Aras and search for new PLM business models

Seriously, how do you take your coffee (err… PLM)? I might like my PLM with free upgrade service and no license fee. It smells kinda disruptive. But look around. The world has changed. Airbnb – the world’s largest accommodation provider owns no real estate. Uber – the world’s largest taxi company owns no vehicles. Facebook – the world’s most popular media owner creates no content. What all these companies have in common? They are disrupting business models of existing companies.

I was reading Joe Barkai blog post this morning – Airbus: Oops… we did it again. The article is discussing recent Airbus’ decision to choose Aras PLM. My favorite part of the article is actually not about Airbus decision – it is about business model innovation. Here is my favorite passage:

But Airbus’s decision could mean more than simply Aras’s ability to compete against the big PLM companies. Anders Romare, Vice President of Engineering Solutions at Airbus was quoted by the press release to say: “The unique SaaS subscription business model of Aras which eliminates up-front license costs and includes system upgrades with customizations is also quite compelling.”

PLM business model used by traditional PLM providers is somewhat industry is questioning here. Last year in my blog post PLM revenue model comparison, I checked possible business models for future PLM growth. Currently, “value based” model with licenses is dominant in PLM business. At the same time, I’m constantly hearing customers complaining about expensive PLM licenses. In many situations it prevents to realize full potential of PLM expansion in an organization. Companies are looking for sustainable PLM licensing model.

Going back to 2012, during my PLM Innovation panel: The future of PLM business models, I discussed potential options how to disrupt existing business model status-quo. Looking at slides again, I found interesting Autodesk comparison of 200 users deployment and statement about delivering PLM x10 times cheaper than traditional PLM vendors. At the same panel, I’ve been talking about Aras, open source and communities. It looks like Aras pivoted from its open source roots towards innovation in PLM business models. It brings PLM with no upfront licenses cost. It takes on a problems of PLM customization sustainability by absorbing upgrade cost into subscription. In my view, Aras’ innovative business formula is compelling to many customers and it might challenge existing PLM providers.

It is speculative to say that existing PLM providers can react and consider to adopt Aras business models too. Industry is moving to subscription-based models. Earlier this year, Autodesk announced their switch to full subscription model. The timing for that can be just right. PLM business has very slow lifecycle, especially for large manufacturing OEMs. Don’t expect for fast changes. But, the advantages of slow lifecycle is that once change happened, the next one will years to come. That’s why most of large manufacturing companies were always slow in taking their business decisions about PLM systems.

We’ve seen business model transformations happening in different industries. Ben Eisntein of Bolt brings few very good examples of innovative business models in hardware. Some of them reminded me Aras business model innovation. In the past, CAD and PLM industry demonstrated few examples of innovation when industry leaders followed technology and market shifts.  All CAD vendors followed PTC 3D innovation. All CAD vendors followed SolidWorks Windows platform innovation. Most of CAD vendors followed SpaceClaim direct modeling innovation. We are in the process of shift to the cloud PLM started by Arena (bom.com) and later Autodesk PLM360. Are we going to watch the change of PLM business models triggered by Aras’ innovative formula?

What is my conclusion? Business model is the hardest part to change for any company. Aras is shaking the fundamentals of existing PLM business models (expensive licensing, customer lock-in, maintenance and services leverage). Software industry is shifting to subscription and Aras’ move can be a trigger that will help PLM industry to re-think the way PLM should be sold. If you think about PLM implementation – it is never done. Once started, company will keep develop and improve PLM implementations together with company business and product development processes. New business formula will provide a better way to take PLM. Just my thoughts…

Best, Oleg