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7/11/2003
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What PLM Is And Is Not

Product life-cycle management may sound like an extension of ERP or supply-chain applications, but it's much more.

Automotive and other discrete manufacturers, such as aerospace and electronics companies, for years have relied on a host of software to help them design and bring new products to market. From these not-so-humble beginnings came one of today's hottest enterprise applications: product-life-cycle management, known as PLM.

PLM is much more than its predecessors, which had a heavy emphasis on computer-aided design and product data management. Newer PLM software is designed to help a company deliver a product and continually enhance it by helping it manage and automate materials sourcing, design, engineering change orders, product documentation such as test results, product packaging, and post-sales data. It can also help companies maneuver through a growing number of local, state, federal, and international regulations. The software typically includes a centralized database that stores all product master records, bills of materials, design-history records, packaging and artwork data, and more.

PLM systems afford companies a more complete and unified view of every aspect of their product-development processes. At a glance, executives can see how any part of product development is impacting other areas--for instance, how a slight change made by the design team is going to change manufacturing specs. They can get instant information on parts availability to prevent possible redundancies in procurement. They can ensure that the plethora of regulatory-compliance issues is addressed earlier in the process of developing formulas and designs. And they can instantly detect if efforts to get a product-development effort on schedule are costing so much that it's threatening projected profit margins.

The broad set of features and processes PLM covers sometimes makes it sound like just another enterprise resource planning or supply chain application. It's not. "Supply-chain software doesn't ever revisit the question of whether a product was designed properly. It assumes you are going to make the product," says Kevin O'Marah, VP of PLM at AMR Research. "There is no room in supply-chain software for asking the question, 'Gee, if we design this printing press to have fewer parts, what would that mean to our costs? What would that mean to our serviceability? What would that mean to our quality?"

But PLM can be integrated with ERP and supply-chain apps to link human-resources, labor, financial, and forecast data with product data. That can give companies a more unified view to better understand how a significant design change that's going to cause delivery delays will impact forecasted sales or how adding a product to the company's portfolio will affect labor resources.

There are dozens of vendors serving the PLM market. At the top are EDS and IBM, which partners with companies such as Dassault Systemes. They've made much of their money in this market from selling PLM, CAD/CAM, and related products such as engineering workstations, mainly into the auto industry. Other heavyweights include companies with roots in CAD/CAM, such as Cadence and PTC. The ERP vendors are making their way into the PLM market; according to AMR Research, SAP garnered about $281 million in revenue from its PLM software, and Oracle, which only recently introduced a full-fledged PLM product, got about $26 million.

Stephan Schindewols, SAP's VP of product management for PLM, says PLM has evolved from a "very discrete manufacturing-centric [process], all around CAD designs, mechanical designs, which is still a large portion of our revenue and our customer base." But ahead, the "tremendous opportunity is in process industries such as pharmaceuticals, chemicals, and consumer packaged-goods companies." SAP has already delivered one module, called Recipe Management, specifically designed for process manufacturers, and more are likely.

Oracle launched its first full-blown PLM offering late last month when it introduced its advanced product catalog, designed to centralize all product-related data. Oracle had dabbled in PLM for several years with its Oracle Product Development Exchange, an independent software system it sold during the dot-com boom. But after the economy went south, Oracle noticed that more customers were seeking a product-development platform that would be an integrated component of the vendor's E-business suite, says Kurt Robson, VP and chief applications architect. "It's become clearer and clearer that you need one integrated system to make this stuff work," Robson says.

Oracle responded with the advanced product catalog, which combines with the Oracle Collaboration Suite and its project collaboration system software to create a PLM system.

A myriad of other vendors specialize in PLM and are making a name for themselves. According to AMR Research, MatrixOne Inc. took in about $124 million last year; Agile Software Corp. garnered about $60 million. Other vendors include Aspen Technology, Formation Systems, Niku, Sciquest, and Sopheon.

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