What Oracle Results Mean for PLM vendors?

March 29, 2013

For many years the business model of CAD, PDM and later PLM vendors was structured as high upfront license combined with continues maintenance payments. The same is true for many other enterprise software vendors. PLM vendors built their businesses around expensive licenses sell covering significant sales cycle cost and even pilot implementations. The majority of PLM software is running on top of relational databases (RDBMS) licensed from big 3 vendors – Oracle, Microsoft and IBM. Back in 2010, I posted Faltered licenses and future PLM business models. 3 years ago it sounded as something that will never happen to enterprise software. However, things are going differently in 2013. Navigate to ReadWrite Enterprise article Oracle big miss and the end of an enterprise era. The author, Matt Asay, VP of 10gen, the outfit behind noSQL open source database MongoDB is clearly biased with the disruptive ideas and business models coming to the enterprise space. Even so, some of his assumptions in the article resonated. One of the key points – Changing the way how vendors get paid. He doesn’t see the problem of bad sales execution, but a fundamental shift in technology and product landscape. Here is my favorite passage:

This isn’t just a matter of improving legacy software products. It’s a matter of fundamentally changing how these legacy vendors deploy and charge for software. For example, Oracle’s entire cost structure is built around the premise of a hefty upfront license and high-margin maintenance (Over 20% of the license fee). We believe the primary issue is a fundamental shift in the technology landscape away from legacy systems towards a new breed of better products at a lower cost both in Apps and in Data Management. Virtually every emerging software trend is having a deflationary impact on spend.

Another aspect of disruption is related to developer communities. Software developers and CIOs of enterprise companies are looking for technological platforms. They don’t like the idea of expensive licenses and approvals of enterprise vendors to develop software on top of their platforms. As a result of that, they are turning to open source as an option to have their “platform of choice”. Here is a interesting quote:

With the rise of open source…developers could for the first time assemble an infrastructure from the same pieces that industry titans like Google used to build their businesses — only at no cost, without seeking permission from anyone. For the first time, developers could route around traditional procurement with ease. With usage thus effectively decoupled from commercial licensing, patterns of technology adoption began to shift…. Open source is increasingly the default mode of software development….In new market categories, open source is the rule, proprietary software the exception. The top-down approach, in other words, is losing its currency within the enterprise, as both open source and cloud enable developers (not to mention line of business executives) to get work done without getting permission.

So, getting back to future PLM business models and ways to disrupt PLM today, what does it mean for PLM vendors? I want to outline 3 main points:

1 – Alternative business models.

Customers are looking for alternatives to existing PLM licensing models. The biggest conflict here is between high cost of lucrative PLM licenses and interests of PLM vendors to take PLM software upstream and downstream in the organization in order to increase usage. However, adoption speed of PLM software is low. High cost of additional licenses is one of the factors preventing customers to expand the usage of PLM software. PLM vendors need to think how to provide flexible portfolios with options allowing to customers to spread PLM systems and technologies across the enterprise.

2 – Diversify revenues and activities

PLM vendors need to learn from the past of IBM and some other vendors. Years ago, IBM reshaped their business from software licenses to services and consultancy. IBM was extremely successful in this change. We can see how existing enterprise software vendors (Oracle, Microsoft, SAP, etc.) are trying to diversify their activities by providing new services and solutions. PLM vendors might be taking a similar path in the future.

3 – Pay attention to open source disruption

Open source is disruptive. Period. It is very hard to compete with free software and good technologies that can be used to develop solutions. Mainstream web is running on top of open source technology foundation. New generation of developers are coming with a significant baggage of knowledge and experience in this space. PLM vendors, system integrators and service providers need to take a note, until it will be late. You future competitors are developing from Starbucks shop next to your office.

What is my conclusion? I think, Oracle miss is a big alert sign to PLM companies. Changes are coming. It will come from customers that will be looking for alternative business models, from developers that cannot tolerate an expensive infrastructure and from technological vendors that will propose alternatives to expense PLM infrastructure. All together it will move PLM industry towards new horizons. PLM vendors need to take a note. Just my thought…

Best, Oleg


PLM Open Source is Better Without Open Source

January 2, 2013

Open source is one of the PLM trends I covered in the past in my blog. I wanted to come back to this topic again. The title of my blog post was half stolen from the article on opensource.comOpen source software policy is better without open source. Read the article and made your own conclusion. The following passage is my favorite:

When the OMB and DOD declared open source software to be "commercial software," it wasn’t a bureaucratic trick to legitimize open source. They meant it quite literally: software is software, and whether it was developed by open source, a proprietary company, or a team of monkeys, all the same rules apply.

Open source software introduced lots of changes in the way software developed for the last 10 years. If I recall open source software policies used by the company I worked for a decade ago, it was completely different back that days. The biggest problem of manufacturing companies (and other enterprises) to deal with open source is trustful support contacts. Here is another passage from the same opensource.com artcile:

The underlying concern (beyondplm: about support), though, is valid. Unsupported software presents a risk. Poor support is almost worse—think of the hours we’ve all wasted with an unqualified or unresponsive support operation. This isn’t specific to open source. Bad support is bad support, no matter how the software was developed.

Aras PLM, the company experimenting with open source and PLM was on my monitor for the last 5 years. Aras developed their business strategy around so-called Enterprise Open Source. The definition itself is not self-explaining. One of a few "smaller PLM vendors" staying alone and independent since early 2000s, Aras’ experiments overall are quite interesting. Making some research on Aras website, I found it presents little to none mentioning of "open source" terms at least from home page.

What is my conclusion? Aras enterprise open source is an innovation in PLM licenses and business models. The discussion about "true" open source definition I’ve seen in the past is probably irrelevant in case of PLM. I’ve seen little to none interest of manufacturing companies to modify existing software code. Opposite to that, I’ve seen lots of interest to develop on top of the software platform with predictable licensing model. The development of new business models is one of the most complicated areas enterprise software is going to discover coming years. Enterprise open source, free software, software-as-a-service (SaaS) – here are just few examples of different approaches in this space. Just my thoughts…

Best, Oleg

picture credit opensource.com article


“JT Open” and the Future of PLM 2.0

August 29, 2011

Despite the fact “PLM 2.0″ was first articulated by Dassault back in 2006, I think, the term itself has some rights for expanded live beyond DS V6 platform. In my blog last week I discussed some aspects of comparison between PLM 2.0 and Web 2.0. One of the most important conclusions, also mentioned in the comments, were about “openness”. Actually, the conversation about openness is always dangerous in CAD/PLM domain. The vendors’ walled gardens provide significant barriers to develop solutions for heterogeneous enterprise environment.

During the weekend, I had a chance to read Design News article – SpaceClaim Stakes Manufacturing Claim. Have a read and make your opinion. SpaceClaim is clearly one of the youngest representatives of CAD vendors. However, what specially caught my attention was a comment made by Blake Courter about JT Open:

Another core area Courter emphasized in this new release was interoperability — a critical requirement, he said, for making in roads in the manufacturing production space, particularly in the automotive sector. In this vein, SpaceClaim built on its backing of Siemens PLM Software’s JT Open technology with the new release’s support for semantic Product Manufacturing Information (PMI). This means SpaceClaim users can leverage JT data in a lightweight format, or they can work with richer, more associative information, including meta data and PMI.

Courter applauded Siemens PLM Software’s efforts around JT Open, particularly as far as the format has made inroads into the automotive sector. “Kudos to Siemens for creating a level playing field and making a neutral format for delivering the goods,” he said. “The JT Open guys have done the right thing going after ISO certification and paralleling other standards where they can.” SpaceClaim is putting its money where its mouth is, Courter said, by becoming a JTOpen and ProSTEP iViP member.

Blake’s comments made me think about future potential paths of JT Open as a potential enabling technology for PLM 2.0. As you remember from the history of Web, some key technological elements made a significant contribution to the development of Web 2.0. The famous LAMP (Linux, Apache, MySQL and PHP) was one of the key elements. Bundle together with AJAX and development of the blogs and wiki platform it enabled live people involvement into the broader development of web content.

One of the biggest problems of PLM these days is the ability of PLM applications to proliferate inside of organizations upstream and downstream. PLM vendors developed multiple exchange formats, and as it seems to me, stack in their transition to the agreement. What can move things forward is some business innovation in this space? Open Source is one of them. What if the technological leader such as Siemens PLM will release JT Open formats and tools under one of the possible open source licenses? Does it sound crazy? I’m not sure. It will allow to remove all barriers to proliferate data and processes downstream in organizations and boost usage of JT Open by other CAD and PLM players.

What is my conclusion? For a long period of time, many ideas were considered as crazy of impossible for implementation. However, for the last decade, we’ve seen already some very interesting industry and technological moves. Will JT Open become another one? Time will show. What is your take? Speak your mind.

Best, Oleg


COFES, Microsoft and Engineering Software Business Models

April 16, 2011

COFES is a think tank for engineering software. This is a place where you can drop any idea and see if it resonates. One of the COFES sessions is so called Maieutic Parataxis session. Think about pitching your idea in front of 300 people. You can see a sequence of 7-10 pitches from people compressed in a row. This is what Maieutic Parataxis is about. Last year I shared the story about Simon Floyd of Microsoft talking about PLM Excels:COFES, Maieutic Parataxies and PLM Excels. This year Simon came with a new idea of future business models for engineering software. Some of Simon’s slides and observations were resonating with my previous thoughts about PLM software business models. About a year ago, I wrote about Faltered Licenses and Future PLM Business Models. I talked about Subscriptions, Advertising and Reverse models. Take a look on Simon’s slides and make your opinion.

What is my take on this? The engineering software is changing slowly. The dynamics are different from the consumer market where the idea of market pace was realized and succeed. I can see multiple reasons why it happens. The most important reason is what I call “a good enough” principle. Traditional manufacturers are very conservative. Software is just a tool for them to produce the result. Existing software can run these companies for years. At the same time, I can see signs of changes. There are two main reasons, in my view: cost and competition. In order to compete on the market, companies need to find more efficient software to get a job done. Engineering software market place can offer a diverse set of tools that can be used. However, the compatibility of these tools, data access and many other reasons can potentially lay down this idea. Leading companies in this space are thinking about market place and application granularity. I think next 5-7 years can show the potential of the realization of this model. Just my thought…

Best, Oleg

[tag PLM, COFES, Microsoft, Business Model]


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