While bold-minded product strategists may get the glory for pushing
forward new innovative product, product differentiation, or market strategies, the
master puppeteer behind the scenes is the modern CFO who keeps these visionaries
honest about the economic returns and viability of different positioning
For instance, before CFOs make a software purchase, one of the first things they will want to know is the timeline for a measurable ROI.
One of the larger payoffs for product lifecycle management (PLM) is reduced time to market, lower costs and higher quality products. This has clear ROI, but the elongated time dimension to see the value of a product cycle which can be anywhere from 6 months to 5 years is oftentimes a bit more opaque to the uninitiated.
Most manufacturing industry experts believe that a live PLM system will demonstrate measurable improvement within the first six months of usage. They also believe the ROI can be broken down into the following three categories, each occurring at different time intervals: immediately, within the first year, and five years into the future.
- Immediately: Infrastructure savings —
ROI appears immediately, the result of improved collaboration and better IT
efficiency than an on-premise solution, especially if a cloud-based application
- 1st Year: Improvement in
operating metrics — ROI accumulates 6-12 months after go-live with demonstrable
improvement in KPIs. Examples of this
could be a multiple number more products being launched in contrast to
historical norms, a marked reduction in NCMRs, and more efficient adjudication
- 3-5 years+: Strategic competitiveness — ROI shows up 3-5 years after go-live. Includes savings on internal programs and processes as well as improved strategic position.
Is PLM the New ERP? Manufacturing Analysts Think So.
Many C-level executives are finding greater financial and business value in their PLM solution than even in their enterprise resource planning (ERP) systems.
Forrester Research wrote in their “ROI of Product Lifecycle Management” report, “Organizations implementing PLM can expect both top-line and bottom-line benefits that come from gains in time-to-market, operational efficiency, production costs and regulatory compliance.” Furthermore, an IDC Manufacturing Insights paper concluded that PLM is “maturing into an enterprise decision-making discipline.”
Benefits of a Cloud-Based PLM Solution
Because of ease of procurement for software, more CFOs are investigating the value and benefits of a cloud-based PLM solution.
One of the main financial reasons why CFOs are turning to cloud solutions in general is the often-overlooked burdensome total cost of ownership (TCO) associated with on-premise systems.
The cloud-based PLM system permits customers to take money spent on IT maintenance resources (opportunity costs that include upgrades, configurations, and addition of security patches) and better allocate money to engineering resources to focus on delivering their core, revenue-generating efforts. Another benefit of cloud is that its security model is now seen on parity with, if not better than, on-premise solutions.
CFOs are acutely aware that theft of critical information, especially IP, can have a crippling financial impact on a company, resulting in lost revenue to compliance exposure and brand damage.
The bottom line is this: strong security translates into strong savings.
It’s for the above reasons and others why more CFOs are specially banking on cloud-based PLM.
Arena’s cloud-based PLM solution enables manufacturing documents to be centrally located in the cloud under strict revision control; this streamlines global supply chain sharing and real-time access to information. Further, it enhances supply team collaboration, including cross-functional data sharing with ERP/MCAD business systems. And by removing IT management costs, a cloud platform scales efficiently and economically. No up-front capital costs needed for servers, hardware and data centers—or for legions of consultants or ongoing IT personnel to maintain on-site servers.
In some cases, Arena has found CFOs personally driving the agenda of unhooking an on-premise PLM solution in favor of cloud-based due to others shrinking from the painful cross-functional buy-in required and the extraordinary fiscal savings that can be realized promptly.
PLM Offers CFOs Compelling ROI
CFOs are exhausted from chasing fractions of a percent reduction in expense spend around Income Statements during a lackluster economy. They find the notion of being able to replace a seven figure on-premise software spend with a six figure cloud-based PLM solution absolutely breathtaking. Many manufacturing companies are embracing cloud PLM, but why are some holding back?
Oftentimes the cross-functional ball of gum is simply too large for a single function to chew. It’s difficult for a single group to successfully serve as the enterprise advocate to advance the cause. The CFO’s chair however is one of the unique few that not only has a deep understanding of the number’s contextual interplays – and how they relate cross-functionally – but additionally has the business card gravitas to effect change.
CFOs know that on-time, “first-to-market” product launches materially impact market share, margins and revenue. But now these new agents of change have a reinvigorated hands-on involvement in determining non-trivial solution purchasing strategies that will achieve that goal.
To learn more why our heroes in finance — the modern CFO — should be involved in PLM investment conversations download this whitepaper.