Last year's record investment in product lifecycle management (PLM) is this year's systems integration challenge. The evidence: In 2006 manufacturers seeking business integration benefits spent a record $20.1 billion for PLM solutions, an unexpected gain of 10.4%, according to analyst firm CIMdata.
The strong showing is expected to continue as manufacturers rush to gain competitive advantage through building and integrating a PLM product information backbone throughout their business processes. PLM investments are forecast to continue their climb over the next five years, increasing at a compound annual growth rate of approximately 8.5% to exceed an estimated $30 billion by 2011 (see chart below).
The attraction is PLM's prowess in supporting the collaborative creation, management, dissemination and use of product definition information across the extended enterprise. That strength, however, is easily jeopardized by improperly integrating the systems that make up a PLM implementation, cautions Ed Miller, president of CIMdata.
His point: PLM is not just a set of technologies, but a strategic business approach that integrates people, processes, business systems and information. "PLM success requires the implementation strategy to focus on optimizing the business process. As newly developed niche technologies expand the PLM footprint, implementers must remember that the goal is not technology optimization, but use of the technology to optimize the business process."
For example, customers of UGS Corp. typically use PLM to help optimize as many as eight key business initiatives, says Bill Boswell, senior director, Teamcenter product marketing. They include new product development, value chain synchronization, enterprise data management, commonization and reuse, knowledge and IP management, regulatory compliance, production efficiency and systems engineering and mechatronics.
Miller says the ongoing proliferation of niche PLM technologies continues to spur the growth of service-oriented architectures (SOA) in an effort to help make systems integration easier. "SOA is essentially a way of componentizing solutions so that they can be more easily integrated with other solutions." A recent survey by Evans Data Corp. reveals that enterprise SOA adoption is expected to double over the next two years. In that survey, close to a quarter of enterprise-level developers indicate that they already have SOA in place, and another 28% plan to do so within the next 24 months.
The vendor count for CIMdata's PLM surveys now exceeds 300 companies. "While consolidation at the very high end is evident, the total number of PLM technology providers continues to grow," Miller notes. For 2006, Miller counts 11 systems integrators with revenues exceeding $100 million, with IBM leading at $500 million.
CIMdata segments the overall PLM market into two primary sub-sectors: PLM information authoring and analysis applications (tools), and collaborative Product Definition management (cPDm). Historically, the tools sector has received the largest amount of investment, although growth of that sector has consistently been slower than that for cPDm. However, industry investments in tools were above forecasts in 2006.
CIMdata reports $13.2 billion was spent in 2006 by companies worldwide on PLM tools, such as mechanical computer-aided design (MCAD), computer-aided manufacturing, electronic design automation (EDA), engineering simulation and analysis and technical publishing. Growth in this sector was primarily driven by investments in EDA (up 11.9%) and mid-range MCAD (up 11%). Areas such as high-end MCAD and simulation and analysis experienced relatively lower growth. The tools portion of the PLM market is forecast to grow at a CAGR of 5.3% over the next five years to reach $17.1 billion by 2011, says Miller.