Navigating tough technical terrain is something engineers at Santa Cruz Bicycles are quite familiar with. After all, they spend their days innovating designs of high-end mountain bikes. But while company employees enjoy bumps and twists on mountain biking trails, it was not what they wanted when it came time to implement a system intended to streamline product development. With only a handful of IT experts on staff, the $20 million bike manufacturer wanted something that would deliver not only results, but also a smooth ride.
The long-time PTC customer and CAD shop got its wish last November when PTC (Needham, MA) rolled out a hosted version of its Windchill product lifecycle management (PLM) and collaboration platform. Now, instead of having to license complex PLM software and invest in the servers and networking equipment needed to run the enterprise application in-house, Santa Cruz Bicycles offloads the operation, support and maintenance of Windchill to IBM, PTC's partner for the new On Demand version of Windchill, all for about a hundred dollars per user, per month.
"We didn't have a PLM system prior to this on-demand offering, mostly because of cost -- we weren't large enough to warrant one," says David Earle, director of engineering for Santa Cruz Bicycles (Santa Cruz, CA). "Going this route saves money upfront ... it makes [PLM] possible. Otherwise, it would have been pretty tough to get everyone pointed in that direction."
A lot of small- and mid-size manufacturers feel that way. These companies are well aware of the cost savings and time-to-market efficiencies that PLM can deliver as a result of making consistent product-related data accessible throughout a supply chain and avoiding the lapses and cost overruns associated with bad designs, supply problems and manufacturing breakdowns from poor communication. Yet they've shied away from the technology, mostly due to concerns about the size of the hardware, software and services investment required for PLM. These companies, most of which have minimal IT support, are also gun-shy about PLM because they lack the resources and internal expertise to orchestrate and maintain an enterprise application of this scale.
OFFERING SMORGASBORD
The tide is turning, however, thanks to advances in Internet security and network performance as well as a maturation of the hosting model, which has become more cost-effective. Leading PLM vendors, such as UGS Corp. (Plano, TX), PTC and Agile Software Corp. (San Jose, CA), have leveraged the technology improvements to deliver scaled-down and hosted flavors of their PLM offerings that are right-sized for smaller manufacturers. Their timing couldn't be better. According to AMR Research Inc. (Boston), companies with annual revenues of less than $1 billion will have invested more than $5 billion in PLM by 2008.
"These players are desperately seeking ways to attack small- and mid-size companies with offerings they can swallow," says Ed Miller, president of CIMdata Inc. (Ann Arbor, MI), a market research firm specializing in product development issues. "Many companies don't have the internal technology infrastructure to support PLM, or they won't allow themselves to spend money upfront. These offerings make it easier to get going."
Easier, maybe, but still not a piece of cake. Miller says that while the new breed of hosted applications let companies get up and running quickly on PLM without having to lay out big bucks, there are still tricky challenges to navigate. Take, for example, the issue of changing business processes to support the new ways of collaborating and sharing product-related data among different functional areas internally, and externally, with suppliers and partners. "Smaller companies will still have all the challenges of process change," Miller says. "Rather than walking in the door with the mantra of process change first, these approaches have the mantra of 'we'll support your processes today, but once [PLM] is in place, we'll go about process change to take advantage of it tomorrow.'"
Sensing that the market is ripe, the leading vendors of traditional PLM solutions have jumped on the hosted application bandwagon. In November PTC teamed up with IBM to offer a hosted version of Windchill, available through IBM's Boulder, CO, On Demand service center. UGS in February partnered with AutoWeb Communications Inc. (Rochester Hills, MI), a leader in data exchange in the automotive industry. The pair is offering a hosted version of UGS' Teamcenter product data management (PDM) and collaboration platform, and JT 3D, UGS' open, lightweight data sharing and visualization format, to the automotive sector. UGS officials say they're evaluating offering hosted versions of their PLM suite to other industries also.
Agile Software, in October, announced Agile Advantage 2005, a scaled-down version of its PLM suite specifically architected for small- and mid-size businesses. In January, Agile followed up with Agile On Demand PLM Small Business Startup Pack, a version of Agile Advantage available on a hosted basis for free, for up to eight licenses. The Small Business Startup Pack can be augmented with additional users for fee-based, add-on licenses.
Why all this activity in hosted PLM? It's partly because the tools have become more appealing to smaller manufacturers and PLM vendors alike. Vendors can now offer hosted versions of their applications that share common resources such as servers and databases. This approach -- called multi-tenancy -- makes hosted offerings easier and cheaper for vendors, who can then offer hosted applications to customers for lower prices. "Previously, the [application service provider] model didn't work well because you couldn't get economies of scale -- it wasn't architected for multi-tenancy. You had to have one server for each client," explains Bryan Stolle, CEO of Agile. "Now you can be smarter about architecting solutions to get better economies of scale."
Vendors have also bolstered the security options for their hosted PLM solutions, providing sophisticated backup and redundancy functions that safeguard critical product-related data while allowing companies to establish multi-level access rights that limit who has access to information.
Also, smaller companies are now facing many of the same product development communication challenges as larger manufacturers, which, until now, have dominated the PLM space. "Now, even smaller companies have business models that are complex ... and diverse, global supply chains ... and that's driving demand to have more data management tools," explains Jay Muelhoefer, general manager of PTC's PLM On Demand product.
Arena Solutions Inc. (Menlo Park, CA), which pioneered hosted PLM in 2001, is not surprised by all this newfound competition. CEO Michael Topolovac has always maintained that a Web-based, hosted approach solves the PLM problem better than client/server enterprise systems. "In a client/server environment, local data is trapped behind a firewall, and it's difficult to communicate. With software as a service, there is one controlled, central environment on the Internet, and it's painless to invite your supply chain in," he says.
Arena is so convinced the hosted approach is the right fit for mid-size manufacturers that it's just released its new PLM Workgroup Edition, an entry-level version of its hosted solution designed for teams of five or fewer, at no charge for the first year. Topolovac sees the free package as a way to seed the market and whet companies' appetites for a full-blown PLM solution.
Aruba Networks Inc. (Sunnyvale, CA), a manufacturer of enterprise wireless security products, was starting out in a fast-growth industry when it opted for hosted Arena PLM two years ago. But the four people it had in manufacturing were already multi-tasking; they couldn't be responsible for setting up and administering a demanding PLM system.
"Arena allows us to have really good PLM tools without having to dedicate a lot of resources to get it up and running," says Yosh Sato, director of operations for the company.
If Aruba had opted for the traditional PLM route, it would have had to hire a specialist to oversee the implementation and invest significantly in employee training. With the Arena product, the setup is pretty "self explanatory," Sato says, and Aruba was able to get it up and running within a few days. Aruba also doesn't have to worry about IT infrastructure issues like backup and security. All of those requirements are handled on Arena's end as part of the hosting package.
Moreover, Sato sees having all the company's product data housed off site as an advantage. "In case the building has a fire ... you want some kind of off-site storage, and we don't have to deal with backup," he says. "To some degree, I think we have better processes than if we maintained the system in-house."