80/20 Rule Detrimental To PLM

Dec. 1, 2003
Manufacturers across virtually all industries have significantly cut information technology (IT) spending. They have also begun rationalizing the numerous applications that have been installed over the years, and have begun migrating from best-of-breed applications to solution suite providers such as IFS (www.ifsworld.com), SAP (www.sap.com), Oracle (www.oracle.com), PeopleSoft (www.peoplesoft.com) and SSA (www.ssagt.com).

The most common reason for such migrations is the desire to minimize ongoing and future IT support, simplify integration, and lower total cost of ownership (TCO).

But is such a switch always in the best interests of the enterprise when the functionality of the suite solution falls short of the best of breed? For many manufacturers who pride themselves on their intellectual and innovative prowess, such a migration in the realm of product lifecycle management (PLM) may not only be shortsighted, but could put a company in jeopardy.

While operating divisions commonly argue that suite solutions rarely have the depth and breadth of functionality or the domain knowledge of best-of-breed solutions, corporate IT is pushing to rationalize and centralize the multitude of applications present within the organization. Driving much of this trend is the need to reduce ongoing maintenance and service costs, as well as lower the costs of integration and long-term support. In turn, this will free up precious IT resources to consider new areas for investment.

A common refrain used by IT departments in making the switch is the 80/20 rule. If we can get 80 percent of the functionality from the suite provider, we will be satisfied, because the savings we will accrue easily makes up for that last 20 percent. This perspective, however, can be simplistic and does not always account for a manufacturer’s overarching strategy, which for most is hinged upon “The Product.”

In an effort to consolidate applications used, top-down software selection and rationalization decisions can create havoc with product development and innovation. Where such efforts are forcibly pushed through, innovation can suffer as researchers and engineers grapple with an unfamiliar and often lacking environment.

Suppliers in the PLM market include such stalwarts as Dassault/IBM (www.3ds.com), EDS (www.eds.com) and PTC (www.ptc.com), which provide strong authoring and design functionality and a number of other PLM-enabling applications, such as Product Data Management (PDM), Portfolio Management and Manufacturing Process Planning. The smaller, more focused PDM players, without authoring, include Alventive (www.alventive.com), Agile (www.agilesoft.com), Eigner (www.eigner.com, which Agile acquired) and MatrixOne (www.matrixone.com). Supply chain companies such as AspenTech (www.aspen tech.com), i2 (www.i2.com) and Manugistics (www.manugis tics.com) bring collaboration and sourcing perspective to PLM.

In Treacy and Wiersema’s compelling book, “The Discipline of Market Leaders,” they argue that while a company must be competent in the three core disciplines of innovation, customer intimacy and operations, to be a true market leader, a company must also be the best-in-class in one of these disciplines.

Therefore, as companies consider their own core strategies and the disciplines in which they wish to excel, they must take a close look at the product-centric attributes of the disciplines and map those to the culture and heritage of a potential PLM-enabling solution supplier. For example, if companies perceive themselves as striving to lead in customer intimacy, the product strategy should be built upon customization and long-term service excellence. To effectively and profitably manage customization, then configuration, parts reuse and version control are critical PLM issues. Solutions from PDM-centric suppliers are best-in-class with such capabilities. If a company’s products have a high after-sales service component, PLM-enabling solutions from ERP-centric suppliers have been shown to be quite effective.

A forced, top-down, IT-driven application rationalization program for PLM is doomed to failure. Even worse, it can severely hurt innovation and long-term profitability. Therefore, employ a team approach to rationalization by drawing members from operations that will be impacted.

John Moore, [email protected], is vice president & general manager, Enterprise Advisory Services, for ARC Advisory Group.