PDM/PLM and Future Competition

Google-Moto deal created a lot of fuss and speculation. At the same time, it created an example of cross-domain innovation, which in my view, worth being analyzed. I’ve been reading Forrester blog earlier today -What Signal Does The Google-Motorola Marriage Send To Product Strategists? Thinking about PLM future, I found the following strategic guidance important:

1. Forget what you know about traditional competitors. If you think you have a rock-solid understanding of your biggestcompetitive threats — think again. You’re probably wrong.

2. Learn as much as you can about adjacent innovations. Look around the fringe of your organization and yourindustry. There are likely to be several pockets of adjacent innovations all around you. If you can’t see them, you’re not looking hard enough. In fact, the next big disruption in your industry will be the result of the unexpectedconvergence and application of those adjacencies.

3. Learn how to control the chaos of idea overload. If you calibrate your R&D spend to stay within your traditionalindustry guardrails, you will fail to see the big adjacent opportunities that may be staring you in the face from theoutside. To be clear, this doesn’t mean to spend more on product development. It means to spend differently, in otherwise unexpected ways.

PDM/PLM eco-system today dominated by a small number of giant providers associated with either large CAD vendors – Dassault, Siemens PLM, PTC and large ERP vendors – SAP and Oracle. The number of smaller companies in this space decreased significantly for the last few years as a result of acquisitions and retirements. I decided to put some of my thoughts related to the potential future of PDM / PLM product, technologies and market space.

Innovation and Consumer IT technologies

I think, manufacturing companies these days are facing a very interesting and even maybe a unique situation. I want to name two most important trends – globalization and cross-organizational optimization. Product cost is the issue on the table, in my view. Because of the current economic situations, companies are not ready to follow the solution path they used before. At the same time, in order to have an ability to decrease product cost, companies are looking how to introduce new solutions, which will be different from what companies have been doing last 10 years. It requires the next level of IT development. Today’s systems are squeezed to the highest level of their potential. Existing PLM software is too expensive and relies on the technologies developed 15-20 years ago. Consumer and web technologies is a potential place where future innovation can come from.

During the last 10 year, the enterprise IT was very busy working on existing software assets and implementations. After Y2K, the enterprise PDM and PLM space wasn’t a place where people focused their innovative ideas. However, last 10 years accumulated huge amount of technologies coming from the web and consumer web space. Web 2.0, online games, social networks, photo-sharing services, e-commerce. This is only a short list of places where real innovation happened. Open source and technological platforms are coming from this place. Manufacturing companies and stagnated enterprise data management deals can be a place to apply these technologies. Focus on how to decrease the cost of change and low TCO can create a future shift in this industry.

What is my conclusion? I think, there is a significant pain in today’s PDM / PLM market status quo. We can see some movements made by existing players on the market. However, in most of the cases, they just put a "lipstick on a pig". To change existing platforms and business models is very costly and painful. Not every business can afford to do so. Especially when you have lots of existing customers and revenues. As it usually happens, outside players can get in and disrupt the space. Do you think it will be possible? I want to know your opinion. Speak your mind.

Best, Oleg

Image: renjith krishnan / FreeDigitalPhotos.net

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4 Responses to PDM/PLM and Future Competition

  1. Klaus Brettschneider says:

    Oleg,
    I share your general perspective about the current PDM/PLM market. CAD and ERP vendors have closed the market for PLM solutions in the discreet manufacture industry between them by providing integrated solutions or free software tools. Smaller and specialized vendors are moving into niches, getting bought or are disappearing other wise. The CRM market had a similar situation in the 90s when the big players like Microsoft, Oracle and SAP moved into this market and closed out smaller vendors. The difference to the PDM/PLM market is that there was no opposing force, so to speak and there was enough space for specialized vendors to survive or grow.
    A comparison with the CRM market and salesforce.com’s success could make us believe that the PDM/PLM market is ready for a disruptive force. Peoplesoft provided it’s web based CRM solution much earlier than salesorce.com, what gave Peoplesoft good growth and success, but didn’t make it a disruptive force. The technological advantage was obviously not the crucial factor. Salesforce.com has built it’s disruptive force with a new business model where easy access, srandards and the user/customer is the focus. A visionary leader (with enough money) and the capability to built a supportive community based on social media supported the success. It seems the PDM/PLM market is currently in a similar situation, waiting for a ‘PDM-salesforce’. Everything for a PDM/PLM solution in the cloud is available from a technological perspective, no real innovation would be necessary and only a new business model approach could bring the disruption you are asking for.
    I do not see a disruptive force in the PDM/PLM market soon because of two major reasons:
    (1) Disruptive changes in business models and markets won’t come from the established software vendors. As we know, disruptive innovations are not coming from big companies anyway. (2) Because the PDM/PLM market is squeezed between CAD and ERP vendors, it is unlikely that a ‘new’ provider could built a ‘salesforce’ success. A market in this situation is too limited and does not provide a good perspective for venture capital, if you have to fear that you will be squeezed out between the big boys sooner or later.

  2. Klaus, Thanks for your insight on the competition and PLM world! I partially agree with your position of “squeezed position”. However, what is the difference between squeezed and occupied place? Going back to salesforce story – SF innovated in the same that was occupied by existing ERP and CRM vendors. At the same time, we can see how existing vendors in this space are trying to re-invent themselves (i.e. PTC – Creo, Dassault V6 and some others..) Best,Oleg

  3. Klaus Brettschneider says:

    You have only to enter a subway during rush hours to understand the difference between an occupied and a squeezed space, but that’s probably not what you and I have meant. The pressure comes from the mandatory integration into CAD, what makes CAD vendors to natural providers and the necessity to offer extended PLM functions into manufacture, procurement and the financial world, what makes ERP vendors the natural second force pushing in the opposite direction.
    My conclusion is not that something similar to the CRM market won’t be possible in the PDM/PLM market, but as already mentioned, the established vendors are not able to innovate (in a disruptive way) and if there is venture capital available for a new force in such a market is questionable.
    BTW – Where doe your impression comes from that CAD vendors are tying to re-invent themselve but PDM/PLM vendors are putting ‘lipstick on a pick’?

  4. Klaus, I partially agree with your statement about the interest of CAD/PLM vendors to innovate and the availability of VC-capital for this market. At the same time, I’d not discount the fact that customers are looking for better solutions. The cost of existing software is so critical that it can push to innovate in this space. I’d not differentiate between CAD and PDM/PLM vendors. The list is almost identical. The “lipstick on a pig” association is coming mostly from analyzes of the difference between what PDM did 10 years and what happens now. Just my opinion, of course. Best, Oleg

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