PLM: Insert 5 Million Coins to Continue

superplmbrosCost is a critical factor in any Product Lifecycle Management (PLM) journey, and collective experience reveals a clear and present danger: that journey can be ridiculously expensive.  The costs of dedicated staff, infrastructure, software, consulting, training, not to mention potential business disruption tend to pile up. Bearing the extreme cost of adoption has, without a doubt, contributed to a few PLM failures.  Worse still, this affordability barrier has kept most out of the game entirely.  In the PLM Trail, I described how the PLM journey leaves little room for experimentation because of the inherent costs, which creates an environment heavily biased against the creative solutions needed to demonstrate real value.  Recent evidence reinforces the fact that PLM may be stuck in an 80’s retro arcade: you have to keep stuffing those coins in just to survive another few seconds.  Except instead of quarters, we’re talking millions.  It’s a-me, PLM!  Which brings forth a larger question: is it time for a new PLM economic model?

James Roche, of CIMdata recently released some Aerospace & Defense survey results that read pretty much like a PLM horror novel:

“A small fraction of A&D companies achieve exceptional return from their PLM investment. Learn the difference between those few value leaders and the majority who struggle to break even.”

The report distinguishes the precious few companies producing significant return on their investment as “leaders” who concretely demonstrate exceptional value with their PLM aspirations.  In contrast the “followers” are marginally more effective than your average Goomba.  Within the analysis, a pretty clear trend emerges between the leaders and followers.  Among many other things, the leaders have cross-departmental management support and demonstrate a firm grasp that PLM is much more than an engineering tool on steroids.  But another trend is disturbing clear:  the leaders mostly spend a metric crap-ton of money.

How much?  Well 63% of the leaders churn through more than $5 million.  Every year.  Let that carefully sink in.  That’s a lot of coin.  In fact it’s 5 million coins to continue.  But just a damn minute – you might think – how do these companies afford that?  Well it turns out that 60% of the leaders have more than $10 Billion in revenue.  $5 million from that perspective is a blip so small it’s not even funny, it’s likely eclipsed by toilet paper supplies and llama rental budgets.

So what’s the problem?  PLM success is unbelievably cheap and accessible!  If you happen to be in the Fortune 500 that is.  At companies of this size, PLM tends to pay for itself in cost avoidance alone, even with a dedicated staff of twenty business analysts, managers, developers, and Koopa Troopas providing all the daily care and feeding… forever.

Which brings us to the real problem – the Fortune 500 are already, for the most part, customers of PLM.  They participate in a PLM economic model built for the Fortune 500, by the Fortune 500.  But those companies are supported by a much larger and broader supply chain that are at entirely different economies of scale.  Not to mention the hundreds of thousands of businesses entirely outside of their supply chain, that could also make use of PLM in new and interesting ways.  Consequently, PLM initiatives lead by large firms with the coin, don’t always understand the amount of financial impact on their own supply chain.  Not surprisingly, the CIMdata report also mentions that the vast majority of leaders (80%) are primarily OEM’s, with leadership quickly evaporating as you move down supplier tiers.

If the PLM economic model scaled down proportionately with company size, the distribution of leadership would extend across companies of all types.  And we clearly see that is not the case.  Without huge volumes of users to scale across, the minimum fixed costs of infrastructure, licensing, customization and maintenance are rearing their ugly heads.  Mama mia!

Long has the PLM market struggled to make an appreciable  dent in the Small to Medium Business (SMB) segment, despite various attempts at artificial simplification – canned templates, OOTB implementations, etc.  The diminishing value proposition at these smaller scales is readily apparent in this study.  PLM is often marketed under the faster, better, cheaper  marketing line, one that is swallowed wholeheartedly by anyone wanting to jump (the shark?) into the PLM bandwagon.  But the larger companies know better – they know to pick any two, and in the case of PLM, cost has been willingly thrown under the bus.  What’s particularly interesting  is the faster, better, cheaper was also in the CIMdata survey.  Guess who placed much lower priority on that tag line?  Of course, the leaders.

  • Ross Bernheim

    Many kinds of software fail to fulfill their promise. PLM is not unique in this respect. For the small and medium sized business, PLM suffers from excessive complication and feature bloat. PLM has grown to satisfy their audience, the Fortune 500 companies. PLM vendors think of smaller customers as a source of additional income from their investment in their PLM program.

    Shoving a program that supports a large Fortune 500 company into a small company is usually not a good fit. Small companies don’t have the resources to support a large complex and expensive PLM program.

    Having implemented PLM in a company with 3 full time and 1 part time employees, I have seen some of the problems and benefits of PLM in a very small company.

    Would I do it again? Definitely. The sooner a company implements PLM, the smaller the task and less disruptive it will be to the company. PLM is disruptive. PLM requires an adherence to a structured process. PLM requires thinking about consequences of actions and planning for growth.

    We tend to think in tasks. Do it and it’s done. PLM is not a task, but a process. When
    adhered to, it can transform a small company and make even a small company competitive in today’s international highly regulated environment.

    Cheap PLM is an oxymoron. PLM is expensive. But the question should be not how expensive PLM is, but how much more expensive is it to not implement PLM?

    How many man hours does it take to manually do what PLM does? What happens when you don’t do it?

    • Ryan

      PLM is a process and you are changing the existing process..here’s where I start to be the drum that I’ve been beating for a long time..you have to have change management if you are to implement a business process like PLM. You can buy the most expensive, highly featured, best sounding, Bluetooth, no battery required, 300 speaker surround sound system with 3 mega bass. But if you can’t get anyone to turn on the system and understand how it is used and where the benefit for them resides. They will leave the system off and just use the stereo speakers and TV remote!
      In those reports, it might be interesting to see how many of the failed implementations didn’t have change management (user acceptance, testing and training) components.

      • That begs another intriguing question… is change management itself facing a real (or perceived) cost barrier in smaller companies?

        • Ross Bernheim

          Ed,
          It is always less expensive to do nothing and easier too. If it ain’t broke, don’t fix it.

          The problem is that it may be broken to some degree and we are just used to living with it. Change costs in time, money and effort, both physically and mentally.

          The question should be what happens down the road if we do or don’t make the changes? One of the important things to remember is that procrastination means the problem will be larger and more difficult and costly to deal with later.

      • Ross Bernheim

        PLM implementation has a number of requirements to be successful. You bring up one of the most important. Buy in.

        The advantages of using PLM need to be carefully explained to those who are going to be subjected to it.

        There are two major areas of resistance. The first is those who have their own little data silo. Their data silos give them a measure of control and self-importance. They need to be made to understand that they are part of the company and the data belongs to the company, not them.

        The second major area of resistance is that it will mean more work for the individuals. This is a bit harder, because there is an element of truth to it. Initially there is a lot of work to get stuff into the PLM database and make sure the data is clean and correct. But the payoff comes when you can easily access the data whiteout having to find our who’s data silo it exists in and can you have access to it. Need a BOM, data sheet, or other document? It’s just a click away in the PLM. Need to know the latest BOM to find out if something is correct? The PLM has the definitive answer right at your fingertips.

        The time savings and ease of getting information makes the PLM worthwhile for everyone. The extra work you do is balanced out in less work for some things you do and less work for everyone.

    • Ross, having defied the odds that seemed to have been overwhelmingly stacked against you, what do other small companies not see that yours did? You knew it was going to be tough because you were playing a game designed for the big boys, yet you not only chose to dive in, but you managed to pull it off.

  • Ryan

    To add to my previous post..if you look at the differences in the Leaders vs Followers you will recognize that the followers are not as focus on standardization, collaboration, compliance and customer support…those are all people-based functions!

    • But… the smaller you are, the less people you have, yes? Same reason smaller companies don’t have IT departments…

  • Joe,
    Thanks for your thoughtful response. My point is not to enforce an ROI test for PLM – but rather that the model breaks down under a certain scale – driven chiefly by the tools used to implement them.

    Regardless of how sound PLM processes and data management methods are they have been designed for a certain economy of scale – usable at the scale for which you see the most success. I tend to think that success is not because those companies have superior cultures, but rather that their bureaucratic waste provides a ripe target, despite considerable expense. That success falls off dramatically with company size – there’s no denying that the influence of PLM disappears when moving down in scale. It’s not because PLM principles are invalidated, or that the cultures of those companies are universally inferior, but that the costs involved with the tools of the day are a non-starter. It’s time for some new approaches.

    (Again, apologies for your comment not showing up earlier – Disqus was over ambitious and defective in its application of spam identification)