PLM Market Landscape: Evolving to Enable Value Chain Excellence

Product Innovation and PLM 2007 Technology and Vendor Landscape Series

PLM Market Landscape: Evolving To Enable Value Chain Excellence

by Jeffrey Hojlo, Michael Burkett, and Koppel Verma

Although many businesses utilize product lifecycle management only for design or product data management, it’s one of the three foundational legs that support a demand-driven supply network. PLM vendors realize this opportunity and are improving their products to support value chain excellence.

Market Services Report Acronyms and Initialisms

A&D Aerospace and defense IP Intellectual property AEC Architecture, engineering, and construction IPPD Integrated product and process design APQP Advanced product quality planning LDAP Lightweight directory access protocol BI Business intelligence MES Manufacturing execution system BOM Bill of materials NPDL New product development and launch CAD Computer-aided design PDM Product data management CAM Computer-aided manufacturing PLM Product lifecycle management CAPA Corrective and preventive action PPM Product portfolio management CNM Customer needs management QA Quality assurance CP Consumer products QC Quality control CPD Collaborative product design R&D Research and development CRM Customer relationship management REACH Registration Evaluation and Authorization of Chemicals DDSN Demand-driven supply network RFX Request for proposal, quote, etc. DFM Decision flow management RoHS Reduction of Hazardous Substances DMS Direct materials sourcing SaaS Software as a service EMEA Europe, Middle East, and Africa SCADA Supervisory control and data acquisition ERP Enterprise resource planning SCM Supply chain management EuP EcoDesign of Energy Using Products SKU Stock-keeping unit FDA Food and Drug Administration SMB Small and midsize business FMEA Failure modes and effects analysis SOA Service-oriented architecture GPD Global product development UI User interface HCM Human capital management WEEE Waste Electrical and Electronic Equipment HR Human resources WIP Work in process

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Product lifecycle management (PLM) vendors, seeing opportunity in enabling The the demand-driven supply network (DDSN) and extended value chain, are Bottom improving their applications to support value chain excellence. Line

When one looks at the mantras of three of the largest PLM provid- Executive Vendors featured ers, it becomes apparent that product lifecycle management is rap- Summary in this Report: idly coming of age: SAP’s efforts to connect the product and service Aras lifecycles, Dassault’s democratization of 3D, and Siemens PLM Arena Solutions Software’s focus on global innovation networks. PLM no longer simply equals CAD Autodesk data management and engineering workgroup collaboration. Dassault Systemes And it’s not just because PLM vendors say so. Our research reveals end users are Enginuity increasingly looking at PLM as a standard enterprise platform. They’re asking how Infor PLM systems can be used to manage their product portfolios, capture customer needs, Oracle and integrate nonengineering staff into the product design process, a domain histori- PTC cally dominated by engineers. Moreover, end users and PLM vendors alike are finally SAP thinking about linking the product design process upstream with the product launch Selerant process to effectively predict demand and product performance. They’re also thinking Siemens PLM about linking it downstream into supply and manufacturing to simulate supply and Software manufacturing capacity.

This decision support capability is critical if PLM is going to be a mainstream, enterprise application or, as AMR Research has always defined it, an enterprise business strategy for bringing new products to market. Although most PLM vendors have some portfolio management and decision support capability either organically or through partnerships, our research has found that the ability to predict and model decisions through the course of the new product development and launch (NPDL) process and across the value chain is still immature.

Despite this immaturity, we expect the PLM market to grow at a 9% five-year CAGR. The 9% allocation of budget to PLM in our 2006 IT spending numbers revealed this will increase over time, particularly as PLM vendors build out their capabilities in performance management, sourcing and procurement, and knowledge management, while tightening their integration with manufacturing operations, CRM, ERP, supply chain management (SCM), and human capital management (HCM).

Product Innovation and PLM Report | 2007 Technology and Vendor Landscape Series © 2007 AMR Research, Inc. 1 Recommendations for users • When deciding which PLM vendor to partner with, consider the product development challenge you are trying to solve: is it simply managing CAD data and communication between engineers, the effective launching of products, or both? • Use PLM as a standard application in your enterprise, just like ERP, CRM, and SCM. • Evaluate vendors on the scalability of their network infrastructure. Robust network performance is necessary for global product development (GPD), particularly when you are sharing rich 3D CAD models globally. • Consider applying 3D to support other NPDL processes, particularly customer needs management (CNM), service, and support. • Demand decision support functionality.

Recommendations for vendors • Expand your definition of PLM from CAD data management to an NPDL and value chain enabler. • Remember: decision support, decision support, decision support! • Weave ideation and voice of the customer into your products. • Enable effective collaboration between value chain constituents in and outside the company. • Provide a software-as-a-service (SaaS) offering. • Link into market research databases and CRM systems to help analyze new product opportunity. • Expand your services practices. • Extend 3D to new audiences and markets.

The PLM market is growing, with tremendous amounts of untapped opportunities in North America and EMEA, as well as in growing markets like Latin America and Asia- Pacific. The primary driver of this growth is that manufacturers are making managing and introducing products top priorities. Nevertheless, there has been low investment in PLM versus ERP or other application categories. Our IT spending studies find that manufacturers list rapid introduction of new products and streamlining supplier management processes as the most important factors in remaining competitive. On the other hand, they remain immature in understanding how to use technology to improve these processes.

Now times are changing. The market is maturing rapidly to support the design-to-manufacturing planning and handoff process that has been around for years: integrated product and process design (IPPD). The remaining area of opportunity for PLM applications is at the business layer, with end users looking to utilize PLM for far more than managing CAD data and concurrent engineering processes. Effectively understanding market and customer needs, turning those needs into products, and then launching them to the market requires more than managing and communicating CAD models. It demands close collaboration with the global value chain to use ideas, capacity, and expertise.

Process-Driven PLM Framework

Define Design Quality Captive Development Improvement Captive Development Centers and Outsourcing Centers and O shoring Service Compliance Supply Supplier F PromoteManufacture acing

Product Portfolio acing Management ustomer F C Customer Needs Demand Supply SCM CRM Management ERP Insights Network HCM Direct Materials Sourcing Collaborative Product Design P nt roduct D anageme IP M ata M rity anagement and Secu

ion Value-Driven Open Innovat

Source: AMR Research, 2007

4 © 2007 AMR Research, Inc. Product Innovation and PLM Report | 2007 Technology and Vendor Landscape Series We are slowly seeing this evolution. Siemens PLM (formerly UGS) has added expanded portfolio management capabilities through its partnership with Planview, and Oracle plans to enhance its business intelligence (BI) and portfolio management capabilities with Agile’s already strong analytics (through partnership with Symphony Metreo) and portfolio management capabilities. Although it remains to be seen how this will be used in the PLM space, SAP is in the process of acquiring Business Objects and is focused on enhancing its CNM and portfolio management capabilities in 2008.

End users are beginning to look to PLM for decision support, NPDL modeling capabilities, sourcing (through tight integration with point applications, at least), and as a platform that enables both internal and external innovation. In other words, they are focused on Stage 4 of AMR Research’s value chain transformation maturity model to achieve the perfect product launch (see Figure 3). Most companies we talk to, however, are actually at Stage 1 or Stage 2, so there is still a great opportunity for end users to improve.

Figure 2: St ages of maturity for new product launch Growth and Profitability Cost To Deliver Cost To Serve

Demand Driven Value Driven External supply partners Joint value creation by become integral to product orchestrating the innovation Externally innovation and launch process across and extended Focused and demand analytics value chain and architecting evaluate opportunity products and services that tradeoffs combine partner expertise 34 21 Customer and Brand Driven Efficiency Markets Focused Internally Internal integrated product Product development Focused teams share a common set operates in a silo and of product information and pushes innovation out in standardized new product search of a market to serve introduction and launch practices Cost Focused Revenue Focused

Source: AMR Research, 2007

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Source: AMR Research, 2007

PLM is the umbrella term for a group of software applications used by engineering, purchasing, marketing, manufacturing, R&D, and service that work on new product development and launch. Done well, NPDL takes into account not only design and engineering, but supply and demand as well as timing of a product launch, service of product once sold, and retirement of a product at the end of its lifecycle. The PLM category is defined to help manage all these elements. The unifying logical element at the base of PLM is product, just as the unifying logical element at the base of CRM is customer. For this reason, PDM is sometimes confused with PLM. A fairer corollary for PDM is the customer master file that a CRM system depends on. Figure 4 is a simplified map of the individual applications that PLM comprises and shows how they touch other major enterprise systems. Figure 5 is a basic PLM process flow diagram. It’s important to note that PLM is a significant enabler of the value chain, integrating with other enterprise systems. For more understanding of PLM’s place in the global value chain, see Figure 1.

Figure 4: Product lifecycle management footprint

Product Portfolio Management NPDL Intelligence Program Management ERP Project Management Reporting

Direct Materials Sourcing Customer Needs Management Strategic Sourcing Requirements Management Component and Supplier Management Preference Analytics RFX Management ETO/BTO/DTO Change Management Collaborative Product Design CRM ERP Product Design Tools SCM Process Engineering Visualization CAD-to-CAD integration ERP Product Structure (BOM) Product Data Publishing SCM Document Management Service Parts Planning CRM Engineering Change Product Data Management Configuration Manage- Management ment = Data flows Source: AMR Research, 2007

Market Assessment

Conceptual Design

Engineering and Detailed Design Change Management/ Release to Manufacturing Sourcing and Supplier Collaboration Production Process Planning Market Rollout/ Launch Aftermarket Support and Service Product Portfolio Management

Source: AMR Research, 2007

8 © 2007 AMR Research, Inc. Product Innovation and PLM Report | 2007 Technology and Vendor Landscape Series The move to global value chains is shifting the way companies look at PLM, with collaborative product design redefined

As manufacturers expand globally, they need to manage a distributed design team and a broader cross-functional team, not just design and development. With this global expansion, issues such as intellectual property (IP) management, enterprise security, HCM, and regulatory compliance need to be managed proactively. These risk factors have always held importance, but GPD brings them closer to the forefront. Manufacturers are outsourcing and offshoring product engineering, with 30% outsourcing some aspect of it and 27% having captive development centers, according to our research.

Some regions of the world, such as Europe and Asia-Pacific, also are instituting a design- for-environment approach to product development with the regulations RoHS, WEEE, REACH, and the EcoDesign of Energy Using Products (EuP) directives. These demand manufacturers tightly link all the players in their value chains, from engineers, to product management, to marketing and sales, to supply, to outsourced engineering services.

The move to global value chains, however, has not yet spawned a PLM SaaS revolution, even though a web-based product development platform that enables easy project and PDM for global teams would help speed communication during the NPDL process and time to market.

As the footprint evolves, the business model stays the same

The primary approaches to PLM deployment are either licensed or on-demand SaaS. This is primarily because of the classic concerns of security and the continued need to manage CAD data locally in a GPD world. That said, Arena Solutions, the lone pure- play PLM SaaS vendor, has gained traction in the small and midsize business (SMB) space, but large vendors are still hesitant to put their crown jewels online.

As vendors offshore engineering work because of the low costs and lack of qualified engineers in the United States, as well as work with local suppliers to facilitate design for supply or late-stage product completion strategies, they increase their risks of working with people and companies that will try to access more data than they should. Clearly, there is significant need for a strong security policy, authorization platform, and authentication schema, and vendors such as EMC, with its RSA product, and CA, with its Netegrity product, provide this. However, the vendors in this Report can, at least, enable basic integration with established security policy and password schema, integration with lightweight directory access protocol (LDAP), and authorization so only the right people see the right information.

HCM, long relegated to the ranks of the human resources (HR) office, is becoming a more strategic aspect of the organization. GPD is one reason why, driving the need to find engineering and design talent from within the company, as well as from outsourced resources like consulting and engineering services firms, to support onshore and offshore development. Having human capital information when determining how to staff a project provides tremendous competitive advantage. Oracle and SAP, since they offer HCM applications already, will have a leg up in this area. The challenge for them will be to provide an integrated, packaged PLM application that includes HCM. Their respective platforms help as well: SAP, with its Enterprise Services Architecture (ESA), and Oracle Fusion, which provides the ability to link disparate applications, data sets, and global teams.

Second Life and 3D: a potential new platform for PLM

Do you have an avatar yet? If not, you may already be behind. GPD teams need to collaborate, but they can’t always hop on a plane for a face-to-face meeting. Also, development teams need to simulate processes without building a physical incarnation of a product design. As NASA’s Jet Propulsion Laboratories (JPL) suggests, if 3D solid models could be communicated in Second Life, a virtual reality environment, and modified in real time across cross-functional global teams that are sitting next to each other at a virtual table, innovation nirvana will have been reached.

Dassault’s upstream focus on 3D, with its 3Dvia line of applications, and recent acquisition of small product documentation and collaboration company Seemage, as well as Siemens JT and 3D XML, are examples of platforms and formats that expand the practical uses of 3D by bringing lightweight 3D models to new vertical markets. The next step is to develop products in a virtual environment that are enabled by a PLM backbone and a user interface (UI) similar to that of a video game to generate realistic product development experiences.

The video game analogy may seem like overkill for the simple sharing of ideas, but it makes sense when trying to simulate manufacturing process or production, since it needs to be as lifelike as possible to reduce errors. This would be very applicable for retail store planning, as well as A&D and automotive for simulating the flying and driving experiences. This approach to developing products also attracts younger talent—the digital natives of the world—who are used to working this way. Ansys, MSC Software, PTC, and Siemens PLM provide strong simulation capabilities.

Service-oriented architecture (SOA) has long held promise as an integrating platform, but it has struggled to find business processes that would truly benefit. Product innovation, however, is certainly one of them.

This is highlighted by the JPL case study. Working with hundreds of engineers across the globe under extreme pressure to come up with how to land a rover on Mars or how to fly a spacecraft through the volatile atmosphere of Jupiter, an SOA provides the integration and business process configuration platform necessary to collaborate across multiple CAD systems and data models.

Results from a recent SOA study we published corroborate this. We asked about the expected benefits of an SOA, and the top answer was faster and more flexible configuration of business processes. Decrease of IT operational costs also topped the list. This is not a surprise when considering all the large manufacturers that have amassed numerous IT systems, reams of data, and a spaghetti bowl of processes, most of which are probably redundant. An SOA can help alleviate these complexities.

The third most popular response in our SOA study was interesting: achieving secure and reliable service levels. This surfaces the topic of expanding the PLM footprint from simply developing and launching a product to service delivery and ensuring customers can easily access the information and applications needed. Dassault Systemes, Oracle, SAP, and Siemens PLM offer their products on SOAs, realizing their customers need to easily integrate data and applications across different business processes.

Decision support and product analytics remain immature in most vendor PLM footprints

PLM vendors focused for years on the low-hanging fruit in the market: getting CAD work-in-process (WIP) data management and engineering workgroup collaboration processes under control. This opportunity still exists, with a predicted 8% five-year CAGR for CAD, computer-aided manufacturing (CAM) and PDM. But it’s slowing as business users realize the need for tools to help manage the NPDL process, connecting design with manufacturing and the broader supply chain.

As a result, PLM vendors have expanded to the shop floor, acquiring and building manufacturing planning and modeling capabilities. They are slowly building out offerings at the business level, mostly through partnerships and acquisitions, with product portfolio management (PPM), direct materials sourcing (DMS), and CNM. End users are focusing more attention on managing portfolios of products and the decisions needed to successfully launch them.

Product Innovation and PLM Report | 2007 Technology and Vendor Landscape Series © 2007 AMR Research, Inc. 11 The primary areas of opportunity that define the future of PLM for users and vendors fall under the umbrella of decision support: • Connecting disparate data sources—Each group sees product information through the lens of its own role: CAD geometry, formula development, manufacturing processes, spare parts data, or pricing and packaging. It’s critical to enable role-based views inside and outside the company for faster decision support. • Single user interface—Most companies don’t have a single product knowledge interface that contains the relevant information for engineering, development, manufacturing, service, marketing, sales, partners, and customers. Creating a single UI with personalized product portals for each constituency would alleviate this challenge. • Customer needs management—This segment has always been in the AMR Research PLM footprint, but its growth didn’t take off until the last two years. As companies reach new levels of PLM maturity with PDM and process management, they begin to think about linking customer data with the front end of design. • Product, process, and people performance and analytics—PPM vendors provide a view of a company’s products, but most applications don’t have deep analytics capability to look holistically at the performance of product, process, and people from an opportunity, sales, quality, and execution standpoint. • Integrated product and process design—Manufacturers need to be able to design, simulate, and execute the product, process, and production definitions to verify they have the capability and capacity to make the products they want to produce.

Sitting at the apex of data in the enterprise—engineering and product development on one side, marketing and sales on the other—the product manager (or brand manager, if you’re targeting consumer goods companies) is often the owner of the decision support process. Yet we’ve found from our research that this person is largely disconnected from the product development process.

Figure 6: Product manager at the apex of data

Product Management

Product

Option

Quality

Customer satisfaction

Parts Packages Costs Pricing Geometry Channels PLM CRM, Con gurator

Engineers Looking from other directions are Sales nance and manufacturing with ERP.

Source: AMR Research, 2007

Not convinced the product manager is a key stakeholder? Consider the perceived technology gaps in the NPDL process: they are all front end in nature according to our research—ideation, testing, prototyping, and marketing. All these processes are driven by the product manager. As PLM vendors grow their product footprints into application areas like PPM and CNM, product managers need to be targeted (see “Voice of the Product Manager, PLM Vendors Need to Listen”).

Although the largest PLM vendors—Dassault, PTC, and Siemens PLM—address most of the elements of the product lifecycle on some level through integration adapt- ers or partnerships, manufacturing, sourcing, and service need to be tightly integrated with the design and promotion aspects of PLM to achieve NPDL excellence. There are exceptions in each individual segment, but no company has closely tied together all these areas.

One of the exceptions on the manufacturing front could be Siemens PLM. The company owns Tecnomatix, which has manufacturing process planning and modeling capabilities as well as Xfactory for MES. Combine this with Siemens, with its Simatic IT line (MES, SCADA, and production performance management) and general focus in manufacturing, and Siemens PLM has the opportunity to be the only PLM vendor offering a complete design-to-manufacture application.

Dassault’s DELMIA, like Tecnomatix, has rich manufacturing planning as well as 3D robot and production line simulation. However, it doesn’t have MES, SCADA, sched- uling, and manufacturing operations management functionality organically. Instead, Dassault partners with iBASEt, Intercim, and Visiprise for this capability. PTC acquired manufacturing process planning company Polyplan two years ago, and it announced the integrated, improved Windchill MPMLink this past summer.

Visiprise has become an increasing presence in the PLM market this year, with the Dassault relationship and partnerships with PTC and SAP, realizing that the deep manufacturing functionality to manage how a product is built is not a strength of PLM or ERP companies. MES vendor Camstar has stuck its toe in the water as well via a relationship with PTC in the medical device market. With Siemens diving in, it remains to be seen what the other large, manufacturing automation companies such as Rockwell will do. We believe they will forge integration relationships with the remaining independent CAD/PLM vendors, like PTC or Dassault, but not buy into PLM.

Connecting the product lifecycle with direct materials sourcing makes sense. We have always included sourcing as a core component of the PLM footprint, but only a hand- ful of PLM vendors have built functionality in this area. The risk with global sourcing is variability because of inconsistent lead times and product quality, hence the need to carry more inventory. Tight integration between the two disciplines of product development and sourcing will help minimize this variability, though. Whether outsourcing to lower cost, developing areas of the world or more industrialized nations, end users need help locating quality suppliers and managing material safety data sheets.

Tier 1 automotive supplier and Siemens PLM customer Visteon, a manufacturer of climate, interior, and electronic systems, has recognized this need. One of the company’s areas of focus is to help develop low-cost cars for less than $10K. The challenge is reducing the cost of parts and other materials purchased from Visteon’s suppliers while still producing a quality design. As such, its procurement and engineering groups are tightly connected through a combination of Teamcenter applications, including Supplier Management and Teamcenter Community for improved collaboration between these historically siloed groups. The end result is a global view of actual spend, faster cost estimates, the ability to forecast purchases, and a snapshot of supplier performance for everyone involved in developing and launching products.

GPD and risk management are driving the need for PLM and sourcing to unite. As evi- denced by the recent product recall debacles in China, the ability to effectively source quality and compliant materials and quickly find reliable suppliers to deliver what is needed to make products in a timely fashion is a challenge. In fact, a recent AMR Research risk management study revealed supplier failure as the biggest perceived threat to many organizations.

Some PLM vendors have built out their sourcing and supplier management applications over the years, but the opportunity does exist to expand their functionalities and grow into new markets. Another vendor example is Dassault’s Sourcing Central, which provides supplier master data management, search, and RFX to the high-tech, automotive, and A&D industries. Because of their heritages as ERP vendors, SAP and Oracle provide sourcing and procurement functionality that can integrate with existing design applications. Oracle, with the acquisition of Agile, has taken a big step forward in its DMS capabilities, since Agile has a mature product in Product Cost Management, which provides the strong sourcing and supplier analytics capability for high-tech con- tract manufacturers.

Another critical and disconnected component of PLM is service. Once a product is launched, there is still an opportunity to provide value to the customer. Tightly integrating service with product enables better quality management, as any product issues are immediately communicated to the front end of design. Product documentation and technical publishing companies like Right Hemisphere, Seemage, and Arbortext (now part of PTC) are examples of companies that are beginning to bridge this communication between the product and service worlds. SAP also provides tracking of service- related issues, but has not yet linked this to the PLM process. However, it recently forged a tight relationship with Right Hemisphere to help bridge this gap.

Siemens PLM offers Teamcenter MRO for A&D manufacturers to connect engineering with service. Oracle provides a corrective and preventive action (CAPA) application that has seen traction mostly in the pharmaceutical market, but recently in high tech as well. What is still lacking, however, is the real-time feed of service issues from the field into the front end of product innovation. This early warning system functionality is critical to head off any quality issues that may arise. More tightly integrating the service lifecycle with the product lifecycle will ultimately lead to a better understanding of customer needs.

PLM vendors need to broaden their definitions of CNM for emerging markets

Requirements management and issue tracking is only one element of customer needs management, which includes the following: • The ongoing capture of customer needs (e.g., via web survey form or online community) • The ability to collaborate on new product ideas in real time with internal and external constituents • The tracking of product issues • Rich workflow • The ability to draw customer information from other systems

16 © 2007 AMR Research, Inc. Product Innovation and PLM Report | 2007 Technology and Vendor Landscape Series CNM applications need to enable open innovation—a reference to the fact that knowledge and good new product ideas are everywhere—with customers, suppliers, brokers, and academia. This globally located IP drives the need for efficient data integration and communication supported by the right technology approach, such as SOA or SaaS.

There are examples of mature open innovation processes, like Procter & Gamble’s Connect + Develop, which employs an ethnographic approach to gathering customer needs, but doesn’t use a PLM or ideation system to enable this process. However, most companies we speak with have not opened up the ideation kimono, no matter what their NPDL technology foundations are. The most prevalent tools are spreadsheets and CRM systems, but neither provide the workflow necessary for easy communication among NPDL teams.

3D and online communities are CNM tools

Online venues like Dassault’s 3Dvia and community collaboration application Communispace are two examples of tools applied today to help better understand customer needs. 3Dvia, launched earlier this year, is a site that can be used by designers to share 3D models and concepts with an audience before physically manufacturing the design. The most radical 3D application by a traditional CAD vendor that we’ve seen is Dassault’s joint venture with advertising firm Publicis called 3D SWYM (See What You Mean), in which ad concepts can be shared with potential customers. The offline focus group is being enhanced with low-cost, online ideation mechanisms that enable companies to quickly iterate on ideas.

Eric von Hippel, professor and head of the innovation and entrepreneurship group at MIT’s Sloan School of Management, has spoken about “user innovation communities” as a vehicle for innovation—that is, enabling user communities to drive the traditional manufacturing-centric, fuzzy front end of product development by innovating and col- laboratively filtering ideas. One benefit is a consistent pipeline of ideas and customer needs—endless fuel for your NPDL process.

One often cited example is a favorite childhood toy, Legos. In 1998, Lego launched its Mindstorms line of toys (mechanical/robotic theme). Shortly thereafter, a number of software developers altered the code in the robots and shared their designs online. The company’s response was to create the Lego Factory, an online community of 200 internal developers and 20,000 external “Lego hackers” that shares designs and is a source of new product ideas for the company.

Communispace also develops and manages online communities for companies like Kraft, which used information from its community to develop the 100-calorie snack-pack line of crackers and cookies, resulting in $100M in sales the first year in the market.

Vendor dynamics: the market continues to consolidate and evolve

The past two years have been dynamic for the PLM market. Consider the following examples: • Agile and MatrixOne, the last two major independent PLM vendors, being acquired by Oracle and Dassault Systemes, respectively • Shop-floor companies like Camstar and Visiprise forging relationships with PTC and Dassault • Niche portfolio management and decision support vendor Sopheon becoming a consolidator by acquiring roadmapping company Alignent and the assets of the now defunct Integrated Development Enterprise (IDe)

Meanwhile, Siemens Automation and Drives acquired UGS, which acquired manufacturing process planning and modeling company Tecnomatix. PTC acquired Polyplan, which is now Windchill MPMLink.

Most recently, PTC agreed to buy small 3D CAD company CoCreate. SAP continues its organic growth in PLM, enhancing both discrete and process manufacturing capabilities by simplifying the UI and improving product development and manufacturing definition, as well as product and process synchronization. The state of the market is essentially a battle between the ERP vendors (Infor, Oracle, and SAP) and CAD vendors (Dassault, PTC, and Siemens PLM), with niche vendors filling in the gaps.

Figure 7: PLM suite vendors expand from traditional strengths

Independent Dassault/MatrixOne, Oracle (Agile)

Financial Customers Business Data Design/ Human Resources Suppliers ERP PLM Product Lifecycle Decisions Oracle Dassault Define Design Promote Supply Support SAP Siemens Infor PTC Industry-Specific Needs Product Plant Product/Process Data Requirement Supply

Source: AMR Research, 2007

18 © 2007 AMR Research, Inc. Product Innovation and PLM Report | 2007 Technology and Vendor Landscape Series The choice in PLM vendor that manufacturers make depends into which vertical markets they sell, the NPDL challenges they face, and their system users. Table 1 helps illustrate the choices.

Table 1: PLM vendor section decision tree

Common Major Decision Considerations Points PLM Features To Look For Guide to Choosing a Vendor Industry Discrete BOM configuration management. Any vendor except process specialty ven- Requirements Manufacturing Unique discrete industry strength. dors. Several vendors have industry special- ties. Consider regulatory needs.

Process Formulas and recipes. Specification Start with the process specialists, then Manufacturing management. look beyond. Several discrete vendors have expanded to manage process data. Consider regulatory needs.

PLM Process Design-Centric MCAD/ECAD data management. Vendors with a CAD legacy are strongest Emphasis Design process automation/reuse. with their native application. Decision is more open if multi-CAD.

Business- Link design to order management. ERP vendors best manage PLM where Centric Data most used beyond engineer- design has less emphasis than business pro- ing. cesses, including aftermarket.

Global Data Access Web access to documents and data. Team program management and simple Requirements View and markup. vaulting may work well. Deep PDM may not be required.

Process Flow Participate in workflow process. Look for a robust configurable workflow Interactive collaboration. that scales. An easy to use but inflexible system may not be best.

Internal Resource Major Subscription/hosted/on-demand. Investigate an ASP or other hosting options. Constraints Limitation Strong training program. Look for solid training support either online or as a prepackaged option.

Minor Issue Standard licensing model. Flexible Consider a highly configurable or program- workflow and modeling. mable application if resources can support continuous process improvement.

Use Existing IT Primary Goal PLM within ERP/CAD or technology Consider if legacy vendors’ native PLM path Applications platform provider. is sufficient. Next look to their PLM partners, or push for partner support.

Secondary Independent PLM with an open Start with the application that best satisfies Goal architecture. the biggest pain. Choose an open architecture for legacy integration.

Source: AMR Research, 2007

As PLM gains traction in emerging vertical markets like retail, consumer products (CP), and food and beverage, so do vertically-specific PLM vendors. Apparel and footwear needs a system to manage the changing fashions throughout the year, the multitude of product lines, and a calendar of activities, all of which are areas that can be supported by PLM applications from Dassault, Freeborders, Gerber, Lectra, NGC, PTC, Siemens PLM, and TXT e-solutions. Each application, however, has its own strength: • Dassault, Lectra, and PTC offer the most mature full-footprint apparel applications. Dassault provides an industry template, or what it calls an accelerator, with standard apparel business processes built in. PTC complements its product with a team of industry experts. • Siemens PLM also provides a preconfigured application template that can be easily modified. It’s had an apparel and footwear application for the past three years. • Lectra, with its acquisition of Kaledo, now has rich design functionality to complement its line-planning and management dashboard offerings. • NGC’s heritage is in shop-floor control systems and sourcing, while Freeborders excels in collaborative design, although it doesn’t solely focus on apparel.

The CP and grocery industries face many of the same NPDL challenges as apparel and footwear, such as managing portfolios of products, rapid product launches, supplier management, and quality management. Agentrics, the product of the merger of WWRE and GNX, provides sourcing, supply chain collaboration, product specification management, and global data synchronization for the private-label food and CP industries. The company has rich sourcing functionality in GenSource, which it aug- ments with its PLM application GenNovation. If you haven’t heard of Agentrics, it may be because most customers put their company names on the Agentrics system to keep their brands top of mind and consistent throughout their supply chains.

Life sciences remains a relatively immature market for PLM vendors, despite business challenges that could benefit greatly from PLM: regulatory compliance, knowledge management, and the tightening relationship between R&D and manufacturing. Other challenges life sciences face, but that are not strengths of most PLM applications today, include supplier management and understanding the voice of the customer. PLM vendors like Dassault, Oracle, PTC, and Siemens PLM have delved into medical device because of their discrete heritages, but don’t have the formulation capabilities like process PLM players Enginuity and Selerant to support pharmaceutical product development. It should be noted, however, that Oracle does target the pharmaceutical market with its Product Governance & Compliance (PG&C), Portfolio Management, and Quality Management applications.

Suite vendors are expanding in both directions

SAP

e Selerant Infor Oracle Enginuity n Autodesk Dassault Arena PTC Desig Siemens PLM Aras rget audienc Ta turing Manufac Point PLM Footprint Full

Notes: Manufacturing needs: process planning, CAM, CAE, MES Designer needs: CAD, formulation, PDM, Simulation Business needs: program management, PPM, CNM

Source: AMR Research, 2007

Collaborative Product Product Direct Customer CAD or Product Data Portfolio Materials Needs Vendor Formulation Design Management Management Sourcing Management Aras

Arena Solutions

Autodesk

Dassault Systemes

Enginuity Formulation Process

Infor Formulation Process/Discrete

Oracle (Agile) Formulation Process/Discrete

PTC

SAP Formulation Process/Discrete

Selerant Formulation Process

Siemens PLM Software (UGS)

Vendor Focus Low High

PLM Industry Best-of-Breed Specific PLM Point Applications Collaborative Product Product Product Direct Customer CAD or Design/ Data/Spec Portfolio Materials Needs Retail Formulation Formulation Management Management Sourcing Management Agentrics, Gerber, Ansys, Centric, Auto-trol, Artemis, Arrow, Accept Freeborders, Cadence, Design2- Product Sight, Computer Cohesia, i2, Software, Lectra, NGC, TXT Lascom, Launch, Softech Associates, Manugistics, Bright Idea, e-Solutions Mentor Lattice Centric Partminer, Cincom, IBM Graphics, MSC Technologies, Software, Powerway Rational, Software, Microsoft, Deltek, Imaginatik, Synopsys Right Emcien, Invention Hemisphere, Jonova, Machine, Mind Shawk, Think3 Microsoft, Matters, Rapt, Powersteering, Rulestream, Primavera, Ryma, SmartOrg, Satmetrix, Sopheon, Serena, Symphony Strategyn, Metreo, Telelogic, Telelogic TDCI, VOC Online Source: AMR Research, 2007

Indus- Auto/ High trial/ Apparel/ Chem/ Medical Pharma/ Food Vendor A&D Tech Discrete Textiles Process Device Biotech and Bev. CPG Aras

Arena Solutions

Autodesk

Dassault Systemes

Enginuity

Infor

Oracle (Agile)

PTC

SAP

Selerant

Siemens PLM Software (UGS) Source: AMR Research, 2007 Primary Industries Emerging Industries

Customer needs management

Companies understand they need to know their customer needs first by linking to demand insights before designing and launching a product (again see Figure 1). Decision support capability is key to understanding these needs and the tradeoff versus the cost to serve in an iterative fashion. The reality is most companies have immature CNM processes, relying on ad hoc discussion, spreadsheets, and, in some cases, CRM systems for new ideas. The reason for this is likely that people don’t think of CNM as a system, but as a way for tracking requirements. Although companies usually have a customer advisory board, it’s rare to find an organization that has the processes and technology in place to support consistent open innovation. This is changing, however, as vendor revenue analysis of the past two years shows CNM grew at 15% and 22%, respectively.

Some PLM suite vendors have basic requirements management capabilities in their products, but have been slow to provide a platform for collaboration with all the afore- mentioned constituents. They also haven’t integrated with other customer-centric systems. Capturing requirements is the foundational functionality necessary to ensure new and existing products meet customer needs. But a continuous loop that logs requests, quality issues, and feedback on prospective designs is necessary for manufacturers to derive the benefits of CNM and for vendors to provide in their stacks if PLM is to become a value chain enabler.

Vendors that have begun to step up to meet this challenge include SAP and Oracle, which, through their respective xPD and PPM (Agile) products and existing CRM capabilities, offer multiple avenues to understanding customer needs. Circling these needs into the design process will require integration to whatever design system is in use. In particular, IBM, with its pending acquisition of Telelogic (which includes Focal Point), could provide the most mature requirements management and decision support functionality.

The challenge for design-centric vendors like Dassault, Siemens PLM, and PTC is that the CNM opportunity exists, but mostly in nontraditional PLM markets like retail, CP, and consumer electronics. In these fast-moving markets, it’s critical to have a finger on the pulse of the market at all times to sense and test new ideas. But as these companies build out their teams in these verticals with the necessary industry expertise to understand the CNM functionality needed, as well as to mature their CNM applications to complement their strong design heritages, they will make it difficult for SAP, Oracle, and niche ideation companies, such as Imaginatik and Invention Machine, to compete in this area.

According to our market sizing data, this segment of PLM has grown the fastest over the past two years and could potentially grow at a 15% CAGR, largely because more than 50% of all product launches fail for the following reasons: • Poor correlation between benefits and R&D investments • Poor demand response for new products • Warrantee and compliance issues abound • Poor alignment to customer needs • Lack of coordination across global markets and supply chains

Many of these issues can be alleviated by PPM, with some PLM suite vendors growing their PPM functionalities inorganically (for example, PTC through Cognos for analytics and Siemens PLM through Planview). Others like Oracle (Agile’s products), SAP, and Dassault (MatrixOne product) have offered applications organically in this area for the past couple of years. Best-of-breed PPM vendor Sopheon has garnered the most mindshare recently, especially in process industries like chemical and pharmaceuticals.

Much like requirements management does not equate to full-fledged CNM, project and program management is not PPM. Understanding the nature and status of projects as well as who inside and outside the organization is working on a particular project are two areas at which project management excels. PPM takes the management of projects and adds modeling and performance management functionality to product management and product lines that enable a company to grow its top line. It provides basic project management in addition to the following functionality: • Management of the product portfolio in both a development pipeline and the mar- ketplace • Product pricing optimization, where tight integration with CNM becomes important • Analytics and reporting, including modeling the performance and capability to make new products • Product roadmapping • Risk management • Defining budgeted costs and tracking project resources

PPM applications still have room for growth. Even the most mature PPM offering in the market today, Sopheon, is working to add functionality like risk management and analytics.

DMS is a rapidly growing segment of the PLM footprint. To date, the product development and procurement teams have been disconnected, but this is changing. GPD and environmental compliance regulation is driving the need to strategically align procurement with the rest of the organization. In fact, chief procurement officer is an evolving title at many Fortune 500 companies.

Dassault ENOVIA (MatrixOne products) and Oracle (Agile) evolved their supplier relationship management and sourcing applications early on to complement very strong PDM and good product and program management capabilities. Siemens PLM has grown its sourcing and supplier management capabilities with the Asian Sourcing Network (in conjunction with AT Kearney and TCS), but has not expanded its offering to some of the newer markets that could benefit most from this functionality, like apparel and footwear.

Agentrics also provides a mature supplier management and sourcing application to complement its data management, packaging, and collaboration capabilities. This is the one company we looked at that started with its DMS capabilities first, then evolved into other areas of PLM, mostly through acquisition and partnership (with UK quality management and supplier audit company Muddy Boots Software). Despite having a mature DMS product, the company has no plans to delve into other markets.

Collaborative product design

All PLM vendors provide applications to bring the NPDL teams together, either to collaborate on CAD or a visual representation. Vendors that come out of a CAD legacy provide rich collaborative mechanical engineering environments. Others provide visualization for multiple design environments, with software like Cimmetry AutoVue, an Oracle product, which is embedded in many PLM applications. The differentiator is how PLM vendors define collaborative product design (CPD)—that is, how far upstream in the organization. CPD has historically focused on engineering collaboration, but it’s being redefined as manufacturers realize the benefits of sharing 2D draw- ings, 3D models, and formulas with other NPDL constituents inside and outside the organization for better product documentation, quality, customer service, and ideation.

In particular, Dassault and SAP are on the redefining-CPD bandwagon with Seemage and Right Hemisphere, respectively. Siemens PLM and its JT format is also on board, as well as Adobe.

For PLM vendors, the business opportunity for CPD today is to facilitate open innovation between design, the shop floor, and suppliers in manufacturing. There are applications to support this demand, with Autodesk and its Design Review platform, Dassault with manufacturing process planning and modeling product DELMIA, Siemens PLM

26 © 2007 AMR Research, Inc. Product Innovation and PLM Report | 2007 Technology and Vendor Landscape Series with Tecnomatix, and PTC with its MPMLink product (strictly process planning versus manufacturing line or robot simulation). There are other successes in this segment of PLM, including Right Hemisphere with Sikorsky. This application started out in the customer service department to enhance technical publications and recently expanded to manufacturing and product development for the sharing of compressed, lightweight models because of its success.

Product data management

Most manufacturers have their product data under control, so the PDM revenue opportunity is slowing (8% five-year CAGR). Some opportunity remains, though, depending on the granularity of the specification. For example, in software and electronics, CAD requires richer PDM functionality, since there are many moving parts and elements to detailed software programs or complex electronics like cell phones or computers.

As PLM expands to emerging markets like retail soft goods, consumer products, and life sciences, the foundational layer is PDM. Getting product data under control is the reason why PLM has taken off in the apparel and footwear market. The multiple sea- sons of retail produce multiple product lines that can include thousands of styles and SKUs, necessitating iterative approval activities like lab dips, strike-offs, and samples. Although existing applications don’t manage the development of products lines well, they do excel at managing the development at a style level. Vendor functionality in this area will likely evolve over the next 12 to 18 months.

With process manufacturing industries, the challenge is that formulas are continu- ously tweaked without any purging of old specifications. Because of this, the data store required is immense. Within this data store (i.e., the specification management system), manufacturers need to have the ability to link formulas, packaging specifications, manufacturing locations, geographic sales locations, and regulatory information. Infor (Optiva) refers to this as the bill of information (BOI).

Quality management

Most vendors are able to check the box when asked if they offer quality management, but few offer true detection-to-correction CAPA products. Two vendors that do are Oracle, through its acquired Agile assets, and Aras, which has an advanced product quality planning (APQP) and failure modes and effects analysis (FMEA) risk management offering to complement its product engineering and program management capabilities. A relatively young company, Aras has gained traction in automotive, A&D, and high tech with its holistic quality planning and management application. Oracle launched its quality management application six years ago. The product took off initially in life sciences, but now is gaining traction in high tech as companies in this industry realize the importance of maintaining a constant feedback loop between product development cycle times.

PDM is one primary necessity to enable a design-for-environment strategy. PLM vendors naturally gravitated to offer compliance data management applications and are adding supplier management functionality as well. Siemens PLM offers one of the strongest offerings in this area through Teamcenter and its partnership with environmental data management and analytics company Synapsis. Dassault’s ENOVIA MatrixOne, combined with environmental consulting firm Tetra Tech, also provides a strong application. PTC’s compliance offering is enhanced with the acquired assets of IHS, i2 Technologies’ former content management application, and testing house Underwriter’s Laboratory (UL). Aras offers RoHS and WEEE regulation templates, which are application extensions that identify substances on a part-by-part basis and cross-reference each European Union RoHS or WEEE regulation. Oracle (Agile) was one of the first to market with its PG&C application, and it continues to mature this offering to address the evolving regulatory landscape.

These applications enable manufacturers to accomplish job No. 1 in environmental compliance: getting product data under control. Job No. 2 is getting suppliers under control and having a collaborative platform for communication, requesting material safety data sheets and testing when required, and maintaining scorecards on each supplier to determine during the design process, not after discovering a noncompliant part or material, the ones that can provide the required materials. Another important aspect is keeping up with regulation changes, as Aras strives to do with its application, as well as services firms Tetra Tech, 5-Trees, The Goodbye Chain Group, and the environmental law firm Allen & Overy. All these capabilities rolled into a PLM offering help manufacturers achieve a true design-for-environment approach to product development, which is important as environmental regulations evolve and new directives come on board, like the energy efficiency directive, EuP.

This research study reviews application vendors that provide multiple components of PLM functionality to manufacturers across multiple industries. AMR Research required that participants be PLM suite vendors selling products that span several, but not necessarily all, PLM functionalities.

Qualification for inclusion

This Report is a review of PLM suite vendors with at least three of the five PLM footprint elements and, most importantly, that manage the product specification or bills of materials (BOMs) across multiple vertical industries, including discrete, process, and retail industries, enabling collaborative design and program management inside and outside the company.

Here are the five elements of the AMR Research PLM footprint: • Product data management—Product information repository • Collaborative product development—Design of products and processes across the NPDL cycle • Direct materials sourcing—Sourcing of standard or custom parts and materials, as well as supplier collaboration • Customer needs management—Managing customer or market input and collaboration • Product portfolio management—Managing analytics, decision support, and resources in product development

Aras

2006 was a year of introspection and transition for Aras. What is the company’s plan for growth for its Innovator product? Is the current model sustainable? How can it survive as best of breed? Aras tackled these questions and made drastic changes in its business model. The company now gives the software away for free, is open source, enables customers to have an unlimited number of users, and makes its money solely on services. Aras’ technology approach is unique from most PLM vendors, with an SOA based on Microsoft Windows Server and SQL Server. The product also ships with a browser-based interface and has configuration options for Microsoft SharePoint and Office clients, so users can work in the virtual environments with which they’re famil- iar. The company’s mission isn’t so much to provide a platform to manage the product lifecycle stages, but rather to facilitate the product workflow that needs to occur to manage programs and engineering changes as well as compliance and quality issues. In its own words, Aras is filling the gap between PDM and ERP.

The result of the new approach has been positive thus far, with 12 new deals in the past year based on its deployment and services packages. The company’s Quick Start package, for example, is $9,990, with deployment services including process consulting, training, and rollout planning. Coupled with the subscription support packages for enterprise companies ($8,300/month) and SMBs (starting at $750/month), this gives Aras a nice reoccurring, predictable revenue stream. It also benefits greatly from a tight partnership with Microsoft for the Microsoft Dynamic AX (formerly Axapta) product.

We think Aras’ quality management module is a strength, providing functionality for such quality processes as APQP, FMEA, CAPA, ISO 9000 document management, and basic quality assurance (QA) processes, quality control (QC), defect and noncon- formance tracking, and customer complaints. A Tier 1 auto supplier we spoke with purchased Aras primarily for this ability, using the application to connect the previously Excel-based disparate sets of data that supported its APQP process. The company initially looked at quality management point applications, but ultimately went with Aras since it offered a more complete application (from program management to manufacturing and quality), a flexible technology core that integrated easily with the Progress Software tools it had in place, and, of course, the free software and subscription model.

Although the auto supplier doesn’t use Aras’ product engineering or program management functions at this time, it does plan to roll out the latter next year, which will increase the number of users from 30 to 150. This is a typical size implementation for Aras in its key industries (automotive, consumer electronics, and semiconductor), although it has scaled to as large as 600 users and 22 sites across North America on a single server instance.

Times are pretty good for Arena in the SMB market as the sole SaaS PLM offering, with over 300 customers. Although the company has struggled to penetrate the enterprise level, it does have some reasonably large implementations of up to 1,000 seats. But Arena knows it will never be the preferred PLM vendor of choice for a large automotive or A&D company. The product configurations and supplier relationships are complex enough that companies like Boeing, for example, prefer to keep their PLM information and processes within the four walls, managed by systems that can support the company’s electromechanical product development processes. Arena, formerly BOM.com, excels at managing the product data, engineering change, and quality management that industrial products companies require. Current customers include Segway, Air International Thermal, Sirius Satellite Radio, XM Satellite Radio, Tesla Motors, and Foundry Networks.

Last year, the company released a PPM module. Although it’s not a decision support and analytics engine, the module does enable the management of projects and products in a company’s current product development pipeline, tying together the project and product records. Despite the absence of a rich analytics engine, Arena does offer a reporting module that provides preconfigured reports for compliance (RoHS, WEEE), BOMs, and issue tracking.

One area of opportunity for the company is to forge relationships with the larger PLM, CAD, and ERP companies. These companies, most of which have been loathe to commit 100% to the SaaS model, could use a relationship with Arena to penetrate the expansive SMB opportunity. Current partnerships include a network of small U.S.- based, third-party deployment companies, as well as electronic component distributors Avnet and electronic component data management firm Promiere.

Autodesk positions itself as a design software company, not a PLM company, but it has forged integration relationships with SAP, Oracle, Microsoft, and PTC in order to be the WIP foundation for engineering collaboration and manufacturing process planning across the enterprise. As Autodesk established these partnerships, its collaboration capabilities have grown, positioning it to be the WIP foundation for what it calls the “cross- enterprise digital pipeline.” Autodesk continues to be the largest presence on the SMB engineering desktop and in the broader design community, with 650,000 Inventor and 90,000 Vault users. The company also experienced 270% growth in Inventor communities. One success story is drive and control engineering firm Bosch Rexroth Canada, which went from the manual sharing of 2D designs with the shop floor to using Autodesk Inventor to share 3D models, leading to decreased design times and manufacturing errors.

Attend an Autodesk customer event and you will understand why the company has surged to $2B+ in revenue. The following is cult-like, and this is primarily with AutoCAD, its 2D product. Inventor, its 3D application, is a growing but still small portion of the company’s revenue (22%). Its primary industries are automotive, industrial manufacturing, and architecture, engineering, and construction (AEC). With its newly announced free design collaboration site Freewheel (similar to Dassault’s 3Dvia site), however, the company has potential to expand its footprint into markets where 3D is not as prevalent, like CP.

Autodesk will focus much of its efforts on growing its presence in the AEC market over the next 12 to 18 months, with its Revit product connected to AutoCAD and its design visualization tool, 3ds Max, enabling building information modeling. This will enable closer connection of design data with the construction process. From a manufacturing standpoint, the company will continue to use 2006 acquisition Alias together with Inventor as well as product design and data management products Vault and Productstream to provide digital prototyping and collaboration between design, engineering, and manufacturing.

Dassault has seen success over the years in the CAD market and continues to see opportunity in the traditional engineering realm but has also pushed upstream to non- engineers, like marketing, sales, customer service, and service technicians. In the past year, the company announced a portfolio of 3D entities: • 3DLive—For collaboration across enterprise • 3DVIA—An online community for designing, sharing, and publishing 3D models • 3D Swym (See What You Mean)—A venture with Publicis and other ad firms that allows marketers to share concepts with customers to get their feedback before going to market

Coupled with production planning and modeling application DELMIA, design tool CATIA, simulation application SIMULIA, and its ENOVIA products (MatrixOne, SmarTeam, and VPLM), it’s apparent Dassault has all the pieces to round out the PLM footprint.

Of course, the challenge is execution. Selling to vertical markets and new audiences across multiple product lines takes resources from sales, system implementation, and consulting sides. Consulting, change management, and training are distinct opportunities in some markets to which Dassault is new, including retail, CP, and life sciences. This is because the buyers in these markets are immature in their understandings of the benefits and applicability of the technology. It’s also because retailers and life sciences professionals, for example, want to speak to industry experts instead of someone who is adept at selling CAD to build airplanes.

The 3D for All strategy is visionary, but it may not pay financial dividends in the short term. However, it does expand the positioning of the company from workgroup design centric to enterprise innovation centric. As PLM evolves from a CAD data management hub to the enterprise-wide collaboration platform, Dassault will be well positioned to support this not only through its 3D approach, but also at the business layer with its ENOVIA Program Central, Product Central, and Supplier Central Products (all of which are former MatrixOne products).

This holistic approach is one of the reasons why one consumer electronics manufacturer decided to use Dassault as its PLM application: the ability to centrally manage product data, provide strong business processes around BOM management, and connect the product development process at the program and supplier level. At the manufacturing layer, DELMIA provides manufacturing process planning as well as robotic and manufacturing line simulation, which gives insight to how a product will be built before the manufacturing line is even started. Another similar example in scope is a recent win, LG Electronics, which selected ENOVIA MatrixOne.

Enginuity possesses one of the strongest formulation calculation engines in the market. But, as with most best-of-breed vendors, some have questions about whether the company is too small to support global formulation teams. Conversations with companies like P&G prove otherwise, with Enginuity’s FWS system managing global R&D and formulation across nine product categories in the healthcare and beauty business units. Led by former P&G employee John Sottery, Enginuity has developed a central repository of data to enable reuse of information, particularly during the formulation experimentation process. The obvious benefits of this are improved productivity, easier collaboration, and faster time to market.

Enginuity also works with Revlon, Schering-Plough, and Zotos, the haircare company. We spoke with Zotos, which said Enginuity helped alleviate the challenge of searching and traceability between formulas as well as linking any file to the formula: artwork, manufacturing histories, or approval documents. This is where document management company Documentum (part of EMC) comes in as a key component of the Enginuity offering. It should be noted, however, that Enginuity is open to integrating with other document management applications.

Process manufacturing companies have a unique set of requirements that demands an expertise most traditional PLM companies don’t have. The one possible exception is Siemens, with its process-centric Simatic IT. The product could be (if integrated) a nice adjunct to the joint UGS-developed Research Knowledge Management (RKM) application, designed to link packaging specification information with formulation and laboratory information management system software. Larger PLM companies that are more discrete industry focused have been loathe to invest in building the teams required to make R&D professionals comfortable buying from them. As a result, small formulation experts like Enginuity have been able to thrive in this nascent market. But how long can these smaller companies exist on their own, especially since many are privately funded?

As the opportunity expands beyond R&D to the supply chain, larger players in the market will accelerate their footprints in the process space, primarily to formulation. The net is the window of opportunity for companies like Enginuity to capture market share and grow exponentially in the next 12 to 18 months. For Enginuity to accomplish this is, it will focus less on adding features and functionality and more on marketing to edu- cate its target audiences (R&D, supply chain, and CXO) on its expertise in health and beauty and pharmaceutical formulation, as well as why spreadsheets don’t cut it in GPD.

After Infor’s last two acquisitions this year, government software application provider Hansen and workforce management company Workbrain, the company said at its recent customer conference that it was done making acquisitions for a while (it has made 31 since 2002). This is a wise move, as this gives Infor time to digest its many assets and continue building an infrastructure for products, sales, and the channel. Infor’s acquired PLM applications—discrete manufacturing product PLM8 (formerly Baan), process manufacturing application Optiva (the former Formation Systems product), and retail industry product RunTime (formerly the Geac product)—is primarily sold to the midmarket with Infor’s ERP suite. Infor’s PLM focus today is primarily in the process space with Optiva, gaining traction with food manufacturers like Rich’s Foods, and in consumer products and pharmaceuticals with a large, Fortune 500 company. From a discrete industry standpoint, Infor recently announced that it would reverse a prior decision by SSA (another of its acquired companies) to discontinue support for Baan IV and V and provide support instead of forcing migration to its LN product. This is not surprising given that there are 6,000 worldwide users of Baan.

One Infor customer we spoke with, a large food and beverage company, had some of the classic challenges of product development, including centralized management of data, collaboration across teams, quality management, and global risk management. Infor’s Optiva product was applied to address these issues, in concert with Accolade, Sopheon’s PPM product, across 800 global users including product development, packaging, ingredient technology, operations, procurement, quality, and regulatory. As far as challenges, it needed to spend additional time cleaning disparate forms of data and getting buy in on the usage from stakeholders: both areas it feels it should have addressed prior to implementation. This was not an Infor shortcoming, but rather a les- son learned, which speaks to the services opportunity for PLM vendors to assist with front-end data cleansing, and change management.

Infor’s plan for 2008 is to incorporate acquired performance management assets. In 2009, PLM8 and Optiva will be available on Infor’s Open SOA. The Open SOA approach will enable companies to have a central hub, or home page for accessing applications and data on a role and event basis. SOA has become a necessity for enterprise software companies, given the multiple software systems and disparate data that exist globally at most companies. Delivered as part of customer’s maintenance agreement, Open SOA also provides a platform to integrate Infor’s solutions. Infor products currently available on Open SOA include Infor ERP SyteLine, SCM WMS 9, EAM, and SupplyWeb. We think this service approach will greatly benefit the company’s PLM products as global product development is driving the need for a unifying, open platform.

Prior to the Agile acquisition, Oracle’s PLM product was not a strong player in the market. The Agile acquisition, however, brought rich PDM, along with mature portfolio management, supplier management, and analytics on cost and quality. Combined with Oracle’s traction in manufacturing, the PLM picture for the company is finally rounding out. From Agile’s perspective, some clients had begun to question the scalability and long-term viability of the company, but this acquisition alleviates this concern. The challenge will be integrating the parts into a cohesive strategy. Oracle is in the process of defining the PLM roadmap and integration touchpoints between Agile and the Oracle suite of products.

Strengths of the Agile product include industry-specific workflows and templates for FDA-regulated industries, like food and beverage and pharmaceuticals, and strong sourcing capability, which has gained traction particularly in high-tech electronics. This is because of the expansive network of offshore suppliers large high-tech companies need to work with to ensure compliance, quality, and rapid time to market. Quality management is also a differentiator, as the product provides a dashboard to spot quality trending downward and enables root-cause analysis, risk management, and analytics. One interesting capability is the tie between supplier management and quality, which allows quality issues to be tied back to the supplier and develops supplier scorecards that contain quality ratings. Harris is an example of one client using both capabilities in concert across 6,000 engineers and 2,000 supply chain professionals inside and outside the company.

Oracle provides good support for the business layer of PLM with its PPM product, which includes project and resource management, as well as tradeoff analysis. However, the company chooses not to delve into CNM at the voice-of-the-customer and idea- collaboration level with its PLM product, preferring to leave that to its CRM, ideation, and requirements management products. Still, the Oracle PLM system enables users to manage a collection of concepts, collaborate on new product ideas, and create a concept and requirements BOM.

36 © 2007 AMR Research, Inc. Product Innovation and PLM Report | 2007 Technology and Vendor Landscape Series Oracle’s traction with new PLM deals over the year has come not just from PDM, but from quality management, product governance and compliance, portfolio management, and direct materials cost management. One pharmaceutical company we spoke with, Invitrogen, experienced the challenges of a large number of SKUs, a broad portfolio of products, and multiple product launches per month. It adopted Agile PPM and product collaboration to provide 1,400 research scientists, program managers, and regulatory experts on a single global instance with easier access to data, document management, and better management of the NPDL process.

The challenge Invitrogen faced throughout the rollout is common: cleaning and ratio- nalizing legacy data, easier part numbering, and establishing standardized processes throughout the global organization. The future includes possible use of Oracle as the front-end data collection mechanism to enhance its e-commerce, web content, and labeling engines and integrate with its distribution, shipping systems, and CAPA processes. Launched six years ago, Oracle‘s quality management initially gained traction in the pharmaceutical market. More recently, it has seen a spike in interest from high tech because of regulations like RoHS and WEEE as well as the hypercompetitive market in which it works. We believe the bigger opportunity is in leveraging Oracle’s other enterprise assets, such as ERP, CRM, HCM, and demand management, into complementary PLM packages.

PTC has presence in most major discrete manufacturing industries, primarily from a design CAD data management standpoint and enterprise-wide collaborative design rather than PPM or CNM. The company’s focus this year has been on integrating Polyplan, the manufacturing process planning software company, into the Windchill product line. In June, the integrated product MPMLink was announced, along with two MES partnerships, Camstar and Visiprise, to enhance its application for IPPD. The product doesn’t, however, enable simulation of manufacturing lines like Dassault DELMIA or Siemens PLM (Tecnomatix). PTC has made other acquisitions as well over the past two years, including publishing engine Arbortext (2005) and technical illustration company ITEDO (2006). The combination of the two, Arbortext IsoDraw, will enable the company to target new segments, such as the service parts aftermarket and financial services. Most recently, PTC acquired a small competitor, 3D CAD and modeling company CoCreate, primarily to add customers and history-free, dynamic modeling capabilities.

Earlier in this Report, we discussed the need for tightly integrating the service lifecycle with the product lifecycle. The addition of Arbortext IsoDraw, much like Dassault with Seemage, will enable fully integrated documentation of a product design or product repair instructions via a lightweight 3D CAD model. One use case is a service tech- nician in the field fixing a washing machine that needs succinct, visually supported instructions to make the repair quickly. The result is increased time in the field to see more customers and lower repair costs.

Although a small portion of its overall revenue, one very strategic focus for PTC is retail. By acquiring the assets of Aptavis and hiring approximately 100 retail specialists, the company has been able to successfully grow its presence in the industry. Using mindshare as a barometer, it’s gaining traction: retail manufacturers we’ve spoken to consider PTC on the shortlist of most PLM deals. One key requirement for a retail PLM application is that it’s combined with a strong services offering. PTC provides this through partnerships with retail consultants Kurt Salmon Associates and Walter Wilhelm Associates.

38 © 2007 AMR Research, Inc. Product Innovation and PLM Report | 2007 Technology and Vendor Landscape Series A major product decision the company made this year was to migrate Pro/Intralink (Pro/I) customers to Windchill PDMLink 8.0 to provide full product definition, better change management, workflow, and item configuration. Pro/I will remain a subset of PDMLink, but PDMLink will not include the full, detailed workgroup data management functionality of Pro/Engineer. Moving from workgroup to enterprise data management makes sense, as it will enable distributed product management, Microsoft Office integrations, and the option to integrate Windchill ProjectLink—all steps to bringing PLM to the masses. However, one challenge is the normalizing, cleansing, and migration of data that needs to occur. PTC recognizes this and has begun to explore working with offshore Indian resources to help customers with this transition to complement PTC Global Services. The company provides its ESI (TIBCO licensed integration) tool for data integration. Still, like any data migration project, the progress is slow and tedious for many customers. In some cases, the customer may be used to working in a Pro/I environment and won’t want to change, which may be a hindrance to upsells.

An advantage SAP PLM has over companies that historically come from a CAD back- ground is the opportunity to use SAP’s business suite of applications, allowing users to integrate product development with program management, SCM, and customer management. SAP’s goal with its PLM software, based on its business process platform NetWeaver, is to improve efficiency across the supply chain, create more visibility for NPDL stakeholders, and enable easier collaboration through centralized data management.

Key areas of focus for SAP PLM continue to be portfolio and program management, in which it includes idea and requirements management, BOM management, product service, and product quality. Into 2008, the stated product roadmap will include an improved UI and information search, improved product and portfolio planning, better role-based decisions across the product lifecycle, improved product intelligence, and stronger support for engineering and flow to digital manufacturing and service. In particular, product intelligence is a focus moving forward, as SAP realizes intelligence and analytics for the NPDL process are both lacking and needed, and thus stands as an opportunity. Why it has taken so long for an application to evolve in this area is a mystery, but since SAP owns much of the business data of a company, it has a great opportunity to provide customers with the holistic product information they need to model product launches and supply and demand, as well as track product success and quality issues.

SAP’s upcoming product release of XRPM 4.5 for portfolio management is positioned as a foundation for decision flow management (DFM), with predefined innovation process templates such as ideas, requirements, materials, and documents. The feedback during reference calls was that companies want to connect with their suppliers during the design process, particularly in the automotive industry, through a simple and secure collaboration platform. This is not to co-design products necessarily, but to share information. One client company said it would like to see SAP expand to complex knowledge modeling versus simple data management, where one model exists with all information, together with constraints, rules, and processes.

We think one area SAP has a great opportunity to own is supporting the need for a complete view of project and product profitability at any stage in the lifecycle, from design to service. Companies need to understand how much of a particular product they are making or how many resources they are using—a complete financial picture. This is likely why SAP is focusing on product intelligence as a key initiative, having recently acquired Business Objects.

Selerant is the oldest best-of-breed PLM company focused on process manufacturing, with 200+ customers worldwide in the food, CP, and chemical industries. Most are based in Europe, as is Selerant, but it does have a strong presence in the United States from where it derives 30% of its revenue. The company started as a compliance software provider for FDA-regulated industries in 1990 and has evolved its footprint to include formulation, product and packaging, specification management, sample management, and portfolio management. Selerant offers the broadest footprint of the available best-of-breed vendors focused on process manufacturing.

Two years ago, the company developed a web-based composite application, DevEx for SAP, with the process manufacturing systems integrator Linx-AS to fill what it thought were some of the gaps existing in SAP’s formulation system at the time. Helped by Linx-AS’s tight partnership and knowledge of SAP capabilities, Selerant has seen sales increase because of this SAP integration. One recent product improvement builds on legacy expertise: the application offers a regulatory framework that manages all current and updated information regarding FDA regulations and could be extended to support the REACH directive. The framework has a flexible process foundation that enables companies to design their own goals and guidelines and create their own rules to help them proactively model product designs against existing regulations. Based on a Microsoft workflow foundation, DevEx 2.0 will be launched in spring 2008 and include an improved UI and integration with SharePoint.

Selerant has enhanced its project management functionality, but still needs to integrate with a portfolio management tool like Sopheon or CA’s Clarity for more robust functionality. One large CP manufacturer is using Selerant to centrally manage over 1,000 ingredients and project-manage the product development process. In the future, the company plans to roll out document management functionality for ingredients, recipes, and manufacturing, as well as the regulatory module. As far as future prospects go, the company continues to thrive on its own for now, but will likely face increased competi- tion from SAP and Siemens, particularly if it decides to merge the Simatic IT specification management capabilities with Siemens PLM’s RKM capability for packaging.

Acquired by Siemens earlier this year, the name UGS went away, and the new brand is now known as Siemens PLM Software. The company’s focus has always been on the global design chain, optimizing global engineering, easy collaboration, and openness. Its real differentiator is in manufacturing simulation, planning, and execution.

An area Siemens PLM has increased its focus this year on is PPM and analytics. It forged a partnership with portfolio management vendor Planview last year and, with Teamcenter 2007, has deepened this relationship to enhance Teamcenter Portfolio Management. For the first time, Siemens PLM has unified all components of the application, from the former SDRC and Unigraphics, on a single data model. The only exception is Teamcenter Community, which will operate independently using Microsoft SharePoint. These capabilities include the following: • Integrated requirements management • Integrated program and portfolio management • Integrated direct materials sourcing • Maintenance, repair, and overhaul applications • A business modeler to simplify deployment • Integration of multiple manufacturing data streams into a single environment for better manufacturing planning and execution

Earlier this year, other key product announcements were made, setting the stage for the unified platform announcement of Teamcenter 2007. This included NX5, which now includes history-free modeling and role-based UIs, as well as Tecnomatix on a single data model with enhanced robotic line simulation.

One area where the company has seen growth is in SMB with the Velocity product (19% year-over-year growth), a bundled CAD, modeling, and PDM product. This growth was probably helped by its close integration with Microsoft, a prevalent NPDL platform for SMBs. Today, Teamcenter is available on .NET and now fully supports Microsoft SQL Server 2005 and SharePoint. .NET and Office 12 are available to Teamcenter Express (PDM) customers. The close four-year-old relationship between Siemens PLM and Microsoft makes sense, since Microsoft has an avenue to expand into manufacturing and Siemens to the SMB market.

As part of the $113B Siemens A&D division, the Siemens PLM group now has extended production management capabilities, inroads to process manufacturing industries through the Siemens Simatic IT product line, deep pockets to grow presence in emerging markets like CP, food and beverage, and retail, and PPM and CNM, complemented by rich product analytics. The next 6 to 12 months will be spent sorting through this wealth of opportunity and deciding on the product roadmap.

Although not included in our vendor landscape tables since they typically partner with or support the full-suite PLM products on the market today, IBM and Microsoft play a critical role in many companies’ product innovation strategies. IBM has been Dassault’s sole U.S. sales arm for 25 years, and so has considerable knowledge of PLM best practices and services required. In the past year, Dassault and IBM decided to move to a named-account approach (approximately 1,000 accounts, with Dassault picking up the difference), and IBM tightened relationships with simulation vendor MSC Software and PLM vendors PTC and Siemens PLM. The Global Business Services group of IBM uses IBM’s software group assets, including Rational, with the goal of becoming the innovation platform of choice supported by its infrastructure products: Information Management (e.g., Ascential), Lotus, Tivoli, and WebSphere.

In our surveys, Microsoft has long been a prevalent answer to question about the tools or applications used for PLM. Top answers typically include Excel, Word, Project Management, and SharePoint. It has become incumbent on Siemens PLM, Dassault, and others to forge close relationships with Microsoft. Many of their customers demand it, particularly SMBs. Even if a company is not using Microsoft tools for innovation, it invariably wants to design or collaborate in a “Microsoft-like” environment. Because of this, the company’s influence in PLM is unmistakable.

PLM remains a fragmented market, with over 400 CAD, non-CAD, and electronic design automation vendors, many of these being one-to-five-person design shops. One consistency, however, is the ubiquitous presence of these two technology industry behemoths lending support to the product innovation process, no matter the design, data management, program management, or sourcing application present.

For practitioners • Is it a best-of-breed or PLM suite?—Consider the product development challenge you are trying to solve: is it simply managing CAD data and communication between engineers, or is it effective launching of products? • PLM should be a standard—PLM should be a standard application in your enterprise, just like ERP, CRM and SCM. New products are the lifeblood of your company. • Press vendors on the scalability of their network infrastructures—Robust network performance is necessary for GPD, particularly when sharing rich CAD models globally. Some users we’ve spoken with cite network performance as a challenge, specifically the ability to quickly communicate and transfer rich 3D models across the global value chain to captive development centers and offshore resources. Time to market has always been one of the top reasons why companies use PLM systems, but if they can’t provide the bandwidth or performance required to support GPD, time to market will suffer. • Consider applying 3D to support other NPDL processes—3D images can be used to enhance marketing campaigns and product manuals, support customer and field service, and communicate new product ideas and designs to customers. • Demand decision support functionality from your PLM vendor—The functionality should include decision support across value chain, full lifecycle strategic product planning, product portfolio analytics by stakeholder, a platform for open innovation, robust value analysis during ideation, and centralized product knowledge management.

44 © 2007 AMR Research, Inc. Product Innovation and PLM Report | 2007 Technology and Vendor Landscape Series For providers • Expand the definition of PLM—Continue to feed the engineering workgroup’s need for collaborative product design, but target the product or brand manager— the lynchpin that connects engineering, design, product, and marketing with sales. Designing new products involves measuring the physical constraints as well as understanding cost data of product families and features. It also includes planning and executing marketing, service offerings, packaging, and base pricing, all areas in which the product/brand manager owns or at least is closely involved. • Weave ideation and voice of the customer into your offerings—Integrate with CRM and ideation applications to connect customer information and demand with product rules for specific markets or channels. • Decision support, decision support, decision support!—Provide a decision support dashboard with robust analytics to help customers measure products, processes, and people. Keep in mind new PLM market opportunities, such as software development, consumer electronics, and apparel, which involve quickly managing complex product designs across different domains that necessitate rapid decision support. • Effective collaboration between value chain constituents is key—It’s key to provide better integration and handoffs to other value chain constituents, such as program managers, manufacturing process planners, and suppliers. • Link into market research database and CRM systems to help analyze new product opportunity—Integrate with a database of customer buying preferences, ideas, trends, and issues, such as IRI and AC Nielsen. CRM systems would help vet where the product development and launch teams should spend their time on scoping and development. This extra step during the product planning process would be an easy way to determine whether the market has an appetite for a particular new feature or product before allocating any resources. This opportunity is highlighted when you consider a study by Dr. Robert G. Cooper on new product development, which showed that 1.2% of funds are spent on preliminary market studies and 0.8% on a detailed market study, compared to nearly 30% on the detailed development stage. • If you don’t already, provide a SaaS offering—There is also an opportunity for PLM vendors with web-based, on-demand services to enable the need for rapid innovation, particularly at small companies. As NPDL is project oriented, it makes sense to offer a subscription-based innovation platform that product managers can access for product planning, ideation, and portfolio management when they need it. Multiple industries could benefit from this approach, including fast movers like retail and consumer electronics, and traditional industries, like automotive, A&D, and high tech, as long as the typical concerns about electronic security are addressed. Current PLM SaaS offerings, like Arena Solutions, are recognizing this need for stronger security.

Product Innovation and PLM Report | 2007 Technology and Vendor Landscape Series © 2007 AMR Research, Inc. 45 • Extend 3D to new audiences and markets—For years, we have preached the virtues of using 3D to enhance current product design and garner new product ideas. Autodesk and Dassault are two of the most prominent vendors now providing 3D viewing and collaboration sites (Dassault with 3DVIA and Autodesk with Freewheel). The idea is to entice nontraditional CAD users to play with the design, configuration, and sharing of 3D models. Companies such as Right Hemisphere and Autodesk, with their Design Review product, provide a collaboration platform to enhance the sharing of designs from engineers to product management, marketing, and sales in engineer-to-order environments. Not only will the liberal sharing of 3D designs across the enterprise improve product design and the customer experience, it will also provide customers with the chance to play with new product designs before they are launched into the market, helping product and brand managers make more accurate go or no-go decisions.

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