Who Pays for PLM?

Who Pays for PLM?

March 20 Post Image

Companies continuously face tough decisions when it comes to enterprise technology investments, should they relate to Enterprise Resource Planning (ERP) or Product Lifecycle Management (PLM) solutions. In practical terms, “PLM is the enabling platform for product engineering and innovation“. Funding these enterprise initiatives and their continuous delivery activities is often challenging due to conflicting expectations and priorities across multiple stakeholders. Successfully implementing enterprise change assumes converging multiple requirements and negotiating expectation tradeoffs.

Typically, PLM investments deliver greater financial and strategic impacts than comparable ERP investments; perhaps more importantly, PLM investments deliver competitive advantage in a way that ERP cannot approach.

Why Investing in PLM?

While technology platforms bring unique value to an organization, deciding which one is realistically the best investment to prioritized – against what scope and what timeframe – can have dramatic impact on return on investment (ROI). Broadly speaking, prioritizing PLM investments upstream will lead to more effective ERP “engine” downstream, while the reverse might lead to lean ERP operations with unreliable, incomplete or inaccurate core PLM data (aka “garbage in, garbage out” scenario which can spiral into deployment or support issues).

Who Benefits from PLM Investments?

Asking “who pays for PLM” often relates to asking “who benefits from PLM” and “how to fund PLM“. However, there is not always a clear causality between these questions as PLM is sometimes perceived as a ‘necessary evil’ to deliver production-ready data to the wider enterprise.

PLM investment decisions go beyond dollar-for-dollar return as the platform is essential to an enterprise in its entirety.

For instance, PLM is considered as an enabling platform that Engineers must use to complete their work, without recognizing or appreciating clearly that it should help them work more effectively and become better and better at what they do.

Types of Investments

As for most cross-functional initiatives, the enterprise is to fund the PLM foundation and spread the investment across the relevant functions or user programs. Simply put, the cost of PLM (as a holistic solution) spreads across three main categories:

  1. Implementation investment (BUILD): from technology and supplier selection, implementation and preparation of the solution (people-process-technology readiness); this includes setting up the infrastructure, building the selected tools and technologies through configuration and customization, testing the solution, validating the new processes, preparing the data migration and interface procedures and tools, preparing the transition and aligning people elements
  2. Deployment investment (EXECUTE): this includes interfacing with the business, training end users, running the transition, facilitating business adoption, performing data extraction from legacy, deploying the relevant interfaces on the selected infrastructure (including cloud hosted options)
  3. Support investment (MAINTAIN): this includes capturing knowledge and capitalizing on PLM implementation and following from deployment investments, preparing day-to-day usage continuous improvements and maintaining future evolution roadmaps

Typically, PLM implementation investments are difficult to justify and requires robust business case creation supported by experienced implementation practitioners (rather than your typical management consultants!). The implementation budget should be owned and managed by the enterprise (across functions) and considered as a “sunk cost” to deliver the foundation of enabling platform across the entire value chain.

Adoption Challenges and Incentives

Subsequently, some organizations might decide to distribute deployment and support running costs across the impacted business functions; this needs to be done carefully in order to avoid certain associated challenges; e.g. asking for project teams or functional teams to “pay” for on-demand PLM usage with cross-charging models that might be perceived as a “usage tax” and therefore put off the business from using (and therefore) adopting the solution.

These situations might encourage teams to work outside of PLM and only use the solution to release or publish data, or limiting access to few “PLM users” to do the “admin job” of checking data in and out for the rest of the team, therefore implying sub-optimal operations, creating new ‘hidden factories‘ outside the enterprise platform, leading to data duplication, uncontrolled processes and data, and other inefficiencies which in turn will affect concurrent engineering and collaboration effectiveness, data reuse, early error identification, quality, adherence to process, etc.

When considering PLM on-going deployment and support cost distribution, it is important to link usage to continuous business benefit realization and incentivize value enablement, instead of simply considering quantitative measures which relate to business consumptions or usage cost (such as number of users).

Towards Benefit-Driven “PLM-as-a-Service”

Recent trends with the move toward “Everything-as-a-Service” supports the fact that cloud solutions can lower barriers to PLM technology adoption. This does not contradict the above, but rather suggests that service models must not simply be understood as “cost models”. Enterprises should instead consider “PLM-as-a-Service” with holistic views on what – and where – benefits are to be realized so that “the right users can access the right data at the right time, from the right source, at the right location, for the right purpose… and at the right price (cost)!“.

Although cloud PLM can address opportunities and problems that traditional IT models cannot, it is only effective for PLM if it helps meet business goals.

The potential benefits, cloud types and services should be carefully evaluated within the context of PLM business processes, partners, IT resources, performance requirements, security needs, enterprise application interoperability, and infrastructure.

What are your thoughts?

#ERP #PLM
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