Mary Meeker of Kleiner Perkins shared her (almost) traditional presentation about internet trends yesterday. The presentation is available here – don’t miss that. In my opinion, if you follow technologies, this is “must see” piece of information.
Among different topics, there is a whole section of presentation focused on enterprise software. It starts from a very clear message of changing business process “one segment at a time”.
The following inspirational quote of BOX founder Aaron Levie made it even more clear – the shift from process improvements to the opportunity of software to change the work itself.
Next few dozen of slides are bringing examples of changing of work processes – Slack, Square, Stripe, Domo, DocuSign, Intercom, Gainsight, Directly, Zenefits, Anaplan, Greenhouse, Checkr, GuideSpark, Envoy. These are great examples of companies that bringing technology into existing inefficient processes and completely turning them around.
It made me think about segmentation of engineering and manufacturing software. The trend for the last year was to consolidate portfolios. PLM vendors were focused on making their portfolio broader and more integrated. For many of them, it was a very successful move. The portfolios were growing, which helped them to grow revenues and increase number of customers. And it was appreciated by customers that were looking how to decrease number of vendors and simplify IT management. The demand for vertical integration between tools was another factor. If you buy PDM/PLM system from the same CAD vendor, the chances are CAD-PDM integration will be better.
The domain of CAD, PDM, PLM and beyond is complex. Customers have high demand for integration. So, how to apply the idea of changing of “one segment at a time” can be even possible? So, I put few ideas below how to make it happen.
1. Cloud Applications
Cloud and SaaS applications are changing the landscape of enterprise software these days. What we have these days is second generation of cloud applications. The first one is clearly associated with first appearance of Salesforce.com. Today we can new apps leveraging from mobile and open source technologies delivering new services for engineers and designers. It took PLM vendors few years to recognize the potentials. There are leaders and more conservative vendors, but the trend is clear.
2. Unbundling Services
In my earlier post – Unbundling strategies in CAD/PLM almost two years ago, I’ve been giving the example of how Craiglist lists were disrupted by multiple companies providing services for a specific vertical niches. The same strategy can potentially work in CAD/PLM space.
3. Platforms vs Apps separation and Upgrades
Today’s PLM technologies and products approached their limits in terms of their functional capabilities and speed of ROI. As a result, the organic growth in PLM implementation was very limited, in my view. The upgrades and implementations are taking long time. Large manufacturing companies are not capable to move into new applications and versions.
The idea of split between “platform” and “apps” is not new. But today it became really critical. Large OEMs cannot afford platform changes more often than 3-5 years and it slows everything down. In my view, PLM vendors are working on how to make it happen.
Earlier this month at Siemens PLM Connection 2015, I’ve been watching examples of how TeamCenter strategies to deliver multiple releases and services packs to make adoption of new apps on top multiple platform versions. It is not a simple change for existing platforms.
Aras Corp claims that Aras Innovator model-based approach is solving upgrades problem for many customers. More about that is here. Aras subscription is including upgrade services, so it makes an upgrade transparent for customers.
PLM software delivered using SaaS model has some advantages because of platform, apps and upgrade complexity are hidden behind “cloud wall”. But it doesn’t make it less complex at the same time.
What is my conclusion? Enterprise software is going through the time of changes. The existing status quo cannot stay up to the demands of customers in terms of speed, agility and cost. So, we can expect new apps and services to disrupt existing segments. As we can see from Meker’s presentation it is already happening. How it will come to engineering and manufacturing domain. Will PLM segment survive as a “whole piece”? Are we going to repeat the trajectory of PLM software development again by reimagining CAD, Data Management, processes, BOM, change management, etc.? I don’t think we have an answer now. The changes are in front of us. The disruption can come from any place. In consumer segment, the innovation came from a garage environment. PLM vendors, watch carefully for garage innovators. The chances are competition will come from that place. Gradually and then suddenly. Just my thoughts…
Best, Oleg
