IaaS, Cloud PLM and Disruptive Pricing

January 18, 2013

PLM vendors are continuing to adopt cloud. I can clearly see a difference between people attitude for cloud solutions now and 4 years ago. Here is my simplistic definition of changes that happened for the last 4 years. The following sequence represents a typical reaction on "cloud PLM" for the last 4 years. 2009: What is cloud? 2010: Why I need cloud? 2011: Why not to use cloud? 2012: How to use cloud?

The last question, actually, has multiple angles. It means all – technology, implementation, product licenses and finally pricing model. The last one is obviously important and I can see some interesting dynamics between cloud and on premise software in coming years. The following Infoworld article caught my attention – Oracle’s faux IaaS now gets faux on-demand cloud pricing by David Linthicum. Take a read. I found it interesting. Oracle is a king of enterprise software market has a lot to lose when it comes to cloud adoption. I found the following passage the most interesting:

Oracle’s "on-demand private cloud" isn’t merely an equipment lease either. It’s an odd hybrid created because Oracle finds itself stuck between the rock and the cloud, reluctant to devalue its hugely lucrative enterprise software products by folding into cloud-service pricing. The rise of cloud computing very much goes against Oracle’s highly profitable way of doing business: enterprise license agreements, maintenance contracts, and all the other trappings of big software.

2013 is perhaps the first year where Oracle will feel real pain from public cloud providers, such as Amazon Web Services, Rackspace, and Google, as well as emerging private cloud providers such as Eucalyptus and those based on OpenStack or CloudStack.

I made me think more about what happens in PLM vendors ecosystem. Traditional PLM vendors (Siemens PLM, PTC and Dassault) are selling premium lucrative enterprise oriented packages with a lot of functionality and value behind that. Autodesk is a newbie of PLM market is playing "cloud alternative game" with SaaS prices and less functionality out of the box. Aras Corp. is providing Aras Innovator using disruptive enterprise open source. I can see some similarities in the attempts of traditional PLM vendors to embrace cloud technology and delivery models. You can see how Aras position their solution as "true cloud" with all advantages of cloud and on premise software. Aras leverages Microsoft Azure platform. Navigate to this link to read more. Siemens PLM introduced TeamCenter IaaS option delivery few months ago. I wasn’t able to get information about IaaS and cloud prices for both Aras and TeamCenter. Both website provided contact option to request the price, but no price.

What is my conclusion? Cloud plays a disruptive roles these days in many markets. Enterprise software is one of them. We can see an interesting combination of vendors, IT and infrastructure providers plays. IaaS vendors will keep existing technological platforms afloat by providing a seamless cloud infrastructure environment to support existing server-client and web technologies. Oracle is a good demo how vendor can reposition and tailor technology model to new conditions. I think, we will see lots of "cloud innovation" from traditional PLM providers in a near future. For a long run, cost matters. Just my thoughts…

Best, Oleg

Image courtesy of [Stuart Miles] / FreeDigitalPhotos.net

2 Comments | Daily PLM Think Tank | Tagged: , , , , , | Permalink
Posted by olegshilovitsky

Cloud PLM and Cost of Data: Your Mileage May Vary?

September 6, 2012

Cost is important. Period. It drives attention of IT managers and CFOs. With a massive changes cloud and mobile bring to a modern enterprise, structure and definition of cost will be transforming. On my way from Tel Aviv to Boston yesterday, I had a chance to read RWW Mobile article – The Rising Cost Of Mobile Data For Enterprises [Infographic]. The good news – the cost of mobile data is going down. Bad news – data trafic is growing.

I found the following passage very important:

Data management is often overlooked in the enterprise mobility conversation. When employers think of mobility in the workplace, the first thing they think about is security and locking down company information on devices that could easily be stolen, lost or hacked. Application deployment and management is the next task for the IT team to figure out, making sure that the right employees have the right apps to do their jobs. In the mobile world, the trend is typically toward more of everything. More security, more apps, more functionality. But more is also… more. It means that employees suck up more megabytes and hence more corporate resources.

If you are in the IT market to shop for enterprise systems, the question of cost (or total cost of ownership) is in the list of your top priorities. Cloud transformation and introducing of Cloud / SaaS packages are changing the way people thin about TCO. Before "cloud era" the traditional TCO formula of licenses, maintenance and implementation usually provided a basis you are working with. This is not true with cloud and SaaS. Software vendors stop selling licensing and switch to sell services. It opens additional opportunity to optimize resources and to get down cost of the software. At the same time, it may introduce new cost for enterprises.

What is my conclusion? Optimization. This is the right topic to discuss with enterprise cloud software vendor. How is it optimized for resources the application sucks from cables and mobile networks? It is the same question you ask your car dealer about the MPG. In the cloud world, you need to shop for lower traffic, which fundamentally will increase the efficiency of your IT stack and will drive TCO down. Just my thoughts…

Best, Oleg

Infographic courtesy of ReadWriteWeb article


2 Comments | Daily PLM Think Tank | Tagged: , , , , , | Permalink
Posted by olegshilovitsky

Will CFO like “cloud PLM”?

April 12, 2012

Cost is one of the aspects all cloud PLM providers bring to the table these days. The demand and the expection is that that PLM (or any other software) on the cloud will become cheaper than on-premises’ alternative.

Earlier this week, I’ve been reading an article from CIO magazine -Why CFO and Cloud Computing Have a Love-Hate Relationships. The article is worth reading. Author is talking about different aspects on how CFO in a company perceive advantages and disadvantages of cloud solutions. According to the author, there is no confirmation about cost-competitiveness of AWS. Here is an interesting passage, in my view:

The author evaluated the historical price changes in AWS S3 storage vs. on-premises, disk-based storage and concluded that AWS isn’t cost competitive. Moreover, he asserted that AWS storage isn’t realizing (or at least, isn’t passing on) the benefits of Moore’s Law, since its prices aren’t dropping as rapidly as on-premises storage pricing.

Later in the article author discussing "love" and "hate" aspects of cloud computing from the standpoint of CFO. The basis of resource consumption is related to the most "hated" behavior. On the side of "love" is clearly the ability of the cloud to turn your company capital investment into something that will be considered as "pay-as-you-go-service".

I wanted to bring some examples of Cloud PLM cost. Today, I can see it mostly around two companies and products -Arena Solutions and Autodesk PLM 360. Arena is a long-time player for OnDemand, SaaS and cloud PLM. It wasn’t simple to find pricing page for Arena PLM on their website. Finally, I found it. Here is the link. You can start with Arena at 79 per-user per-month. In addition to that you have a menu to get a quote.

At the end of the last year I took my first attempt to discuss it. Navigate to my post – PLM, Cost and Enterprisey Clouds. The example of PLM cloud deployment for 200 people presented at AU2012 stated 10x difference between so-called "Traditional PLM" and Autodesk.

The new version presented during Autodesk Media Summit two weeks ago presented even bigger distance between traditional PLM and Cloud PLM.

What is my conclusion? The best interest of cloud providers is to set up and an aggressive pricing strategy. As we all know from the public web, the usage is the first important thing towards winning a competition battle online. In my view, actual usage is clearly missed today for Autodesk PLM 360. Arena is probably operating with some historical examples, but I have never seen them published. I also don’t expect vendors to share cost structure publicly. The absence of examples and pricing reflecting "consumption rates" for storage or computing resources hints to the fact that cloud PLM is still far from maturity. So, I can see everything that happens now as very interesting and promising experiments that clearly can make CFO happy in the cloudy PLM future. The jury is still out…

Best, Oleg

7 Comments | Daily PLM Think Tank | Tagged: , , , , , | Permalink
Posted by olegshilovitsky

Cloud PLM and IT Basic Instinct

January 27, 2012

The amount of publications about PLM and cloud is growing. This is not surprising me. There are two reasons to that. Cloud is clearly hyping. Second – major player such as Autodesk is making their move towards the cloud. Carl Bass, Autodesk CEO announced that today’s technologies allow to Autodesk to come with a reliable and affordable PLM system. Almost at the same time, during DSCC 2011, Bernard Charles is announcing that DS invested about $2B in the development of the most sophisticated online cloud platform in the word (he was talking about Enovia platform).

I was reading ECN article Seeing Past the Clouds – PLM and what’s What? by Eric Marks. The article is speaking about trends in the cloud PLM and four possible strategies: public, private, community and hybrid. I can clearly understand the difference between public and private (read one of my previous posts – PLM Cloud: dedicated, private, public). However, the concept of community cloud is a bit complicated, since it is point on how cloud services will be used, rather on if it goes to public servers and multitenant opposite to private server placement. At the same time, I found the passage about "hybrid cloud" the most interesting. Here it is:

And lastly there are “hybrid clouds” where a private cloud can extend onto a public cloud for specific activities and on an as-need basis. The benefit of a hybrid approach that incorporates a public cloud is that it provides extra performance scalability for the private cloud that would be in use.

I can clearly see how it can make a difference. I’m sure you’re familiar with Basic Instinct movie. Let me make an association with IT. The basic IT instincts are control and cost. As I’ve been told by IT people in one of the manufacturing companies in Mid West – if the cloud is be more cost-effective for effective for us, we will be moving towards the cloud. Otherwise we stay in our racks. Hybrid model allows to keep IT on premise and extend to cloud in order to have a cost effective expansion and scale. It sounds like something that can keep everybody happy and, at the same time, it is clearly Trojan horse that cloud providers will put in organizations. As soon as such solutions will be running in production, rest of the game for cloud providers will be to leverage the economy of scale and not to blow up "security" red-herring.

Another passage from ECN article practically confirms that.

According to Edward Quinn, Mevion Medical Systems IT Manager, “to do this, Mevion is leveraging a “hybrid cloud” in order to be able to scale quickly and efficiently to distributed cloud data centers at far less cost than purchasing expensive equipment or renting/building out corporate data centers. The IT department can leverage the advanced international infrastructure already in place by leading cloud computing companies and activate and pay only for the services that its business needs.”

What is my conclusion? There are many reasons why companies can decide to move towards the cloud – better collaboration, ease of install, mobile, and many others. However, the cloud fundamental is about how to drive costs down using the economy of scale. PLM won’t be an exclusion from this game. In order to move towards that, vendors need to pass "IT police" in every organization. Hybrid cloud looks like a good weapon leveraging IT basic instincts. Just my thoughts….

Best, Oleg

Leave a Comment » | Daily PLM Think Tank | Tagged: , , , , , | Permalink
Posted by olegshilovitsky

PLM Cost and Enterprisey Clouds

December 30, 2011

PLM is a costly piece of software. Software licenses, installation, implementation, support, services. All these components of PLM software make the decision of manufacturing companies to adopt PLM software questionable. In the past, out-of-the-box solutions promised by software vendors claimed to decrease PLM software TCO. However, it was only a promise. These days "cloud" perceived as something that can make this change. If you listened to Autodesk Buzz Kross recently, you probably noticed the following passage from Autodesk Nexus 360 announcement:

"Our approach to PLM is a sharp contrast to the decades old technology in the market today," said Robert "Buzz" Kross, senior vice president, Manufacturing Industry Group at Autodesk. "Autodesk 360 for PLM will enable customers of all sizes to achieve the full promise of PLM with a scalable, configurable and intuitive solution.

The following slide presented a month ago during AU 2011 shows that Autodesk approach is to provide much more affordable PLM solution.

Cloud and IT’s bluff

I was reading blog article by David Linthicum. One of the topics discussed there was related to efforts made by cloud providers to provide solutions acceptable by enterprise companies. The questions of security and data replications are probably on the top of the list by many providers. One of the solutions mentioned was Google’s high availability data replication (so-called high-Replication Datastore). At the same time, according to David, introducing multiple "enterprisey" features can remove a potential to provide affordable enterprise-cloud solutions. Here is the passage:

The problem I have with this process is that much of what’s valuable in the world of cloud computing is the simplicity and cost advantage — which is quickly going away as cloud providers pile on features. The good news is that enterprises won’t have an excuse not to move to cloud computing, and adoption will accelerate in 2012 and 2013. However, as cloud offerings appear to be more and more like enterprise software, the core cost advantage of cloud computing could be eroding.

What is my conclusion? The key to make cloud solution cost effective is to keep the right balance between enterprise IT requirements and capabilities of cloud-based software. Some of these "enterprisey" cloud requirements are reasonable, and some of them are typical "red-herring". We are going to watch the process of balance finding in the next few years. Just my thoughts…

Best, Oleg

Image: scottchan / FreeDigitalPhotos.net

2 Comments | Daily PLM Think Tank | Tagged: , , , | Permalink
Posted by olegshilovitsky

PLM, ECO and Cost of Change

December 21, 2011

Cost is an important topic. Period. Everybody agrees with this statement. I can even say many companies investing a lot in their ability to calculate and predict the cost of product. Compared to that, cost of change is much less exposed. However, cost of change can be even more destructive for the overall cost of the product you manufacturing and the business. Recently, I’ve been spending some time analyzing how companies are managing changes and how PLM systems are supporting them. I decided to put some thoughts about change management and cost calculation.

Cost Standard and processes

There are several policies or standards you want to have in your company when it comes to cost management and change processes. Change cost policy – usually specify the changes that required cost calculation (or not) and company payback period. Cost calculation document. You want to have it in the way that allows you to follow up it from the historical perspective as well as an instruction how to do so. The important question of every PLM implementation is how you are able to automate cost of change calculation and embed it in the overall change process.

Is there something you can call "average cost of change"?

The perception of people in any company is that cost is expensive thing to have. At the same time, it is hard to come with a range of how much an average change cost. $1K-5K is a range you might be hearing. But it is too broad. Another point of confusion is to conclusion out is included in this cost – engineering services, labor, equipment, etc.

Cost Calculation Classification

I can classify all changes into four groups: cost reduction, product maturity, product development, others. Depends on what type of change you are estimating, actually change cost calculation can be different. If you estimating change that marked to save cost or time, you absolutely need to calculate the cost. However, if you making a change that related to product maturity, you probably can skip some cost of change calculation. Taking right assumption can significantly improve the speed of change processes, which is an essential part of every manufacturing organization.

What is my conclusion? Change management is one of the most complicated discipline in product development lifecycle. To measure it right and tack the history and metrics of changes together with cost calculation is tricky and very important. I haven’t seen ready out of the box implementations that can do so. Main reason – system customization is complicated to have all information in PLM system. Sometime, if cost calculation is complicated, you can calculate profit erosion. What is your practice and experience? Speak your mind, please. Do you have any examples you can share?

Best, Oleg

Image: jannoon028 / FreeDigitalPhotos.net

Leave a Comment » | Daily PLM Think Tank | Tagged: , , , | Permalink
Posted by olegshilovitsky

The Enterprise and PLM will rock 2012?

December 18, 2011

As usual, at the end of the year, there is a time for blog posts with predictions, opinions and future trends. Last 2-3 years of technological boom were around consumer applications – social, web, mobile. These are three major application field that developed many technologies of the past years. How it may impact enterprise and PLM?

I was reading thebarefootvc blog earlier today – 10+ trends: recap of 2011 and what’s next… One of the trends mentioned in the context of 2012 was Enterprise. This is my favorite passage:

The Enterprise: The last few years have focused on consumer usage and adoption of technology. However, large companies are recovering from the shock of the 2008 collapse and re-aligning to the New Normal. Technology can play a role through cost reduction and creating efficiencies (virtualization, cloud computing) as well as top line revenue enhancement (utilizing data and social media for better customer service and sales strategies). New financial services and healthcare regulation will also create the need for related IT solutions.

It made me think about PLM in 2012. Few important events happened in the end of 2012. One of them – Autodesk entered PLM. This is an important move. Autodesk means "volume". Consumer market is also about volume. Volume means broader adoption and lower prices. Volume is about Toyota and not about Lexus. Second is a broader adoption of the cloud technologies. For many enterprise organizations now it is a question of "when" and not a question of "why".

What is my conclusion? 2012 has a potential to become a year of PLM rock stars. Cost will be one of the most important factors of PLM in a near future. Cloud technologies and behemoths like Autodesk will be playing a significant role in this process. Just my thoughts…

Best, Oleg

2 Comments | Daily PLM Think Tank | Tagged: , , , , , | Permalink
Posted by olegshilovitsky

What is PLM Software Associated Cost?

November 7, 2011

Buying enterprise software is different experience from busing consumer goods or even automobile. Direct cost (licenses) is very often is a small fraction of the overall cost. So-called Total Cost of Ownership (TCO) is combined from multiple elements – licenses, maintenance and support, implementation, etc. Few days ago, I was reading an interesting article in Redmondmag.com – Study: SharePoint cost high due to inadequate skills. The article is talking about what is the associated operational cost of SharePoint. I found the following numbers in research made by Osterman Research interesting:

Theaverage cost to manage SharePoint is $46 per user per month, according to a "State of the Market" study by Osterman Research, which surveyed "more than 120 IT executives, managers, and staffers at mid-to-large enterprises." The study, conducted via an August survey, was commissioned by Seattle-basedAzaleos Corp., a provider of management services for e-mail, collaboration and unified communications, based mostly on the Microsoft stack.

What is my conclusion? Actually no conclusion today. I wanted to ask your advise. SharePoint is obviously not a PLM system. However, the nature of problems SharePoint is solving for many organizations is very similar – content management and collaboration. I was thinking about some comparison and tried to find similar numbers for PLM systems. What is the cost PLM system operation? What does it included? Is it a meaningful component of your PLM operational budget?

Best, Oleg

Leave a Comment » | Daily PLM Think Tank | Tagged: , , , | Permalink
Posted by olegshilovitsky

What if… “PLM on the cloud” succeeds?

May 24, 2011

Push aside our fear about security and PLM on the cloud. I was reading Washington Post’s “Video Viewing on Netflix Accounts for Up to 30 Percent of Online Traffic“. The following link leads us picture comparing web traffic coming from various providers. Video is king on the web.

CAD files, visualizations and other heavy weighted stuff. It is not lightweight Twitter 140 chars status updates or Facebook low resolution picture sharing. Cloud service providers from Amazon to Google and Rackspace are building data centers to accommodate the future of cloud applications. It made me think “What if PLM on the cloud succeeds?”, what will be the cost of this solution? CAD and PLM companies are starting to offer solutions to share data on the cloud for better collaboration and data exchange. I wrote about such a type of the solutions before.

The following quote from Wash. Post article is interesting:

Last week, Cable One introduced metered prices for U.S. customers that include 50 to 100 gigabytes per month. According to its Web site, the company (owned by The Washington Post Co.) will charge customers 50 cents for each gigabyte beyond the caps, but it will continue to offer a flat-rate monthly plan also.

Beginning this month, AT&T began limiting data usage to 150 gigabytes for DSL subscribers and 250 gigabytes for its UVerse broadband customers. Users will be charged an extra $10 a month if they exceed the cap. Comcast also has a 250-gigabyte cap for its broadband users.

What is my conclusion? The PLM on the cloud conversations is always about the security and never about the price and cloud usage. I don’t know if my drawings will be stolen faster on cloud. The question what if the transfer of my drawings, models, animations and rest of the stuff on the web will be costly. It might be significantly more costly than today’s software licenses. What is your take?

Best, Oleg

Leave a Comment » | Daily PLM Think Tank | Tagged: , , , , , , | Permalink
Posted by olegshilovitsky

CAD, PLM and Product Cost

February 7, 2011

Cost is important. Period. About 70% of product cost is defined during the design phase. So, to have PLM helping you to predict a product cost and drive it down can be a very important feature and benefit of spending the time to implement your PLM software and set up right processes. However, to get an enterprise view of cost is not a simple task in manufacturing companies. Last year, I wrote – PLM and Enterprise View of Product Cost. Since then, I had few very interesting conversations about a product cost related issues.

Who is working on this?

I wanted to find recent examples of tools (CAD, PDM, PLM) dealing with cost calculations. I found few examples and references of PLM vendors doing “costing work”. Agile, Dassault, Siemens did some work. However, I didn’t find visible public references related to the cost integrations into their product suites. I know two vendors – aPriori and Akoya, focusing on cost issues. I thought, PTC InSight is planning to provide a solution for cost visibility. However, for the moment, more focuses on environmental problems. The following two videos present slightly different aspects of cost calculation.

SolidWorks World 2011 Demo Preview (thanks deelip.com for capturing this video during SolidWorks World 2011) presents future SolidWorks cost calculation capabilities. The important element of this implementation is the level of integration of costing functions into the design environment.

Obviously, SolidWorks’ focus is on part manufacturing-design aspects. SolidWorks solution is not up to solving enterprise cost scenarios.

Then another example comes from aPriory video. aPriory is a company developing Product Cost Management software. Watch the following video to get a glimpse of understanding how stuff works.

This video made me think again about integration with various tools and information related to the cost. This example is more focusing on multiple aspects of product cost and not limited to “design environment” only.

Cost: Important, but NOT transparent

I can hear two voices related to the cost. One – cost is (obviously) important. The ability to control cost is absolute. The enterprise software (in general) and PLM specifically needs to solve the problem of cost analysis and visibility. Second voice says, cost is not transparent in an organization. The transparency of cost is not obvious and there are multiple interests a company to make cost transparent. Part of them is coming from work with suppliers, part of them is coming from manufacturing.

PLM Software Fails, Excel Wins

I can hear “Design for Cost” more and more often. At the same time, I don’t see products in this space demonstrating strong functionality and capabilities to solve costing problems. When talking with customers, I’ve heard about the complexity of the costing problem and inflexibility of solution. Most of the solutions, I’ve seen relies on our “PLM buddy” – Microsoft Excel to solve any problems.

What is my conclusion? I think, costing is another place where MS Excel has huge market dominance. Software vendors slowly, but started to understand the importance of vertical cost integration. The solution in this space is not obvious and requires significant effort in data integration. So far, I’ve seen little activity in this space. Just my thoughts…

Best, Oleg

7 Comments | Daily PLM Think Tank | Tagged: , , , , | Permalink
Posted by olegshilovitsky

« Previous Entries
Follow

Get every new post delivered to your Inbox.

Join 115 other followers