AMR looks back on the highs and lows of product lifecycle
management in 2002.
We thought readers would appreciate a look back on the year's
happenings in the product lifecycle management (PLM) market. First,
the bad news: As with most of technology, PLM vendors had to fight
through nasty economic conditions.
Our original estimates for market growth turned out to be way too
high. Most of the larger vendors were happy to keep revenue flat
from 2001. Among smaller vendors, tough selling conditions coupled
with high valuations set in 1999-2000 put quite a few into an
irreversible death spiral.
And the good news?
Most of it is for users that gained clarity about what PLM means in
terms of software functionality and business impact. The market
finally has a series of anchor users that are spurring their
industries to get a grip on the systems and processes that support
product development, launch, and retirement.
Major user milestones
Procter & Gamble - As a bellwether for the Consumer
Packaged Goods (CPG) industry, P&G's decisions matter. Having
publicly touted more than $100m in savings with a specification
management system built on MatrixOne's technology and, at the same
time, delivered on a far-reaching system for handling artwork and
packaging with EDS, P&G is setting the bar high.
Software vendors are being pushed in the right direction, with
MatrixOne partnering with Formation Systems to fill gaps in formula
management, and EDS building out a consumer goods product. The
winners are large CPG companies that now have more to consider than
just SAP.
Toyota - IBM's win at Toyota was huge. The team of IBM and
Dassault are providing Catia, Enovia, and Delmia systems plus IBM
hardware and services with a bill expected to total somewhere
between $800m and $1bn over several years. What stood out about
this deal was not just its size, but the fact that Toyota, a
world-renowned master of engineering and manufacturing process
excellence, should accept the PLM vision of outsiders, especially
when this means abandoning its homegrown Toga engineering system.
General Motors - At AMR Research's Fall Conference, GM's
Kirk Gutmann described the dramatic overhaul of the automaker's
vehicle development process. GM has spent seven years and
substantial money rebuilding its PLM processes and systems. The
goal was to radically shorten development cycle time and cost.
Results include a simplification of systems (down to 500 from
1,500) that funded much of the budgetary cost and big improvements
in engineering productivity (up 10% per year), which shortened
total vehicle development cycle time to 18 months from 48 months in
1996. Technology partners of choice include EDS and Microsoft, with
applications that support 18,000 users worldwide.
High-tech manufacturing
Having enjoyed great success with Agile's engineering change
management, the high-tech sector started to see PLM as a larger
issue. Big manufacturers including Motorola, Intel, Sun
Microsystems, and others have begun to map out PLM strategies, and
in many cases are making big technology decisions now.
The National Electronics Manufacturing Initiative (NEMI) even
included PLM as one of the elements in its roadmap, which the
association authors to "chart future opportunities and challenges
for the electronics manufacturing industry".
On the vendor side, not all was doom and gloom:
PTC, despite continued jabs for its infamous sales style,
scored well functionally and technically in detailed product
reviews. AMR Research published a Report, "Product Lifecycle
Management: What's Real Now," in which Windchill fared very well.
EDS had its hands full integrating products from SDRC,
Unigraphics, and others into the Teamcenter suite, but as the GM
and P&G stories illustrate, the firm's capabilities are deep.
IBM PLM spread itself out a bit, bringing IBM Global
Services partners MatrixOne, SAP, and i2 Technologies into the fold
alongside long-time partner Dassault Systemes. IBM's PLM group has
been a bit of a golden boy this year.
Dassault Systemes came to market this year with a major upgrade to
its flagship product, CATIA. User reviews of CATIA V5 are glowing
and about 80% plan to upgrade. This is in addition to some big
wins, of which Toyota was the most visible.
Agile greatly widened its product offering, and although its
core High-Tech user market has bought little this year, new
business looks realistic, especially in sourcing. Partnerships with
Centric Software and Alventive bring some interesting design
collaboration capability to the mix.
MatrixOne's stock may have suffered along with the rest of the
enterprise applications business, but its revenue held steady
through the year. The good news was largely on the partnership
front where the IBM relationship offers some big brother backup to
calm nervous buyers.
Eigner is still fighting to crack the U.S. market, but
success at Varian Semiconductor is a convincing start, and big
European customers like Siemens and Keiper look ready to buy more.
Enterprise Resource Planning (ERP) vendors were active.
SAP
is in a very strong position in its ERP installed base and built
substantial new functionality this year to keep users loyal.
Oracle has built much of the footprint for PLM and has
several big-name customers signed up now.
QAD did a deal
with BOM.com and
PeopleSoft is tied up with
Agile.
Challenges for 2003
Looking ahead, users' chief
concerns should be:
Establishing ownership of PLM - AMR Research found that 66%
of discrete industrial manufacturers and 79% of consumer process
manufacturers have either a shared budget or don't even know where
the budget resides. PLM decisions involve weighing long-term
benefits like quickening time to market or increasing aftermarket
revenue with very mundane near-term gains like retirement of old
systems and savings on document handling.
Without some clear focus in decision authority for PLM, many
companies could flounder in committee hell while their competitors
break away with better product innovation. CIOs are the most likely
candidate to own this matter.
Semantics - PLM is massively cross-functional, with very
different terminology applied to product structure. As a result,
it's not uncommon to sell things that can't be made. Product data
management (PDM) will need to be redefined as the data model for
PLM.
This means establishing translation principles between the
Engineering Bill of Materials (E-BOMs) and the sales configurator
view of product structure. The AMR Research Report "The Last Mile
of PLM: Co-ordinating Product Structure Across the Enterprise,"
December 2002, explores how some users are dealing with this
problem today.
Project scoping - PLM is a good idea. Some 27% of business
users surveyed last spring agreed it was the enterprise application
with the biggest influence on the overall business.
However, launching a project with a reasonable scope is tough when
so many functions are affected. GM's effort or IBM's Integrated
Product Development transformation, both of which have taken more
than 6 years so far with more work ahead, are massive corporate
programs.
Normal people with typical compensation schemes based on a 12-month
calendar should not be expected to embrace such missions unless
they are broken into tightly mapped out phases.
These questions are being addressed in a field study to be
published this month. The root question, initially posed by a large
aerospace client was: "I've got product data management (PDM). Now
what?"
For now, remember that few users really have PDM at all, and that
pushing a PLM strategy will require most to redefine what is meant
by PDM.