PLM Future Business and Social Models

June 8, 2010

Usually, when we are discussing various aspects of software, we are spending lot of time talking about technologies. However, I think, most of the people, learned these days, that to have an excellent product and technology is only part of the game. Business Model matters not less than technology. You may have an excellent technology. However, you have no idea how to sell it to your customers. Nowadays, to think “business” is not enough too. My take is that we also need to put “Social” next to business. I think, “social” becomes a very important part of the business.

Before I will dig inside of possible business and social models, I want to ask – what is so special about PLM? Is the same as any enterprise software? My guess is that there is some differentiation that can be applied to PLM. It comes due to a huge dissonance I can see between adoption of PLM as a manufacturing strategy and PLM software adoption level. I can see a great level of PLM ideas adoption. If you talk to engineering and manufacturing people, they will explain how important Product Lifecycle Management strategies for their business. However, if you’ll shift talks to the topic related to software packages, the actual discussion will be going a very wrong way.

There is a lot of magic in the word ‘open’. Very often, we are manipulating by “open”. Open API, Openness, Open Access to Data, Open…  In my view, the strongest trend in the space of “Open” is, actually, Open Source. Many companies outside of PLM space are experimenting with the open source and lately I had chance to see lots of interesting results coming out of this space. Aras Innovator is the only product in PLM space today thinking about Open Source. Without going too much in the details, some of these experiments are very fascinating.

Another interesting direction is Free or Freemium. We had chance to see lots of examples related to free models in consumer space. However, businesses are also starting to explore this space. I had chance to post about different aspects of Free models. You can take a look on one of my previous posts. Freemium model is coming from the combination of free and premium. In my view, it can be combined with Open model as well. Free can provide an easy path to customers. However, I had chance to hear lots of criticism of free in the business space, especially from people selling value to enterprises.

I learned an interesting and new trend in business models from Daniel Freeman on his marketing phreaks blog. Causium is a new business model based on the idea of charity and donation. The fundamentals of this model are in the psychological incentives and psychic needs of all parties. You can take a look on the experiment Atlassian is making by charging 10$ and proceed these revenues to charity. I don’t see many other examples of this model, but it provides a very unusual way to get into business with customers.

What is my conclusion today? PLM need to think how to innovate in a non-technological space too. I’m not saying that PLM vendors successfully solved all technological problems. Nevertheless, it seems to me that even with today’s level of PLM product and technological development, their adoption stacks because of some business and social aspects. Do you think existing PLM vendors will be able to make this shift? Time will show. In my view, all depends on how healthy is their core business today. Just my thoughts…

Best, Oleg


PLM, Cloud, SaaS and Software Upgrades

February 25, 2010

I’m continuing to discuss various aspects of PLM on the Cloud and SaaS. The issue I wanted to discuss today is related to the software upgrades. This topic is considered as a painful in the enterprise software and requires additional significant investment and effort. Let think what SaaS/Cloud can change potentially? In my view, there are two separate aspects we need to analyze: technological and business.

Technology of SaaS/Cloud
From the technological standpoint, moving to cloud or SaaS solution still doesn’t mean change in comparison to what we have today when we run software on premises. If your PLM solution, for example, will be delivered on dedicated servers hosted in data centers, you are not going to experience any change in comparison to the web solution deployed in the orgnization. These servers will run the specific version of PLM software installed on them and you (or your provider) will need to care to upgrade them in the same way you are doing it today. However, if PLM solution will be delivered in the multi-tenant architecture, and you’ll share instances of the servers with other customers, you have a potential to experience non-stop migration between software versions deployed by vendors. Even in this case, the question of how it will happen to be heavily dependent on details of the system implementation, data modeling aspects and many others. So, in my view, the devil of SaaS/Cloud technology is in details. You’ll need to watch it closely and understand what can be supported by your software provider. Certainly, some of the software aspects related to data modeling will still require “upgrade point” anyway.

Cloud / SaaS as a business model
This is another aspect that I’d not connect directly to the technology of an upgrade. The most widely accepted situation when moving to SaaS model is to get software licenses paid by a subscription fee and not by license fees. These change of the business model will likely move your software expenses to a monthly/yearly payment. I had chance to read some interesting observation about that business from Burton Group blog yesterday. You can find it here. ( However, even this subscription looks like a big change, in practice, lots of SaaS contracts that promoted actively as monthly payments, will be considered as 1-2 years contracts. So, forklift event, Burton’s blog is writing about, will be created by vendor.

What is my conclusion today? Marketing is doing a great job around SaaS and cloud software. However, not all marketing presentations are translated into practical realities. It can stay in the power point slides. Even if SaaS/Cloud computing is providing an option to be different from software on premises, you need to watch details of a specific solution you are going to move to.

These are just my thoughts… What is your opinion on that?

Best, Oleg


CAD/PLM On The Cloud and Vendor Lock In

February 24, 2010

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


Faltered Licenses and Future PLM Business Models

February 3, 2010

In my view, we are observing the major disruption of enterprise software business models ever. Since yesterday’s post FREE and COOL trends in CAD/PLM I had chance to have quite many discussions with my colleagues about possible new innovative business models in product lifecycle management. I have to say, that COOL option seems something that considered as simpler one. However, FREE option is something that raising many interesting questions and opinions. In my view, the most powerful business models need to be dumb simple. Let think about that. The PLM business fundamental, as a typical enterprise business today is presented by ability to sell licenses, maintenance and services.

Licenses. These are the basics of enterprise software business – expensive licenses and focus on the business value proposition. This model worked well for many years. This is still the most used business model in the enterprises.

Maintenance. In my view, this is the first source of revenues for enterprise software vendors in the bad economy. It is obviously depending on how your customers hold back against recession, but maintenance revenues is definite pain relief for many vendors these days.

Services. The ultimate way to customize your product and support all customer needs. The relative weight of services in each industry shows, in my view, the maturity of products and adoption level for mainstream deployment.

Before talking about the possible options, I want to bring some very interesting article in UK’s Independent. You can see it here. Oracle is suing small rival providing services for Oracle customers. Without going in details, my hunch is that services become a more important component of enterprise business. Similar to what happens with IBM when they were enforced by Microsoft to re-build their business around services, we can see similar signals in the current enterprise business outfits.

So, what are possible directions in the future business models I can see?

Subscription Models
In my view, the most straightforward. You are not paying for licenses, but pay for subscriptions. The obvious advantages are to simplify user adoption and decrease upfront cost for customers. On the dark side of this model is customer’s feeling to “pay for bug fixing”, which moves customer satisfaction level down. This model is actively discovered by providers of Open Source and Free Software providers.

Reverse Models
This is something that can really improve the subscription model. Let’s make subscription model to work in reverse. In this case, customer will pay a subscription fee if software works. What will happen in case of problems? Yes, customer stops paying. Does it sound weird? Maybe, but I found similar models are working in different industries like, for example, in medical services in China.

Advertising Models
This is the most fascinating one. I think, relationships between advertising and enterprise need to be researched from the beginning in 2000s. There are several factors that will drive the future change in this space: cloud applications, subscriptions and online business. My hunch is that advertising money can be turned toward payment for enterprise software vendors and PLM’s unique potential, here is in the ability to manage complete product information including interaction with customers and suppliers during the whole product lifecycle. Yes, to prevent some comments – it may not work for all industries. However, industries like consumer products, telecommunications, high-tech, apparel has a huge potential to use it in the future.

So, what is my conclusion today? We are going to see continues disruption of enterprise software business soon. These are my thoughts. Does it make sense to you? I’m looking forward to our future discussion.

Best, Oleg


Freemium PLM – Yes or No?

December 7, 2009

Freemium is a business model became very popular among internet start-ups and established companies. Services like LinkedIn, Flikr and Skype are using freemium business model. If you are not familiar with this term, take a look here. Also, I’m recommending Anderson’s book.

Why do I think freemium model can be successfully applied to PLM?

1. It will remove the initial barriers of PLM evaluation, value generation and long sales cycle.
2. It will allow to create a significant community of customers.
3. It will improve a quality of PLM software and generate the new barriers for competitors.

Nevertheless, can be a potential scope of free PLM? I’d like to raise few options. However, I’m not pretending on bulletproof definitions. Chris Anderson defines the following options for freemium model implementation:

Feature limited. In general, the most efficient, but at the same time, the most problematic for PLM. How to find a good combination of paid and free services?

Time Limited. Another interesting option. Full functioning PLM becomes paid after one or two years of work in the organization. This can be a good chance to show ROI before you will be taking money from customer.

Capacity limited. This is a very popular option. Limited storage, limited number of licenses.I’m expecting some promising results here.

Seat limited. You can provide PLM system fully functioning to the limited set of user in the organization. Assuming PLM global plan will be realized. This is a point of time, when a customer starts pay for the service.

Customer Class Limited.
To split small and big customers? OEM and Suppliers? These are also very interesting cases that can be realized and, partially realizing now too.

So, what is my conclusion? Do you think “free” is a bad word in the context of PLM or even wider, enterprise apps? Free becomes a very popular word, but still I cannot see good examples of freemium model in enterprise application. Do you think an idea of free+license combination in Product Lifecycle Management can be interesting and will catch the interest of customers?

Just my thoughts, please let me know what do you think?
Best, Oleg

PLM Prompt: Open BPM tools.. Oh, Yes! It’s free! But where is PLM?

October 4, 2009

Picture 16New week start. Interesting prompt related to free and open source software. Take a look on a quite impressive list of open/free BPM suites (thanks Process Cafe for links).

Free BPM and Process Modeling Tools:

Now, my question is why we don’t see more PLM tools in Open Source, Free or Freemium models?

Have a good week! Best, Oleg

What is the Next Big Deal in PLM services?

September 24, 2009

implementation-serviceDell’s $3.9bn acquisition of Perot Systems few days ago drove me to think about PLM and Services for some time. Of course, services are not related to cool PLM technologies, functionality and strategies. However, looking on analyst data, services are earning a significant portion of the overall PLM revenues (ref to CIMData).

I want to figure out few interesting observations around PLM services:

1. PLM Service organizations are closing gap between PLM vision and practical PLM implementation for customers. In the end, after all presentations, meetings and planning sessions, PLM services come to customer and “connecting dots” by adding functionality, integrating systems and improving usability of the systems where it is possible.

2. PLM Service organization is huge experimental space for gathering PLM knowledge and expertise, incubation ideas and technologies. In my view, PLM service organization becomes unique place to discover all advantages and disadvantages of PLM technologies and product. In many cases, these organizations is orienting on multiple or combined vendor offerings. You can learn a lot from the standpoint of how to make PLM work for customers.

3. PLM Services is one of the major destructive factors for PLM products and portfolios. This is another side of the coin. PLM services see vendor’s product as a platform to generate services. In many cases, PLM services abandon or re-implement standard functionality available in PLM systems.

4. In many situations, PLM services (or VAR/partner) have much more influence on what customers are doing than PLM vendors. By accumulating knowledge about customers requirements and expectations, PLM service organization can significantly influence ever decision made by customers.

What is my today’s conclusion with regards to PLM Services? Despite “love and hate relationships”, in most of the cases, I see PLM service organization as a very positive entity in PLM business landscape. PLM service organization needs to be involved more and get higher status as PLM eco-system builder and knowledge incubation. At the same time, we need to think how to convert PLM services into new product portfolio facilitator in PLM zone and not as a consumer of PLM platforms.

Best, Oleg.


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