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ERP

Unlocking the Value in PLM-ERP Integration

By | ERP, IT Strategy, PLM | No Comments

PLM-ERP Alignment is Critical

In the seemingly endless conversation about product development software, there are those that argue that PLM and ERP serve different roles in product development and product lifecycle management. Those on that side of the fence use arguments such as “PLM helps drive product innovation, ERP helps execute the business of manufacturing”, and prop their arguments by making debatable observations such as that ERP is a static system of record and PLM manages product changes; that product data structures in ERP are rigid whereas PLM’s are flexible; or that ERP can only handle hierarchical data relationships as opposed to the dynamic many-to-many relations data model of PLM. Some years ago there was even an attempt to restore the lackluster image of ERP by coining a new term:  “Operational ERP.” Read More

PLM Service Providers Ready To Deliver Greater Value

By | Aquisition, ERP, IT Strategy, M&A, Manufacturing, PLM, Strategy | No Comments

What Do Recent Mergers and Acquisitions of PM Services Companies Mean for Manufacturing Companies?

Recently we have been witnessing a wave of mergers and acquisitions of PLM services companies. Here are some examples, listed chronologically:

  • In October 2013, Accenture announced the acquisition of the PRION Group – a consulting and systems integrator that specializes in Siemens PLM software.
  • Later that month, Accenture announced plans to acquire PCO Innovation, another PLM consulting group.
  • In April, 2014, KPIT Technologies reported the acquisition of I-Cubed, a PLM product and services company specializing in PLM data migration. Only a few months earlier, I-Cubed acquired Akoya, a should-cost analytic software company.
  • On May 21, 2014, Kalypso, an innovation consulting company announced it had merged with PLM consulting firm Integware,

I don’t think the increased activity in of mergers and acquisitions focusing on PLM services, or the fact that Accenture all of a sudden is paying attention to PLM is a mere coincidence. Rather, it is an indication of a gradual change in how enterprises view product lifecycle management, the role of PLM software in the enterprise, and, with those, new opportunities for PLM related growth.

For years, PLM companies focused more on PLM /PDM implementation than on actually improving business processes. While the business benefits of PLM were well articulated and supported by rosy ROI models and complex colorful architecture slides, many manufacturing companies were unable to achieve the process changes and enterprise software integration that were need to reap the promised benefits, and ended up implementing a PDM system. Albeit critical for managing product data, this reality might explain why some manufacturers feel they might have overpaid for their PLM implementation efforts.

The status quo may be changing, and organizations that have gone through massive implementation projects are ready for more. They need to improve their capacity for more complex multidisciplinary decisions using product data, whether it’s stored in PLM/PDM, ERP or in other, less structured forms; they need to improve collaboration in elongated and fragmented design partner networks and supply chains; they need to leverage product and consumer insight garnered  from social media, warranty claims, and channel activities.

Indeed, a great deal of this movement is driven by PLM vendors, flaunting new ideas and vying to show value in a pretty much non-differentiating arena. Likewise, services companies such as those mentioned in the opening part of this article are trying to add capabilities and scale to capture new business opportunities in activities that I often lump under the umbrella of “enterprise PLM.”

And there’s more. The availability of cloud-based PLM 360 from Autodesk, and modern, flexible and easy to consume PDM software from companies like Aras and GrabCAD, while perhaps not enough to challenge the hegemony of Dassault Systèmes, PTC and Siemens, certainly raises the bar and put pressure on the traditional PLM vendors to demonstrate similar functionality and aptitude that are better aligned with modern enterprises.

However, with the exception of Accenture, the PLM services companies we’ve mentioned are small companies that while relatively successful, are unable to scale to fulfill the market demand for deep domain expertise and competence to deal with business process complexity. In fact, Accenture’s aggressive push into the space of previously occupied by boutique consultancies poses a risk to many of these companies.

More Mergers and Acquisitions on the Horizon

I expect we will see more mergers and acquisitions of PLM and technology consulting companies, especially in the burgeoning area of ALM and in complex simulation. There are a number of small but capable companies in this space that are unable to scale unless they become part of a broader underpinning and are less resources constrained. It wouldn’t be right to name them here (feel free to contact me directly if you are interested in discussing them.)

Manufacturing companies should pursue opportunities to leverage product data to improve product related decisions, especially in downstream activities such as DFX, serviceability improvement and supply chain optimization. Look for partners and providers that offer a broad portfolio of domain and process expertise along the entire product lifecycle and strong process integration capabilities in addition to “just” IT.

 

A Reluctant Buyer? PTC Acquires NetIdeas

By | Aquisition, ERP, Manufacturing, PLM, Strategy | One Comment

A couple of years ago, when the notion of cloud-based application delivery was beginning to gain interest in the manufacturing industry, I asked PTC’s CEO Jim Heppelmann about his plans to offer cloud-based flexible subscription options for Windchill customers. His response, typical to other PLM vendors at the time, was that there was no real demand for this capability.

On Sept 10, PTC reversed its position and announced it had acquired long-time partner NetIdeas, Inc., a New-Jersey based provider of PLM software hosting and engineering consulting services. NetIdeas has been a PTC partner for more than a decade, offering “Windchill On Demand” hosted with SunGard Data Systems datacenter in Philadelphia.

The purchase price was not discussed – PTC does not have to disclose details of deals under $63M, or 5% of the company’s revenue.  But considering NetIdeas annual revenue of about $1M (as reported by Dun & Bradstreet), this was a very easy transaction for PTC, even if NetIdeas got a sweeter deal than the typical 2-3X revenue multiplier, which is not very likely given PTC’s past lukewarm interest in hosted applications.

So why the change of heart? Why did PTC buy NetIdeas?  I suspect this is more a statement of intent in response to pressure from Wall Street and market analysts than a strong belief in a new market opportunity.  In fact, the pricing of hosted Windchill will be based on a per-user price, the same as of a standard on-premise installation. This pricing strategy, which, admittedly, is not unique to PTC, has been one of several reasons for the tepid adoption of cloud-hosted PLM. When I spoke with customers of NetIdeas, GoEngineer and other providers of PLM on demand, they often complained that in addition to the hosting fees, about the need to pay the software vendor for a regular per-user license so that they are eligible for training and technical support.

Going forward, PTC’s wait-and-see strategy may backfire, not so much from existing Windchill customers, which are slow to move to the cloud anyway, but rather from limited ability to exploit future market expansion, especially in smaller organizations that find flexible hosting options much more attractive than purchasing high price monolithic software and the IT resources it requires. The acquisition of NetIdeas will bring necessary expertise and hosting resources in house to compete effectively against ERP and PLM competitors that already have robust hosting offerings.

While current PTC customers are not going to be impacted by the acquisition (or even care), NetIdeas customers should see value in having software and hosting services provided by the same company, although time will tell if this will result in better pricing or the other way around.

 

CIO Magazine, Mobile Technologies and the Shiny Object Syndrome

By | ERP, Mobile Technology | No Comments

A recent CIO Magazine article offered a perspective and guidance on how to “Avoid Mobile App Failure.”  Not that we expect much depth from CIO Magazine, but this one-page piece, based on advice from a couple of industry analysts, reads like any other tired project management 101 guide: develop a roadmap, secure a project sponsor, do a pilot test, get user feedback, etc.

But the topic itself does beg a question: Is there a fundamental difference between developing a mobile application and deploying other types of end-user software? Is it true, as the author implies, that there are more challenges and failures deploying mobile applications than other types of software?

In recent years I have helped a number of end-user companies, software vendors and system integrators understand and exploit the opportunities offered by the proliferation of mobile devices and pervasive connectivity, as well as the associated challenges and risks. Here are five common mistakes they make.

Mistake 1 – The Shiny Object Syndrome
Companies and their IT teams are often lured by the media hype and fall victim to snazzy displays and cool user interfaces. They often forget to apply commonsense business measures to assess the value of mobile applications, and merely assume that just about any process and application – no matter how poorly designed or how little end-user value it might have – will be embraced by the users due to the fact that it runs on a “cool” device. They are, of course, wrong.

Mistake 2 – Do Think You Know Your Users?
Interestingly, some of the more commonly cited use cases for mobile applications offer very little value to end users.  For instance, there are numerous examples of technical information delivered to a tablet instead of as paper manuals. Makes sense, doesn’t it?  In reality, most assembly line workers and service technicians perform routine tasks and use manuals only rarely.  Moreover, when they need information, they tend to prefer personal communication over searching for information, which tends to be too generic and out of date. Of course there are exceptions to this rule, so you need to select the use case that will provide tangible and credible end user value and assess the return on that investment.

Mistake 3 – Missing a Bigger Opportunity
Conversely, in their haste to port existing applications to a mobile platform, companies neglect to reevaluate existing processes and determine if and how they will benefit from the inclusion of mobile technology and is there an opportunity to restructure or even do away with suboptimal processes.

Mistake 4 – Underestimating BYOD
The BYOD (bring your own device) trend is accelerating. It appears that some companies are not only accepting it – they have little choice in this matter – but also embracing it, believing a BYOD policy helps lure millennials to the workplace and drive usage of corporate applications. These arguments have merit, of course, but BYOD also add complexity to systems management and create potential security and privacy liabilities, which the IT department may not be staffed to handle.

Mistake 5 – Who Needs a Corporate App Store?
Apple’s App Store is the envy of the industry, and, for some reason, companies believe mimicking that construct adds immediate value. The functional equivalence of an app store: a centralized repository of corporate-approved applications that ensure multi-platform compatibility and security compliance makes sense for IT. But in a corporate environment, the notion of apps: snippets of functionality designed to accomplish a very narrow task, each with a different user interface and workflow and no interoperability can often lead to process fragmentation and data gaps.

So here are my five steps to help you succeed in deploying your mobile applications:

  1. Define the unique characteristics of user applications deployed on a mobile platform, such as ubiquitous access in tangible terms and in the context of your business and user needs. Also consider potential downsides such as screen size, data security and BYOD management.
  2. Assess if and how deploying mobile applications will improve the current process or perhaps enable a new and better process. This is where most companies fail miserably. They assume, incorrectly, that porting an application to a mobile device will magically encourage users to use it more frequently and efficiently. The reality is that a poorly designed business process or an application with no clear end user value will not improve when ported to a mobile device; most likely, the opposite.
  3. Once you conclude that incorporating a mobile device has tangible value, redesign the business process, paying close attention to related processes and enterprise applications that may be impacted and ensuring application and data interoperability.
  4. Determine the appropriate App Store analogous that fits your business.  Instead of disparate apps think about packaging user activities and business proceeds elements in user interface apps connected at the back end. For example: inventory lookup, individualized reports, or product inspection app, all connected to the back office ERP systems so that data integrity is maintained.
  5. Go back to CIO Magazine for the rest of the project managers handbook

Foes Unite to Form an Unexpected Partnership

By | Cloud Computing, ERP | One Comment

Oracle and Salesforce Partner

Larry_Ellison_on_stage

(Photo: Wikipedia)

In a call with analysts last Thursday, Oracle’s CEO Larry Ellison announced a planned close alliance with Salesorce.com. The agreement, to be detailed this week in a call, is to share data between Salesforce.com’s and Oracle’s could-based application.

This is quite a surprising reversal from just two years ago, when Ellison essentially declared Salesforce.com’s Marc Benioff a persona non grata and called off his keynote address at Oracle Open World conference at the last minute, perhaps in response to unflattering comments made by Benioff on Facebook. Benioff response at the time was “It’s free publicity, and it is clear that Oracle is threatened by us.” But the sentiment last week was very different: “Larry and I both agree we need to unite our clouds. Oracle is a very important part of our strategy” said Benioff.

Oracle just capped its 2013 fiscal year with two lackluster quarters, especially in the areas that the company was betting on: Cloud computing and big data analytics.

Cloud computing and cloud-based application delivery is yet to catch up with hype of industry analysts and some software vendors, and cloud related revenue at Oracle and others are growing but hardly as pace some analysts suggested.

In the last several years both Oracle and its archrival SAP – which also happens to its largest database reseller – spent much time and many advertising dollars arguing for technology superiority. SAP is pushing HANA – its in-memory database technology – threatening Oracle’s bread-and-butter relational database business. Oracle, on the other hand, is betting on Exadata: a data warehousing and analytics “appliance” running on the Sun hardware it had acquired in 2010, challenging IBM and SAP for speed face-off.

However, the lukewarm response of enterprise software buyers to the MIPS wars seems to indicate that they care less for speed and more for sustained business value of their IT systems. Oracle seems to finally acknowledge that the value is not as much in the appliances and database technology as much as in wealth of data obtained from a large ecosystem of networked people, systems and devices. This should not be too surprising. Back in the 90s Ellison often spoke about the value of the network, the time when Oracle became interested in NetSuite, which was also named a partner in this alliance.

The formation of the proposed alliance is similar to other ‘surround SAP’ strategy Oracle is so good at. This time, instead of buying a technology company to block SAP’s progress, Ellison is moving to influence the value creation ecosystem.

Another interesting alliance is going to be announced tomorrow (Monday).  Microsoft’s CEO Steve Ballmer, Windows & Tools President Satya Nadella, and Oracle’s co-president Mark Hurd will announce the availability of Oracle’s technology, perhaps Oracle’s upcoming 12C database technology, on Microsoft’s Windows Azure cloud.

Microsoft has been trying for years to make a dent in Oracle’s database dominance with not much success. Microsoft’s SQL Server is a very capable product, but most large companies have already committed to Oracle’s technology and have no reason nor appetite to evaluate Microsoft’s’ technology against that of Oracle’s. On the other hand, the popularity of the Microsoft technology stack, especially in smaller companies, will make it easier for Oracle to get a foothold in these companies and compete more effectively against tier two ERP companies such as Infor and IFS.

Microsoft also needs more tools and a broader ecosystem to fuel its Azure cloud infrastructure and be able to compete more aggressively against Amazon’s S3. Microsoft may then attempt, not for the first time, to create online marketplace and actively engage in ecommerce applications.

Perhaps next week calls will bring more information and clarify about the cloud partnerships between Oracle, Salesforce.com, NetSuite and Microsoft, but I think that the following points are fairly certain:

  • Oracle, Microsoft and Salesforce.com and their customers will certainly benefit from these alliances, as awkward as they may be initially.
  • On the other hand, the new partnerships will put much more pressure on SAP that must get off the HANA bandwagon as the only way to view and solve customer needs.  SAP should be able to demonstrate business value across its product portfolio and customer business processes. Still, I don’t expect the impact to be too dramatic within SAP’s installed base.
  • On the other hand, while SAP has a broad portfolio that can leverage cloud services, as do Oracle and Microsoft, these alliances and the new balance of power will likely threaten HP’s Converged Cloud business unit which is still trying to figure out its strategy.