In a recent report on the state of the cloud enterprise software industry, Bessemer Ventures notes that the market cap for the top 10 public cloud companies more than septupled from less than $25b to more than $175b (note that 2 of the previous top 10 have since joined the SAP family, which has a market cap of $90b on its own). Clearly this is a growing market. However, it is not growing for all industries at the same rate.
In conversations that I have with manufacturing companies around the world, there is still a reluctance to adopt cloud for what are seen as some of the most important and differentiating capabilities distinct to each company—specifically in this context their product designs and management thereof (through to manufacturing included). However, to be fair, until recently one of the major hindrances to adoption was the ability to manage CAD in the cloud. The industry has been, or perhaps I should qualify this and say that I have been blown away with some of the technological advancements in cloud CAD capabilities currently being peddled by OnShape. While really only viable for certain industries within the SME marketplace, Jon Hirschtick is once again setting out to change the CAD world.
Now, arguments abound that a company’s most important data are their customers’ and employees’ information—CRM and HR being some of the first lines of business to make a widespread move to the cloud. I am not here to judge what makes sense for any given company; rather, I am here to help companies adopt software strategies that map to their business strategies and risk profiles. The other part of my job is to help SAP make investments and create software offerings that map to the biggest market opportunities. It is through this lens that I would like to lay out how I see the cloud market for PLM advancing.
1. Compliance: companies are really starting to look to the cloud for help with compliance needs. Much of the compliance market is dependent upon public regulatory requirements—though certainly not all. Perhaps companies think of this information as information that would be shared anyway. Or perhaps they see it as non-mission critical. Or it could be that the benefits simply outweigh the risks by freeing resources to focus on higher value add activities.
2. CAD: product geometry is generally a touchy subject. While SAP does not have a CAD offering, we do enable 3D visualization and analytics with our Visual Enterprise solutions. Companies tend to be very reluctant to publish this information and it has challenging when trying to enable cross-supply chain collaboration. The technology exists, yet most companies say “not just yet.”
3. Project Management: this area is one of the most ripe for transitioning to the cloud. Recent Gartner reports highlight this and looking at the number of companies playing in this space it is safe to say the outlook for this sector is cloudy. However, most companies tend to focus on IT project management and less so on R&D project management. Two likely reasons are the lesser sensitive data involved in these projects and their relative ease of management when compared to other use cases. Our tools give customers the choice of on premise on in the cloud for any use case they choose, be it R&D, IT, Commercial or Capital.
4. Core Systems: here I include things like product innovation platforms and systems engineering. The former is mission critical and also dependent upon many currently deployed on premise solutions for most companies. The latter has so far proven too complex—some might even argue that it has yet to be solved anywhere, on premise or otherwise. The market feedback I receive is that most companies are just not interested in moving this part of their business to the cloud. In a recent conversation I had with an automotive supplier I asked if they thought they might consider something like this in the cloud in 3-5 years, the answer “note even in ten.” While I think it may happen before that, the comment is indicative of most customers’ sentiments.
5. Networks: this is somewhat of an outlier as it is more of a technology than a solution area. However, this category is meant to highlight the solutions where cloud-enabled networks deliver so much business value that companies are willing to look beyond risks—perceived or otherwise. A great example of where there is the opportunity for high adoption include product compliance within the supply chain. Another use case for networks is as they relate to some collaboration scenarios, for example with crowd sourcing innovation ideas.
Cloud is also a very interesting question when people start to dig into what it actually means from a technology perspective, for example do you mean private cloud, public cloud, multi-tenant, single-tenant / multi-client, PaaS, SaaS—the list goes on. Working for SAP means that there are many, many different technologies and deployment options from which to choose. Our PLM portfolio actually takes advantage of all of the aforementioned technologies such that each offering can be tailored to each customer’s unique requirements. You can learn more about some of the things we are up tohere.