Defining the PLM Magic Quadrant by Criteria and Use. We provide the methodology used in developing our product life cycle management Magic Quadrant.

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1 Markets, M. Halpern Research Note 18 March 2003 Defining the PLM Magic Quadrant by Criteria and Use We provide the methodology used in developing our product life cycle management Magic Quadrant. Core Topic ERP II, Supply Chain & Manufacturing: Engineering and Manufacturing - Strategies, Applications and Technologies Key Issues How will plant operations and engineering vendors and markets evolve? How will successful enterprises select, deploy and manage plant operations and engineering solutions to minimize risk and achieve optimum ROI? The product life cycle management (PLM) Magic Quadrant graphically represents Gartner's assessments of the software vendors that have or will have the greatest effect on that market, based on our assessment of their PLM vision and ability to execute. These two metrics are plotted on the x and y axes, respectively. Completeness of Vision: This axis refers to a vendor's understanding of emerging PLM needs and market trends and how well the vendor is preparing to fulfill those needs. Ability to Execute: This axis refers to a vendor's current viability and performance in the PLM market. Included in this metric is development and support resource availability, delivery of applications and enhancements, software functionality, application architecture, customer satisfaction and financial performance. Gartner uses vendor briefings, vendor-specific inquiries, financial reports and analyses, and user feedback to make its judgments. Scoring on completeness of vision and ability to execute places a PLM vendor in one of four quadrants: Leaders: Leaders score well on both completeness of vision and ability to execute. These vendors have a significant presence in the PLM market, with good prospects for the future. Visionaries: Visionaries have a clear understanding of where the PLM market is going. However, they do not yet execute consistently. Challengers: Challengers execute well in a subsector of the PLM market and have the capacity to become leaders. However, their future performance in the PLM market is at risk unless they refocus their priorities to address PLM market directions. Gartner Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice.

2 Niche Players: These vendors either do well in a subsector of the market or are unable to innovate or outperform other vendors in the market. Enterprises should use the Magic Quadrant as one indicator of a vendor's current and expected performance when planning PLM strategy directions and commitments. Requirements for Inclusion on the PLM Magic Quadrant As a software market, PLM serves a subset of the needs of PLM as a business process. As a business process, PLM helps enterprises achieve the greatest return on investment (ROI) in products. It spans activities related to strategic business planning, marketing, engineering, production, product introduction, sales, financial tracking, services and support. Almost all of the business applications Gartner covers contribute to the business process of PLM. PLM focuses on supporting and guiding the activities that create and evolve a product definition throughout a product's life. PLM applications also enable enterprises to leverage a product definition to support PLM as a business process. Table 1 summarizes the scope of these product-related activities and the software functionality that PLM vendors support. 18 March

3 Table 1 Product-Related Activities and Functions Supported by PLM Vendors PLM Activity Focus PLM Functionality Needs Strategize Plan Manage Execute Foundation Portfolios, products, variants, services Phases, gates, people, multi-project programs, budgets, product definition Portfolios, projects, product data, tasks, acquired product/process knowledge Design, engineering, manufacturing process planning, service, maintenance Align goals and processes from executive levels to operational levels, communication, workflow support, collaboration Product portfolio management Product requirements management Cost tracking and analysis Resource management Project and program management Product data management Workflow management Document management Product knowledge capture and re-use Manufacturing process planning and management Integration with design creation, validation, and documentation tools Visualization Collaboration enablers Product data exchange support Source: Gartner Research (March 2003) A vendor must have or be creating an environment that brings together at least a subset of the functionality summarized by Table 1 in a coherent framework through its own development or through committed partnerships. It is not sufficient to build interfaces to disparate applications and call the result a PLM framework. Coherent means that the PLM applications organize the functionality in a logically consistent way, making PLM tasks and workflow easy to follow. The framework should make data sharing across the functions as transparent as possible. Although the framework should be coherent, it should also provide sufficient flexibility to customize the software environment to support the unique needs of specific industries and businesses. Vendors included in the PLM Magic Quadrant provide users with the best opportunity to buy software and services that help them support at least a subset of the needs below: Defining and developing products and product portfolios with the greatest potential to open new markets and expand established ones Monitoring the status of a product definition, its subsystems, its parts and related product information at any stage of a 18 March

4 product's life, including design, production, service and retirement Tracking the assignment of resources and the status of tasks relevant to developing a product definition throughout all stages of a product's life Tracking the performance of activities (such as comparing to budget and schedule) used to develop a product definition throughout its life Supporting decision making that affects how products evolve this support includes locating and analyzing relevant information about a product definition and the processes used to create it, such as its conception, design and production planning Streamlining the use of a product definition to produce, service, improve and expand product families Streamlining the capture and reuse of product-related experience and lessons learned to continuously improve products and execute life cycle activities The PLM Magic Quadrant includes those vendors that meet the criteria described here and those that Gartner believes will have the greatest effect on shaping the PLM market through To be included on this quadrant, vendors must meet at least one of the following criteria: At least $50 million in PLM software revenue At least 50 customers Innovation on PLM practice in ways that will have a significant effect on the PLM market A significant amount of end-user inquiry on the vendor Four major criteria determine placement along the Completeness of Vision and Ability to Execute axes: viability, features and functionality, service and support, and technology. Evaluating Completeness of Vision Completeness of vision measures how well a vendor's business direction, growth plans and expected delivery of applications align with Gartner's view of PLM market needs and software functionality. It suggests how well a vendor will perform in the future. Table 2 summarizes how Gartner applies the four criteria to evaluate a vendor's completeness of vision score. 18 March

5 Table 2 Completeness of Vision Criteria and Their Descriptions Criterion Viability Features and Functionality Services and Support Technology Description PLM business strategy aligns with PLM market directions and priorities Management understands and correctly addresses PLM market conditions and the economic climate Software packaging and pricing keeps pace with market trends The vendor consistently identifies new applications and services that increase PLM revenue generation The vendor is astute at identifying complementary vendors for partnership or acquisition The scope of PLM functionality fits the vendor's business model The vendor understands the priorities of PLM functionality The vendor is astute at identifying new applications and services increase new PLM revenue generation The vendor is astute at identifying complementary vendors for partnership or acquisition The vendor's approach is to decrease cost and time to deployment and upgrades The vendor is innovative in education and training The vendor has developed methods to decrease time to response and increase the quality of response to customer inquiries and requests for support The vendor delivers industry-specific support The vendor has developed partnerships with third parties for service and support The vendor is able to identify and adopt IT trends that enhance PLM application functionality and performance Source: Gartner Research (March 2003) Vision presented does not carry as much weight as vision executed. Therefore, Gartner adjusts its scoring of completeness of vision against vendors' actual deployment of services and software and the rate of customer adoption. 18 March

6 Evaluating Ability to Execute Ability to execute measures a vendor's ability to fulfill a customer's needs and perform well as a business. It is Gartner's judgment that a vendor will deliver PLM value and protect its customers' investments. Three major factors weigh on vendors' ability to execute. Current Market Presence: This is an indicator of past performance. Vendors with greater market share typically have more lead time to adjust to changing market conditions, which is an advantage. However, the greater legacy of customers and customer data usually reduces the speed at which they can accommodate new requirements, which is a disadvantage. Current Business Performance: This is a lagging indicator of a vendor's past vision. Vendors that are performing well usually executed well on vision in the past. Strong current business performance suggests that a vendor will continue to perform well, but does not guarantee it. The ability to address changing business climates and markets will determine its ongoing performance. Motivation to Execute: Vendor with a mission dedicated to PLM (that is, their business depends on it) will be more motivated to execute than broad-based vendors that support PLM applications as one of the many classes of applications they support. Table 3 brings these factors together with the four major criteria used to evaluate vendors. 18 March

7 Table 3 Ability to Execute Criteria and Their Descriptions Criterion Viability Features and Functionality Service and Support Technology Description Size and loyalty of customer base Business performance Extent of customer adoption as a strategic PLM partner Financial resources Extent and performance of development and support resources Dedication to PLM Competitive application pricing Availability of PLM functionality packaged in commercial applications Proven ability to continuously introduce new PLM functionality Application packaging that enables short time to value Application packaging that phased PLM deployment Proven ability to address vertical industry needs Customer validation of functionality value Statistically significant validation of customer satisfaction Extent of sales, service and support resources, including third parties Knowledge of vertical industry priorities and processes Availability of self-service, support and troubleshooting capabilities Wide knowledge of the vendor's development platform among an extended developer/consultant community Flexibility of PLM applications for customization Scalability of application performance Extensibility of software architecture to fulfill expanding PLM needs Extensive ability to interface with external applications Source: Gartner Research (March 2003) Using the PLM Magic Quadrant for Vendor Selection When using the PLM Magic Quadrant for vendor selection, users should first consider: Their vendor's culture, attitudes and policies toward IT adoption 18 March

8 Requirements to perform and compete in their respective vertical industries The nature and scope of the business problems they will adopt software to address These factors determine the type of vendor selected, because the leaders are not necessarily the best choice for every business situation. Leaders are typically best suited for enterprises that want to take moderate IT risk (Type B enterprises). These enterprises want to improve productivity, but do not necessarily need cutting-edge functionality. In addition, a large investment may warrant a cautious approach that makes a vendor with proven ability to execute the optimal choice. Enterprises that require competitive advantage in highly competitive industries may want to take greater risks with leading-edge or specialized software capabilities. They might consider a visionary or niche vendor. Although the risks are higher, visionary and niche vendors typically give more specialized attention and service to their clients as they strive to build their reputations and market share. Sometimes it makes sense for a large, conservative enterprise to adopt a visionary or niche vendor to serve focused departmental needs across the enterprise and adopt a leader (or visionary with strong ability to execute) for its PLM backbone. Challengers may best serve companies in slow-moving industries with little opportunity to change the nature of competition. These enterprises are typically risk averse, and challengers usually deliver reliable, proven software at a low cost. Because challengers have a strong ability to execute and often a narrower focus than visionaries or leaders, they can be good candidates to serve focused needs across an enterprise, even in competitive industries. Gartner's PLM Magic Quadrant summarizes our analysis of the vendors that will have the greatest effect on the product life cycle management market. The vendors in this Magic Quadrant focus mostly on creating and managing the evolution of a product definition throughout the product's life cycle. Bottom Line: The product life cycle management (PLM) Magic Quadrant serves as one input for selecting vendors or assessing the ongoing prospects of an established vendor. However, the rules for using the Magic Quadrant for making IT strategy decisions are not always obvious, because the use of the Magic Quadrant depends on specific business needs and Magic Quadrants do not exhaustively reflect functionality that serves all industries. Gartner clients should use this Magic Quadrant as one input to help develop an overall IT strategy for PLM. Gartner 18 March

9 clients that need to learn more about differences among the vendors should search gartner.com for more in-depth research or schedule inquiries with appropriate analysts. 18 March