PLM software waste and future business models

PLM software waste and future business models


Enterprise software vendors are in transition from perpetual licenses to software as a service (SaaS) models. The question of “use” is becoming of the most interesting for a manufacturing companies forced by vendors to pay “for use” instead of paying for license.

My attention was caught by a very interesting report from 1E offering an insight into the enterprise desktop software and the topic of “unused” software.

Global enterprise software waste today stands at 38%, totaling $28 billion of waste in the US alone.

The report source is here. Business Wire article shed some additional lights into the topic:

Drawing on exclusive data spanning five years, and covering 149 companies, 16 industries and 4.6 million users, the Software Usage and Waste Report 2016 provides unique insight into the enterprise desktop. The report defines waste as a piece of software that has been deployed to a desktop but not used. “There is huge evidence of software waste across all sectors,” says Buffi Neal, co-author of the report. “The inability of organizations to reduce average waste levels suggests that they remain unaware of the underlying cost-saving opportunities.”

Article provides an interesting perspective on specialized software usage and brings CAD software as an example.

The Software Usage and Waste Report also analyzes software efficiency by industry. Of the 16 global industries defined, government (28%) boasts the lowest waste, while aviation (47%) and education (47%) have the highest. “All industries have a need for specialized software,” comments report co-author Peter Beruk. “An accounting firm will have the need for accounting software, while an engineering firm will have a greater need for CAD software. The Software Usage and Waste Report will allow the SAM manager to recognize those applications most unused within their business immediately and develop a remediation plan.”

The article made me think about PLM software waste. I can see two most interesting use cases that can create a potential software waste for PLM software.

1. PDM / PLM attachement

This is a situation when PDM software is sold or provided for free as an add-on to CAD package. In that case, customer might be even not aware about the product or not using it because of the reasons related to complexity of installation and use. The average PDM application attachment rate is relatively low. My optimistic non-scientific assessment would be between 30-50% of CAD seats are using PDM software.

2. PLM company licenses

The goal of PLM vendors is to make their software used widely by all company users. There is a good reason for that. PLM software value can be maximized if all people in a company will use it. The reality is different in many cases. In many situations, PLM implementation projects are stuck in the middle and it takes long time until customer will adopt PLM software usage in a full scope.

What is my conclusion? Usage will become a fundamental criteria of business models and future pricing. Software utilization is an interesting topic and it will become increasingly important for manufacturing companies as soon as they will shift into new business models. Companies will be more deliberate in the way they purchase software subscription. SaaS software provide more granular software usage models. How much waste is loaded in current PLM software suites is a good question. Pay as you use it will be a future of PLM. Time to figure it out is coming. Just my thought…

Best, Oleg

Want to learn more about PLM? Check out my new PLM Book website.

Disclaimer: I’m co-founder and CEO of openBoM developing cloud based bill of materials and inventory management tool for manufacturing companies, hardware startups and supply chain. My opinion can be unintentionally biased.


Share This Post