Back in the old days of manufacturing, companies were selling products. We used to buy these products (actually we still do). We still can go and buy a car, computer or furniture. Although it is still happening to us, the business environment around these products is fast moving forward. The change actually started almost two decades ago. My first exposure to the change was when I learned about Michelin Fleet Solution. Here is the case study about how Michelin moved from selling tires to providing services. Michelin was not alone in this transformation and for the last two decades, we’ve seen many companies moving from selling products to selling services (kilometers, hours, electricity, computer time, etc.).
Fast forward in our days, I think the manufacturing industry is rolling into the next wave of transformation – SaaS business. But let me step back for a second. Unless you lived under a rock for the last few years, you’ve heard that every manufacturing company is now a software company. The reason behind that is simple – a growing amount of manufactured products are now “connected” and provide a substantial amount of software as part of what they do. Software is eating manufacturing and products that just a decade ago were purely mechanical are quickly transforming into electrical products with substantial software components. Don’t stop here and move even faster. The software these days is not the only runs inside the product (think about controllers and embedded software), but very much software that runs outside the product, connects products to an entire world, and makes them actually live and smart. And this is a very interesting transformation – the SaaS transformation.
My attention was caught by a SaaSIndustry article – Siemens to turn its software business into SaaS. In a nutshell, Siemens has decided to move a substantial portion of its software business to SaaS. According to Siemens, the new SaaS services will help users accelerate their digital transformation by delivering greater accessibility, easier collaboration, and limitless scalability. My favorite passage is the following one, which outlines the approach of expanding services using the reach of digital channels and SaaS capabilities:
The shift will help Siemens accelerate development by opening up new vertical markets and recruiting new users and customers, particularly in small and medium-sized businesses that will decrease their investment in complicated IT systems. Despite the transition’s “temporary burden,” Siemens expects the DI business to maintain a 17–23% profit margin. Siemens claims to be “rapidly driving” its technology portfolio, which currently comprises software and automation systems, an IoT platform, and critical technologies in AI, digital twins, 5G, industrial edge, and cybersecurity, among other areas
Let me go back to the topic of my article – how manufacturing companies are turning into companies using the software as a service component and transforming their business from products to services. What role PLM and related digital technologies and service providers can play in this transformation. I found three interesting trends and opportunities that are opening in this space specifically for SaaS PLM software vendors.
1- Digital+Physical Data
In the past, the lifecycle of a product ended when the product was finished and shipped to the customer. This is not the case anymore. The companies are collecting a lot of information during the design process, production planning, procurement, and other phases, but the new opportunity is to start capturing data from physical processes and also to perform changes to a digital representation of the physical product instance. It can be a source for a lot of useful information.
2- Maintenance and Assets Services
Maintenance is quickly becoming a super important function in the world of switching from products to services. Getting information about physical product instances provides an invaluable strategic piece of data, to control, optimize, and dispose or recycle products. Integrating the product data with other services for maintenance and other planning purposes can be a big deal in helping to facilitate efficient maintenance and recycling processes.
3- Release and OTA services
Like every product, which has its physical presence, the question about the lifecycle of products and their updates is supercritical. Physical objects have a much longer lifespan and companies need to look at how to provide services that can remotely control and improve existing products (services using the software. In the past, new features were introduced by new mechanical or electronic components. These days, new features can be introduced or improved by tuning the software or uploading new software to already existing physical devices.
What is my conclusion?
We live during a very interesting moment in the transformation of industrial companies. Each of these companies will be following the path of moving from product to services and, later, to SaaS. The last is inevitable because of a new form of the digital continuum. Nothing lives disconnected these days. Every company and every product is becoming tightly connected and SaaS services provided by PLM vendors can be an interesting option for PLM and industrial companies to find the path forward and provide platforms and develop online services for future industrial and consumer products. 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.
