”Great ERP, worse PLM” – What SAP PLM needs to sharpen its competitive edge

Someone once said that SAP ”is the IT company people love to hate”.

Someone once said that SAP “is the IT company people love to hate”. Project implementers say that because it’s hard to implement due to the complexity. Chief financial officers have declared it expensive. And end-users have said, “ease-of-use is something you have to look for elsewhere”.

Still, almost every sizeable company runs SAP. Why? The simple truth is that SAP’s solutions get the job done, at least on the ERP side. As soon as organizations and products reach a certain stage of complexity, particularly when coupled with manufacturing, you can bet that a system from SAP is playing a significant role. As a result, this gigantic enterprise solutions developer is the world’s number one provider of ERP systems, with some 260,000 customers worldwide.

SAP is the world’s number one enterprise business IT provider, but what about PLM? Last year CEO, Bill McDermott, could note revenues of $ 1.4 billion from this area. But for the ERP giant SAP, with a turnover of around 22 billion, this is just a small part of the income. This may say something about the company’s priorities.


Clearly SAP dominates the ERP arena, but what about PLM? They’re big in this space too, and have been a long time player, but not to everyone’s delight. PLM competitors accuse them of buying their way into the space simply because customers that have deployed SAP’s ERP system get PLM for “free”.

While the “PLM for free” aspect is debatable, some facts are not: In terms of revenues in the overall PLM market, SAP PLM systems ranked fifth last year, behind Dassault Systemes, Autodesk, Siemens PLM, and PTC. In the sub-segment of cPDM (collaborative Product Data Management), often regarded as the backbone of PLM, they were even more successful. SAP was the number one (software only) revenue generator in 2013, according to CIMdata.

Apparently there are a number of PLM-related “SAP values”​​, but what are they about? What are the weak spots? Are new technologies, like the in-memory “database” platform HANA, a threat to the traditional PLM database solutions? Or is it an opportunity?


“SAP is like a glacier”, they move slowly but
the shere size makes them nearly unstoppable.
The downside is among other that the slowness
creats opportunities for competitors.

“Competitors don’t need to run fast to stay ahead”
In the world of  modern new product development, the SAP giant is moving slowly, “like a glacier”, says Gartner’s PLM analyst Marc Halpern. And like that ice sheet, sheer size makes them nearly unstoppable. The advantage of scale is that it incrementally diminishes the value of investing in SAP’s PLM competitors. But there’s a downside too; SAP’s slowness can be frustrating for their customers, creating opportunities for competitors, integrators and service providers.

The bottom line is that SAP’s competitors don’t need to run very fast to stay ahead in terms of functionality enhancements. “While I am impressed with what I have seen of SAP’s ‘Engineering Control Center’ developed by DSC, I think SAP should have had such a solution to support mechanical CAD years ago”, says Halpern.

He notes that the same tardiness can be found in other areas, “Many of SAP’s competitors are moving fast in the world of systems engineering… I hardly see activity from SAP in this regard at all”. From a competitive standpoint this may prove costly. Systems engineering is one of those areas that drive the transition of product development processes.  Organizational, procedural and integration issues are not far behind as systems engineering grows more important. 

One crucial factor in the race of the Smart
Factory leadership is about BOMs in general
and specifically the mBOM. Right now there
are primarly four participants in the
battlefield: Siemens (the picture above
symbolizes their version of the Industry 4.0
concept), SAP, GE/PTC and IBM. From an
overall perspective, the “war” is about linking
shop floor IT with product development.

If we talk about the integration of the tools, it has to start at a systems level. One of the obvious connections will be to Bills of Material (BOM). Elements or items from the BOM come from different directions; software, electronics, and mechanical components, for example. A key question is: How do you effectively orchestrate all the activities in the flows from the parallel tracks of software, electronics and mechanics? A PLM developer that falls behind in this will be in trouble.

SAP PLM’s toughest competitors are working on the problem. Siemens PLM bought the Belgian company, LMS a couple of years ago and is currently working full steam to integrate the systems engineering capabilities into the Teamcenter suite. Nor has Dassault Systemes been idle, addressing systems engineering on the 3DEXPERIENCE platform with the Swedish developed Dymola solution, which was also the result of an acquisition.

PTC has also been active in acquisitions.  After the previous purchase of the ALM solution Integrity, PTC this summer acquired British engineering specialist Atego.  The company has also launched an integration initiative within the framwork of the PLM suite, Windchill.

SAP may not be on that thin ice yet, but should, according to Halpern, be able to be more proactive in this crucial area.


SAP holds a strong postion in the Central
European industrial belt. Almost every sizable
manufacturer uses the ERP giant’s software.
BMW (above) is a good example. One of SAP’s
strengths in this context is that it has evolved
to become “the natural system of records for

SAP’s strengths reside outside of product design
While these issues can pose problems, SAP has many strengths too.  Those are generally found outside of the design area. “Primarily SAP is the natural system of record for products that are actually produced and delivered to customers”, says Halpern.

Since SAP is often used as an MRP system (Material Resource Planning), SAP naturally owns the record of the “as built” BOM, the mBOM (manufacturing BOM), as opposed to the eBOM (engineering BOM) which reflects the product as designed by engineering, which more commonly is created by traditional PLM systems like Siemens’s Teamcenter, PTC’s Windchill or Dassault Systemes’ Enovia.

In most cases, the eBOM comes from a PDM system while the mBOM comes from an ERP system. It’s not a rule, but in the case of SAP this is how it generally works.

Marc Halpern asserts that, “this gives SAP an advantage if the company should decide to invest more in the service lifecycle for products”.


SAP’s strong analytics technology has “great
potential”, according to analyst Gartner.
Daimler Trucks North America is one example
of a SAP analytics user: They utilize SAP
Lumira to identify and track potential sales
for dealers.

A strong analytics technology with great potential
Today, SAP also has advantages in their ability to link inventories of parts to new products that are under development. This gives SAP advantages in managing part enhancement while manufacturing is being planned for new products.

Moreover, SAP’s strong analytics technology has great potential to continuously improve sourcing, design for cost, design for manufacturability, market acceptance of products and design for quality.  “I see SAP’s strength and ongoing potential as it relates to that part of PLM that is outside of actual design activities”, relates Halpern, adding “as it relates to New Product Development, SAP has strong potential to provide product strategists and new product development managers with insights into strategic product priorities (including financial implications) and continuous improvement. However, SAP has yet to fully exploit this potential”.


Competition on the analytics arena is tough as
the traditional PLM players are enhancing their
capabilities in this area too. Among others
Siemens PLM acquired Perfect Costing, which
is now implemented into the Teamcenter PLM
suite (TC Product Cost Manager). With this
solution, you can calculate the cost of, for
example, a part in a product’s earliest phases
without having to base your choice on
historical facts.

SAP’s Hans Thalbauer presented the company’s
PLM Roadmap in 2007. After that SAP has
continued to improve their PLM solution and
have, according to CIMdata, “strengthened
their competitiveness”.

Has the SAP “glacier” strengthened its PLM competitiveness?
Inertia aside, the SAP “glacier” has nevertheless moved forward over the past seven years. In 2007, SAP’s Hans Thalbauer, today senior vice president, Line of Business Solutions for Supply Chain and R&D, presented a roadmap for improvements in their PLM system ranging from improved usability to better program planning. This wasn’t SAP’s first PLM commitment, but the level of detail in this plan made ​​it worthy of note. Emphasizing support for the “business of product”, SAP promised better integration to all parts of the SAP product suite to support decision making on product innovations.

Since then, SAP has continued to implement the PLM roadmap. CIMdata even claims that “SAP (has) strengthened its competitiveness”.

From a historical perspective, this is correct. They have improved usability over the last several releases and added new or enhanced functionality to support features such as “product structure and configuration management, lifecycle process management, and collaborative activities”. It’s also true that new landmarks appeared on the SAP PLM roadmap, including EDA data management, application lifecycle management (ALM), systems modeling, and S&A data management.

Some, but not all have been implemented, but clearly this has made their PLM solution and vision stronger. The question remains as to whether these measures are more a matter of catching up rather than proactively seizing a technological lead. 

Today, SAP PLM contains modules for Portfolio and Project Management (the PPM offering that has powered their cPDM growth over the last several years), Document Management System, CAD Integration in PLM, Quality Management, Collaboration, Engineering Change Management, Bill of Materials, Variant Configuration, Batch Management and SAP’s PLM 7.01 for Discrete Industry, which contains a number of specifically adapted discrete manufacturing modules like BOM, engineering change record, product assembly and product structure solutions. There is more, however.


“The Visual Enterprise solution may emerge
as one of SAP’s strongest PLM-related

The visual enterprise strategy
In early 2012, SAP announced their “Visual Enterprise” strategy, which leveraged their earlier Right Hemisphere acquisition. SAP Visual Enterprise may emerge as one of their strongest PLM-related new solutions. 

“Both the technology and the business process it enables add a lot of power to the SAP PLM portfolio”, claims industry consultant Joe Barkai. “Besides SAP’s high level of process and data integration allowing for better product related decisions, especially involving multidisciplinary data that is typically scattered across different business functions and tools, Visual Enterprise is one of the most useful tools.”


Visual Enterprise (VE) consists of three core products:

1. The VE Generator: A processing engine that translates nearly any 3-D  CAD file into a lightweight file format used in downstream processes. It can also be configured to support specific work processes in engineering, manufacturing and maintenance.

2. The VE Author: An end-user application that creates animated procedures, 3-D embedded documents and high-definition imagery.

3. The VE Viewer: A lightweight, free-of-charge end-user tool to view and interact with the authored and published content.

“It’s great software integrated with the SAP Business Suite that gives the user a complete new ‘view’ of their data, while combining visual information with business content improves collaboration, enables better decision-making and drives faster time to market for our customers”, commented SAP’s Thalbauer. 


SAP’s  Bill McDermott is not immune to the
revenues “promised” by the “beyond PLM

SAP expands their vision to go beyond PLM
Is SAP an innovative company? The answer is indeed multifaceted. Here’s my take: There is a lot of idea and thought power in this German company. It wasn’t just a one-shot stroke of genius that brought them to the position as one of the world’s leading business IT companies.

They’ve had many visions over time, primarily related to enterprise business systems like ERP, SCM, CRM etc.

Even in the PLM area they were “early birds”. As a matter of fact they might very well be the first company that mentioned the acronym PLM. This is at least what the American CAD journalist Ralph Grabowski found out when he was looking for the roots of this term. As early as 1999 SAP mentioned “PLM” in a press release, according to Grabowski.

One of the challenges when it comes to SAP PLM is that the division is a pretty small part of a big corporation; out of almost $22 billion in revenue for 2013, approximately $1.4 billion came from PLM-related activities. This puts their commercial focus in perspective. It’s not a bold statement to claim that the main attention will remain on business-related enterprise IT solutions, more so than on PLM.

However SAP’s CEO, Bill McDermott and SAP leadership are not immune to the revenues “promised” by the “beyond PLM development”.  Things like the Cloud, the “Product-as-a-Service” concept and the Internet of Things (M2M included) are technologies that can capitalize on trends that analysts like Gartner and IDC say are about to reshape the world’s commercial and consumer markets. To be able to compete you have to develop broader and deeper capabilities than what is offered by classic PLM vendors. Dassault Systemes (3DEXPERIENCE), Siemens PLM (Teamcenter), Autodesk (PLM 360) and PTC (Windchill) have realized this and have started to act.  Their customers demand it, and as they do, SAP is changing too.

To that end, last year SAP began promoting a new focus, “Idea to Performance”. This expands their vision beyond PLM to include Sustainable Innovation (focus on product as a service), Operations Excellence, Responsive Manufacturing and After Market Services. Also, SAP has invested heavily in mobile (so far not applied in the PLM space).


SAP HANA, the innovative in-memory
database platform, “will help people to work
up to 10,000 times faster”, claims Steve Lucas,
SAP’s President of Platform Solutions.

Is SAP HANA a threat or an opportunity?
Many of the new offerings from SAP are now being powered by SAP HANA, SAP’s in-memory database platform.  In my opinion, this is the company’s most interesting innovation in several years. Paired with their strong predictive analytics tools, HANA can turn out to be one of the aces up SAP’s sleeve and represents one of SAP’s core strategies. So far this technology hasn’t had an impact on the PLM market, but it certainly can add valuable capabilities as it evolves.

SAP’s President of Platform Solutions, Steve Lucas, said that, “Hana will help people work faster, from 10 to 10,000 times faster and the in-memory applications will make our business lives simpler and help us work smarter. Let me also underline that Hana is not only a database but also a platform as it introduces a number of libraries and processing services”.

The architecture of SAP HANA.

Is HANA a threat or an opportunity to the traditional developers’ databases? From my perspective it’s the latter. The traditional PLM databases are generally more than “just” databases, there’s a lot on top of them. The ability to integrate applications, predict product and process performance across multiples disciplines and to provide information support across the full lifecycle requires a lot of application logic on top of a data base. 

“I think HANA has a great deal of potential. It can play a significant role in rapid access to product lifecycle analytics related to service lifecycles, manufacturing performance metrics, cultivating product portfolios, etc. That potential is great. While I think SAP has the technology, the outstanding question is the readiness of SAP, SAP’s service partners, and SAP’s customers to capitalize on it”, says Marc Halpern.


SAP’s toughest challenges
There’s no question that SAP has vision, they have the resources to realize them and they have the customers. On the other hand, PLM is a small part of the company’s operations and therefore gets less attention. SAP is also relatively sluggish due to its size and is rarely (SAP HANA is the shining exception)  on the technological edge, at least when it comes to PLM.

According to Marc Halpern the most important short term concrete challenges relate to working across the multiple views of Bills-of-Material and orchestrating manufacturing process plans with BOMs, as well as achieving appropriate juxtaposition/blending/federation of data across ERP, PLM, CRM, SCM, etc. These questions come up more often with SAP than the other PLM vendors.

Tough? Yes, but there’s one consolation for SAP: most PLM players face those same challenges.