Down Economy Shows PLM Licensing Must Change

By Peter Schroer

In 2008 the world changed. The credit crisis and financial industry meltdown plunged the global economy into recession. Pervasive corporate uncertainty has forced companies to take dramatic measures across the board and engineering IT is faced with a stark new reality: Do more with less,  starting immediately.

CIO magazine’s IT Budget & Staffing survey in October revealed that 74 percent of IT executives plan to reduce spending or freeze budgets in 2009. That’s up from 37 percent just six months earlier. Technology purchases are being delayed and existing contracts are being renegotiated. Unlike other areas however, engineering cannot simply put product development initiatives on hold. Nor can engineering IT fail to deliver on the automation projects that enable companies large and small to bring new products to market to generate revenue to make it through the downturn. These conditions present an unprecedented challenge for engineers around the world. Namely, how to contain technology costs without strangling new product development.

  Engineering collaboration and process improvement remain absolutely essential as cross-functional product teams strive to work more efficiently in an environment that includes international supply chain partners. For the past decade companies have turned to enterprise PLM solutions to satisfy these requirements, but at a cost. The licensing schemes of these systems are complex and costly, requiring a company to purchase different modules and servers along with end-user licenses for each user.

  As a PLM system rollout expands beyond design and engineering to include participants throughout the organization, the licensing expenses become prohibitive. The price tag to provide everyone in a company with access to essential product data ranges from several hundred thousand dollars for midsized organizations to multimillions for larger enterprises. Economic circumstances for the foreseeable future make the capital outlay for broad enterprise PLM system access unrealistic just when global product development collaboration is needed most.

  To remain competitive, manufacturers need PLM licensing that enables users across the company and the supply chain to securely access product information and PLM functionality without incurring runaway expenses. Smart companies are using proven strategies like enterprise open source in new ways because of the business advantages inherent in the licensing format.

  The enterprise open-source structure removes the upfront capital expense for licenses, enables companies to prove solutions before committing, and allows for unlimited users without incremental costs. The benefits are clear: elimination of expense risk, high-quality enterprise-class support and services, assured business value, and a predictable, fixed-cost structure.

  The enterprise open-source format also means that companies have options. A business can either migrate to a corporate PLM environment entirely, or integrate with an existing system to extend PLM to more people. For example, a leading global electronics provider is using open source integrated with a legacy PDM system to provide online workflows to thousands of users around the world without the named user license expense. Their approach leverages previous investments, contains costs, and expands functionality and access.

  The conventional PLM user-licensing schemes are holding companies hostage by forcing exorbitant expenses upfront, compelling the customer to assume all the risk. Corporate competitiveness is being crippled at companies of all sizes because of these inequitable licensing policies. In this era of economic uncertainty, engineering business leaders will have to challenge the assumptions of the past in order to deliver results. What companies really need is freedom from licensing.

Peter Schroer is president of Aras Corporation. Send e-mail about this commentary to [email protected].