”Great ERP, worse PLM” – What SAP PLM needs to sharpen its competitive edge

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Someone once said that SAP "is the IT company people love to hate". Project implementers say that because its hard to implement due to the complexity. Chief financial officers have declared it expensive. And end-users have said, "ease-of-use is something you have to look for elsewhere".

Still, almost every sizeable company runs SAP. Why? The simple truth is that SAPs solutions get the job done, at least on the ERP side. As soon as organizations and products reach a certain stage of complexity, particularly when coupled with manufacturing, you can bet that a system from SAP is playing a significant role. As a result, this gigantic enterprise solutions developer is the worlds number one provider of ERP systems, with some 260,000 customers worldwide.

Clearly SAP dominates the ERP arena, but what about PLM? Theyre big
in this space too, and have been a long time player, but not to
everyones delight. PLM competitors accuse them of buying their way
into the space simply because customers that have deployed SAPs ERP
system get PLM for "free".

While the "PLM for free" aspect is debatable, some facts are not: In
terms of revenues in the overall PLM market, SAP PLM systems ranked
fifth last year, behind Dassault Systemes, Autodesk, Siemens PLM, and
PTC. In the sub-segment of cPDM (collaborative Product Data Management),
often regarded as the backbone of PLM, they were even more successful.
SAP was the number one (software only) revenue generator in 2013,
according to CIMdata.

Apparently there are a number of PLM-related "SAP values"??, but
what are they about? What are the weak spots? Are new technologies,
like the in-memory "database" platform HANA, a threat to the
traditional PLM database solutions? Or is it an opportunity?

"Competitors dont need to run fast to stay ahead"

In the world of  modern new product development, the SAP giant is moving slowly, "like a glacier", says Gartners PLM analyst Marc Halpern.
And like that ice sheet, sheer size makes them nearly unstoppable. The
advantage of scale is that it incrementally diminishes the value of
investing in SAPs PLM competitors. But theres a downside too; SAPs
slowness can be frustrating for their customers, creating opportunities
for competitors, integrators and service providers.

The bottom line is that SAPs competitors dont need to run very
fast to stay ahead in terms of functionality enhancements. "While I am
impressed with what I have seen of SAPs Engineering Control Center
developed by DSC, I think SAP should have had such a solution to
support mechanical CAD years ago", says Halpern.

He notes that the same tardiness can be found in other areas, "Many
of SAPs competitors are moving fast in the world of systems
engineering… I hardly see activity from SAP in this regard at all".
From a competitive standpoint this may prove costly. Systems engineering
is one of those areas that drive the transition of product development
processes.  Organizational, procedural and integration issues are not
far behind as systems engineering grows more important. 

If we talk about the integration of the tools, it has to start at a
systems level. One of the obvious connections will be to Bills of
Material (BOM). Elements or items from the BOM come from different
directions; software, electronics, and mechanical components, for
example. A key question is: How do you effectively orchestrate all the
activities in the flows from the parallel tracks of software,
electronics and mechanics? A PLM developer that falls behind in this
will be in trouble.

SAP PLMs toughest competitors are working on the problem. Siemens
PLM bought the Belgian company, LMS a couple of years ago and is
currently working full steam to integrate the systems engineering
capabilities into the Teamcenter suite. Nor has Dassault Systemes been
idle, addressing systems engineering on the 3DEXPERIENCE platform with
the Swedish developed Dymola solution, which was also the result of an
acquisition.

PTC has also been active in acquisitions.  After the previous
purchase of the ALM solution Integrity, PTC this summer acquired
British engineering specialist Atego.  The company has also launched an
integration initiative within the framwork of the PLM suite, Windchill. SAP may not be on that thin ice yet, but should, according to Halpern, be able to be more proactive in this crucial area.

SAPs strengths reside outside of product design

While these issues can pose problems, SAP has many strengths too. 
Those are generally found outside of the design area. "Primarily SAP is
the natural system of record for products that are actually produced
and delivered to customers", says Halpern.

Since SAP is often used as an MRP system (Material Resource
Planning), SAP naturally owns the record of the "as built" BOM, the mBOM
(manufacturing BOM), as opposed to the eBOM (engineering BOM) which
reflects the product as designed by engineering, which more commonly is
created by traditional PLM systems like Siemenss Teamcenter, PTCs
Windchill or Dassault Systemes Enovia.

In most cases, the eBOM comes from a PDM system while the mBOM comes
from an ERP system. Its not a rule, but in the case of SAP this is
how it generally works.
Marc Halpern asserts that, "this gives SAP an advantage if the
company should decide to invest more in the service lifecycle for
products".

A strong analytics technology with great potential

Today, SAP also has advantages in their ability to link inventories of
parts to new products that are under development. This gives SAP
advantages in managing part enhancement while manufacturing is being
planned for new products.

Moreover, SAPs strong analytics technology has great potential to
continuously improve sourcing, design for cost, design for
manufacturability, market acceptance of products and design for
quality.  "I see SAPs strength and ongoing potential as it relates to
that part of PLM that is outside of actual design activities", relates
Halpern, adding "as it relates to New Product Development, SAP has
strong potential to provide product strategists and new product
development managers with insights into strategic product priorities
(including financial implications) and continuous improvement. However,
SAP has yet to fully exploit this potential".

Has the SAP "glacier" strengthened its PLM competitiveness?

Inertia aside, the SAP "glacier" has nevertheless moved forward over the past seven years. In 2007, SAPs Hans Thalbauer,
today senior vice president, Line of Business Solutions for Supply
Chain and R&D, presented a roadmap for improvements in their PLM
system ranging from improved usability to better program planning. This
wasnt SAPs first PLM commitment, but the level of detail in this plan
made ??it worthy of note. Emphasizing support for the "business of
product", SAP promised better integration to all parts of the SAP
product suite to support decision making on product innovations.

Since then, SAP has continued to implement the PLM roadmap. CIMdata
even claims that "SAP (has) strengthened its competitiveness".

From a historical perspective, this is correct. They have improved
usability over the last several releases and added new or enhanced
functionality to support features such as "product structure and
configuration management, lifecycle process management, and
collaborative activities". Its also true that new landmarks appeared on
the SAP PLM roadmap, including EDA data management, application
lifecycle management (ALM), systems modeling, and S&A data
management.
Some, but not all have been implemented, but clearly this has made
their PLM solution and vision stronger. The question remains as to
whether these measures are more a matter of catching up rather than
proactively seizing a technological lead. 

"Both the technology and the business process it enables add a lot
of power to the SAP PLM portfolio", claims industry consultant Joe Barkai.
"Besides SAPs high level of process and data integration allowing for
better product related decisions, especially involving
multidisciplinary data that is typically scattered across different
business functions and tools, Visual Enterprise is one of the most
useful tools."

Visual Enterprise (VE) consists of three core products:

1. The VE Generator: A processing engine that
translates nearly any 3-D  CAD file into a lightweight file format used
in downstream processes. It can also be configured to support specific
work processes in engineering, manufacturing and maintenance.

2. The VE Author: An end-user application that creates animated procedures, 3-D embedded documents and high-definition imagery.

3. The VE Viewer: A lightweight, free-of-charge end-user tool to view and interact with the authored and published content.

"Its great software integrated with the SAP Business Suite that
gives the user a complete new view of their data, while combining
visual information with business content improves collaboration,
enables better decision-making and drives faster time to market for our
customers", commented SAPs Thalbauer. 

SAP expands their vision to go beyond PLM
Is SAP an innovative company? The answer is indeed
multifaceted. Heres my take: There is a lot of idea and thought power
in this German company. It wasnt just a one-shot stroke of genius that
brought them to the position as one of the worlds leading business IT
companies.

Theyve had many visions over time, primarily related to enterprise business systems like ERP, SCM, CRM etc.

Even in the PLM area they were "early birds". As a matter of fact
they might very well be the first company that mentioned the acronym
PLM. This is at least what the American CAD journalist Ralph Grabowski
found out when he was looking for the roots of this term. As early as
1999 SAP mentioned "PLM" in a press release, according to Grabowski.

One of the challenges when it comes to SAP PLM is that the division
is a pretty small part of a big corporation; out of almost $22 billion
in revenue for 2013, approximately $1.4 billion came from PLM-related
activities. This puts their commercial focus in perspective. Its not a
bold statement to claim that the main attention will remain on
business-related enterprise IT solutions, more so than on PLM.

However SAPs CEO, Bill McDermott and SAP leadership
are not immune to the revenues "promised" by the "beyond PLM
development".  Things like the Cloud, the "Product-as-a-Service"
concept and the Internet of Things (M2M included) are technologies that
can capitalize on trends that analysts like Gartner and IDC say are
about to reshape the worlds commercial and consumer markets. To be
able to compete you have to develop broader and deeper capabilities than
what is offered by classic PLM vendors. Dassault Systemes
(3DEXPERIENCE), Siemens PLM (Teamcenter), Autodesk (PLM 360) and PTC
(Windchill) have realized this and have started to act.  Their
customers demand it, and as they do, SAP is changing too.

To that end, last year SAP began promoting a new focus, "Idea to
Performance". This expands their vision beyond PLM to include
Sustainable Innovation (focus on product as a service), Operations
Excellence, Responsive Manufacturing and After Market Services. Also,
SAP has invested heavily in mobile (so far not applied in the PLM
space).

Is SAP HANA a threat or an opportunity?
Many of the new offerings from SAP are now being powered by SAP HANA,
SAPs in-memory database platform.  In my opinion, this is the
companys most interesting innovation in several years. Paired with
their strong predictive analytics tools, HANA can turn out to be one of
the aces up SAPs sleeve and represents one of SAPs core strategies.
So far this technology hasnt had an impact on the PLM market, but it
certainly can add valuable capabilities as it evolves.

SAPs President of Platform Solutions, Steve Lucas,
said that, "Hana will help people work faster, from 10 to 10,000 times
faster and the in-memory applications will make our business lives
simpler and help us work smarter. Let me also underline that Hana is not
only a database but also a platform as it introduces a number of
libraries and processing services".

Is HANA a threat or an opportunity to the traditional developers
databases? From my perspective its the latter. The traditional PLM
databases are generally more than "just" databases, theres a lot on top
of them. The ability to integrate applications, predict product and
process performance across multiples disciplines and to provide
information support across the full lifecycle requires a lot of
application logic on top of a data base.

"I think HANA has a great deal of potential. It can play a
significant role in rapid access to product lifecycle analytics related
to service lifecycles, manufacturing performance metrics, cultivating
product portfolios, etc. That potential is great. While I think SAP has
the technology, the outstanding question is the readiness of SAP,
SAPs service partners, and SAPs customers to capitalize on it", says
Marc Halpern.

SAPs toughest challenges
Theres no question that SAP has vision, they have the resources to
realize them and they have the customers. On the other hand, PLM is a
small part of the companys operations and therefore gets less
attention. SAP is also relatively sluggish due to its size and is
rarely (SAP HANA is the shining exception)  on the technological edge,
at least when it comes to PLM.
According to Marc Halpern the most important short term concrete
challenges relate to working across the multiple views of
Bills-of-Material and orchestrating manufacturing process plans with
BOMs, as well as achieving appropriate
juxtaposition/blending/federation of data across ERP, PLM, CRM, SCM,
etc. These questions come up more often with SAP than the other PLM
vendors.

Tough? Yes, but theres one consolation for SAP: most PLM players face those same challenges.