PLM Strategies -The SMB Serenade

PLM woos small and midsize businesses.

XML, ODBC, ERP. Acronyms live or die by Darwin's principle. The ones that are created willy-nilly don't have a fighting chance. They quickly disappear, never to be seen again. The deserving ones eventually become a permanent part of industry lexicon. In the long run, only the fittest ones survive.

One that keeps pummeling its way into PLM conversations lately is SMB (small or midsize business), also written SME (small or midsize enterprise). I'll stick to SMB as a courtesy to the Society of Manufacturing Engineers, which has an earlier claim to SME.

Whos Who in SMB PLM

Everybody Loves SMB

In the early and mid-1990s, when nearly every company boasted a bloated budget and an inflated stock quote, enterprise software vendors could—and did—pitch their products and services as protracted data- and infrastructure-consolidation projects. With relative ease, they convinced industry behemoths to sign up for decade-long implementation plans, methodically mapped out with the help of armies of paid consultants. Now budgets are much smaller, headcounts much lower and patience much shorter. Market globalization has leveled the playing field, allowing smaller, nimbler companies to create and offer products virtually indistinguishable from those of the industry titans, often at a fraction of the cost.

IBM, nicknamed "Big Blue," was among the first few technology vendors to cash in on the surge of SMBs. Its worldwide Small Business Program, rolled out in 1999 with a $100 million marketing push, was targeted at e-businesses with 100 or fewer employees. Then in 2003, doubling the marketing budget, it fired off another initiative, this one aimed at midsize businesses with 100 to 1,000 employees. The baits were its Websphere and Global Services, previously offered only to large businesses. So the down-market avalanche continues.

Today almost all enterprise software vendors, even those that used to cater exclusively to the Boeings and GMs of the world, tout their solutions as SMB-friendly. Some interpret the category broadly, perhaps to give their SMB marketing literature the statistical boost needed. Everyone is trying to "think small," or trying to figure out how small businesses think, so they can sell big. But what do SMBs really need?

Understanding SMB

I turn to Gartner's (www.gartner.com) PLM analyst Marc Halpern for insight. He says SMBs are already embracing the basic PLM components, such as CAD, CAM, CAE and data exchange tools, but he doesn't find them rushing to adopt the more sophisticated tools, such as sourcing software, regulatory-compliance software and cost-estimation software, let alone knowledge-based engineering. "Generally with technologies that are highly process-centric," he says, "a great deal of resources are needed to really understand how the product can be used effectively. And most SMBs simply don't have the resources to experiment. When they adopt a new technology, they need to have confidence that they can be productive with it quickly."

Anticipated PLM Growth *

What does Andrew Anagnost, senior director of product management for Autodesk's Manufacturing Solutions Division (www.autodesk.com), see when he scans the SMB landscape? "We see a set of customers still very much in paper-based processes," he says. "In our survey of the installed customer base, 80% say they have nothing for automation. They use Excel and e-mail to manage their data."

Tom Shoemaker, PTC's director of product marketing for Windchill (www.ptc.com), sees something similar. "A high percentage of SMBs have not yet fully embraced 3D. Even among those who have, they are not fully taking advantage of the built-in capabilities—for instance, the QA functions and design optimization tools that come with CAD programs like Pro/ENGINEER. For some, Windows Explorer is their data-management tool. They use creative naming conventions. The burden is on the engineers to tag the files properly, to keep track of what's going on, to know who made the last update, and to avoid overwriting one another's work."

Here's an example of the technology consumption habits of SMBs shared by both vendors and analysts. The incremental approach, or the modular approach, makes PLM easier for them to digest. Gartner analyst Halpern says his idea of a best-of-class PLM solution is "where you have a common platform, and, as you encounter a particular business need, you can adopt a suite or a library of specialized applications to address it."

What makes PLM even more palatable to the SMBs is the availability of on-demand solutions, sometimes called hosted solutions. For more on the topic, see "Pick What You What, Pay As You Go," September 2005, http://manufacturing.cadalyst.com/0905plm/.

Variations on a Theme

Michael Topolovac, founder and CEO of Arena Solutions (www.arenasolutions.com), believes the proliferation of on-demand solutions can do for PLM what the advent of affordable PCs has done for computing. "It's PLM for the masses," he says.

To fulfill this mission, his company offers a free 12-month trial, with instantaneous deployment. Arena's on-demand products are offered on a pay-as-you-go model, with no upfront cash required. Topolovac believes that companies need the option to adopt PLM in stages—basic, intermediate and advanced—based on where their business is.

"This doesn't always equate to revenue or employee size," he clarifies. "Our experience is that even some of the smallest startups require advanced functionality because they are a virtual manufacturer relying heavily on outsourcing." He also warns that buyers should make a distinction between vendors who simply offer hosting services and those who are focused on delivering the PLM infrastructure: "On-demand is a business model—not a delivery model."

PTC's Shoemaker describes how uninitiated SMBs can start out on a pilot program with hosted PTC solutions, such as Windchill PDMLink or Windchill ProjectLink. He also predicts, or hopes, that when these clients become comfortable enough with PLM routines, they'll consider migrating to a more dedicated setup—bringing the solutions in-house.

"In my opinion," remarks Autodesk's Anagnost, "[hosted solutions] function like viable extranets, where a company can make sure its suppliers get the most updated info, have a way to access it, the data is controlled and the system manages itself for the most part." What he is skeptical of is the idea of manufacturers using hosted solutions "to do it all," from managing proprietary source code to IT infrastructure to sales—"the whole enchilada." He says, "There are pieces that [SMBs] want to control internally, and then there are other tactical components. Hosted solutions may be an interesting possibility for these components."

I ask Gartner analyst Halpern to give me his assessment on the risk involved in using hosted solutions to handle proprietary data. He says, "My opinion is that these environments are generally pretty secure. There's no convincing evidence that there's a gross security risk with those solutions." The viability of the solution provider, on the other hand, is a legitimate concern.

Halpern says, "When you own the license to, say, PDM software, even if the vendor goes out of business, you still own the software. You may not get any more enhancements or support, but you can continue to be productive. But what would happen if a hosting company goes out of business? If one day the hosting company disappears, you can lose access to your intellectual asset and the ability to manage it internally. So you want to feel confident that the on-demand service provider can stay in business"

Larger Than You Think

Depending on who you ask, a PLM client in the SMB category can be a revenue-less startup still developing its first product, an established enterprise generating $1 billion a year or anything in between (see Who's Who in SMB PLM). Autodesk's Anagnost points out that such a client might also turn out to be an autonomous business division, because large enterprises often have independent departments that operate with their own sets of objectives, their own budgets and their own suppliers.

Based on a provider's background, a buyer can expect strong expertise and support in certain areas of the lifecycle. Those deeply rooted in the design culture, like Autodesk and PTC, consider content-creation tools a critical part of the lifecycle, so their PLM tools are tightly integrated with CAD, CAM and CAE tools. Products from SAP and others steeped in the business culture, on the other hand, are better known for managing enterprise assets, procurement operations and post-sale transactions.

With the lowest entry cost, on-demand solutions represent the most economic option for small startups, but it's difficult to tell who among these providers have the tenacity to cope with PLM's crossing from puberty to maturity.

PTC's Shoemaker says he's not terribly fond of the acronym PLM. "PLM is nothing new. We've always created products, always collaborated with people, always archived drawings. We used to do it around conference tables, inside file cabinets—we just didn't do it too well, by today's standards. But the acronym conveys the mistaken idea that the need for PLM is something new."?

Kenneth Wong is a former editor of Cadence magazine. He explores innovative use of technology as a freelance writer. E-mail him at kennethwongsf@earthlink.net.