PLM investment – value vs bubble?

PLM universe is buzzing after $70M investment that Goldman Sachs put in Aras.  Check my earlier article – Does Aras have enough money to win over Enovia, Teamcenter and Windchill?. Don’t miss comments from Aras Chief Strategy Officer, Marc Lind about who is a buyer for Aras solution and why is it different from a traditional PLM.

Engineering.com article – Why Goldman Sachs Thinks “Less than 20%” of Aras PLM is Worth $70 Million written by Verdi Ogewell pulls bunch of facts and data points about Aras, competitors, Aras acquisition and growth strategy, including development of SPDM (Simulation Process Data Management). It also hints on the valuation of Aras (not sure where it came from). Read the article and draw your conclusions.

Here is my favorite passage from Peter Schroer and PLM investment trend.

“PLM INVESTMENT IS A TREND,” claims Aras’ Peter Schroer. He claims that there are two outstanding things in today’s Goldman Sachs $70 million investment news. “One, of course, is that it is Goldman Sachs. They are a very special kind of investor. The other is that only one year ago, we announced a $40 million investment by Silver Lake Kraftwerk. So, in one year, that’s more than $100 million invested in Aras, which says something about Aras, but also about the PLM industry. It is becoming pretty hot for investors.”

Schroer also points out that the company expanded its PLM capabilities, “We have traditionally been very strong in areas like configuration, quality and supply chain management. The recent acquisitions of simulation process data management (SPDM) company Comet and Impresa, covering the MRO (Maintenance, Repair, Overhaul) area for aircrafts, have broadened the scope considerably.”

PLM industry seen few other growth investment event during the past year. Both related to Arena Solution – another long time player in PLM industry (both Aras and Arena were founded back in early 2000s) – Arena and Omnify: Nuts and bolts of cloud PLM acquisitions. Arena got strategic investment from JMI growth fund. Another event is $18M investment in Propel PLM. Check my article – where cloud PLM is propelling.

So, money is flowing into PLM domain and this is a good thing. Aras $70M investment is especially remarkable. It was long time ago since somebody was actually investing such amount money in pure PLM player. I can related it to few similar events long time back in 2000s when MatrixOne and Agile Software went public. Which reminded me… bubble days.

It made me think about type of investments you can do in PLM these days. And as we can see, even from the examples of companies I mentioned earlier, these investments can be different. I can outline few possible investment options:

1- Strategic investment in technologies. In such case, investor put a bet in new product with a high potential to growth, but still early in the development process. Risky investment, but if you bet right you have a chance.

2- Buying customers. PLM solution is sticky. Once sold and used by customer this solution is very hard to replace. So, by acquiring customer assets, you can get a potential easy access to  customers base.

3- Game changers that can switch the trajectory of a specific market domains. There are two large status quo segments in PLM these days. Large vendors were indispensable with very small chance to be replaced by a new solution. Another status quo is small to medium companies that under-served by large PLM vendors.

What is my conclusion? Money is coming to PLM and it is up to investors, vendors, consultants and customers to define trajectory of each investment and to realize potential of each market segment, company and technology. Investors are looking for adoption, traction and potential to growth. Engineering software vendors are looking for under-served customers as an opportunity to gain additional market share. PLM and other engineer software is well-known as very sticky, which is might be a good reason to invest in PLM. Just my thoughts…

Best, Oleg

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