Vendors that serve both enterprise and midmarket companies notice some practical differences in these customers' respective mind-sets. "In large enterprises, you walk in and deal with big customers who already have best-in-class processes in place. They want your system to fit their processes and be completely customizable," notes Bruce Boes, VP of Velocity Series marketing for UGS Corp. "Smaller customers want best-in-class processes dropped on the desktop to plug and go."
Enterprise-level PLM users "almost don't care what it costs" to get the job done, Boes adds, "But the smaller customer says, 'Hey, I have a problem, but if I can't afford [your software], there's no point in talking.'"
Ashworth's Frank McMaster can relate to that perspective. "My budget for this [project] is a couple hundred thousand, definitely under half a million," he says bluntly. "Anyone who came in here talking six months and more than half a million, I ruled them out."
McMaster's survey of the PLM market left him convinced that these systems "basically all do the same things." He wants something Web-based, easy to integrate with his ERP system and configured to serve his apparel business. The last thing he wants is a top-of-the-line model. "We're coming from spreadsheets here," he says. "I don't want to buy a Cadillac; I want a Ford."
Vendors and industry analysts alike agree that taking the on-demand or Software as a Service route to PLM will cost about one-third what traditional, on-premises software does. But they hasten to note that for most users, concerns about data security, control and protection of intellectual property loom large.
Some 270 small and midmarket companies have surmounted these concerns with Arena Solutions Inc. in Foster City, Calif., the most prominent on-demand provider of PLM software. "Competitively, we lose mostly to Excel spreadsheets. This market is still maturing," says Arena CEO Michael Topolovac. "There are 100,000 companies out there that need PLM, but only a few thousand who have bought it."
For Arena's customers, the average deal runs $25,000 to $30,000, though some start as low as $5,000. "When you buy a traditional $100,000 PLM software system, you can spend that same amount in IT infrastructure, maintenance and personnel just to run the system," Topolovac says. "With on-demand, that cost is zero."
Color Kinetics Inc. in Boston counts itself among the on-demand faithful. The $53-million maker of digital lighting products signed on as Arena's second customer back in 2001, just as the dot-com bubble burst and the notion of storing confidential data on someone else's system was "pretty scary," as CTO Fritz Morgan puts it. "We figured worst case, if they didn't make it, we'd at least get all our data into a structured format and could export it to another PLM system," he says.
"But we badly needed a system we could get on anywhere in the world with Web access," says Morgan, who was then VP of engineering. He got demo accounts for three different systems and threw them to his engineering wolves. "Ultimately, if the engineers aren't into it, a system is pointless," he says, echoing a common wisdom about PLM systems.
Arena's offering was also the most affordable choice for a company that was still privately held and not yet profitable. Currently, the company pays about $1,000 per Arena seat annually. Today Color Kinetics stores product information for more than 10,000 parts with Arena. "Our vendors in China are all online with this system. They love it because they can use it without any special software," Morgan notes. "What the IT department loves about this is not having to deal with it at all."
This was first published in May 2007