Jim Brown

Research Rap: TCO for PLM Implementations
July 2, 2008

A quick peek into some research on ... the TCO (Total Cost of Ownership) of implementing and maintaining PLM applications shows that - like their enterprise system cousins - a big cost is in the people element. This is counter to the view that many have when they approach an implementation, where they frequently look at the cost of acquiring the software and/or hardware as the primary cost driver. If they make their decisions (and set their budgets) based on only that small portion of the total cost, they may be in for a big surprise.
NOTE: I am looking for some more information here, so if you are willing to share some research or your personal experience please let me know at jim.brown@tech-clarity.com.

What the Experts Say
I have been reviewing some industry analyst reports from a few of the leading analysts on behalf of one of my clients. Just a few tidbits from the background to give you an idea.

• Gartner Group reports "Manufacturers should accurately determine whether their PLM deployment will require substantial process changes or streamlining existing processes by analyzing the need for business improvement. This will be the most fundamental influence on the cost of PLM deployment."
• AMR Research determined that on average only 28% of a PLM implementation budget was for applications - and that was just for the implementation budget

My Thoughts
I have not done as extensive research as Gartner nor AMR. But time and time again I see people focusing on the wrong costs. Some people are lured into the trap of low-cost software, only to find it doesn't meet their needs. The total cost of ownership for a low-cost software option can easily exceed the TCO of more expensive solutions if it does not have the required functional capabilities, is difficult to use, is hard to integrate, or (worst) is not embraced by the user community.

Many companies face a decision on whether to spend more on an application. They should ask that question, of course, but not in isolation. The need to look at the full TCO. Don't get me wrong, there are some great low-cost solutions on the market. Aras recently took their solution open source. SaaS (software as a service) options like Arena Solutions can offer a low cost of entry. And many companies may already have a relationship with their ERP vendor that allows them to get heavily discounted seats to their PLM offerings. These are all offerings that are worthy of review, but in the full context of how your organization will implement, integrate, train, and support the users and the technology over time.

So that was a quick peek into some recent research on TCO for PLM, I hope you found it interesting. I realize the research content is a little light, but I hope sharing a couple of perspectives was helpful. Does the research reflect reality? Do you see it differently? Let us know what it looks like from your perspective.

Posted by Jim Brown on July 2, 2008 | Comments (0)