Cloud PLM license cost and lessons from Uber

It became a cliche for the last few years to compare everything with Uber and Airbnb. I have to admit that I’m guilty and I’ve fallen in that trap last year too. If you feel like Uber-for-X, read the following article – Why there won’t be Uber in every industry. Uber’s business model isn’t unique, but it also isn’t ubiquitous.

Uber one click car ride order is fascinating. I’m sure it inspires many people to apply similar ideas to manufacturing. For example, One-click-manufacturing (OCM) might sounds very much Uber-like. Cloud PLM is eliminating IT services and installation is also very much on the way of thinking how to bring PLM faster and… maybe cheaper?

The challenge is that many took the wrong lesson from Uber.

I’m convinced industry can learn a lot from what Uber does. My attention was caught by the the article – Taking the wrong lesson from Uber. It speaks about some fundamental economics of Uber. Here is my favorite passage:

The challenge is that many took the wrong lesson from Uber. Yes, convenience is huge, but it was only part of the picture. The magic of Uber is that it used mobile to create a 10x better product than the incumbent (taxis), and did so at a lower price. The “and” is everything.

It took three years for Uber to execute this. Uber, as we all know, launched as an on-demand black car service. They nailed convenience from the beginning, but the service was a luxury. Then in July 2012, Uber took a cue from Lyft’s ride sharing service, and launched uberX. UberX was 10x better than taxis — but more expensive. It wasn’t until June 2013 that Uber did something important: it re-launched uberX in California with cheaper prices. The headline: “The New uberX: Better, Faster, and Cheaper than a Taxi” (emphasis added).

You can ask how is that connected to engineering, manufacturing and even more specific to product lifecycle management? PLM industry is not about commodity like taxi sharing rides that will pick the cheapest ride in most of the cases. PLM industry was always about selling value to customers and when you sell value, price is less important.

Here is the thing and might be totally wrong. But, this is one of the lessons I learned it from my (now) already seven years of daily blogging about PLM and speaking to many users.

License price does matter and PLM is not an exclusion from that rule

Everything customers will tell you about the fact price is not important and manufacturing companies have money to pay is a biggest illusion. Typically, you are talking to engineering IT and these people are interested how PLM technology and products can solve their problems. But, it will come down to price and must be prepared for tough license cost related discussions.

While in most of the cases perpetual license cost of PLM systems is hidden from public, cloud PLM license cost information is available online. As an example, I grabbed information from PLM vendors websites selling SaaS only PLM cloud services – Arena Solutions, Autodesk PLM360. I also picked information about new cloud PLM offering on top of Salesforce.com – PropelPLM.

Arena PLM license price:

Autodesk PLM360 license price:

PropelPLM license price:

Surprisingly enough cloud PLM license cost was in the same price range for all these vendors. With the average cost 80-100$ / user / month, billed annually, medium size manufacturing company that will be interested to put PLM system in front of 500 users, will have to pay $480,000-600,000 annually for cloud PLM licenses. In addition to that, there is a chance PLM implementation cost and additional services will be needed too.

I’m sure some on-premise PLM systems can cost more, but that is not my point. With the license price tag of six figures, cloud PLM software is not a cheap project for a manufacturing company. I’m sure companies would like to explore alternatives before signing $1M deal.

What is my conclusion? In my view, high cost is one of the biggest reasons of PLM low adoption among wide range of manufacturing companies. Clearly one size doesn’t fit all, but when it come to $1M price tag, engineering IT will try to explore alternatives or just slam breaks and postpone the decision to acquire PLM systems. In other words, if uber cloud PLM taxi is so expensive, I can take a bus. Just my thoughts…

Best, Oleg