PLM Business, Digital Transformation, Services, Micropayment – Only Pay For What You Use?

In today’s business world, it is more important than ever to be able to digitally transform your company in order to keep up with the competition. However, how to do so can be a very complex question to answer. Digital transformation is a commonly used answer these days. But companies are different. What is your recipe for digital transformation? Business advisors and coaches are around and can certainly help you to decode old and new trigrams (PLM, ALM, BLM, … ) from the language that is understood by you. While the value of an adviser is not disputable, in my view, they cannot change the “law of physics” that is embedded into current PLM business models – data locking. A few years ago, the topic was discussed during the PI event in Chicago – check my article here. I also recommend one of my earlier articles – Can we liberate product data from PLM vendors and dissolve it in the digital thread. The foundation of the current PLM system is to own data and sell applications generating and using this data is widely used by all PLM vendors in a very successful way.

Service Economy and New Digital PLM

However, the world around us is changing. The business model of services is getting more and more popular. You don’t buy products these days (eg. tires, cars, computers, software licenses, etc.). Instead, you buy a “usage equivalent” of these products (eg. miles/km, lease cars, time of virtual computers and software, etc.).

The services are sold based on the usage and the value and this change are quickly becoming a new normal according to leading research published by Harvard business review and other respectful publications. Check this article as an example – Welcome to Experience Economy.

Jos Voskuil in his recent article says “PLM is not dead – welcome to business lifecycle management” is advocating for PLM advancing to a business reference a new “service” model and referring to a new digital PLM:

Digital PLM, if implemented correctly, could serve people along the full product lifecycle, from marketing/portfolio management until service and, if relevant, decommissioning). The bigger challenge is even connecting eco-systems to the same infrastructure, in particular suppliers & partners but also customers. This is the new platform paradigm.

It made me think about what it means for PLM vendors and how the service model is going to be introduced to PLM business.

PLM and SaaS Model

Cloud and SaaS are becoming very popular these days. Most PLM vendors are moving fast to adopt the SaaS model – examples of new PLM SaaS product data management and existing platforms converted from on-premise models have a widespread effect. Practically everything is now SaaS. The question only – how is it different from what we had before. Most of PLM SaaS systems are sold with fixed annual (or sometimes multi-year contracts) and the functions they perform are the same as these product lifecycle management products performed when companies used them on-premise.

In my view, the fundamental change must happen to the product lifecycle management and the way companies are using these services sold to manufacturing companies.

Data as a Services – Only Pay For What You Use

Let’s talk about the most important and fundamental thing in the product lifecycle management business – information about products, connected sets of related artifacts for design, planning, manufacturing, service, sales, etc. that were recently re-introduced by the PLM industry with a new name – Digital Thread. The importance of digital thread is growing and companies are focusing on how to establish a competitive advantage from the usage of data they have both created and collected based on their business activities and usage of products by their customers.

Data is the most important asset and manufacturing companies of all sizes are serious about how to handle the data from all perspectives – starting with how to own the data company creates, but also from the standpoint of how to get a valuable data and intelligence that can help them to operate in a more efficient way. The latter includes the mechanism for sharing data between companies, contractors, suppliers, and customers.

In my article about Post Monolithic PLM World, I shared my thoughts and experience with large companies such as Mercedes Benz Cars about building federated data sets, data meshes, and semantic networks capable to handle data between multiple applications and services. The plug-in model in which a company can use PLM components by adopting an open data model and business services model will become a foundation for the future PLM infrastructure. Check my OpenBOM article – BOM services and semantic federation layer.

New Business Models, Web Services, and Micropayments

During the last two decades, businesses collected a lot of experience in discovering new business models. When it comes to web services, one of the most fascinating ones which I’m learning about is the widespread adoption of various micropayment methods that transforming traditional licensing methods. Telecom was one of the first that naturally used the “pay per call” method. Internet and cloud computing adopted micropayment methods to charge customers for their consumption. All cloud PaaS vendors are using micropayment as a foundation of their business models charging customers for time, CPU usage, memory, and many other usages of valuable infrastructure and applications.

The initial adoption of micropayment was introduced by some CAD and PLM vendors charging customers for simulation time and some other development resources. Here is an example of Autodesk Forge Credits.

The switch to a new business model will allow to providers of PLM software, to charge for the service usage, similar to how we pay for other services available online (eg. AWS RDS, AWS machine learning, etc). It will make a fundamental consumption switch – services providing useful information will start charging for usage of these services. Established companies, such as global manufacturers and many businesses in manufacturing, construction, and related fields have a need for product lifecycle management and can use such services to manage core product information and associated data are familiar today with such a business model. These companies are using AWS, Microsoft Azure and other services

Producr Data and PLM Internet

 Cloud technologies are quickly becoming a way for manufacturing companies to improve their operation and agility. The days when manufacturing companies were afraid of the cloud are over. The question now is how to apply cloud technology and enable products with the new technologies to deliver a bigger value. 

Product data needs to be digitalized to be used in a service economy. In my OpenBOM article about what is Digital BOM and how you can improve data management and overall company operation, I shared my experience of how to introduce an infrastructure that makes product information available and shareable in the organization and across the borders – contractors and suppliers. 

I want to step up and bring to the next level of thinking and talk about cloud and web services and how the new service paradigm will allow you to rethink the way PLM and other enterprise applications will be delivered in the near future to solve the most painful problems in manufacturing business – connecting business functions with data and switch companies into data-driven enterprises. 

PLM Internet will become a connected space helping manufacturing companies to build new products. It will include design services, planning, contractor, and suppliers. This is a new model is already in the process of building. Various new businesses are making their production resources available online. It includes manufacturing on-demand providers (eg. Xomertry, Hubs), distributers and, I’m sure advanced PLM vendors will be joining this model soon. And it is starting to happen already. Here is how Jon Hirschtick, co-founder of SolidWorks and Onshape sees the future of CAD-connected services.

With IoT/IIoT, digital twins, generative design, the increasing importance of simulation, integrated electronics and software, augmented and virtual reality (AR/VR), 3D printing and more, today’s design demands are placed on the capabilities and holistic ability of 3D CAD software to connect and integrate with these new technological environments. Products are also being developed with a tilting of the content towards the use of more artificial intelligence (AI).

At OpenBOM, we are growing the number of online services available to developers via REST API. These services allow manufacturing companies to connect and consume their product information and intertwine it in the business workflows. Here is my passage from BOM as a Service article. OpenBOM as a service instantiated in your company AWS account will allow performing multiple tasks. Here is an idea.

Data is the foundation of future manufacturing intelligence. Companies must-have tools to leverage their data to help to make the right decisions (eg regulation. compliance, cost, etc.) Speed and cost are two factors that are most critical for all manufacturing companies these days. So, called on-demand manufacturing models are growing out of the space of the intersection between the company data and global online platforms. It is like Airbnb helps you to find the right apartment when you travel, online manufacturing services can use data to help you to find the right manufacturing options, contractors, and suppliers. 

What is my conclusion?

Product lifecycle management is transforming into a service-oriented infrastructure that will replace a traditional PLM system. Such information will deliver tangible resources to manufacturing companies and it will allow expanding the commercial install base by bringing more customers by making real-time data available online and used by manufacturing companies as a connected service via the marketplace to improve profitability and turn the manufacturing operation into agile service. Such transformation of PLM business models won’t happen overnight, but examples and first signs of the new business models are already visible in the industry. PLM system with a new business model will transform the way manufacturing companies build their products and cooperate together. Usage of this service will deliver a fundamental competitive advantage and lower the cost of manufacturing. Reduced costs are one of the most important decision factors for manufacturing companies and intelligent PLM services connected with other online services will allow businesses to increase their market share and build better products. 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.