Cloud PLM Changes ROI Mathematics
Historically speaking, identifying the total financial benefit from a product lifecycle management (PLM) solution is not as obvious as it is with an enterprise resource planning (ERP) system. Nor is it as straight-forward.
But that may all soon be in the past. To win in this modern manufacturing economy requires new cross-functional champions with a broader appreciation of the enterprise. That said, the business value of PLM is fast becoming elevated as it gets even more of the respect it so richly deserves.
My main man Jim Brown, Founder and President of independent research firm Tech-Clarity, recently published a column on ROI mathematics.
"Cloud Changes ROI Mathematics. The ROI for cloud solutions is fundamentally different. On-premise, licensed approaches take a lot of justification and validation before pulling the trigger. Why? Because you have to commit to spend a lot of money without any guarantee that you’ll get a return. Effectively, your 'I' is fixed and your 'R' is variable."
Jim’s spot on. I’ve personally spoken to companies in the last year who validate the compelling ROI cloud PLM brings promptly to their company. Here are some proof points:
- A venture-backed computer startup decreased design cycles from six months down to a few weeks. Cloud PLM eliminated 90% of their product errors, saved an estimated $500,000 recurring annually by removing on premise IT-management, and reduced time to market 25%. Boom.
- A virtualized platform for public and private cloud infrastructure company used cloud PLM to reduce engineering change order cycle (ECO) times from days to hours.
- A semiconductor company eliminated the time consuming complications of managing unwieldy change order packages by formalizing ECO processes. In addition, cloud PLM helped reduce ECO cycles by 50%, allowed refactoring of large bill of materials (BOM) trees in a few hours, and dramatically lowered procurement costs.
For years, a product lifecycle management application has been seen as a solution that makes the lives of engineering and operations teams easier. But more strategically minded CFOs now see PLM as a game changing cross-functional play to drive the needle further than they could previously in its absence. In fact, many C-level executives are finding greater financial return in their PLM solution than their ERP systems.
A recent Gartner report reflected a growing consensus among manufacturing analysts that the business impact of PLM may soon surpass that of ERP. “In addition to PLM’s inherent value, PLM decisions have strong influence on the business model and benefits that can be realized by ERP, Supply Chain Management (SCM) and Customer Relationship Management (CRM) applications in downstream business processes; in that sense, PLM is the most fundamental business application in manufacturing.”
In our recent ROI-focused whitepaper, Why Executives Are Using Cloud PLM to Save Money we break down exactly how and when you should expect a PLM solution to start paying dividends. While each industry has their own set of pain points, when it comes to product development there are a myriad of ways to achieve a strong ROI, including reduced engineering change order (ECO) cycle times, lower direct materials costs, improved product quality and collapsed time to market.
In our next blog post, we share stories from other innovative product companies that confirm the very real — and the very rapid — ROI achieved from utilizing a cloud-based PLM solution.