Product Life Cycle Management
| PLM Implementation
PLM Cost
The overall cost of a PLM solution varies depending on the provider and several factors, such as the number of users and your individual business goals. In a comprehensive chart provided by PLM Technology Guide, the elements of PLM are shown with their percentage of the total initial cost of implementing a PLM solution. This chart also shows the type of cost for each element — whether it is a one-time capital investment, annual recurring expense, one-time expense, or initial post-go-live support.
One-time capital investment:
Software - 30% of initial cost1
Cost dependent on:
- Number & type of users
- Required functionality or functional modules
- Deployment option: On-premise or on-demand
- Floating licenses or named user licenses
- List price and discount
Cost dependent on:
- Number of users & sites
- Configuration & performance requirements
- Quantity of data and required disk space
- Required system availability and uptime
- Deployment option: On-premise, hosted or on-demand
- List price and discount
One-Time General Expenses:
Education and Software Selection - 8% of initial cost1
Cost dependent on:
- Understanding of PLM & PLM Market
- Duration & thoroughness of evaluation
- Involvement of an external PLM consultant
Cost dependent on:
- Number of processes & methodology
- Size of organization & understanding of PLM
- Documentation of existing practices and processes
- Involvement of an external PLM consultant
Cost dependent on:
- Required configuration and/or customization
- Contract terms: Fixed price or time & material
- Hourly rate and discount
Cost dependent on:
- Training delivery: Vendor or Train-the-Trainer
- Training material: Standard or custom
- Training location: Vendor, on-site, and/or web-based
Cost dependent on:
- Approach: Manual or automated
- Number of source systems
- Type of data: Metadata, structured data and files
- Quality & quantity of data
Annual Recurring Expenses:
Software Maintenance - 5% of initial cost
Cost dependent on:
- Number & type of users
- Required functionality or functional modules
- Deployment option: On-premise or on-demand
- Floating licenses or named user licenses
- List price and discount
Cost dependent on:
- Duration
- Type and level of support
- Response time and system availability requirements
- Hourly rate and discount
A research study conducted by AMR/Gartner shows the typical range of PLM cost, based on a multimillion dollar investment plan with deployments being supplier facing, customer-facing, or internally oriented.
| PLM Costs | High | Average | Low |
|---|---|---|---|
| Core PDM, per user seat license* (net) | $6,000 | $2,600 | $500 |
| Implementation Costs (multiple of SW) | 2X | 1X | 0.5X |
| Maintenance Costs (per year, percentage of license) | 22% | 18% | 12% |
| Additional Costs | |||
| Database Licenses | $200,000 | $125,000 | $50,000 |
| Internal Allocations (multiple of SW) | 3X | 2X | 1X |
| Specialty Applications (per deal) | |||
| Product Portfolio Management | $1.5M | $500K | $50K |
| Implementation Costs (multiple of SW) | 2X | 1X | 0.5X |
| Component Supplier Management | $2M | $500K | $100K |
| Implementation Costs (multiple of SW) | 4X | 3X | 0.5X |
| Configurators | $3M | $600K | $120K |
| Implementation Costs (multiple of SW) | 4X | 2X | 1X |
* Deployments may be supplier-facing, customer-facing, or internally oriented
In a separate research study by AMR/Gartner of PLM projects, the results (displayed in the figure below) showed the typical fully budgeted PLM project costing $750K for midsize companies and $2.6M for large companies.
Source: AMR/Gartner
Consider All The Costs
On the cost side, there are two basic areas of consideration: up-front costs (e.g., software configuration, data migration, licensing fees, employee training) and ongoing costs (e.g., system support, license renewals, and maintenance fees). These costs are not especially difficult for organizations to determine, but actual costs will vary according to the number of sites, users, and business functions entailed, among other factors.
Companies would do well to consider "soft costs," such as the time spent by management teaching, leading, and encouraging staff, as PLM implementations get underway. According to analysts, these costs are typically underestimated. Primary among expected benefits—and criteria for evaluating ROI—are the following:
- Reducing engineering change orders to drive up productivity and reduce time to market
- Lowering product costs; particularly during recent times, top-down benefits have taken a back seat to bottom-up benefits such as cost reductions
- Improving quality and regulatory compliance
AMR/Gartner | www.gartner.com
PLM Technology Guide | www.plmtechnologyguide.com
Managing Automation | www.managingautomation.com