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Integrating the PLM Ecosystem

April 2008

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© 2008 Aberdeen Group. Telephone: 617 723 7890 www.aberdeen.com Fax: 617 723 7897

Executive Summary Developing, launching, supporting - and ultimately profiting - from new products is challenging. It requires the integration of business processes and product data across the multiple product development, data management, design, and analysis applications that make up the extended Product Lifecycle Management (PLM) suite. Additionally, in order to ensure profitability across the product lifecycle, these tools must also exist within the overall enterprise system footprint.

This report serves as a roadmap for companies seeking to identify Best-in-Class approaches to integrating disparate applications within the PLM suite and the extension of those applications into the broader enterprise, ecosystem to achieve higher returns from product investments.

Best-in-Class Performance Aberdeen used six key performance criteria to identify Best-in-Class performers. Analysis of these measures of product profitability reveals a large performance gap between Best-in-Class performers and their peers, most notably, they are:

• 26% more likely to hit target launch dates than the Industry Average and two-times as likely as Laggards to hit these same targets

• 29% more likely to meet product lifecycle cost targets than the Industry Average and 2.4-times as likely as Laggard companies

• 17% more likely to meet product revenue targets than the Industry Average and 2.2-times as likely as Laggard companies to hit these top line goals

Competitive Maturity Assessment The December 2007 Product Innovation Agenda 2010 Benchmark Report study found that the second largest growth area for PLM-related technology adoption by the Best-in-Class between 2008 and 2010 is the integration of PLM with other enterprise applications. Survey results show that the firms enjoying Best-in-Class performance share several common characteristics in regards to integration, including:

• 52% more likely to have processes span the extended PLM suite as well as 44% more likely than Industry Average to have business processes / workflow spanning PLM and other enterprise suites (such as ERP)

• 2.8-times as likely as the Industry Average to integrate Corrective and Preventative Action (CAPA) processes, and 2.3-times as likely to integrate quality planning

• More likely than other companies to bring actual costs, sourcing, and supplier data from ERP to PLM, and four-times as likely to be

Research Benchmark

Aberdeen’s Research Benchmarks provide an in-depth and comprehensive look into process, procedure, methodologies, and technologies with best practice identification and actionable recommendations

http://www.aberdeen.com/summary/report/benchmark/4170-RA-inovation-agenda-2010.asp



developing and integrating a "should be" cost in PLM that is then sent to ERP

Required Actions In addition to the specific recommendations in Chapter Three of this report, to achieve Best-in-Class performance, companies must:

• Use PLM to centralize product information. The Best-in-Class are more likely to centralize product data and more likely to use PLM as the primary system of record in the enterprise for most forms of product data.

• Take process integration beyond the release to manufacturing and change management processes. Best-in-Class companies are going beyond the basics and integrating additional processes such as quality management and costing.

• Take a multi-dimensional approach to integrating PLM. There is no “silver bullet” for integration, even the Best-in-Class are compelled to use multiple approaches based on the applications they are integrating.

• Adopt next-generation approaches to integration. Best-in-Class companies are planning to adopt Service Oriented Architecture (SOA), Product Information Management (PIM), and Master Data Management (MDM) approaches to integrating PLM.





Table of Contents Executive Summary....................................................................................................... 2

Best-in-Class Performance..................................................................................... 2 Competitive Maturity Assessment....................................................................... 2 Required Actions...................................................................................................... 3

Chapter One: Benchmarking the Best-in-Class ..................................................... 6 Pressures .................................................................................................................... 6 The Maturity Class Framework............................................................................ 7 The Best-in-Class PACE Model ............................................................................ 8 Actions: Integrating PLM Processes..................................................................... 9 Actions: Integrating Applications within the PLM Suite .................................. 9 Actions: Integrating Applications across the Enterprise Ecosystem..........10 Actions: Integrating Product Data within the PLM Suite..............................11 Actions: Integrating Product Data across the Enterprise Ecosystem........12 PLM as the Emerging System of Record...........................................................14

Chapter Two: Benchmarking Requirements for Success ..................................16 Competitive Assessment......................................................................................16 Capabilities and Enablers......................................................................................16

Chapter Three: Required Actions .........................................................................22 Laggard Steps to Success......................................................................................22 Industry Average Steps to Success ....................................................................22 Best-in-Class Steps to Success ............................................................................22

Appendix A: Research Methodology.....................................................................24 Appendix B: PLM as System of Record ................................................................26 Appendix C: Related Aberdeen Research ...........................................................28

Figures Figure 1: The Maturity Class Framework................................................................ 8 Figure 2: Process Integration across PLM and Enterprise Systems...................9 Figure 3: Integration within the PLM Suite............................................................10 Figure 4: Integration of PLM across the Enterprise Ecosystem .......................11 Figure 5: Integration of Product Data within the PLM Suite ............................12 Figure 6: Integration of Product Data across the Enterprise Ecosystem.......12 Figure 7: The Competitive Framework - Process and Organization..............17 Figure 8: The Competitive Framework - Knowledge Management................18 Figure 9: The Competitive Framework - Performance Management ...............18

Tables Table 1: Top Pressures Driving PLM Suite Integration ........................................ 6 Table 2: The Top Five Pressures Driving PLM to Enterprise Systems Integration....................................................................................................................... 7



Table 3: The Best-in-Class PACE Framework ....................................................... 8 Table 4: Data Integrated between PLM and ERP.................................................13 Table 5: Enablers - Integration within PLM...........................................................19 Table 6: Enablers - Integration across the Enterprise Ecosystem ...................19 Table 7: Best-in-Class Growth in Integration Technologies.............................20 Table 8: The PACE Framework Key ......................................................................25 Table 9: The Competitive Framework Key ..........................................................25 Table 10: The Relationship Between PACE and the Competitive Framework.........................................................................................................................................25 Table 11: System of Record for Product Data by Type.....................................26



Chapter One: Benchmarking the Best-in-Class

The components of PLM provide significant value, but there are no fully integrated offerings on the market that perfectly cover every aspect of the product lifecycle. Companies have to integrate data and processes in order to develop a full solution. PLMs primary function is to define, develop, and manage the product definition. Other solutions are employed to enable manufacturing, sales, and service aspects of these products' lifecycles. The integration of all these product-related processes require both connectivity and cross-application support in a way that entails both process and data integration.

The issue is on the forefront of executives' minds and is a top priority in many product-centric companies. In fact, Aberdeen Group's Product Innovation Agenda 2010 study reveals that 60% of Best-in-Class manufacturers are planning to integrate PLM with enterprise applications (ERP, SCM, CRM, etc.) between now and 2010. This is a projected 88% growth rate from the current 32% of respondents indicating that they have integrated PLM with enterprise systems - making integration second in the list of highest growth technology investments identified in the study.

Pressures What is driving these companies to integrate applications both within the PLM suite and across the enterprise application ecosystem? In both cases, the answer includes improving product development efficiency (Table 1 and Table 2). Forty-seven percent (47%) of respondents indicate that a need to streamline product development processes is a top factor driving integration within the PLM suite (Table 1), and thirty-two percent (32%) indicated that they are integrating PLM with enterprise applications for that same reason (Table 2).

Table 1: Top Pressures Driving PLM Suite Integration

Pressures All

Respondents Streamline product development processes 47%

Support distributed, global design teams 27%

Integrate product and manufacturing process design 23%

Coordinate change process across systems / people 19%

Reduce cost of wasted time and effort 18%

Source: Aberdeen Group, April 2008

Other factors driving integration within the PLM suite were split relatively evenly among the integration of product and manufacturing process design, better management of change, the reduction of wasted time and effort, and

Fast Facts

The Best-in-Class are integrating a range of processes, product data, and applications both within the PLM suite and across the enterprise ecosystem. Our research finds that the Best-in-Class are:

√ 2.8-times as likely as the Industry Average to have integrated Corrective and Preventative Action (CAPA) processes across the enterprise and 2.3-times as likely to integrate quality planning processes

√ 20% more likely than the Industry Average to integrate enterprise PLM with their core PLM as well as 83% more likely to integrate product management applications

√ 40% more likely than the Industry Average to integrate PLM with their ERP solution, 3.3-times as likely to integrate PLM with Quality Management System (QMS), and 4.2-times as likely to integrate with Sourcing or Supplier Relationship Management (SRM) solutions





the need to support a globally dispersed design team, which received a slightly higher response. Streamlining product development processes, however, is the clear leader.

Efficiency is also a major component of integration across the enterprise ecosystem (32%). The gap between the first and second most popular answers is not as great - with better coordination of the change process reported by 36% of respondents. This was reported nearly as often as the need to more effectively release products to manufacturing (40%). Both processes are focused on improving the communication of product information from engineering to manufacturing, and are typically major friction points where companies get out of sync and suffer from disruption (and profit erosion) in the product lifecycle.

Table 2: The Top Five Pressures Driving PLM to Enterprise Systems Integration

Pressures All

Respondents Release products more effectively to manufacturing 40%

Coordinate change process across systems / people 36%

Streamline product development processes 32%

Release products more effectively to supply chain 22%

Eliminate errors 14%


The Maturity Class Framework Between March and April 2008, Aberdeen Group surveyed over 270 manufacturers about their PLM integration plans. To determine which approaches provide the most tangible business benefits, Aberdeen benchmarked respondents according to six key performance criteria which evaluated their ability to meet crucial product development targets, including the percentage of products meeting the following:

• Product launch dates

• Product revenue targets

• Product cost targets

• Product development budgets

• Quality targets

• Lifecycle cost targets

Using these metrics, Aberdeen classified companies into the top 20% (Best-in-Class), the middle 50% (Industry Average) and the bottom 30% (Laggard) of performers. Figure 1 highlights the performance gaps that define each ranking. This gap indicates a large differentiation between the Best-in-Class



and their competition in the ability to profit from product innovation. This finding raises the need to understand what these leading companies do differently, if anything, in regards to PLM integration.

Figure 1: The Maturity Class Framework

90%87% 88% 88% 87% 89%70%69% 75% 71% 74% 77%

37%48%

31%49%41%44%

0%

50%

100%

ProductLaunch Dates

Product RevenueTargets

Product CostTargets

ProductDevelopment

Budgets

QualityTargets

Lifecycle CostTargets

Best-in-Class Industry Average LaggardSource: Aberdeen Group, April 2008

The Best-in-Class PACE Model Integrating systems, both within the PLM suite and across the enterprise ecosystem can be a complex prospect. The Best-in-Class are taking a multi-dimensional approach to integrating PLM, integrating processes, applications, and data. To do so they leverage process, organizational, and knowledge management capabilities that are summarized in Table 3.

Table 3: The Best-in-Class PACE Framework

Pressures Actions Capabilities Enablers Streamline product development processes Release products more effectively to manufacturing

Integrate product release to manufacturing, change management, and CAPA processes within the PLM suite Integrate documentation, project management, and enterprise PLM applications within the PLM suite Integrate PLM with ERP, quality management, and sourcing applications Centralize or synchronize product data within the PLM Suite Use PLM as the system of record for product data for the enterprise, including: Bills of Materials (BOM), costs / sourcing, items / parts, and quality plans

Business processes / workflow spanning PLM and other enterprise suites (such as ERP) Business processes / workflow tied to product data Formalized data ownership Integration of corporate and engineering IT Ability to measure KPIs from product data

Data cleansing Data warehousing Enterprise Application Integration (EAI) or Enterprise Service Bus (ESB) Web services / SOA middleware Data standards (IGES, STEP, etc.) Design visualization CAD data translation




Actions: Integrating PLM Processes The top pressures driving integration include streamlining and improving product development and change management processes. When it comes to which processes are integrated across PLM and enterprise systems, the most popular integrations are not surprising - release to manufacturing and change management (Figure 2). These are commonplace among many companies, with almost two-thirds of all respondents indicating they have integrated in both of these areas. They are slightly more common in Best-in-Class companies as well, indicating that there is value in this integration.

Figure 2: Process Integration across PLM and Enterprise Systems

85%77% 77% 75% 69%

79%70%

28%33% 38% 47%44%

21%

59%73%

0%

50%

100%

Product Release(to manufacturing)

ChangeManagement

Corrective andPreventative

Action (CAPA)

Quality Planning (APQP, etc.)

Product LaunchPlanning

Best-in-Class Industry Average Laggard Source: Aberdeen Group, April 2008

The Best-in-Class, however, are going beyond the basics and addressing a more closed-loop process between PLM and enterprise systems. For example, they report an increased focus on integrating quality processes. Immediately following change management, the Best-in-Class are integrating quality planning (75%) and Corrective and Preventative Action (CAPA) processes. Both of these integration actions are large differentiators. The Best-in-Class are 2.8-times as likely as the Industry Average to integrate CAPA processes, and 2.3-times as likely to integrate quality planning. What's interesting to note is that the most common processes are primarily single-direction integration, namely from engineering to manufacturing. The more differentiated approaches also include a bi-directional flow of information (specifically with CAPA) that can provide information from product execution back to designers.

Actions: Integrating Applications within the PLM Suite The most common applications to be integrated within the PLM suite are technical documentation applications, CAD, enterprise PLM, or PDM. These are also areas where the Best-in-Class are more likely than their peers to integrate (Figure 3).

"If changes in bills of materials and item revisions must be transferred manually into the ERP system, you lose significant opportunity for productivity gains and introduce significant opportunity for errors. Errors can have major consequences for manufacturing, ranging from missed shipment dates to customers, all the way to massive excess inventory.”

~ Scott E. Davis, Director, Global Documentation Systems, Symmetricom



Figure 3: Integration within the PLM Suite

92%75%

67% 62%62%41%

63%52% 50%

38%38%

76%

0%

50%

100%

TechnicalDocumentation

Project Management CAD of other designtools

Enterprise PLM / PDM


CAD, PDM, and enterprise PLM are core areas of the PLM suite. Integration here may come as no surprise. Integration with CAD is about integrating product-context data, such as Bills of Materials (BOM), with detailed designs. The integration with enterprise-level PLM mirrors this extension into design, bringing the business and supply chain context to PLM. These are common areas of integration for the Industry Average as well as the Best-in-Class. Laggards, however, fall off when it comes to integration with enterprise PLM, reported by only 38% of these companies.

Beyond these core applications, the Best-in-Class are integrating with technical documentation and project management tools. Documentation is a popular area of integration for the Industry Average and Laggards as well, but is still differentiating for the Best-in-Class which are 50% more likely than Industry Average performers to do so. This integration can range from integrating deliverables such as drawings to integrating the development of documentation with product development. In this sample, Laggards are more likely to integrate than the Industry Average. Previous Aberdeen research on the integration of product documentation supports the fact that Laggards are behind with regards to integrating documentation to product data.

In addition to documentation integration, integration with project management applications displays the clearest difference across the performance framework, with the Best-in-Class 83% more likely than the Industry Average to integrate. Best-in-Class organizations' focus here is likely tied to the pressure to increase the efficiency of product development.

Actions: Integrating Applications across the Enterprise Ecosystem The most common integration among enterprise applications is between PLM and ERP. This is not surprising given the integration of processes identified earlier, and the role that PLM and ERP play in product design and product execution respectively. The majority of companies (59%) with PLM have integrated these systems with their ERP system. Beyond being a common integration, it is also a performance differentiator, with the Best-in-

"We have integrated our CAD and visualization applications to PLM thus far. The main benefits we’ve achieved are a decrease in design cycle, higher quality designs out-of-the gate (improved manufacturability of new designs and design changes), reduced prototype runs and costs due to improved manufacturability, as well as a decrease in the number of design changes post release."

~ Mark Halbish Global PLM Director

TI Automotive



Class 40% more likely than Industry Average companies to have integrated PLM to ERP. However, these Best-in-Class companies are much more likely to take enterprise systems integration efforts a step further than their peers (Figure 4).

Figure 4: Integration of PLM across the Enterprise Ecosystem

77% 69%54% 46%55%

21% 13% 17%13% 7%19%

41%

0%

50%

100%

Enterprise ResourcePlanning (ERP)

Quality ManagementSystems (QMS)

Sourcing applications / Supplier RelationshipManagement (SRM)

Content ManagementSystem (CMS)


Following ERP, the two applications that see the highest levels of integration among the Best-in-Class are also the most differentiated. Integration with sourcing applications is a major differentiator, with the Best-in-Class four-times as likely to integrate this to PLM as the Industry Average. This may reflect the importance of making appropriate sourcing decisions early in the product lifecycle where costs are still easily influenced.

However, what is interesting is the attention that the Best-in-Class have given Quality Management Systems (QMS). QMS is the second most commonly integrated application with PLM among the Best-in-Class (69%), with less than one quarter of Industry Average and Laggard enterprises having taken this step, supporting the previous findings that the Best-in-Class are more likely to be integrating quality planning and CAPA processes across applications.

The Best-in-Class are also 2.7-times as likely as the Industry Average to integrate PLM with Content Management Systems (CMS) that manage documentation, web content, and other information across the enterprise. The Best-in-Class are making product related information available more readily available to the rest of the organization.

Actions: Integrating Product Data within the PLM Suite Beyond process and applications, companies are integrating product data. This is perhaps the most commonly known capability of PLM, managing product data. Within the PLM suite, multiple applications store and use product data. Ninety-three percent (93%) of the Best-in-Class either store data in a centralized database within PLM, or keep data in multiple databases in sync automatically (Figure 5). In fact, the Best-in-Class are more likely than others to synchronize data as opposed to strictly centralizing it, however the majority of the Best-in-Class (62%) centralize their data.

"One of the things we added to our new NPDI process is a focus on quality function deployment and building quality into the product. One integration point between PLM and QMS is a custom NPDI portal which is linked to our quality management notification system. QM needs visibility into the PDM and CAD data that is provided through the PLM interface. This gives QM a ‘seat’ at the product development table as well as giving QA departments increased access to the data they need to develop inspection programs and increased input into supplier selections and certification programs."

~ Tom Hillison Manager, Business Process

Management Sloan Valve Company



Figure 5: Integration of Product Data within the PLM Suite

17%28%

62%

31%

8%

73%

10%17%

56%

0%

50%

100%

Product data is stored in acentralized database

Product data is stored in multipledatabases, but kept in sync

automatically

Product data is stored in multipledatabases, w ith the potential forconflicting data in each system


Actions: Integrating Product Data across the Enterprise Ecosystem Across enterprise applications, there isn't as clear of a picture. One thing that is clear is that the Best-in-Class are twice as likely as the Industry Average (55% compared to 25%) to store data in a centralized database (Figure 6). While this can be a challenge given acquisitions, it is still the way that leading companies are approaching data integration within the PLM suite. The other thing that is clear is that Laggards are four-times as likely to simply store product data in multiple databases without synchronizing or managing the conflicts. Clearly managing product data is the preferred approach of Best-in-Class companies.

Figure 6: Integration of Product Data across the Enterprise Ecosystem

18% 12% 0%

55%9% 18% 9% 9%25%

4%32% 32%

7%41%29%

0%

50%

100%

Product data isstored in a

centralized database

Product data isstored in a federated

model (linkedtogether logically,

but data is in

Product data isstored in multiple

databases, but keptin sync automatically

Product data isstored in multiple

databases, w ith thepotential for

conflicting data in

Data from multipleapplications

(including productdata) stored inMaster Data

Best-in-Class Industry Average Laggard


ERP is the traditional data backbone of the enterprise ecosystem, serving as the central data source for many companies. Although it serves as the system of record for a lot of corporate information, it has not been the primary location to store design and engineering data. Perhaps that is why, as seen in Figure 4, ERP is the most often integrated application with PLM. What are companies integrating between ERP to PLM? The majority of the information is flowing from PLM to ERP (Table 4). Ninety percent (90%) of

"Integrating PLM and supply chain planning means having information about new products and BOMs available in our planning systems earlier. This gives us the opportunity to plan and asses the impact of decisions on capacity, material requirements, etc., which should result in smoother new product introductions."

~ Food and Beverage Manufacturer



companies that have integrated ERP and PLM are sending BOMs from PLM to ERP, and 60% are sending change orders. These support the release to manufacturing and change management processes discussed earlier.

Table 4: Data Integrated between PLM and ERP

Best-in-Class Industry Average

Laggard

Bills of Materials (BOMs)

90% 93% 86%

Change orders

60% 60% 71%

Should be costs

PLM to ERP

60% 13% 14%

Costs / actual costs

78% 67% 33%

Sourcing data

67% 42% 50%

Vendor / supplier data

ERP to PLM

67% 33% 67%

Source: Aberdeen Group April 2008

What sets the Best-in-Class apart in PLM to ERP integration, however, is the integration of supplier and cost information. The Best-in-Class are more likely than other companies to bring actual costs, sourcing data, and supplier data from ERP to PLM. However, what is most interesting is that the Best-in-Class are also four-times as likely to be developing and integrating a "should be" cost in PLM that is sent to ERP. This supports a different use of PLM with regards to costing, where costs are identified and developed in the product innovation and engineering environment as opposed to - or in addition to - the ERP environment. This suggests that companies are adopting a Product Cost Management (PCM) approach to develop costs based on design data, potentially much earlier in the product lifecycle where it can be better impacted.

Integrating PLM & ERP - Arriving at a "Single Source of Truth"

A manufacturer of computer equipment and peripherals has integrated their PLM and ERP systems. This has automated the transfer of product information from PLM to the more complex ERP system. The OEM subscribes to a “single source of truth” philosophy, and is careful to ensure that PLM is the source of product information and that ERP is the system of record. This means that all changes originate in PLM and are then passed to ERP which ensures that information is accurately aligned between the systems.

continued

"Electronic transfer of BOM data to the ERP system from the solid models in 3D CAD has eliminated data entry errors. Additionally, integrating our documentation system with PLM has improved the quality of the data we use to manufacture products. The documentation system is now electronic, making it impossible to get the wrong revision of a drawing on the manufacturing floor."

~ Theodore Langevin Sr. VP Technical Services

Gunther International Ltd.



Integrating PLM & ERP - Arriving at a "Single Source of Truth"

This company has also integrated other systems that require the data that is controlled in PLM, again, with a single source of truth model. One of the benefits of this has been the decrease in confusion. With PLM as the identified source of product information enterprise-wide, it is clear where to go to change it. This includes downstream data, such as packaging information, that must be communicated to the retail customer (including dimension, weight, quantities, and UPC information). This manufacturer enters all of this data into the PLM system, which is then passed on to ERP, where it becomes accessible to the enterprise. A director at the enterprise observes, “Having this data accurate and controlled is key. Entering it in the PLM system allows us to have that single source of truth, which helps to ensure that the customer gets accurate information. They get upset when it is not.”

PLM as the Emerging System of Record The role of ERP as the primary data backbone is changing as PLM continues to transform into an enterprise application from its roots as an engineering tool. PLM is becoming the System of Record (SOR) - the primary, trusted data source - for a large amount of product data (Appendix B). While many applications use product data, including ERP, Best-in-Class companies are shifting the master source for product data further towards PLM. While there is too much data to review in detail, the following highlights stand out:

• Items / parts. PLM is the most common SOR, and even more prevalent among the Best-in-Class. The same is true for packaging and item specifications.

• Bills of Materials (BOMs). ERP is a slightly more common SOR for "as built," but one-third of the Best-in-Class use PLM (three-times more than others). ERP is the more common SOR for manufacturing BOMs overall, but the Best-in-Class are split between ERP and PLM (42% for each). ERP is the most common SOR for "as maintained" BOMs, except for the Best-in-Class which are about 2.5-times more likely to use PLM. Finally, the Best-in-Class overwhelmingly (92%) use PLM for configurations.

• Costs / sourcing. ERP is the most common SOR, but 42% of the Best-in-Class use PLM (three-times more likely than others). The Approved Material List (AML) SOR is about split between ERP and PLM overall, but 75% of Best-in-Class use PLM. The Approved Vendor List (AVL) SOR, on the other hand, is more evenly split by the Best-in-Class between ERP and PLM (42% versus 50%).

• Product graphics. PLM is the most common SOR, overwhelmingly so among the Best-in-Class (83%).



• Manufacturing. The SOR for manufacturing processes is split between ERP, MES, PLM and others / none overall, while ERP is the most common SOR for the Best-in-Class (50%). For the production model and process specifications SOR is scattered overall, but 42% of Best-in-Class store both in PLM.

• Quality. Over half of the Best-in-Class store quality plans in PLM, over two-times more than others. The Best-in-Class are most likely to use PLM as SOR quality results as well (33%), with QMS close (25%), and ERP not far behind (17%).

• Service. Service instructions are scattered in regards to SOR, but the majority of Best-in-Class (55%) use PLM as SOR.

Aberdeen Insights — Strategy

The major driver for integrating PLM is streamlining processes. Streamlining processes can indicate a focus on not just efficiency but improving the speed of product development. Making processes more efficient and reducing unnecessary administrative work means that designers and product development resources are freed up to focus on innovation, and can bring their innovation to market quickly to capitalize on margin advantages for new products.

To address this, Best-in-Class companies are integrating processes, applications, and product data. The leaders are more likely to go beyond the basics in all of these areas. While release to manufacturing and change management are the most common integration focus for all companies, the Best-in-Class are starting to focus on integrating quality into the design process and optimizing procurement decisions by integrating quality management, sourcing, and costing functions into PLM.

At the highest level this analysis makes it clear that the majority of companies are integrating both within their PLM suite and into the broader enterprise application ecosystem, with the Best-in-Class leading the way (and reaping the benefits in terms of meeting the product development targets that drive product profitability). In addition, PLM is emerging as the clear SOR for most product data in the integrated enterprise ecosystem.

In the next chapter, we will see what the top performers are doing to deliver on their greater ambition for PLM integration.

"Management now has the capability to view current and potential projects on their terms. They can view projects in ‘real time’ and not rely on monthly meetings or reports. This has given them a better feel for resource constraints and project progress rather than filling out a request and waiting for the product to ‘drop out’ of the end of the pipeline. This helps us avoid ‘pipeline gridlock’ and scale our development efforts to the projects at hand."

~ Tom Hillison Manager, Business Process

Management Sloan Valve Company



Chapter Two: Benchmarking Requirements for Success

Competitive Assessment Aberdeen Group analyzed the aggregated metrics of surveyed companies to determine whether their performance ranked as Best-in-Class, Industry Average, or Laggard. In addition to having common performance levels, each class also shared characteristics in five key categories: (1) process (the approaches they take to defining and executing their integrated PLM processes); (2) organization (corporate focus and organizational responsibility for integration); (3) knowledge management (formalized data and process ownership); (4) technology (the selection of appropriate integration tools and effective deployment of those tools); and (5) performance management (the ability of the organization to measure their results across integrated systems in order to improve their business). These characteristics (identified in Figure 7 through Figure 9) serve as a guideline for best practices, and correlate directly with Best-in-Class performance across the key metrics.

Capabilities and Enablers Based on the findings of the Competitive Framework and interviews with end users, Aberdeen’s analysis of the Best-in-Class demonstrates that when it comes to PLM integration, the Best-in-Class are taking a more structured approach than their competitors. Not only are they more likely to integrate both within the PLM suite and into the enterprise ecosystem, they are also taking an approach that ensures that integration goes beyond passing bits and bytes (or even XML) between applications. Integration isn't just about software, and Best-in-Class enterprises recognize that they need to ensure that the procedural and organizational capabilities are in place to allow them to take advantage of integration.

Process and Organization Integration is best applied when it supports a business process. Product innovation, product development, and engineering processes are broad and cross-functional. Engineering tasks often span applications within the PLM suite, requiring integration between multiple data management, CAD, and analysis applications, among others. To this end, Best-in-Class companies are 44% more likely than Industry Average companies to have business processes that span applications within the PLM suite.

Identifying across applications is important to ensuring a streamlined and effective process. In a similar manner, the Best-in-Class are 64% more likely than the Industry Average to have processes that span PLM and other enterprise applications. Clearly, defining cross-application processes is an important precursor to integration, as well as a benefit to be gained from integration.

Fast Facts

√ Best-in-Class performers are 52% more likely to have processes span the extended PLM suite as well as 44% more likely than the Industry Average to have business processes / workflow spanning PLM and other enterprise suites (such as ERP)

√ The Best-in-Class are 56% more likely to possess formal data ownership and 52% more likely to possess formal process ownership than the Industry Average



Figure 7: The Competitive Framework - Process and Organization

54% 62% 62%

35% 43%34%

0%

25%

50%

75%

Business processes /w orkflow spanning PLM

and other enterprise suites(ERP, etc.)

Business processes /w orkflow spanning

Innovation / PLM suite

Integration of Corporate andEngineering IT

Best-in-Class All Others


The Best-in-Class also report more integrated Information Technology (IT) organizations than other companies. Best-in-Class companies are 50% more likely to have integration of their engineering and corporate IT organizations. While corporate IT typically does not have the knowledge and expertise required to support engineering applications, as PLM drives engineering processes and data further into the enterprise, many of the lessons learned in corporate IT are invaluable, and in some cases are becoming mandatory. While this may cause some organizational challenges given different cultures and experiences, it is an essential element in the continued evolution of PLM.

Knowledge Management PLM, in many ways, is a knowledge management application. Chapter One discussed the importance and benefits of data integration. Past Aberdeen research has clearly shown a strong tie between centralized data and better product development performance. The Product Innovation Agenda 2010 study found that Best-in-Class companies are twice as likely to have centralized product data. Beyond data, the research shows a strong correlation between improved performance and the integration of business processes with the underlying data. Survey responses for this benchmark indicate that Best-in-Class companies are 47% more likely, in fact, to have business processes or workflow tied to product data.

Another aspect of knowledge management is knowledge ownership. Product knowledge is an asset that must be nurtured and maintained. To support this, Best-in-Class companies are 33% more likely to have formalized data ownership. This also extends to the knowledge of business processes, where the Best-in-Class are 38% more likely to employ formal ownership.

"Education, education, education - PLM is not widely understood up and down the organization so time spent on education at all levels of the organization is critical. Getting the involvement of all the key stakeholders in an integration to define requirements and solution specifications is tough to pull off, but critical to your ultimate success."

~ Mark Halbish Global PLM Director

TI Automotive




Figure 8: The Competitive Framework - Knowledge Management

69% 69% 62%50% 57%

43%

0%

25%

50%

75%

Business processes /w orkflow tied to product

data

Formalized data ow nership Formalized processow nership

Best-in-Class All Others Source: Aberdeen Group, April 2008

Performance Management The Product Innovation Agenda 2010 report also showed that Best-in-Class companies are much more likely to measure Key Performance Indicators (KPIs) related to product innovation, product development, and engineering than other companies. Perhaps it is not a surprise, then, that this study identified that Best-in-Class companies are 2.6-times as likely as the Industry Average to be able to measure KPIs from product data. Even more staggering is that almost one half of Best-in-Class companies can measure KPIs with data across applications, including both the PLM suite and enterprise suites. The Best-in-Class are over three-times as likely as all others to be able to do this, which in turn further supports their ability to measure and improve their Best-in-Class performance.

Figure 9: The Competitive Framework - Performance Management

54% 46%

20%9%

0%

25%

50%

75%

Ability to measure KPIs from product data Ability to measure KPIs w ith data acrossapplications (Innovation and Execution)

Best-in-Class All OthersSource: Aberdeen Group, April 2008

Technology When it comes to the supporting enablers for integration both within the PLM suite and across the enterprise ecosystem, there is no one answer to the integration challenge. This includes the Best-in-Class. In fact these companies are not only more likely to adopt technology to integrate PLM; they are more likely to adopt a broader range of technology than their competitors. In particular, to support integration within the PLM suite, they are much more likely to leverage composite applications, harmonized user interfaces, web services, portals, and other integration technologies (Table 5).




Table 5: Enablers - Integration within PLM

Technology Enablers Best-in-Class Industry Average Laggard

Data warehousing 80% 58% 60% Portals 80% 59% 50% Data cleansing 70% 19% 13% Published APIs 70% 38% 14% Web services / SOA middleware 70% 41% 44% Data standards (IGES, STEP, etc.) 70% 52% 33% Enterprise Application Integration (EAI) or Enterprise Service Bus (ESB) 60% 46% 73% Harmonized user interface across applications 56% 15% 13% Integration standards (ISA95, etc.) 50% 16% 13% Single signon across applications (LDAP, etc.) 50% 27% 25% Composite applications 40% 19% 13% Master Data Management (MDM) 40% 23% 19%

Source: Aberdeen Group April 2008 When it comes to integration across the enterprise ecosystem, the Best-in-Class don't show as heavy technology adoption, but again show a broad adoption of enablers at greater levels than Industry Average and Laggard organizations (Table 6). The Best-in-Class are using a broad array of technologies including data warehousing, data cleansing, single signons across applications, and published APIs.

Table 6: Enablers - Integration across the Enterprise Ecosystem

Technology Enablers Best-in-Class Industry Average Laggard

Data warehousing 73% 66% 57% Design visualization 64% 50% 47% CAD data translation 55% 46% 53% Data cleansing 50% 24% 20% Single sign-on across applications (LDAP, etc.) 50% 25% 21% Published APIs 50% 29% 15% Web services / SOA middleware 50% 45% 47% Product Information Management (PIM) 45% 39% 36% Master Data Management (MDM) 45% 39% 36%

Source: Aberdeen Group, April 2008 While there is no single solution to integration today, Aberdeen found that when looking to the future, the Best-in-Class are focused on four areas of technology investment more than others (Table 7). These include four technologies that promise to help ease the integration burden on companies:

• Web services / Service Oriented Architecture (SOA) middleware. SOA is a newer approach to architecting applications that allows business processes to be run by an internet request,



enabling business logic and data to be accessed independently of the primary application or user interface. This is a maturation of the application development approaches of the past, leveraging newer web-based technologies to make modular application functionality available so companies can develop composite business processes that call appropriate capabilities as needed.

• Master Data Management (MDM). MDM is an approach and application suite that provides a central repository for master or reference data that can be accessed and utilized across applications, providing a common SOR to be use by multiple applications, providing normalized data in a usable format.

• Product Information Management (PIM). PIM is an application suite that provides data synchronization and cleansing to connect and integrate disparate applications, recognizing that data will be stored in multiple systems of record and must be kept in sync. Frequently used to distribute product data across companies, these applications typically span not just applications, but also supply chains where different companies likely have different, conflicting data definitions that must be accommodated.

• Single signon. This is a service by which a user can sign on one time to authenticate themselves with a login and password, and then share those authorization credentials across multiple applications to avoid having to log on to multiple applications independently, helping to streamline the user experience for processes that span multiple applications.

Industry Average and Laggard organizations show less focus in these areas. All of these enablers show planned adoption by an additional 30% or greater of Best-in-Class companies over the next 12 months. In addition, Best-in-Class companies are planning to adopt the use of integration standards such as ISA95 that can help to standardize the interfaces between multiple systems through the use of a common data structure.

Table 7: Best-in-Class Growth in Integration Technologies

Currently Use

Plan to Use

Master Data Management (MDM) 50% 30% Product Information Management (PIM) 44% 33% Web services / SOA middleware 56% 33% Integration Standards (ISA95, etc.) 20% 50% Single sign-on across applications (LDAP) 56% 33%




Aberdeen Insights — Technology

This benchmark has not identified one single Best-in-Class approach to integrating the PLM Ecosystem. Instead, it has highlighted both the desire for integration and the continued challenge that integration provides. There is no single technology that is proving to be the "silver bullet" that helps the Best-in-Class achieve their higher levels of performance. Instead, the analysis indicates that the Best-in-Class are taking a multi-dimensional approach to integrating PLM.

This reflects the reality of PLM and enterprise applications today. The integration capabilities of today's PLM and enterprise applications are at many different stages of maturity. To succeed in this environment, the Best-in-Class have had to build a toolkit of integration capabilities and apply the appropriate integration based on the situation and the applications involved. In short, it is not necessarily the approach to integration that currently sets apart the Best-in-Class from others, but the integration itself.

Looking into the future, however, there is promise. Newer technologies such as SOA, MDM, and even PIM are promising to make integration between applications simpler. These technologies, separately or in combination, are the keys to enhanced integration efforts in the future. The Best-in-Class, already leading in regards to integration and gaining tangible advantages in profitability today, are planning to lead the way into the next generation of PLM and enterprise application integration.



Chapter Three: Required Actions

Whether a company is trying to move its performance in product innovation, product development, and engineering from Laggard to Industry Average, or Industry Average to Best-in-Class, the following PLM integration actions will help spur the necessary performance improvements:

Laggard Steps to Success • Centralize or synchronize product data within the PLM suite and

across the enterprise application footprint. Best-in-Class companies are more likely to provide a single system of record for product data.

• Integrate common processes between PLM and ERP, including release to manufacturing and change management. These are the most common processes integrated, and also contribute to Best-in-Class performance.

• Take advantage of technology as available to integrate applications, focusing on integration of ERP with PLM first.

Industry Average Steps to Success • Integrate Best-in-Class processes such as quality management and

product launch processes, expanding on the basics of release to manufacturing and change management.

• Continue to take advantage of technology as available, extending PLM integration beyond ERP to the additional applications leveraged by the Best-in-Class companies, including Quality Management Systems (QMS), enterprise PLM, sourcing, and project management systems.

• Develop capabilities in newer integration technologies such as SOA, MDM, PIM, and single sign-on to keep pace with the Best-in-Class companies that are growing the use of these technologies. Migrate existing integration to these new technologies as the opportunity to achieve greater levels of value increase, but leverage existing integration capabilities as available.

Best-in-Class Steps to Success • Integrate next generation processes, extending the current lead in

integration by addressing integration with sourcing, where only about half of Best-in-Class have integrated.

• Migrate existing integration to these new technologies as the opportunity to achieve greater levels of value increases, but leverage existing integration capabilities as available. Remember that even peer Best-in-Class companies are using a host of different integration technologies depending on the situation.

Fast Facts

√ Use PLM to centralize product information - the Best-in-Class are more likely to centralize product data and more likely to use PLM as the primary system of record in the enterprise for most forms of product data

√ Take process integration beyond the release to manufacturing and change management processes - Best-in-Class companies are going beyond the basics and integrating additional processes such as quality management and costing

√ Take a multi-dimensional approach to integrating PLM - there is no “silver bullet” for integration, even the Best-in-Class are compelled to use multiple approaches based on the applications they are integrating



Aberdeen Insights — Summary

PLM integration is being pursued by companies at all levels of performance, indicating a strong need for integrated solutions for PLM. This reflects the desire that most companies have for a single, integrated solution that would meet all of their product innovation and product execution needs, but is not yet available. The need is clear, and so is the value. PLM integration helps to drive improved performance in the metrics that drive product profitability.

To meet this need, the Best-in-Class take a broader approach to integration, recognizing that there is no “silver bullet” for integration. Even these leading companies are compelled to use multiple approaches to integration depending on the circumstance, requiring the adoption of a multi-dimensional or toolkit approach. Highest growth areas planned by the Best-in-Class include SOA, PIM, MDM, and single sign-on capabilities (such as LDAP) which promise to make integration easier, but also allow business processes to more seamlessly span the multiple applications within the PLM and enterprise ecosystems.

PLM is maturing and securing its role as a mainstay in the enterprise system footprint, and is emerging as the system of record for a broad range of product-related data in the enterprise. The need for integration, therefore, will likely increase as more companies adopt PLM and look to integrate their PLM ecosystem. Newer technologies will help, but all companies will need to continue to be resourceful in their integration efforts, and leverage a range of techniques.





Appendix A: Research Methodology

Between March and April 2008, Aberdeen examined the experience and intentions of the PLM integration strategies and plans of over 270 enterprises, both within the Innovation Suite and across the enterprise ecosystem. Aberdeen surveyed what is driving these companies to integrate, what systems specifically they are integrating, what steps they are taking, and what benefits they are seeing as a result.

Aberdeen supplemented this online survey effort with interviews with select survey respondents, gathering additional information on integration strategies, experiences, and results.

Responding enterprises included the following:

• Job title / function: The research sample was drawn predominately from engineering (38%) and information technology (28%) departments and included respondents with the following job titles: manager (42%); director (20%); vice president; (7%); senior management (5%), and engineer (12%).

• Industry: The research sample included respondents from across a number of discrete and process manufacturing industries. The largest groups of respondents came from the following sectors: industrial equipment manufacturing (14%); consumer goods (14%), automotive (11%), aerospace and defense (9%); high technology (9%), and medical devices (7%).

• Geography: The majority of respondents (65%) were from North America. Remaining respondents were from Europe (20%), the Asia-Pacific region (11%), and other (4%).

• Company size: Forty-two percent (42%) of respondents were from large enterprises (annual revenues above US $1 billion); 38% were from midsize enterprises (annual revenues between $50 million and $1 billion); and 20% of respondents were from small businesses (annual revenues of $50 million or less).

• Headcount: Sixteen percent (16%) of respondents were from small enterprises (headcount between 1 and 99 employees); 30% were from midsize enterprises (headcount between 100 and 999 employees); and 54% of respondents were from small businesses (headcount greater than 1,000 employees).

Solution providers recognized as sponsors were solicited after the fact and had no substantive influence on the direction of this report. Their sponsorship has made it possible for Aberdeen Group to make these findings available to readers at no charge.

Study Focus

Responding product development and information technology executives completed an online survey that included questions designed to determine the following:

√ The degree to which applications within the PLM suite have been integrated with another as well as with applications across the enterprise ecosystem.

√ How product data and processes are managed and integrated across enterprise applications

√ Current and planned adoption of strategies and technologies to support PLM integrations.

√ The benefits, if any, that have been derived from PLM application integrations

The study aimed to identify emerging best practices for integration, and to provide a framework by which readers could assess their own capabilities.



Table 8: The PACE Framework Key

Overview Aberdeen applies a methodology to benchmark research that evaluates the business pressures, actions, capabilities, and enablers (PACE) that indicate corporate behavior in specific business processes. These terms are defined as follows: Pressures — external forces that impact an organization’s market position, competitiveness, or business operations (e.g., economic, political and regulatory, technology, changing customer preferences, competitive) Actions — the strategic approaches that an organization takes in response to industry pressures (e.g., align the corporate business model to leverage industry opportunities, such as product / service strategy, target markets, financial strategy, go-to-market, and sales strategy) Capabilities — the business process competencies required to execute corporate strategy (e.g., skilled people, brand, market positioning, viable products / services, ecosystem partners, financing) Enablers — the key functionality of technology solutions required to support the organization’s enabling business practices (e.g., development platform, applications, network connectivity, user interface, training and support, partner interfaces, data cleansing, and management)


Table 9: The Competitive Framework Key

Overview The Aberdeen Competitive Framework defines enterprises as falling into one of the following three levels of practices and performance: Best-in-Class (20%) — Practices that are the best currently being employed and are significantly superior to the Industry Average, and result in the top industry performance. Industry Average (50%) — Practices that represent the average or norm, and result in average industry performance. Laggards (30%) — Practices that are significantly behind the average of the industry, and result in below average performance.

In the following categories: Process — What is the scope of process standardization? What is the efficiency and effectiveness of this process? Organization — How is your company currently organized to manage and optimize this particular process? Knowledge — What visibility do you have into key data and intelligence required to manage this process? Technology — What level of automation have you used to support this process? How is this automation integrated and aligned? Performance — What do you measure? How frequently? What’s your actual performance?


Table 10: The Relationship Between PACE and the Competitive Framework

PACE and the Competitive Framework – How They Interact Aberdeen research indicates that companies that identify the most influential pressures and take the most transformational and effective actions are most likely to achieve superior performance. The level of competitive performance that a company achieves is strongly determined by the PACE choices that they make and how well they execute those decisions.




Appendix B: PLM as System of Record

Aberdeen surveyed companies regarding their System of Record (SOR) for a range of product information. Table 11 lists the answers to these questions for any application that was reported by more than 10% of respondents. In cases where an application was indicated, but by less than 10% of participants, the responses were aggregated as "other."

Table 11: System of Record for Product Data by Type

Best-in-Class All Others PLM 75% 60%

ERP 25% 32% Items / Parts

Other / None Defined 0% 8%

PLM 42% 17%

ERP 58% 70% Item Costs


PLM 75% 67%

ERP 17% 18% Engineering BOM


PLM 42% 22%

ERP 42% 57%

MES 16% 9% Manufacturing BOM


PLM 33% 13%

ERP 50% 61%

MES 8% 11% As Built BOM


PLM 55% 22%

ERP 36% 46% As Maintained BOM


PLM 92% 53%

ERP 8% 24% Configurations


PLM 17% 15%

ERP 50% 36%

MES 17% 23%

Manufacturing Processes




Best-in-Class All Others PLM 83% 53%

ERP 8% 18% Product Graphics


PLM 58% 18%

ERP 17% 18%

QMS 8% 29% Quality Plans


PLM 33% 9%

ERP 17% 23%

QMS 25% 27% Quality Results


PLM 55% 31%

ERP 9% 16% Service Instructions


PLM 83% 64%

ERP 17% 27% Item Specifications


PLM 75% 41%

ERP 17% 34% Approved Material List


PLM 50% 18%

ERP 42% 48%

SCM 8% 16%

Approved Vendor List (By Item)


PLM 42% 18%

ERP 25% 27%

MES 17% 5%

Production Model Definition


PLM 42% 32%

ERP 25% 16%

QMS 0% 11%

Process Specifications (setpoints, etc.)


PLM 75% 42%

ERP 8% 22% Packaging Specifications


Source: Aberdeen Group April 2008



Appendix C: Related Aberdeen Research

Related Aberdeen research that forms a companion or reference to this report include:

• Winning Master Data Management (MDM) Strategies for 2008; January, 2008

• Product Innovation Agenda 2010; December, 2007

• Profiting from PLM: Strategy and Delivery of the PLM Program; July 2007

• Integrating PLM Processes; September 2006

• Enterprise Service Bus and SOA Middleware; June 2006

• Enabling Product Innovation: The Roles of ERP and PLM in the Product Lifecycle; December, 2005

Information on these and any other Aberdeen publications can be found at www.Aberdeen.com.

Author: Jim Brown, Group Director, Product Innovation & Engineering Research, [email protected]

David Houlihan, Research Associate, Product Innovation & Engineering Research, [email protected]

Since 1988, Aberdeen's research has been helping corporations worldwide become Best-in-Class. Having benchmarked the performance of more than 644,000 companies, Aberdeen is uniquely positioned to provide organizations with the facts that matter — the facts that enable companies to get ahead and drive results. That's why our research is relied on by more than 2.2 million readers in over 40 countries, 90% of the Fortune 1,000, and 93% of the Technology 500.

As a Harte-Hanks Company, Aberdeen plays a key role of putting content in context for the global direct and targeted marketing company. Aberdeen's analytical and independent view of the "customer optimization" process of Harte-Hanks (Information – Opportunity – Insight – Engagement – Interaction) extends the client value and accentuates the strategic role Harte-Hanks brings to the market. For additional information, visit Aberdeen http://www.aberdeen.com or call (617) 723-7890, or to learn more about Harte-Hanks, call (800) 456-9748 or go to http://www.harte-hanks.com

This document is the result of primary research performed by Aberdeen Group. Aberdeen Group's methodologies provide for objective fact-based research and represent the best analysis available at the time of publication. Unless otherwise noted, the entire contents of this publication are copyrighted by Aberdeen Group, Inc. and may not be reproduced, distributed, archived, or transmitted in any form or by any means without prior written consent by Aberdeen Group, Inc.

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