COVID-19 will impact PLM market despite fuelling the digital transformation initiatives. It has triggered a tug of war. One side is the heavy gravitational drag of uncertainties and recession hanging around in the valley. And, on the other hand is the vision of the futuristic PLM kingdom where the physical and digital avatar of the smart connected products will co-reside and interact with each other.
COVID-19 may slow down the PLM growth temporarily but there is no drift in the commitment on the PLM’s promises for a greener and smarter connected world. The slowdown in PLM growth this year will create a pile of opportunities which will provide growth spike next year 2021.
The pictures used in this paper are illustrative and are used for easier explanation of the concepts. The Microsoft (MS) Office clip art items are used as an ingredient for the creation of some of the illustrative pictures. In some sections, quantitative data are used and are borrowed from public domain and may not be very accurate.
Today, companies are more product-centric than ever in the past. Digital product definitions, capabilities and processes cannot be managed in network data drives and in preliminary non-PLM tools. Higher product complexities, risks of product recalls, shorter time to market, cost of compliance, increasing variants driven by customer need, pressure to innovate, real time performance of the products, etc makes PLM a need for all industries.
Below are some economical forces which may drag the PLM growth temporarily but eventually PLM’s commitment will outweigh the drag and come back to a better growth trajectory within a year.
Unlike Enterprise Resource Planning (#ERP) and Supply Chain Management (#SCM), PLM is not transactional in nature. Many companies designing and manufacturing great products have lived without a well defined PLM systems. Many are still managing their product digital definition/ blueprint in MS-office tools and network data drives. But, to perform, scale, adhere to compliance and innovate in the Industry 4.0 era, the digital transformation of the businesses is inevitable and cannot be accomplished by a non-enterprise PLM tool.
The GDP contraction and temporarily paralyzed economy may compel some companies to hang on with old methodologies and tools due to budgetary reasons. Per analysts, for the last few years, 75+ % of companies have always maintained or increased their annual spend on PLM. This trend may have some dent in 2020 but there will be an immediate U-turn either by year end 2020 or early 2021.
Lower risk appetite means less mergers and acquisitions, less site consolidation opportunities, less migrations, less integrations and less PLM work. It is a reality that the M&A deals have dropped significantly post Jan 2020. Many active deals have been shelved. It is difficult to execute M&A deals when the current valuations are damaged, and the future is uncertain. Even if there are M&A deals triggered by opportunistic buyers, the system level integrations and product portfolio alignments may not happen within the next 3~4 quarters. The good news is that it is certain that we will have vaccine one day and the world will not end and there may be a surge in M&A deals in calendar year 2021.
Less inventions/ innovations means less new products/ services, less new product variants, less changes, and less PLM work. Invention is the creation of a new product or service or process for the first time. Innovation is the improvement or incremental value creation over an existing product or service or process. In either case, the inventor or the innovator is either trying to solve a problem or creating a requirement which never existed like the iPhone.
Every crisis creates tons of problems. It also opens many doors for inventions /innovations. Covid-19 crisis is no different. Covid-19 has displaced many from their comfort zone but has placed them into a dry zone of an emotional terrain which is not conducive to drive new inventions/ innovations. Many are drowned in the ocean of anxiety crisis. Despite challenges, many ideas may get piled up for review, evaluation and action once covid-19 issues are settled since priorities will change by then (probably by end of 2020).
In the last few years, almost all leading PLM software companies have switched over from perpetual to subscription licensing model. The timing was propitious since it did not coincide with COVID-19 and hence skipped the cash hole risks. On the other hand, the recurring revenue through subscription model will help to mitigate the covid-19 erosion in the current year 2020.
Covid-19 has created so much uncertainties, but it has zero impact on AR and VR since these breakthrough technologies are defining their own future paths VR cuts us off the real world and immerses us into a virtual environment. On the other hand, AR retains the real world and enables us to add virtual products in our environment. Both are 3D technologies and PLM’s core capability is to manage 3D data. AR is used for many scenarios in various industries like for manufacturing instructions, surgical training, etc. AR interfaces with PLM to pull the virtual / digital representation of parts/ products into the real world. All these are digital and adheres to the new normal definition
PLM on cloud has emerged as the OSCAR winner of covid-19. The PLM dream of real-time interactions and unification of physical and digital world is not possible without cloud computing. Covid-19 will accelerate the PLM migration from on-premises to cloud, especially for small and medium size businesses.
Artificial Intelligence (#AI) and Internet of Things (#IoT) are looking very promising than ever in past. AI and IoT technologies create values the through unification of the physical and digital world. It helps us to build the real time close loop feedback process between the physical product and its digital definition. It enables the live product to alter its DNA in real time for providing effective and efficient services. It helps us to extend the product value beyond product’s lifecycle and the owning enterprise. These technologies are core to smart products, smart factories, smart cities, etc and is implicitly leading us to the most evolved version of PLM.
The good news is that Covid-19 has accelerated our belief and trust to the threshold zone. We can witness disruptive growth led and driven by AI and IoT. Covid-19 has boosted the trust and confidence that these technologies are lean, greener and are the way forward.
Despite Covid-19 challenges, the root problems for companies are still the same. PDM is the foundation and wings of growth for PLM. 70% of the customers (especially manufacturing) are still on the PDM orbit with CAD, Docs, Parts, BOM and change management capabilities and processes. They have minimum impact by Covid-19 on their current PLM investments. New enhancement may get deferred if it does not fall under essentials category.
Most countries are easing the lock-down. Many companies are opening their plants and kick-starting their assembly lines. One of the key challenges that every company may encounter is the sharp productivity dip due to the new normal like social distancing, remote working, etc. The factories were never designed for the new normal. Companies will innovate new paths to bridge productivity gaps through multiple shifts per day, 24×7 work, etc. And all such measures will be augmented and driven by digital transformation. PLM being core to digital transformation will have an important role to play, for e.g, the design and manufacturing collaboration can be accomplished virtually through PLM.
Obviously, the PLM value will outweigh COVID’s heavy gravitational efforts.
Our generation started working on TDM/PDM in 1997 and the overall PLM market inclusive licensing, CAD, simulation, etc was just few billion dollars. Today, the PLM market has grown to around $50+ billion dollars. Also, the PLM world is now much deeper and broader in scope and technologies. The market for System Integrator (#SI) and resellers is around 15% of the overall PLM market and has been growing at 7~8% annually. This growth may get dented by 40~50% in 2020 but will bounce back to better levels by early 2021.
The current challenging times will pass by soon. We must plan and optimally use the current phase for the future readiness and the disruptive growth ahead …
Stay Safe and Healthy!