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.
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.