PLM vs ERP – Change The Battleground

My last article PLM vs ERP Tug of War generated a great number of comments. Thanks, everyone for sharing your insights and opinions. There are many reasons why the discussion is always hot about PLM-ERP. The main one is because these systems are traditionally responsible for both sides of the product development process and the efficiency of the process is very dependent on how both systems are performing.

I agree with my readers telling that companies are locked in silo thinking and the focus should be on the optimal flow of information and accountability. This is a very rational way of thinking. There are many ways to define this rational division between PLM and ERP – transactions vs innovation, business vs knowledge, product vs finance, these formal separations are not including two very important aspects of PLM-ERP development:

1- Company influence, internal politics, and legacy data
2- Vendor competition and market dynamics

The first one is a topic for a separate article. I might be coming to it later. But the second one is the reality of business and technological development – we cannot avoid it. The business is not standing still and vendors from both sides (PLM and ERP) of the equation are looking to grow their businesses and influence. It comes across in a variety of strategies such as acquisitions and new product development and partnerships. You can see PLM companies acquiring ERP vendors (eg. Dassault/IQMS), you can see ERP vendors acquiring and developing PLM software and technologies (eg. Oracle), you can see partnerships (Eg. SAP/Siemens). This is just a small number of examples. In fact, the changes are much bigger – digital transformation is a great opportunity for expansions for vendors from both sides.

Every expansion is a kind of war in which vendors are looking on how to capture more business. PLM-ERP business relationships are far from idyllic regardless of what strategy is used.

If you hear people making simplifications like ERP is finance/business and PLM is knowledge/product, those things are not holding water beyond some traditional ERP and CAD functions. Obviously, PLM companies are not focusing on finance and general ledger. At the same time, ERP companies are not creating design (CAD) systems. Beyond that point, both sides are actively seeking how to expand. The dynamics vary and depend on the industries and companies’ sizes. PLM software is traditionally stronger in engineering-focused business rather than mass production of standard products. Customers have a strong focus on how to leverage data and turn it into value, which can become a foundation for many new strategies and trends.

One of the most powerful strategies I observed can be called “change the battleground”. The best example of this strategy is a fight between eagle and snake. The way the eagle wins is by changing the battleground. Snakes are wise and powerful on the ground. Eagles take snakes and flying them in the air where snakes are quickly losing their power and dying.

Think about design data as the most solid foundation of CAD and PLM businesses. Nothing can be done much to replace this information and engineering is usually a stronghold of CAD/PLM vendors. By capturing engineering information, ERP vendors can empower an entire company business process via information sharing, and eventually, CAD/PLM vendors will be losing their grounds, scaling back to the pure design and product development domain. The opposite strategy can be used as well. Just think about advanced EBOM/MBOM transformations, configurations, and powerful maintenance services. Small and medium-sized companies are a special place where competition can be really interesting. Most of these companies cannot afford both traditional PLM and ERP systems. So, the winner technically takes the advantage.

What can change the business dynamics? New data management, analytics, and cloud/SaaS technologies. SaaS can be very interesting and powerful because it can bring very powerful differentiation strategies on both sides. Imaging cloud-based services capturing design and engineering data to serve it in the business scenarios covered by production and purchasing planning. Cloud CAD systems are another way to expand for design vendors that are not limited to file systems locked in the engineering departments. SaaS technologies are also an opportunity to capture a new business, especially the companies that can experience ERP system sticker shock. CAD/ PLM vendors have an advantage here as they can come first during the much earlier stages.

What is my conclusion?

Despite many voices about holistic processes and planning of information flow, the brutal reality of the market and the business is to expand by offering new services, capturing new markets, and by offering new vertical integration and new SaaS services that can become a facilitator to streamline the information flow. Things will be moving from both sides – companies will be better planning their data assets and software vendors looking how to change the battleground for the next spiral of business expansions. Just my thoughts…

Best, Oleg

Disclaimer: I’m co-founder and CEO of OpenBOM developing a digital network-based platform that manages product data and connects manufacturers, construction companies, and their supply chain networks. My opinion can be unintentionally biased.