More ways to collaborate as PLM market consolidates

Product life-cycle management (PLM) software vendors took some major steps this year in fulfilling a long-stated promise: enabling manufacturers to freely share product data throughout the extended supply chain.

This heightened level of data sharing is being made possible—in large part—by mergers, acquisitions, and alliances between traditional PLM vendors and suppliers of enterprise software.

Prime examples of this merger trend include Oracle buying Agile Software and Siemens buying UGS. Microsoft also has been involved in several alliances, opening up its integration tools like BizTalk and SharePoint, and its Office suite for tight integration with PLM systems.

User enthusiasm for potentially broad-reaching solutions sparked a 10.4-percent increase in PLM spending in 2006, according to CIMdata , an Ann Arbor, Mich.-based PLM consultancy. “What’s caused PLM to explode is the recognition that it’s now about the enterprise,” says Ed Miller, president. “You can see the push into manufacturing—not just how to design the product configuration, but also the processes for making the products.”

Other industry experts see this trend, and some think PLM sales will grow even faster once large, well-funded vendors like Oracle and Siemens start actively marketing PLM solutions.

“New product development will continue to accelerate as these larger companies put more sales efforts behind PLM,” says Doug Brockway, managing director for Waltham, Mass.-based investment banking specialist Innovation Advisors . “[PLM] will end up in more people’s hands, which will have a corollary impact on their product development efforts.”

Rooted in awareness

Oracle President Charles Phillips says acquiring Agile will make it easier for Oracle to deliver something manufacturers now demand from enterprise software suppliers: industry-specific functionality.

“Profitable innovation is critical to product-based industries, making PLM one of the fastest-growing application segments,” Phillips said in the wake of the Oracle/Agile announcement. “The addition of Agile—which will be the foundation of our PLM offering—will further Oracle’s strategy of delivering industry-specific enterprise applications.”

Michael Topolovac, president of Arena Solutions , a best-of-breed PLM vendor that offers an on-demand application for managing bills of material, says the joining of ERP and PLM systems is rooted in “the general awareness in the marketplace that PLM is a third key leg in the enterprise.”

The first two legs are 1) the financial record—or ERP—and 2) the customer record, typically housed in a customer relationship management system. “PLM is becoming as strategic as the other two enterprise applications,” Topolovac contends.

Analysts view the Siemens/UGS deal in similar terms, although it figures to forge tighter links with the factory than with accounting or sales departments. “The combination of these two companies gives Siemens an opportunity to truly join the manufacturing and design components of the product life cycle,” says Michael Burkett, VP at Boston-based AMR Research .

While these mergers are sure to result in larger, integrated systems that facilitate broad-based data sharing, the remaining stand-alone PLM vendors believe they still have something of value to offer.

“Instead of ripping out and doing a lung-heart transplant of a PLM system and an ERP system at the same time, many companies are still looking for something that is easy to build into their current paradigm,” says Mark Holman, Arena’s senior VP of operations.

Enabling collaboration is the primary value proposition associated with PLM software—whether it comes from a large vendor with a broad, integrated solution; or a small best-of-breed supplier. CIMdata’s Miller says PLM vendors are striving to create an atmosphere in which companies can develop innovative products in the tradition of famous inventors Bill Hewlett and Dave Packard, who started one of the world’s largest technology companies in a garage.

“When we talk about collaboration, we’re trying to recreate an environment that’s like working in a garage shop,” says Miller. “If you work in a company that has five people, and you’re all sitting in the same office, then you have a collaborative environment.”

One way PLM vendors are doing this is by integrating their offerings with Microsoft applications such as Outlook, Word, and Excel—which people use every day. UGS was among the first to take this approach, with the goal of providing a single source for product and process data, and business solutions that link ERP with PLM.

Other vendors have since followed suit. Sopheon, for example, facilitates collaboration between all functions—e.g., finance, marketing, R&D, and manufacturing—with its Accolade solution, which enables manufacturers to pick winning products earlier in the process.

“Accolade disguises the data-entry process,” says Brian Seyfarth, solutions marketing director at Sopheon. “Since it’s already working in Excel and Word, users don’t need to go to another application to enter the data.”

Perfecting the pipeline

London-based SABMiller , a brewery and bottler with distribution in 60-plus countries, adopted Sopheon’s Accolade partly because of its tight integration with Microsoft Office applications. SABMiller needed to improve knowledge sharing and product pipeline management throughout its regional operating hubs—a concern many manufacturers face as operations expand globally.

“Accolade will help us overcome the challenges of our decentralized approach to innovation across regional hubs,” says Neil MacGilp, group technical director, SABMiller. “In addition to giving us a unified process structure, the system’s features will guard against duplication of effort and allow cross-functional teams responsible for product innovation to more easily share knowledge.”

Another feature of Accolade is how it ties into supply chain systems, acting as an early-warning system. “Information is brought in much earlier than usual to help the manufacturer understand if the supply chain can meet the needs of the product,” explains Seyfarth. Questions like “What state of readiness is the supply chain in?” therefore become priorities for designers.

Sopheon will extend Accolade’s reach via recent acquisition of Alignent Software, a supplier of advanced product road-mapping software. Alignent technology allows users to predict how external market and technology trends will impact product plans over time—yet another way manufacturers can lessen potential product failures.

While vendors have made solid progress toward delivering PLM solutions that support the entire supply chain, they are far from done. That means the wave of mergers, acquisitions, and alliances—in short, industry consolidation—will continue.

“Consolidation has been happening across virtually every software technology vertical,” says Innovation Advisors’ Brockway. “PLM has been a narrowly targeted, niche-oriented category. But when practiced properly, it ties in with supply chain processes, broader ERP practices, and ultimately back to the customer.”

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