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.