Product Innovation and PLM
2007 Technology and Vendor Landscape Series
PLM Market Landscape: Evolving To
Enable Value Chain Excel ence
by Jeffrey Hojlo, Michael Burkett, and Koppel Verma
Although many businesses utilize product lifecycle management only for design
or product data management, it’s one of the three foundational legs that support
a demand-driven supply network. PLM vendors realize this opportunity and are
improving their products to support value chain excellence.
Market Services Report

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Acronyms and Initialisms
A&D Aerospace and defense
IP
Intellectual property
AEC
Architecture, engineering, and construction
IPPD
Integrated product and process design
APQP Advanced product quality planning
LDAP Lightweight directory access protocol
BI
Business intelligence
MES
Manufacturing execution system
BOM Bill of materials
NPDL New product development and launch
CAD
Computer-aided design
PDM
Product data management
CAM Computer-aided manufacturing
PLM
Product lifecycle management
CAPA Corrective and preventive action
PPM
Product portfolio management
CNM Customer needs management
QA
Quality assurance
CP
Consumer products
QC
Quality control
CPD
Collaborative product design
R&D Research and development
CRM Customer relationship management
REACH Registration Evaluation and Authorization
DDSN Demand-driven supply network

of Chemicals
DFM Decision flow management
RFX
Request for proposal, quote, etc.
DMS
Direct materials sourcing
RoHS Reduction of Hazardous Substances
EMEA Europe, Middle East, and Africa
SaaS
Software as a service
ERP
Enterprise resource planning
SCADA Supervisory control and data acquisition
EuP
EcoDesign of Energy Using Products
SCM
Supply chain management
FDA
Food and Drug Administration
SKU
Stock-keeping unit
FMEA Failure modes and effects analysis
SMB
Small and midsize business
GPD
Global product development
SOA
Service-oriented architecture
HCM Human capital management
UI
User interface
HR
Human resources
WEEE Waste Electrical and Electronic Equipment
WIP
Work in process
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PLM Market Landscape: Evolving To
Enable Value Chain Excel ence
by Jeffrey Hojlo, Michael Burkett, and Koppel Verma
Product lifecycle management (PLM) vendors, seeing opportunity in enabling
The
the demand-driven supply network (DDSN) and extended value chain, are
Bottom
improving their applications to support value chain excellence.
Line
When one looks at the mantras of three of the largest PLM provid-
Executive
Vendors featured
ers, it becomes apparent that product lifecycle management is rap-
in this Report:
Summary idly coming of age: SAP’s efforts to connect the product and service
Aras
lifecycles, Dassault’s democratization of 3D, and Siemens PLM
Arena Solutions
Software’s focus on global innovation networks. PLM no longer simply equals CAD
Autodesk
data management and engineering workgroup collaboration.
Dassault Systemes
And it’s not just because PLM vendors say so. Our research reveals end users are
Enginuity
increasingly looking at PLM as a standard enterprise platform. They’re asking how
Infor
PLM systems can be used to manage their product portfolios, capture customer needs,
Oracle
and integrate nonengineering staff into the product design process, a domain histori-
PTC
cally dominated by engineers. Moreover, end users and PLM vendors alike are finally
SAP
thinking about linking the product design process upstream with the product launch
Selerant
process to effectively predict demand and product performance. They’re also thinking
Siemens PLM

about linking it downstream into supply and manufacturing to simulate supply and
Software
manufacturing capacity.
This decision support capability is critical if PLM is going to be a mainstream, enter-
prise application or, as AMR Research has always defined it, an enterprise business
strategy for bringing new products to market. Although most PLM vendors have some
portfolio management and decision support capability either organically or through
partnerships, our research has found that the ability to predict and model decisions
through the course of the new product development and launch (NPDL) process and
across the value chain is still immature.
Despite this immaturity, we expect the PLM market to grow at a 9% five-year CAGR.
The 9% allocation of budget to PLM in our 2006 IT spending numbers revealed this
will increase over time, particularly as PLM vendors build out their capabilities in per-
formance management, sourcing and procurement, and knowledge management, while
tightening their integration with manufacturing operations, CRM, ERP, supply chain
management (SCM), and human capital management (HCM).
Product Innovation and PLM Report | 2007 Technology and Vendor Landscape Series
© 2007 AMR Research, Inc.
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Recommendations for users
• When deciding which PLM vendor to partner with, consider the product develop-
ment challenge you are trying to solve: is it simply managing CAD data and commu-
nication between engineers, the effective launching of products, or both?
• Use PLM as a standard application in your enterprise, just like ERP, CRM, and SCM.
• Evaluate vendors on the scalability of their network infrastructure. Robust network
performance is necessary for global product development (GPD), particularly when
you are sharing rich 3D CAD models globally.
• Consider applying 3D to support other NPDL processes, particularly customer needs
management (CNM), service, and support.
• Demand decision support functionality.
Recommendations for vendors
• Expand your definition of PLM from CAD data management to an NPDL and
value chain enabler.
• Remember: decision support, decision support, decision support!
• Weave ideation and voice of the customer into your products.
• Enable effective collaboration between value chain constituents in and outside the
company.
• Provide a software-as-a-service (SaaS) offering.
• Link into market research databases and CRM systems to help analyze new product
opportunity.
• Expand your services practices.
• Extend 3D to new audiences and markets.

2
© 2007 AMR Research, Inc.
Product Innovation and PLM Report | 2007 Technology and Vendor Landscape Series

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The product lifecycle management market
The PLM market is growing, with tremendous amounts of untapped opportunities in
North America and EMEA, as well as in growing markets like Latin America and Asia-
Pacific. The primary driver of this growth is that manufacturers are making managing
and introducing products top priorities. Nevertheless, there has been low investment
in PLM versus ERP or other application categories. Our IT spending studies find that
manufacturers list rapid introduction of new products and streamlining supplier man-
agement processes as the most important factors in remaining competitive. On the
other hand, they remain immature in understanding how to use technology to improve
these processes.
Now times are changing. The market is maturing rapidly to support the design-to-manu-
facturing planning and handoff process that has been around for years: integrated product
and process design (IPPD). The remaining area of opportunity for PLM applications is
at the business layer, with end users looking to utilize PLM for far more than managing
CAD data and concurrent engineering processes. Effectively understanding market and
customer needs, turning those needs into products, and then launching them to the mar-
ket requires more than managing and communicating CAD models. It demands close
col aboration with the global value chain to use ideas, capacity, and expertise.
Product Innovation and PLM Report | 2007 Technology and Vendor Landscape Series
© 2007 AMR Research, Inc.
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F
igure 1: PLM—a critical component of the global value chain
Process-Driven PLM Framework
Define
Quality
Design
Captive Development
Improvement
Captive Development
Centers and Outsourcing
Centers and O shoring
Service
Compliance
Supply
Supplier F
Promote
Manufacture
acing
Product Portfolio
acing
Management
C
ustomer F
Customer Needs
Demand
Management
Supply
SCM
CRM
ERP
Insights
Network
HCM
Direct Materials
Sourcing
Collaborative
Product Design
Product Data Management
IP Management and Security
Value-Driven Open Innovation
Source: AMR Research, 2007
4
© 2007 AMR Research, Inc.
Product Innovation and PLM Report | 2007 Technology and Vendor Landscape Series

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We are slowly seeing this evolution. Siemens PLM (formerly UGS) has added expanded
portfolio management capabilities through its partnership with Planview, and Oracle
plans to enhance its business intelligence (BI) and portfolio management capabilities
with Agile’s already strong analytics (through partnership with Symphony Metreo)
and portfolio management capabilities. Although it remains to be seen how this will
be used in the PLM space, SAP is in the process of acquiring Business Objects and is
focused on enhancing its CNM and portfolio management capabilities in 2008.
End users are beginning to look to PLM for decision support, NPDL modeling capabili-
ties, sourcing (through tight integration with point applications, at least), and as a plat-
form that enables both internal and external innovation. In other words, they are focused
on Stage 4 of AMR Research’s value chain transformation maturity model to achieve the
perfect product launch (see Figure 3). Most companies we talk to, however, are actual y at
Stage 1 or Stage 2, so there is still a great opportunity for end users to improve.
F

igure 2: Stages of maturity for new product launch
Growth and Profitability
Cost To Deliver
Cost To Serve
Demand Driven
Value Driven
External supply partners
Joint value creation by
become integral to product
orchestrating the innovation
Externally
innovation and launch
process across and extended
Focused
and demand analytics
value chain and architecting
evaluate opportunity
products and services that
tradeoffs
combine partner expertise
3 4
2 1
Customer and
Brand Driven Efficiency
Markets Focused
Internally
Internal integrated product
Product development
Focused
teams share a common set
operates in a silo and
of product information and
pushes innovation out in
standardized new product
search of a market to serve
introduction and launch
practices
Cost Focused
Revenue Focused
Source: AMR Research, 2007
Product Innovation and PLM Report | 2007 Technology and Vendor Landscape Series
© 2007 AMR Research, Inc.
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Fig ure 3:
Measure
Market Success
ROI
ROA
Demand
Supply
Validate
Product
Source: AMR Research, 2007
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© 2007 AMR Research, Inc.
Product Innovation and PLM Report | 2007 Technology and Vendor Landscape Series

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The business-user definition of PLM
PLM is the umbrel a term for a group of software applications used by engineering, purchasing, marketing,
manufacturing, R&D, and service that work on new product development and launch. Done wel , NPDL takes into
account not only design and engineering, but supply and demand as well as timing of a product launch, service
of product once sold, and retirement of a product at the end of its lifecycle. The PLM category is defined to help
manage all these elements. The unifying logical element at the base of PLM is product, just as the unifying logical
element at the base of CRM is customer. For this reason, PDM is sometimes confused with PLM. A fairer corol ary
for PDM is the customer master file that a CRM system depends on. Figure 4 is a simplified map of the individual
applications that PLM comprises and shows how they touch other major enterprise systems. Figure 5 is a basic PLM
process flow diagram. It’s important to note that PLM is a significant enabler of the value chain, integrating with other
enterprise systems. For more understanding of PLM’s place in the global value chain, see Figure 1.
Figure 4: Product lifecycle management footprint
Product Portfolio Management
NPDL Intelligence
Program Management
ERP
Project Management
Reporting
Direct Materials Sourcing
Customer Needs Management
Strategic Sourcing
Requirements Management
Component and Supplier Management
Preference Analytics
RFX Management
ETO/BTO/DTO
Change Management
Collaborative Product Design
CRM
ERP
Product Design Tools
SCM
Process Engineering
Visualization
CAD-to-CAD integration
ERP
Product Structure (BOM)
Product Data Publishing
SCM
Document Management
Service Parts Planning
CRM
Engineering Change
Product Data Management
Configuration Manage-
Management
ment
= Data flows
Source: AMR Research, 2007
Product Innovation and PLM Report | 2007 Technology and Vendor Landscape Series
© 2007 AMR Research, Inc.
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F
igure 5: PLM business process map
Market
Assessment
Conceptual
Design
Engineering
and Detailed
Design
Change
Management/
Release to
Manufacturing
Sourcing and
Supplier
Collaboration
Production
Process
Planning
Market
Rollout/
Launch
Aftermarket
Support and
Service
Product
Portfolio
Management
Source: AMR Research, 2007
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© 2007 AMR Research, Inc.
Product Innovation and PLM Report | 2007 Technology and Vendor Landscape Series

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Document Outline

• The Bottom Line: Product lifecycle management (PLM) vendors, seeing opportunity in enabling the demand-driven supply network (DDSN) and extended value chain, are improving their applications to support value chain excellence.
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