Goliath Reinvented (PLM Strategies Column)31 Dec, 2007 By: Kenneth Wong
PLM giants outfit themselves to battle for SMB market share.
A year ago, when I was planning my PLM (product lifecycle management) coverage for 2007, I envisioned something similar to the tale of David and Goliath. I'd look at how the smaller vendors and relative newcomers were grabbing market shares from the industry titans by catering to the underserved manufacturing communities. I had even sketched out my plot, pitting affordable, on-demand solution providers such as Arena and Agile against the big three: Dassault Systemes, PTC, and Siemens PLM (formerly UGS).
Surveying the battlefield, however, I have come to realize the dynamics of the campaigns have changed. The big three have spawned their own versions of David to penetrate the small and midsize businesses (SMBs). Two of them — Dassault and PTC — are brandishing their own on-demand and software-as-a-service (SaaS) products. So I'm updating my script. It isn't about David and Goliath. It's about the giants that are learning to be nimbler, gentler, and friendlier to the little guys that can help or hurt their bottom lines.
In this article
The New Battlefield
With a sizable IT budget and a large resource pool, a Fortune 500 company may be willing to tolerate — or even prefer — a lengthy, tailor-made PLM implementation that can be refined and perfected over several years. But money and time are luxuries the SMBs don't have. They're likely to find software implementations that cost less and promise a quick return on the investment more appealing. For the speed gain and affordability, they may even be willing to put up with some minor limitations (an interface that's less than ideal for their industry-specific needs, for example). Consequently, when on-demand PLM vendors such as Arena Solutions and Agile appeared on the scene, SMBs were delighted.
It wasn't long before the big three in PLM realized they were missing out. Now, each has come out with its own SMB bundle. The emphasis is on speed, as apparent in the names and the marketing literature: CATIA PLM Express from Dassault; Quick, Easy, Affordable PLM from PTC; and UGS Velocity Series from Siemens PLM.
Agile has been acquired by another giant. Not a PLM giant but an enterprise software giant: Oracle. Oracle and SAP (Oracle's nemesis) have been inching toward the PLM market for some time now, and each has its own PLM package. With Agile safely tucked in its pocket, Oracle has an affordable product to pitch to the SMB crowd. However, it's unclear whether that's Oracle's target market. During the Oracle OpenWorld conference in November, the company announced that Agile, now rebranded as Oracle's Agile Enterprise PLM, is "being designed to be extended through open, standard-based [application integration architecture] to different enterprise components such as manufacturing and shop floor capabilities, ERP applications, supply-chain planning functionality . . ." Oracle's press office didn't respond to inquiries on the fate of the pre-existing Agile Advantage program, aimed at SMBs or Agile OnDemand.
Testing the Water with On Demand
In early 2006, PTC began offering its Windchill ProjectLink, Windchill PDMLink as IBM-hosted on-demand software. Jay Muelhoefer, vice-president and general manager of PLM on demand at PTC, explained, "75% or more of PTC's customers are what you might call SMBs. Now, with global competition, we see many of the smaller companies facing the same product development and manufacturing challenges as big companies — working with people in multiple locations, outsourcing designs, doing a lot more work overseas. We started looking at what we could provide them. On demand was a natural fit. So we take the best practices from the Toyotas of the world and provide them as out-of-the-box solutions."
The SMB Battlefield
It's difficult to judge how successful PTC has been during the past 12 months with its on-demand business. Muelhoefer was unable to provide statistics or revenue breakouts.
Diving into SaaS
Dassault may be a relative latecomer to the on-demand game, but if the high spirits with which Bernard Charles, Dassault's president and CEO, introduced ENOVIA 3DLive is any indication of the vigor with which he will pursue this vision, the company could soon catch up with the frontrunners.
In June 2006, Dassault launched the beta version of a Web-based PLM repository navigation application called ENOVIA 3DLive. This year in May, Charles enthusiastically introduced the application to the public at the annual CATIA Operator Exchange conference.
Two months prior, in March, Dassault went to China, putting on a road show to promote its "latest SMB-oriented Express PLM solutions" ("Dassault Systemes PLM Express Solutions Speed SMBs' Successes," March 28, 2007, www.3ds.com). In the next quarter, it rolled out DELMIA PLM Express and CATIA PLM Express, which include ENOVIA SmarTeam Design Express, targeted at the midmarket.
The Dassault press office pointed out that by following the not-just-PDM (product data management) strategy, the company has recently rolled out a vision, followed by a brand, 3DVIA, which extends the PLM experience beyond traditional enterprise users. Using an online application format, 3DVIA allows consumers to participate in the product-definition process.
At least for now, Siemens PLM's feet remain firmly planted outside the on-demand camp. Bruce Boes, Siemens PLM's vice-president of marketing for UGS Velocity Series, believes an SMB doesn't necessarily have to resort to on-demand PLM to reap the benefits promised by this model. If customers want low IT overhead, affordable entry cost, and minimal customization, he'll point them to the Velocity Series.
According to the opponents of the on-demand model, the shared hosting environment that serves as everyone's data repository is the Achilles' heel. To them, it represents a security compromise. "Your data is your company," Boes noted. "When you start to shift it offsite to somebody else, you're taking a pretty substantial risk."
CIMdata's director of research Ken Amann remarked, "IP [intellectual property] protection and security has been a major issue in moving to SaaS and shared on-demand environments. However, concerns about security in shared environments have lessened considerably as technology has improved and experience with these software models has grown. While companies still need to be aware of IP protection issues, many are accepting that Web/network–based delivery of product-related information and processes can be a cost-effective, secure solution for their business."
Content Management, at Your Own Pace
UGS may not offer on-demand, but its new owner Siemens uses it, at least in one division. In May, Siemens Energy and Automation, Postal Automation Division, signed up for Astoria On-Demand for structured content management.
Astoria Software, which provides Web-based solutions for managing dynamic content (technical publications and product manuals, for example), is a bit of an anomaly in the on-demand sector because it sells the type of SaaS solutions generally associated with SMBs to the Fortune 1000 companies, "really big companies with very complex requirements," according to Dan Ortega, vice-president of marketing at Astoria.
Astoria used to pitch its product under the perpetual-licensing model primarily, targeting aerospace and defense contractors, but it decided to explore the on-demand model because it found sales cycles taking too long, Ortega revealed. "Aerospace and defense companies tend to take a long time to make a decision. We're a startup. We can't hold our breath that long," he said. "The on-demand model has an average sales cycle of four months, and our deployment time is literally two to three weeks."
The Challenge for the Giants
When asked about Dassault and PTC descending on the SMB territory and the SaaS model, Mark Holman, Arena Solutions' senior vice-president of operations and strategic development, observed, "We have not yet come up upon these companies in our day-to-day business. We've been entrenched in this market with on-demand PLM for seven years and have learned a lot about what it takes to serve these SMB customers with on-demand. It's often more challenging for large vendors. A typical PLM system isn't architected to be Web-friendly, to function as a single instance, multitenant solution [the way SaaS operates]. The other challenge is a sales channel conflict."
"The software architecture problem is easier to fix, given time and money," Astoria's Ortega said. "But the sales channel conflict is more difficult to tackle, particularly for a big company."
The PLM titans are coming down from Mount Olympus. But the air on the ground is not quite the same. Which of them will win the trust — and, more importantly, the businesses — of the SMBs? The battle has just begun.
Cadalyst contributing editor Kenneth Wong explores the innovative use of technology and its implications. E-mail him at Kenneth.Wong@cadalyst.com.