Issue in Focus: Assessing the Cloud PLM Opportunity. Evaluating Benefits, Requirements, and Considerations

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1 Issue in Focus: Assessing the Cloud PLM Opportunity Evaluating Benefits, Requirements, and Considerations Tech-Clarity, Inc. 2012

2 Table of Contents Introducing the Issue... 3 The Cloud Meets PLM... 3 Evaluating the Key Features and Benefits of Cloud Computing... 4 Leverage Economies of Scale... 5 Eliminate Non-Value Added Work... 6 Take Advantage of Cloud Level Systems Performance... 6 Enhance Flexibility and Agility, Reduce Business Risk... 7 Final Considerations... 8 Conclusion... 9 Recommendations... 9 About the Author Tech-Clarity, Inc. 2012

3 Introducing the Issue Tech-Clarity research shows that Product Lifecycle Management (PLM) offers manufacturers the ability to increase revenue, decrease product cost, and reduce product development costs. How does PLM do this? A successful PLM initiative improves business performance by enhancing data management, streamlining business processes, enabling better collaboration, and enabling better product development and engineering decision-making. Product Lifecycle Management (PLM) offers manufacturers the ability to increase revenue, decrease product cost, and reduce product development costs. From a data perspective, PLM brings all product information into one comprehensive location. It integrates data from different aspects of the product in a meaningful way, providing the ability for manufacturers to control, access, and share this information across their business. Not only can companies share product information with a broader array of people, they can also extend the value of the information by integrating it with product-oriented processes to coordinate activities. This allows multiple disciplines to provide input to develop optimal products. It also improves performance by providing accurate, up-to-date information from early concept design through service to the people that need product data to play their part in delivering profitable products. Cloud offerings have the potential to change the way PLM solutions are delivered and improve the ROI by reducing the investment required to achieve the benefits. This paper assumes that the return portion of the PLM ROI (return on investment) discussed above is relatively well known and focuses on how to achieve the benefits rapidly with the least investment. The potential benefits have been available for some time in the current generation of PLM systems. Now, the introduction of cloud PLM offerings allows this value to be delivered in a new way. Cloud offerings have the potential to change the way PLM solutions are delivered and improve the ROI by reducing the investment required to achieve the benefits. The Cloud Meets PLM PLM in the cloud is an exciting development with large potential to expand PLM benefits to more people. Unfortunately, there is a lot of confusion around cloud PLM solutions. This is partially due to the variability in what people call cloud. This paper will explore the benefits of cloud computing and explain how they are achieved in order to develop meaningful criteria to evaluate cloud PLM offerings. This should help alleviate some of 3 Tech-Clarity, Inc. 2012

4 the confusion and provide clear criteria for manufacturers to use when evaluating the potential value of a cloud PLM offering. The time has come to explore cloud PLM in a considered way, demystify cloud, and offer guidance to manufacturers. Cloud computing is generally recognized as the next generation of information technology (IT) architecture. Large and small companies alike are using cloud solutions to simplify their IT infrastructure. These companies are taking advantage of lower costs, faster time to value, and increased agility available from Internet-based applications. Many companies have already moved applications such as , customer relationship management (CRM), collaboration, and other systems into the cloud. Vendors have now introduced cloud-based product lifecycle management (PLM) solutions. The time has come to explore cloud PLM in a considered way, demystify cloud, and offer guidance to manufacturers so they can evaluate cloud opportunities in PLM. Evaluating the Key Features and Benefits of Cloud Computing So what is the cloud? Put simply, it is the Internet. According to Wikipedia, Cloud computing is the delivery of computing as a service rather than a product, whereby shared resources, software, and information are provided to computers and other devices as a utility (like the electricity grid) over a network (typically the Internet). One of the key points is that cloud computing is not just about the technology but also about the business relationship with the vendor. Cloud concepts have been around for some time but are new to PLM for most companies. The use of cloud applications is proven (if not pervasive) in other enterprise application spaces, most notably in CRM. This provides an experience base to learn from and means that companies looking at cloud PLM are not treading into unchartered territory. Instead, they can apply lessons learned from more prominent cloud application markets to evaluate the opportunity available from cloud PLM. To achieve the available benefits the solution must meet certain software and business model requirements or the cloud solution will fall short of enabling cloud benefits. Cloud solutions, when done properly, can save time and money and add business flexibility. To achieve the available benefits the solution must meet certain software and business model requirements (described in this paper) or the cloud solution will fall short of enabling cloud benefits. Most manufacturers probably don t care about the strict definitions of Software as a Service (SaaS), Cloud, Private Cloud, and hosted solutions. Instead they should focus on saving time and money and achieving the benefits they are 4 Tech-Clarity, Inc. 2012

5 targeting. Fortunately, with some due diligence, manufacturers can understand whether those benefits are available and sustainable over time from a given solution. By assessing the requirements in advance in addition to functional capabilities of course there should be no surprises. The next sections of the paper look at the required capabilities, how to verify them, and how the cloud delivers them. Leverage Economies of Scale An effective cloud offering delivers value more efficiently by leveraging shared resources. Cloud offerings and business models reduce time and cost dramatically by eliminating waste and redundancy. Cloud solutions use a concept called multi-tenancy where the software environment is shared across multiple companies. Work is eliminated (or greatly reduced) by this approach, allowing cloud providers to pass savings along to their customers in the form or reduced subscription costs. An effective cloud offering delivers value more efficiently by leveraging shared resources. Where do these savings come from? The provider performs work once in a central location that would normally be done by each individual company. Routine jobs such as creating backups and performance tuning are the responsibility of the vendor. In addition, keeping infrastructure software like database management systems (DBMS), operating systems (OS), and other 3 rd party software are done once for everyone. This reduces the burden on each individual company. Dedicated, specialized resources shared across multiple businesses may also address these tasks more quickly, and may even do a better job than resource-constrained, internal IT resources. Cloud solutions offer immediate availability without any installation required, allowing companies to achieve desired benefits more rapidly. The company using the software has multiple benefits including little or no requirement to add overhead to support the system. Cloud solutions offer immediate availability without any installation required, allowing companies to achieve desired benefits more rapidly. Simply point a web browser at the right location and sign up. There is no need to acquire and provision new hardware or other IT infrastructure. There is no need to hire additional IT resources. Perhaps most refreshing to people in the line of business, there is no need to wait in the IT queue for attention from scarce resources. Some of these benefits can be replicated with other approaches like hosting, but unless the cost is removed from the overall system the customer will end up paying for it. 5 Tech-Clarity, Inc. 2012

6 Eliminate Non-Value Added Work In addition to centralizing work, there are quite a few activities that are simply not required in a cloud environment. For example, vendors traditionally have to design, code, and test their software on the various infrastructure options their customers operate. They must ensure compatibility with multiple database management solutions, hardware, and operating systems. In addition the often have to support multiple releases of the DBMS and OS software, and combinations of each. Because the cloud provider controls the infrastructure, they can build the solution for their specific environment and eliminate the need to develop and test against alternate infrastructure options. Much of the low value work of developing and maintaining systems is simply not necessary because it s handled by the vendor for all customers. In addition, because the cloud provider executes the new versions of the software for everyone, they eliminate the need to create, test, package, and deliver software patches, hotfixes, and installers. They also eliminate the need to produce documented installation and upgrade procedures for clients and the translation of these documents into multiple languages. In fact, there is no work involved in upgrading to the newest release of the PLM software because it is done once for all customers. Much of the low value work of developing and maintaining systems is simply not necessary because it s handled by the vendor for all customers. Take Advantage of Cloud Level Systems Performance In addition to cost reduction, companies using cloud solutions have an opportunity to leverage cloud-level performance for their systems. As mentioned earlier, companies save money by leveraging shared resources. They can also access more highly specialized resources that they could not justify for their own business. These experts are skilled at delivering high performance computing in a global, cloud environment. This can improve performance and open up more opportunities than a single company can offer. For example, a cloud service provider can offer greater compatibility with a broader selection of end user computing devices on a global basis. They can also afford dedicated resources to ensure backup and recovery, where an individual in a smaller company would likely have this as one of many different tasks. The cloud model allows companies to achieve a higher level of computing capability than they could on their own. Another example of leveraging highly skilled, specialized resources is security. Cloud providers base their business success on providing security and uptime. They can afford top-notch experts (some of whose salaries might rival the executives in a small 6 Tech-Clarity, Inc. 2012

7 manufacturing firm) because they are leveraging these resources across multiple companies. The cloud model allows companies to achieve a higher level of computing capability than they could on their own. Of course it s also important to remember that many companies implementing PLM are probably replacing s, documents, and spreadsheets and most cloud solutions offer a big step up from that IT infrastructure. A hidden advantage of using shared services is that it is far easier to hold the provider accountable for performance when they control the infrastructure. Because the solution is standard and runs on the vendor-approved cloud, it is clear that the vendor is responsible if it isn t performing. And for the vendor, they are much more likely to be able to fix it rapidly because they are intimately familiar with the environment. Enhance Flexibility and Agility, Reduce Business Risk Cloud offerings are also easier and faster to implement and scale up. It is easy to add users and new sites more quickly to be responsive to business needs. More users should just be increasing monthly subscription cost, without worrying about commissioning new hardware or going over some hosting threshold that requires new infrastructure investments. Because of techniques like server virtualization, cloud providers typically have excess capacity that is ready to be used on demand. Cloud solutions are easier to embark on and offer lower business risk because they require no capital expenditures, no depreciation, and lower sunk costs. Cloud solutions are easier to embark on and offer lower business risk because they require no capital expenditures, no depreciation, and lower sunk costs. For example, a service offering is typically easier and faster to get a budget approved and start a project. For one thing, it is typically not a capital budget line item. Cloud models are also easier to pilot. The barrier to entry is much lower. So is the cost of failure. Companies can simply turn on the solution and experiment with it, and if they learn that the solution doesn t meet their needs they can simply turn off the subscription. That failure is easier to see as a valuable learning experience when the cost of entry and the cost of abandonment are so low. It is also easy to set up new subsets of information, known as tenants, for different purposes. This can be very useful when setting up a virtual organization such as a joint venture or skunkworks project. In this case, companies can take advantage of using the same solution but be assured that technical resources don t have access to the data in the primary instances. Cloud solutions can help companies take advantage of business opportunities quickly without waiting for availability from IT. 7 Tech-Clarity, Inc. 2012

8 Cloud solutions can help companies take advantage of business opportunities quickly without waiting for availability from IT or concerns about data leakage. It also allows them to scale the instance up as needed, for example if a business venture becomes wildly successful. If the team scales, the company can simply add new users. And if the opposite happens and the team shrinks or the project is over, companies can simply turn off the subscription without the need to keep maintaining underworked servers or pay for software licenses that are going unused. Final Considerations Cloud solutions offer other benefits as well. In a traditional environment, a new release is released every year or two bringing large changes at once. Each takes a significant effort to implement so companies typically skip a release to avoid the upgrade effort. This is understandable because of the disruption, but it also means they are running an older version with less functionality. In the cloud environment, on the other hand, new functions come online as they are available. This allows companies to absorb the changes incrementally over time instead of having to relearn an entire system. In fact, many companies get so far behind in upgrades and make so many customizations that every upgrade is really a re-implementation as opposed to an adopt as you go approach. In the cloud environment new functions come online as they are available. Another benefit of cloud solutions is ready access. Because it is available via the Internet, everyone can be granted access regardless of physical location or corporate boundaries. There is no special VPN software or network configuration required. Nor are special devices required. In fact, many cloud solutions are built to run on the booming number of non-traditional devices that can run a browser (although the browser is not the only requirement, as discussed in Tech-Clarity s PLM Goes Mobile). A couple of final considerations include data ownership and integration. Make sure you can get your data out when you want it. Look for APIs but also a way to dump the data if you desire. No cloud provider should hold your data hostage. This is a contractual issue as well as a technical issue. Also, ensure you can integrate the system to other enterprise systems should you desire. Look for a well thought out API strategy. Due to the popularity of enterprise cloud systems, there is a robust ecosystem of solutions available to integrate web applications into existing enterprise applications like ERP suites including SAP. Fortunately, the ecosystem is mature due to Salesforce.com and other cloud solutions, but ensure your vendor has done the work on their end to make their solution open to integration. 8 Tech-Clarity, Inc. 2012

9 Conclusion Cloud PLM is becoming a reality. The opportunity to save money by leveraging shared resources and eliminating duplicate work is compelling. At the same time, subscription models increase business agility, reduce risk, and provide a more predictable spend based on users. In addition, cloud companies can help improve performance by leveraging dedicated specialists for complex tasks like infrastructure maintenance, performance, and security. The opportunity to save money by leveraging shared resources and eliminating duplicate work is compelling. It s important not to forget about the benefits that solution offers in addition to recognizing the lower investment. Implementing cloud solutions wouldn t make sense if the company doesn t expect to improve their business and get a return on the investment. But how long will they have to wait for their return? One of the compelling things about a cloud offering is faster time to benefit. Cloud solutions are faster to implement and therefore provide returns more rapidly, and costs are more aligned with actual usage. Recommendations Based on industry experience and research for this report, Tech-Clarity offers the following recommendations: Take advantage of lessons learned in more established cloud-based enterprise applications Understand the benefits available from cloud solutions Understand what is required from solutions and vendor business models to provide cloud benefits in a sustainable way Don t assume everyone s cloud solution meets the requirements or provides the same benefits Ask questions and check to make sure you are comparing apples to apples with cloud solutions Consider security, availability, data ownership, and integration approaches to ensure benefits are achieved without unnecessary risk but also realize you are likely replacing low maturity solutions like spreadsheets, documents, and e- mail Don t forget about the primary objective achieving PLM benefits. PLM offers tangible, bottom-line business improvements you should expect from any PLM provider. 9 Tech-Clarity, Inc. 2012

10 About the Author Jim Brown is the President of Tech-Clarity, an independent research and consulting firm that specializes in analyzing the true business value of software technology and services. Jim has over 20 years of experience in software for the manufacturing industries, with a broad background including roles in industry, management consulting, the software industry, and research. His experience spans enterprise applications including PLM, ERP, quality management, service, manufacturing, and others. Jim is passionate about improving product innovation, product development, and engineering performance through the use of software technology and social computing techniques. Jim is an experienced researcher, author, and public speaker and enjoys the opportunity to speak at conferences or anywhere that he can engage with people that are passionate about improving business performance through software technology. Jim can be reached at You can follow Jim on Twitter you can read his blog at or you can find Tech-Clarity on Facebook. 10 Tech-Clarity, Inc. 2012

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