CIMdata Upgrade Research Results -- Is Obsolete PLM Software Killing Your Business?

CIMdata Upgrade Research Results -- Is Obsolete PLM Software Killing Your Business?

Yes, as the world becomes more digital, PLM obsolescence could be costing organizations hundreds of millions of dollars every year, impacting their top and bottom lines.

Takeaways

CIMdata Research Conclusion

CIMdata has published the results of their PLM Upgrade Research with a very clear-cut conclusion:

The results of this research show that the Aras PLM platform is easier to keep current than its competitors. Aras users upgrade more often, over a shorter duration, and at less cost than their competitors. Customizations, a critical area inhibiting upgrades are a significantly smaller problem for Aras customers than for those of their competitors.”

To be future-ready, you cannot be stuck running legacy PLM software, which is the case for most of our major competitors as shown in the chart below.

By contrast, the reason Aras keeps our customers current is that Aras was architected, from its inception, with customization in mind, and this is why Aras performs our customers’ upgrades as part of the subscription. Unlike our competitors, Aras sells one thing—the Aras Platform, Aras Innovator—so our business model is significantly different and more equitable. We only succeed when our customers expand.

This began to disrupt the PLM market several years ago when Aras started winning over marquee customers from the other PLM competitors, a trend which continues today.

While I don’t think the results of the survey surprise many industry veterans, I do think the significant and negative impact of PLM obsolescence on business is not well understood by many business leaders. This is what I’ll focus on.

The Value Gap

Last week, I interviewed Peter Bilello, the President and CEO of CIMdata, in our thought leadership webinar on their CIMdata Upgrade Research. Peter re-introduced the Value Gap, shown below, which I’m sharing from the eBook.

In short, as technology (green) becomes more pervasive, a company’s vision of what they want to achieve will grow (blue). But companies that are “followers” are unable to take advantage of this because their PLM software is not current, thus creating a value gap where the “value potential” is not met. The “leaders,” on the other hand, are current and take advantage of their increased capabilities to come closer to their vision.

  


Source: https://www.cimdata.com/en/resources/complimentary-reports-research/white-papers - scroll down to 2013

I would add that when you’re operating at a higher level in any endeavor, your vision will continue to rise as you incrementally add more capability and value, and continually meet incremental goals that become more and more achievable. This creates momentum and increases innovation, allowing the business to realize even more of a return on their investment. While notionally correct, I think the value gap between leaders and followers is far more dramatic than depicted in the chart and with Aras technology and vision, would show incremental steps upward every year or with every upgrade.

Reasons for PLM Obsolescence

You’ve likely heard the phrase, “If it ain’t broke, don’t fix it,” which, to be clear, is just an excuse. According to CIMdata, “A sustainable PLM solution is one that can meet current and future business requirements with an acceptable return on investment (ROI) via incremental enhancements and upgrades.” But as clearly shown in the research, many companies using our competitors' PLM software are not staying current. In my experience, there are five reasons PLM software is not upgraded:


Technically Impossible
Typically, after an arduous deployment and the necessary customization to meet the businesses current needs, the software is no longer capable of upgrading. As time goes on, this just get worse as architecture and schemas of the new versions change and you become stuck, unable to upgrade without a massive redeployment that includes expensive and time-consuming migration activities.

No ROI
If you take a year to upgrade and it costs close to a million dollars, the cost and impact to the business is so outrageous it can’t be justified. Now you have legacy which, in an earlier blog, I termed “Instant Legacy,“ typically with many integrations on your hands. This is a digital transformation killer and is the opposite of what PLM software is intended to do.

No Budget
Not having the budget is a real concern, but often the lack of budget is a mistake—a mis-prioritization of what’s important to your organization’s future growth, often combined with a high percentage of the overall budget being consumed by technical debt. A modern PLM platform, such as Aras, not only benefits your operational efficiency and provides your business with much needed resiliency, it can also reduce your technical debt by sunsetting legacy applications and incorporating them onto the platform, which we keep current. By reducing your legacy maintenance costs, this sustainable approach can save you millions to tens of millions and expands your digital thread across the enterprisetruly impacting your bottom-line.

We Spent a Gazillion Dollars and We’re Committed
The only thing worse than spending large amounts of money on the wrong thing is doubling down and spending more, expecting a better experience. The pandemic has accelerated the need to change, to expect transformation with less risk, less cost, and greater ROI that will lead to greater business resiliency. Throwing good money after bad is no longer being tolerated—there is more of a focus on the bottom-line and doing more with less. People that surround leaders of failed deployments or replace the person that was in charge are typically less committed to failing their business. As a society, we are becoming more connected, and in organizations, people expect that. We as consumers certainly do, so it’s no longer acceptable to stay stuck in the past.

When deciding to modernize PLM software, a process that often takes a year and costs around a million dollars, the cost benefit analysis is not likely to yield the ROI you’re looking for. A best practice is to do major upgrades every year, but if it takes you a year, you need to consider an alternative. If you’re not sure what to do, you can download Aras or run a small proof-of-concept (POC).

Leadership Doesn’t Understand Dependency of Digital Transformation on PLM
If your PLM system hasn’t been upgraded in years and isn’t the foundation for continuous digital transformation efforts, there is an absolute lack of understanding of how PLM can transform a business. CIMdata agrees, believing that “executive awareness of the dependency of digital transformation on PLM is lacking. This lack of understanding of its association to PLM-related investment and sustainability puts many digital transformation programs at risk of becoming yet another program of the month.”


However, in defense of leadership, if you keep going back to the well to ask for more money and can’t show continuous ROI, then it’s hard for any leader to invest and sponsor something that doesn’t impact their top and bottom-lines.

Regardless of the reasons why, you don’t stay current, the result is you’re clogging the arteries of your product ecosystem with disconnected obsolete technology that adds cost and becomes an impediment to any effort to adapt or transform your business.

Technical Debt

Large enterprises can spend as much as 80 percent of their IT budget on maintaining and operating legacy systems. And it’s not just the planned budget to maintain legacy, but also reacting when things go wrong, both adding IT cost and consuming your best IT resources. This directly impacts your bottom-line and is something that a current, resilient platform can reduce.

Cost of Keeping Your PLM Current

Per the CIMdata research, the costs to do an upgrade with our competitors averages between $732,000 and $1.25 million as shown in the chart below. That’s up to 27 times what it costs to do upgrades with Aras.



CIMdata’s research demonstrates that our competitors take between 11 to 14 months to execute as shown in their diagram below, which means you likely can’t justify keeping current because it takes so long to upgrade or re-deploy which, in my experience, is often the case.

This explains why, on average, our competitors are upgrading or redeploying every 8 to 12 years. There is simply no ROI that could justify this. The CIMdata survey goes on to show how customizations to our competitors inhibit their ability to upgrade.

If you can’t customize in order to optimize your processes and then regularly upgrade, there is no chance you’ll be able to adapt and compete with others who can.
And as bad as this seems, it’s only a drop in the bucket compared to the negative impact of technological obsolescence on IT and even more so on the business.

Ongoing Maintenance Costs – Trickle Down Dependency

From an IT perspective, the cost of ongoing maintenance goes up and up and up due to not staying current. This is known as “trickle down dependency.” In addition to spending more time and money on responding to a growing majority of disgruntled users, you spend more on resolving internal issues because of integrations breaking and other changes impacting your “stuck in time” legacy PLM software. You end up becoming dependent on your PLM vendor to support the unsupported. Ultimately, the vendor no longer supports your release while other software, such as browsers, begin to fail. For extra money, the vendor will support your legacy habit. And what choice do you have at that point?

You do have a choice—and that is to get off that software as soon as possible and onto a more sustainable platform technology that will not only drastically reduce your IT costs, but also improve your business profits and revenues.

Productivity

Recently, I wrote a blog entitled, ”Which PLM Vendor Keeps You Most Current?,” that focused on the results of the CIMdata research that Peter Bilello presented on Tuesday. There, I posed the question, “What does outdated technology cost?” The average user, loses about 40 minutes of productivity a day, which translates to $3,930 annually. (Ladder.com) If I assumed, 5,000 users, that would be $19,65M per year. If you’re taking more than 7 years to upgrade to average, your users are wasting approximately $140M over that period. And that’s just their individual productivity due to not staying current.

Collaborative Productivity

When someone using legacy PLM tells me they have 5,000 users, I compare that to how many possible employees could use it and what they do. Usually, they’re in engineering, focused on design—either new product introduction or requisition to order or both, working with CAD, managing parts, BOMs, basic change management, and integration to some number of ERPs. Finally, I ask if the user count has gone up or down over a period of years. In my experience, legacy PLM users don’t expand based on need, and high concentrations of them are in engineering doing PDM, not PLM. In fact, oftentimes the legacy system is so hard to use, much of the work is done outside it.

This is important because the example I used above is a group of 5,000 users staying stagnant over time. I haven’t factored in the rest of the enterprise and any collaborative productivity or efficiencies they’re missing due to their inability to collaborate and/or expand the use of the PLM software across the lifecycle.

Within seven years, a typical Aras customer would expand its users approximately 50% to 400% from the original 5,000 users. That’s also with fewer people in given functions due to the enhanced productivity they get with new capabilities provided to them with each upgrade.

Why do Aras users expand? They expand due to the proliferation of data and connectivity that obsolete technology can’t take advantage of to the same degree. Aras’ customers expand first, because all of the applications are included in the platform subscription, along with any newly released applications, and all on an inherent digital thread. If you want to expand your deployment in quality or to expand into digital twins, they already have applications, that expands the collaboration to other groups.

Aras users also expand because they use the Aras low-code platform to quickly develop applications and role-based interfaces to expand usage and collaboration to users that were previously using other unsustainable tools or less productive workarounds. This enables more and more users to be connected to their digital thread, which keeps expanding across the enterprise, dramatically increasing collaborative productivity.

As an example, here are two slides from Insitu’s presentation at the ACE conference entitled “Insitu’s Agile Approach to Transforming their Engineering.” This demonstrates how customers expand the use of Aras applications and re-build legacy applications on the platform. You’ll notice they began in 2011, but moved to an Agile approach in 2017. In case you’re wondering, there were 7 upgrades after their initial deployment.

Going back to our previous example of 5,000 users with individual productivity of $20M per year (2 hours a week). According to Forrester, collaborative productivity increases that by 10% a week or 4 more hours a week—double.

At 5,000 users, Aras’ users overall productivity is $60M per year ($20M in Individual Productivity + $40M in Collaborative Productivity).

But over time, the number of users expands. So, if we conservatively say we’re only going to double the users over seven years, we would be talking $648M in productivity alone as shown in the chart below. This doesn’t even consider the reduction of technical debt and the flexibility to increase the percentage of your IT budget to fund more digital transformation and innovation initiatives.

Years

 Users

Productivity

 

5,000

6,000

7,500

9,000

10,000

 

Deployment

 

 

 

 

 

 

Year 1

$60M

 

 

 

 

$60M

Year 2

 

$72M

 

 

 

$72M

Year 3

 

 

$90M

 

 

$90M

Year 4

 

 

$90M

 

 

$90M

Year 5

 

 

 

$108M

 

$108M

Year 6

 

 

 

$108M

 

$108M

Year 7

 

 

 

 

$120M

$120M

Total

 

 

 

 

 

$648M

This also doesn’t factor in the cost of subscription, deployment, and additional customizations, but I may have underestimated the six hours of productivity gained by upgrading every year with Aras. That’s already a 15% productivity increase. “By using social technologies, companies can raise the productivity of knowledge workers by 20 to 25 percent.”
(https://www.mckinsey.com/industries/technology-media-and-telecommunications/our-insights/the-social-economy)

Lost Opportunity Cost

This is the cost of a missed opportunity. What features does your business need that your legacy PLM software doesn’t provide? If you’re using legacy software, you’re missing many capabilities. One example might be: do you have digital twins in place—exact replicas of your assets in the field? Do you have the insights to make better data-driven decisions? Are you using this technology to build tighter relationships with customers—providing more value to them, and yourself, at less cost? Or is there a tremendous amount of swivel chair going on with little knowledge or ability to react to your customer’s needs?

According to CIMdata, a “US $20,000 investment has the opportunity to support US $200,000 in new revenue, a 10:1 return. The actual number may not be this large as there are many other costs and constraints, but the opportunity potential is still very large and when we perform ROI analyses, the returns are impressive, validating the opportunity cost premise proposed here.” 

Every company needs to calculate their own ROI and consider the Time to Value (TTV). Even if the estimates of productivity for my hypothetical company are high, you’d likely consider many other factors, such as the difference in the cost of quality (COQ), direct material costs, direct component costs, reduction in scrap, significant reductions in rework, and potential softer cost avoidance, which are events that don’t occur because of intervention (usually impacting productivity), and which, having personally been involved in, makes me think the productivity numbers are understated. You’d also see major differences in data security and IP protection, the cost of regulatory compliance, and possibly damage to your brand and time-to-market and the likelihood you are losing customers.

Impacting Your Top and Bottom Lines

PLM obsolescence absolutely impacts your top and bottom-line. Here is a chart from an IDC Manufacturing Study in 2020 that shows the growing divide between non-digital manufacturers and digital manufacturers with similar results in the revenue profit index and the profit performance index. Those that stay current benefit considerably, while the divide is only going to widen.

IDC estimates the growth in manufacturing ops data will continue to explode over the next five years, ranging in industries from 154% (Light Industrial) to 469% (Semiconductor). Aerospace – 233%, Automotive OEM – 234%, Heavy Industry – 191% Medical Device – 234%. (Source: IDC, Operational Data: From Slideshow to Main Event, Doc # US45813220, Jan. 2020)   

If your PLM software and your internal product ecosystem are not current, not resilient, and not functioning as a seamless digital thread that is expanding across your enterprise, enabling your value chain to collaborate and make better data-driven decisions, then I believe your lack of modernization will overwhelm you.



What Does Staying Current Look Like?

I encourage you to check out Microsoft’s presentation from our annual global ACE2021 Conference, “Aras Upgrades – A Customer’s Experience.” Microsoft went live in 2015. In each of the last five years, they upgraded five times as per the slide they presented below.


They’ve expanded the breadth of their deployment, now with 6,000+ internal users and 1,000 external users. They perform over 10,000 revisions a day and operate 24/7 on every continent. They have 25 integrations using many applications with many customizations and custom applications based on Aras Innovator’s low-code platform. According to Microsoft, their end users love the continual upgrades.

If you’re using a legacy PLM, is that what your users are saying? I could quote various statistics on retention of best employees based on using current technology versus legacy PLM software, but I think we all get the picture.

Now, hypothetically, let’s say we take that all away and go back to 2015 and give the users back the two legacy PLM systems they had, which had never been upgraded, and see what their experience would be like. If you’re on a legacy PLM system, watch that presentation and try to imagine them on an old, legacy PLM. That’s quite simply a major factor between success and failure.

Can You Digitally Transform on Legacy PLM?

There is no such thing as digitally transforming on legacy technology. In fact, your legacy PLM, which should be the catalyst technology, becomes one of the obstacles.
How important is you PLM platform to digitally transforming your business?

According to IDC, “Organizations continue to digitally transform, and industry ecosystems are a key investment; CEOs realize the importance of complementing data, applications, operations, and innovation initiatives for greater resiliency. 60% of CEOs surveyed in February 2021 cite industry ecosystems as a top priority or priority investment.” (Source: IDC, CEOs Prioritize Industry Ecosystems for 2021 and Beyond, DOC # US47499821, March 2021)

We’ll all look back on 2020-2021 and the pandemic as a time when we either seized the opportunity to transform or clung to our past. Economic adversity has always led to periods of business transformation and this time is no different. A current PLM platform that adapts as you require, and enables you to digitally transform to meet your current and future needs with a digital thread connecting your employees and stakeholders, is fundamental to being a leader.

CIMdata’s Upgrade Research concludes: “Companies pursuing a digital transformation should include Aras on their shortlist solutions to investigate.” 

Does the Cloud Solve Your PLM Obsolescence Problem?

No, and Peter Bilello was very clear on that point in the webinar.

Moving to the cloud has many benefits, but it doesn’t solve the upgrade problem that the major PLM software vendors have to date. In fact, you could argue some have made it impossible.

First, just because a multi-tenant cloud pushes releases out, it doesn’t mean you have the unlimited customization most large complex customers require. And the software vendor pushing updates of any consequence on the customer can potentially wreak havoc with their existing capabilities and customizations.

Second, you can’t take a highly customized enterprise on-premise PLM system and move it to our competitors' cloud offerings if the functionality isn’t one-to-one.

These are the two primary issues that have slowed PLM adoption in the cloud. Aras has an alternative.

Aras Innovator is now containerized, meaning the platform with the same low-code platform services is available in the cloud in the Standard Edition (formerly called Premier), which companies can host in their own public or private cloud and, except for implementation, has the same functionality as they could deploy on-premise. And Aras offers an Enterprise SaaS, which hosts the same Aras Innovator Platform in the cloud with additional DevOps and Managed Services.

The two major differences between other cloud offerings and Aras’ are:

  • Unlimited customization, which no one else offers, and guaranteed upgrades.
  • One-to one compatibility as Aras Innovator platform services and applications are identical.

Agility Cost

This is the cost when you can’t adapt to meet changing business needs. Resiliency and agility are two of the most important characteristics in business. You could suffer everything I’ve described and more, redeploy and pay close to a million dollars and spend a year not transforming your company, or you could choose a flexible PLM platform where the upgrades are included in the subscription.

According to Rick Villars, Group Vice President of IDC, "The COVID-19 pandemic highlighted that the ability to rapidly adapt and respond to unplanned/unforeseen business disruptions will be a clearer determiner of success in our increasingly digitalized economy. A large percentage of a future enterprise's revenue depends upon the responsiveness, scalability, and resiliency of its infrastructure, applications, and data resources." (Source: IDC, FutureScape: Worldwide IT Industry 2021 Predictions, Doc # US46942020, October 2020)

Aras is changing the way people design, manufacture, and maintain products. Aras is a digital transformation platform—a resilient PLM with an inherent digital thread and a low-code platform that not only enables sustainable PLM, but also enables you to transform your business far beyond PLM.


Conclusion

Legacy systems don’t happen by accident, and a resolution won’t happen on its own until companies acknowledge the predicament they’re in. The CIMdata research clearly demonstrates that many companies are not in good shape—many are not current with the foundational software that should be driving increases in your profit margin and revenues. “To be successful, companies need to have the right tool and be up-to-date to take advantage of the latest capabilities.” (CIMdata)

The other week, I suggested you share the blog “Which PLM Vendor Keeps You Most Current?” with your leadership, and some did. With Aras, you can download Aras Innovator and try it out. We do no risk Proof-of-Concepts based on your criteria. If you choose not to go with Aras, you lose nothing. So, what do you have to lose?

Hopefully, this is the beginning of a wake-up call to consider a PLM platform that can meet both your current needs and your future ones as well—one that will stay current, increase your ability to adapt to the unforeseen, reduce your technical debt, expand your digital thread, drive greater business resiliency, and increase your agility. It starts by choosing technology that is open, flexible, scalable, and upgradeable—technology that can evolve with you and empower your people to continually drive digital transformations, increase collaboration, make better data-driven decisions, and out-innovate your competition—www.aras.com.

Sean Coleman