PLM business model transformation: from selling software to buying services

For many years, selling PLM was a fascinating adventure. Tons of stories were published about marketing and sales tactics, selling to C-level, convincing customer about right timing and conditions and so on. The demand to help organizing PLM sales was (and still is) very high. To understand the level of complexity, read PLM sales cheat sheet blog I wrote almost three years ago.

PLM is still complex business to sell. Few days ago, I came across an article Product Data Management published by Razorleaf, a consulting and service outfit focusing on PLM implementations and integration. Read the article and draw your opinion. It raises many important points, but one o my most favorites is related to matching PLM requirements:

No single PLM system does everything; no vendor has an out-of-the-box solution that will work exactly the way you need it on Day One. The experts at Razorleaf can help you before you invest in a PLM system; we can design a platform capable of filling in workflow gaps as well as automating existing procedures. We will make sure you have a PLM system in place that is easily updated and extended to support new requirements or growth.

While there is nothing wrong in helping companies to decide what PLM system to choose, it made me think about how things can change and what technologies and business models can change it.

Existing PLM systems is a great example of enterprise software – something that needs to be sold. Software vendors keep an army of sales people, consulting, advisors, hiring service providers, etc. This huge army of people is convincing manufacturing companies to buy software licenses and perform services. Hosted cloud PLM didn’t change much in this model, except of optimizing it for less IT.

However, if you think about different type of software – online services, you can see a big difference and transformation coming to enterprise software space. Software is replacing with services vendors are providing on demand. The latest is what makes the whole difference. Existing PLM software is typically bought based on a long list of features and functions. In the cloud service world, company can start using software and gradually discover the value.  Therefore, the last one is about how to discuss business value rather then features.

Are we going to see a change in the way PLM software is sold? This is one of the biggest question I can see standing in front of vendors selling existing PLM paradigm. The philosophy of PLM will be changing from controlling data to data intelligence, from operating databases to helping companies to decide where to manufacture and what components to use, from releasing documents to helping manufacturing business to optimize support and services. Existing PLM software even distributed via cloud (IaaS model) hosting can be different. And the core reason is the way software is operating. PLM software, even hosted distributed via cloud servers, was developed to support old PLM paradigm, it is a software to perform data controlling tasks. New global online service will behave differently. They can be used by thousands companies and millions of users at the same time. They can bring a collective intelligence of decision making and optimizing of engineering and manufacturing processes.

What is my conclusion? PLM systems are going through the transformation from the status of business software for data management to a set of services to perform specific engineering and manufacturing activities. By measuring these activities, companies will make an assessment how new PLM services  improve the business. The consumption of future PLM services will be growing as soon as companies will be discovering new services and transactions supported by PLM cloud services. The old process of selling software will transform into the process buying services by companies, similar to how companies are buying storage and internet services today. The role of consulting and implementing companies will switch towards helping manufacturing companies to use software and optimize the processes. Just my thoughts…

Best, Oleg

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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.