM products), budget owners (for example, CIO), Exec sponsor (somebody from upper management, who is responsible for PLM program) and PLM team (you can often see a group of people responsible for PLM system deployment). Sometimes they are aligned, but sometimes, they might have different interests.

2. Partners. In many situations, companies are using partners for different reasons – indirect sales, implementation services, etc. It is not unusual for company to hire independent consultants to help with decision making or strategy. Implementation services can come from vendor, but also can be provided by independent company.

3. Vendors. There are multiple vendors involved into PLM system deployment. Of course, it starts from software vendors for CAD, PDM, PLM. Companies are often working with multiple vendors, IT/Software vendors are selling other enterprise software – databases, information systems, ERP, CRM and other enterprise software. Hardware vendors, obviously, is in business of selling computing resources. In modern eco-system, you can see new type of vendors – IaaS provder (Amazon is an example of public cloud IaaS). However, sometimes, IaaS provider can be provider of hosting computing services.

What is my conclusion? PLM business models are complex and composed of multiple players and relationships between them. To make it work is not a simple task. To make it profitable is even more complex goal. PLM vendors are operating in an existing eco-system of customers, partners and other players. This eco-system was mainly created as a result of years of relationship building between vendors, companies and partners. My hunch, customers are thinking about some sort of “re-imagining” and refresh, which is driven by new business models and trends. It is a time to think and ask right questions how to do it. I can see vendors are coming with additional services, subscriptions and other business initiatives. A good start, but what will come next?  Just my thoughts…

Best, Oleg

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