SaaS vs Hosted PLM – What Is The Practical Difference For Manufacturing Companies?

Choosing the right software for your manufacturing company can be a daunting task. Do you go with a Software as a Service (SaaS) option, or hosted software? What is the practical difference? Since we’ve got an internet connection for computers, the idea of providing PLM system and associated data available over the web, the companies started to look how to use for business advantages and use other computers located elsewhere. In the beginning, it was called “on-demand software” and ASP (application service providers). For the last decade, the “cloud” was the main buzzword that was used by CAD and PLM vendors in their technical and product marketing. While it is still the case, CAD and PLM vendors are starting to be more focused and more specific in their outreach by attempting to claim their differentiators.

In this blog post, we will explore the benefits and drawbacks of the SaaS model and SaaS providers of product lifecycle management, to explore each option to help you make an informed decision. SaaS and hosted software have long been confused as the same thing, but there are some big practical differences between the two. In this blog post, we’ll take a look at what those differences are and how they might impact your manufacturing business. By understanding the benefits and drawbacks of each option, you can make an informed decision about which is best for your specific needs.

Let’s Clear PLM Marketing Mess

For the last several years, the SaaS applications industry is buzzing and becoming more popular PLM marketers were super confusing when it came to the point of discussing cloud, hosted, and SaaS systems. Here is what I can see happening now and how you can avoid being confused by PLM marketing. I can see the cloud as a more broad technological aspect related to the future development of CAD and PLM systems. But let’s be honest, no one is really developing anything today that is not capable to run on the cloud infrastructure. The question is mostly about “how” by addressing technological details. Mainstream PLM mindshare leaders are not interested in the details (except for a few exclusions) and continue to blur the difference. To do so, SaaS is presented as a business model rather than technology difference and “hosting” as a general approach to put anything beyond the desktop or corporate IT center. Be aware of this marketing and don’t buy immediately a strategy of “SaaS applications” from a vendor hosting 20+ years old platform using Microsoft Azure or another IaaS platform.

What is SaaS and what are the benefits for manufacturing companies?

The foundation of SaaS product lifecycle management is a technological platform provided by a vendor and capable to serve multiple users and companies at the same time. From the technology standpoint, such a platform is optimized for online services, global access, security, and data retention. An important differentiator of a SaaS platform is multi-tenant technology allowing to use of shared computing resources, but also might have a multi-tenant data model. You need to spot the last one because it is really important. Can one user share the data with another user if they don’t work for the same company (eg. OEM and contractor)? If the answer is yes then you have a multi-tenant data model. Such a model provides a “network layer” in data management architecture, which is extremely important for cross-company business processes and data intelligence capabilities. Without a multi-tenant data model, multi-tenancy is very limited to the usage of shared computing resources that limit overall SaaS benefits for the customers.

From a business standpoint, the SaaS model means subscriptions. The platform provided by a vendor is usually owned by a vendor or controlled by a vendor to optimize all DevOps processes. As a customer, you eliminate many headaches of local IT and computing management, which is mostly done by a vendor. An interesting opportunity will be the future hosting of multi-tenant SaaS platforms by large OEMs to develop their PLM with the global supplier’s access. I will talk about it in a separate article.

What is hosted software and what are the benefits for manufacturing companies?

Hosted PLM system is usually one of the existing PLM systems that are hosted in an isolated virtual environment “hosted”. The environment is usually owned by a customer or created for a specific customer with a multi-year subscription contract. From a product standpoint, hosted PLM system is not different from the PLM system deployed on-premise. The advantages of hosted PLM come from the operational perspective by virtualizing the environment, improving the security, and streamlining DevOps processes. The weakest point of any hosted PLM system is its data management limitations related to what is usually 20-25 old SQL-based architecture.

The obvious benefit of hosted PLM systems is a combination of a mature set of PLM features with advantages of a cloud environment, reduced IT cost, streamlined DevOps, and increased security.

The practical difference between SaaS and hosted software for manufacturing companies

It is impossible to compare Hosted and SaaS PLM without special context. This is not Apples to Apples comparison. In my view, you should always bring the following 3 important things into the comparison:

1. Company maturity in the digital transformation process
2. Existing PLM environment
3. Security requirements

One of the biggest limitations of hosted PLM environments is related to data management – limited scale, and inability to create a global environment aggregating data and processes from multiple companies. These limitations will eventually define the end of life for many hosted PLM systems. However, it might take another good 10 or more years until modern SaaS PLM platforms will reach the maturity of current mainstream PLM platforms.

The biggest difference between SaaS platforms and hosted PLM is the multi-tenant network data layer, which creates a digital thread in multiple dimensions – organizations and product lifecycle. SaaS platforms enable data sharing across multiple companies – manufacturers, contractors, suppliers and creates a foundation for knowledge graph and future data intelligence.

Which option is best for your business – SaaS or hosted software?

To answer this question you need to make an assessment of your company’s digital transformation strategy, and existing systems and goals. For large enterprise companies already involved in PLM implementation (some of them more than a decade), hosting existing or upgraded PLM systems from mindshare vendors can be a preferred option. Such a solution will be a better fit and easier step towards the values of cloud software. For these companies, optimizing TCO and gaining IT elasticity, and simplification of upgrades will be a clear win.

For the largest group of SMB/SMEs and millions of engineers, contractors, and suppliers SaaS is the right path to escape from the current mess of legacy solutions, a variety of spreadsheets, databases, and local file storage. This group of customers will benefit from a modern infrastructure, and unparallel capabilities to collaborate across the value chain, to connect OEMs, contractors, and suppliers into a manufacturing network. SaaS solutions operate as public platforms as well as special deployed solutions serving as a platform for OEM and all their suppliers.

Conclusion

The goal of every manufacturing today company is to optimize their business performance based on the streamlining processes, optimizing data handover between multiple users and processes, and focusing on how to lead with the best data-driven decision support connected to their business goals. Product lifecycle management environment from SaaS providers is focused on SaaS applications that can be available to global manufacturers with a strong focus on product data, customer data, and product data management environment that is capable to bring the SaaS model to the reality of business processes. Hosted PLM provides mature technology but lacks the “network layer” capable to connect companies, people and provide the needed intelligence for future connected digital manufacturing. Depending on your company’s state in its digital transformation journey, SaaS or Hosted solution can be a better choice. SaaS is clearly a better option for companies of any size starting their PLM journey. SaaS Network Platforms will get better over time as they will benefit from the network effect, unlike their hosted PLM predecessors which will continue to be the same PLM but hosted elsewhere. Just my thoughts…

Best, Oleg

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