The PLM Debate
As part of our ongoing research programme, Cambashi is running a debate on product lifecycle management (PLM) and how it interfaces with the supply chain. Various IT vendors were invited to respond to a discussion paper : "In 2004, will PLM and SCM still be recognisable TLAs?" (a version of which was first published in the FT)

Arena opinion

Michael Topolovac is founder and CEO of Arena Solutions.

Michael says we are asking the wrong question. The method of applications delivery, rather than the applications themselves, is the next new wave in manufacturing IT.

The End of Enterprise Software
(As We Know It)

Prior to starting Arena Solutions, I founded and served for ten years as chief executive officer of the world's leading manufacturer of high-performance underwater imaging products for consumers. During that time, while developing dozens of cool new products, I also implemented a wide variety of enterprise software systems.

This painful experience led to my epiphany, now shared by many others: the emergence of the Internet as a redundant, low cost global network made it possible to consolidate hardware and software and deliver enterprise software as a Web service. Manufacturers didn't need to waste precious resources buying boxed software, installing it, patching it, upgrading it, and paying lots of money for the hardware and personnel to run and maintain it. Other companies could focus on IT and let manufacturers focus on product development and manufacturing.

Outsourcing isn't really a novel concept. Most product companies outsource processes that aren't core to their business such as payroll or die-casting, and some outsource manufacturing entirely. So why shouldn't they outsource software systems? For nearly all manufacturers, IT is only a means to the end; it isn't an end unto itself.

To be clear, delivering software as a Web service is more than simply hosting a client-server application remotely, kludging together VPN links and such. Enterprise software as a Web service means engineering software systems from the ground up to leverage the Internet as a global network, while ensuring financial-grade security. Companies such as Salesforce.com in CRM software, NetLedger and Intacct in accounting software, Buzzsaw in project management software, and Arena Solutions in PLM software have over the past five years introduced such systems, based on a new Web-native architecture that supports tens of thousands of simultaneous users on a single software/hardware platform.

The introduction of these new "on-demand" solutions has enabled enterprise software to start moving out of the primordial muck of manufacturers' server closets to a more refined and secure environment. Consider the benefits of enterprise-class software delivered as a Web service:

Secure universal accessibility without hardware or software to maintain - Using only a Web browser and Internet connection, manufacturers access sophisticated software solutions 24x7 globally.
Low Risk - The Web service delivery model lets customers pilot the application without a large investment to validate that it provides measurable benefits.
Pay as you go: Instead of prepaying for the software for the next 10 years of use, manufacturers pay for it as they use it.
On-demand, instant deployment - Companies using software Web services are up and running in days, rather than the months typical of client-server systems.
Latest version - Companies have immediate access to the most current, powerful, robust, and secure version of the software, and benefit from regular software innovations without needing to install software on their computers. Bug-fixes, upgrades, and security patches to Web-native applications are incorporated transparently.
Dramatic reduction in IT costs - The total cost of ownership for Web-native software is many times less than client-server solutions. Web-native applications need only work and be tested on one set of hardware and a single operating system on the server side. Compatibility issues are limited to browser compatibility; there is no need to test compatibility with different hardware platforms, different operating systems and different versions of the same operating system.
Data redundancy and security - Web service providers maintain sophisticated security and data backup systems. If a disaster strikes your company, you don't have to worry about losing their business' core intellectual assets.

Collaboration is an additional factor that makes enterprise software as a Web service even more compelling. Client-server systems trap data inside the enterprise. If a manufacturer wants to communicate complex, dynamic data across a geographically dispersed supply chain, it has a big problem. Yet for manufacturers in the 21st century, collaboration is the name of the game. Most companies today share this information haphazardly, at best, via phone, fax or unencrypted email. This presents significant issues of data security and integrity, in particular the miscommunication of data and the reconciliation of data that has been duplicated and sent to different locations. If you don't think this is an issue in your business, total up your scrap costs sometime. Or ask yourself when was the last time your products shipped on time?

With Web-native software, manufacturers and their extended global supply chain have universal access to the same information with financial-grade security that is simply cost-prohibitive for most companies. The problems inherent in trying to collaborate with client-server applications disappear. There's no need to open up firewalls, duplicate data, and email multiple copies and versions to different suppliers. With web-hosted applications, everyone can log into the same database real-time and access exactly what data they need when they need it.

The ability to deliver enterprise-class software across the Internet means the end of enterprise software as we know it. And, more importantly, it means that manufacturers can go back to doing what they do best - creating and building products. That can only be a good thing for CEOs who have better things to worry about than the latest IT crisis … like staying competitive in their product markets.

Michael Topolovac is founder and CEO of Arena Solutions, a leading provider of online Product Lifecycle Management (PLM) software.

Adapted from an article which first appeared in Start Magazine

If you have any feedback to add to this debate, please email plm@cambashi.com with the subject "PLM debate".