CAD/PLM On The Cloud and Vendor Lock In

I found a very interesting Forbes Magazine’s story – The Future of Enterprise Software. The author is writing about coming Cloud Software revolution. The write up is saying- Cloud Applications are coming and vendors won’t be able to lock in customers with the specific software. Customer will be “free to stay” or “free to go” and use any software from cloud.

“While concern over lock-in has a long history in hardware and services, it’s relatively new in enterprise application software. Companies always figured they owned the software because they put so much work into customizing it. Now, it appears, they are willing to forgo that level of ownership for the ability to move freely among cloud providers for the lowest possible cost or the best security benefits”.

This article made me think more about lock in and CAD/PLM software. The story behind customer lock in with enterprise software is not simple. And this is because of massive software customization that happens in the enterprise. Customers are building enterprise solutions based on software provided by enterprise vendors – MRP, ERP, CRM, SRM. The resulting solution is something to create strong affiliation between customers and software vendors.

However, in the context of CAD and PLM is even more interesting. In addition to customization and solution building on top of software products, customer creates intellectual property (IP) that dependent on CAD and PLM software. So, this IP in the forms of CAD models, drawings, Bill of Materials, etc. is an additional strong link between software vendor and customer. This dependency always discussed by CAD and PLM industry as “the interoperability” issue. I think, this issue will come back as soon as we’ll enter to the era of cloud CAD and PLM software.

Let’s try to understand what is the fundamental behind vendor lock in. I think, the ugly truth behind this is the cost of new customer acquisition. It is very high. To get a new customer on board is an expensive process and vendors are trying to keep customers not only by providing them more value and additional products, but also by putting additional cost them to walk out and use alternative products. This cost is translating of CAD models, export engineering and product data. This process is not always straightforward and requires experience, deep knowledge of software on both sides.

Now, let’s turn back to the cloud software. What is that about? I think, on the fundamental level, this is also about how to decrease new customer acquisition costs. Cloud software as services can simplify a selling process, can provide an easier way to demo software and provide free trial versions available for customers. In the end, fewer vendor bucks will be spent to get another happy customer on board. Done deal! What’s next? Do you think customer’s walk away from cloud software will be different than a similar process with software installed on premises? No, I don’t think so… The rest is very similar, in my view. Customer’s data, customization and many other factors will keep users on these systems exactly in the same way as it was before.

So, what is my conclusion today? Cloud is the way to software vendors to simplify the selling process. This is a huge advantage. In addition to that, there are many additional advantages related to the software on cloud. However, vendor lock in is with us to stay….

Just my thoughts… What is your view? What are your expectations from cloud software business relationships on both sides – vendors and customers?

Best, Oleg

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16 Responses to CAD/PLM On The Cloud and Vendor Lock In

  1. Craig Rode says:

    I agree to some extent with what you’re saying here. But part of the problem with the term ‘cloud’ is, well, it’s cloudy. One example of cloud computing is Infrastructure as a Service (IAAS). In this model, the enterprise is simply using off- instead of on-premises computing resources. This lowers cost, increases flexibility, and moves CAPEX to OPEX. In this model, the enterprise would likely still have to purchase the software license. On the other hand, Software as a Service (SAAS) provides thin client (web browser) access to applications. It’s hard to see how with today’s infrastructure this would work, because CAD/CAE applications are so computationally and graphically intense. I don’t think we have near the bandwidth for that. So that’s a case where Software Plus Services (S+S) would make sense.

    But this is all about where the software is running and how it’s licensed. The real issue is the one you identify, each CAE system has its own proprietary model representation, so at least as far as PDM is concerned, cloud or no cloud makes little difference. It would be a whole ‘nother world if the major CAD vendors could or would agree to a standard.

  2. Christine Longwell says:

    Choosing a PDM system is like selecting a spouse. Theoretically, you could make a change in the future, but that is certain to make you miserable (at least in the transition). No solution is perfect, and at the end of the day you may not get all of your assets back.

    Having lived through a CRM transition, I understand that there is a certain leap of faith that you need to take to move forward. The end goal is often worth the pain, but it is not for the weak hearted.

  3. Allen Liu says:

    If the cloud clipboard provides the CAD data exchange service,
    If the cloud viewer provides the visualization of the CAD model,
    If the cloud file system provides the security storage of the data, The vendor lock-in situation will be changed.

  4. Guy Alroy says:

    Hi Oleg,

    I tend to agree that the fact that the software is delivered in a SaaS model does not, for itself, constitute any difference when it comes to vendor lock-in.

    A lock-in is a derivative of several elements, the cost of converting data, the cost of getting at least the same level of functionality (out of the box or customized), the cost of training, the cost of implementation, the cost of hardware and more…

    Without mentioning names, there are SaaS delivered enterprise software packages, who do provide customization capabilities that can lock a customer in, just like a traditional package would.

    However, the SaaS delivery model, when geared toward SMBs, allows customers who DON’T WANT customizations, and happy to use well configured software as is, the basis to engage and disengage easily, through addressing some of the costs mentioned above.

    Happy blogging!
    Guy Alroy

  5. Craig, Thank you for your comment! I agree, we are in the early stage of understanding how to utilize cloud computing in the enterprise. I’m expecting vendors in enterprise domain and CAD/PLM specifically will be experimenting with different technological and business models to find the best match to the customer’s requirements and needs. SaaS?Cloud licenses will be part of this game. Best, Oleg

  6. Christine, Thanks for great association! I cannot agree more… When I’m looking on how customers are choosing PLM is definitely reminding me the marriage. There are not silver bullet solutions and decision always made of multiple trade-offs -functional, business, organizational. Best, Oleg

  7. Allen, Thanks for comments! Agree, CAD exchange, visualization and storage on the cloud can change the status quo. However, availability and licenses can be a key. Today CAD files can be sent to anybody. However, lock-in still in place… My view is that the real game changer can be to find a way to be more open. Best, Oleg

  8. Guy, Thanks for your insight and comments! I agree with you. In the case of no-customization and SaaS delivery to support migration between version is a much simpler task. However, it won’t eliminate vendor lock-in. And the problem is data migration as you mentioned. The absence of API and customization can be an excellent way to lock data inside and elimination customer migration process to another solution. There are multiple examples in non-PLM software in on-demand / SaaS space that can prove this assumption, in my view. Best, Oleg

  9. [...] CAD/PLM On The Cloud and Vendor Lock In « Daily PLM Think Tank Blog [...]

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  11. Tom Gill says:

    Hi Oleg,

    I just found this article about a google initiative that aligns pretty well with this topic.

    http://arstechnica.com/tech-policy/news/2010/03/why-google-makes-it-easy-to-leave-google.ars?utm_source=rss&utm_medium=rss&utm_campaign=rss

    or http://tinylink.com/?naNi8mu7Fh

    This is another advantage of Open Source PLM software as you have better access to the data to move it somewhere else if necessary.

  12. Tom, Thanks for the link. I found it, indeed, interesting… On your second point- I think the movement of data is very complicated. The key is not if you have “open source” or not. They question is how your system is open to get data in/out. Thanks for your comments! Best, Oleg

  13. Allen says:

    Yes, “open source” is not the key point, “open your data” is the first step, “open source” may be the second step.

    Bentley provide DGNLib for reading and writing DGN files.
    Autodesk provide DWG API for reading and writing DWG files.

    The advantage of “open source” is that you can build your own software on a high level platform, shortern the development cycle and get the high quality. “open source” system need to open its data first.

  14. Allen, I agree, open source can add another vector of flexibility to your PLM solution. However, open source flexibility cannot cross-compensate “open data”. Best, Oleg

  15. Tom Gill says:

    I agree that open data is more important than open source, but, having source access can also provide the “how” and “why” of the data.

  16. Tom, Agree with you – open data and open source are related but not equivalent. Open source can compensate the data openness, but system better need to built data open bottom up. Thanks for your comments! Best, Oleg

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