Sometimes you lose, but sometimes you win.

A few weeks ago, Dassault Systèmes lost the Bosch PLM deal to Siemens when the German industry giant decided to standardize on Siemens PLM’s NX and Teamcenter.

Today it appears that the French software developer has returned the favor, winning one of the year’s biggest global PLM/PDM deals over Siemens.

According to my sources, global telecom company Ericsson has decided to adopt Dassault’s ENOVIA V6 and 3DEXPERIENCE PLM platform.

This is an important decision for Dassault in general, and ENOVIA V6 and 3DEXPERIENCE in particular, for several reasons. The most important of these reasons is that Dassault needs a boost regarding the uptake of the relatively new technology that their end-to-end platform represents.

With many thousands of seats at stake, this outcome is an exciting win for the French software developer, especially since they beat out tough competitor Siemens PLM and Teamcenter in the final round.

Ericsson already has thousands of seats of an older version of ENOVIA (V5; or rather, an updated version of Matrix 10). The move to ENOVIA V6 includes a sizeable number of new seats and likely includes updates to the existing V5 seats as well.

While Siemens PLM didn’t lose anything it already had, it did lose the opportunity to make an exciting entrance in a “new” customer environment. For Dassault, however, this was a “must-win” situation due to the need for more large referenceable wins alongside the Jauguar Land Rover case in the automotive industry and a couple cases in aerospace.

A BIG WIN FOR BERNARD CHARLES. Telecom giant Ericsson’s decision to bet on Dassault Systèmes PLM/PDM solution ENOVIA V6, primarily for the company’s R&D department with 25,000 employees, is an important deal for Dassault and CEO Bernard Charles. The French PLM developer needs to boost sales of the 3DEXPERIENCE platform, where ENOVIA serves as the product data backbone. So far, the uptake of 3DEXPERIENCE solutions on the V6 architecture has been weak, so the Ericsson’s decision is a breakthrough.

For Ericsson, the choice of Dassault’s ENOVIA on the V6 architecture is driven primarily by the goal of leaving behind the old, IBM mainframe-based legacy system PRIM in favour of a modern PLM/PDM system configuration and database engine.

However, according to my sources within Ericsson, the decision is also about applying and developing new product realization processes that will better meet the requirements of disuptive technologies and platforms including the Cloud, software driven product development, the Internet of Things (IoT), and 5G (next generation, radio-based wireless communications) among other things.

This upgrade chiefly concerns Ericsson’s R&D organization comprising about 25,000 workers, which certainly tells us something about the size of the deal.

In this context, another important fact is that 100,000 employees at Ericsson are connected to PRIM, and as Ericsson’s Kenneth Skartedt said during his presentation at Management Event in Stockholm, “We have ENOVIA V5 and SAP connected to PRIM.”

However, Swedish PLM & ERP trade magazine VerkstadsForum previously wrote that Agile and PTC’s Windchill solutions are also connected to PRIM. As a whole, it is quite a diversified and complex environment, and one that requires an update to become more streamlined and able to adapt to the future.

Why Telecom is Growing Strong

This environment has served Ericsson’s basic business demands well in an expanding market.

PLM analyst CIMdata points to four major factors behind the telecommunications sector’s strong worldwide growth:

Demand for additional voice telephone communication. As countries such as China develop a consumer economy, demand for basic communications devices goes up.
Demand for additional lines for Internet and e-mail communication. As companies and markets become more global in nature, the need to communicate with customers and suppliers increases.
Demand for wireless communication. Wireless technology has become a staple, not only for business and personal use in developed countries, but also as a primary means of communication in developing countries that have not (or will not) put a wide-ranging landline system infrastructure in place. Not only does this drive the demand for mobile devices, but also increases demand for ground equipment (receiving and transmission) and satellites as well. This demand has grown exponentially due to the convergence of computing and telephony offered by smartphones. The resulting need for bandwidth will drive growth in networking equipment and cloud-based services.
Deregulation and privatization of national telephone companies. In order to satisfy the demand for increased communications, government-owned companies are finding it necessary to privatize in order to acquire the capital to expand. This trend has also been influenced by the World Trade Agreement on Basic Telecommunications Services.

An example of the ENOVIA V6 interface.

Complex BOM’s and Worldwide Processes

These four factors mean that Ericsson is facing a competitive market. This intense competition affects demands on products and services, which also affects how these products and services are developed, produced and distributed.

“The designs are complex in the absolute, and are further complicated by a diverse set of telecommunications standards that vary from country to country,” said CIMdata’s Stan Przylibinski. He continued, “This leads to a complex set of product BOM’s (Bills of Materials) and worldwide participation in the design process itself. In addition, cost pressures are intense, so the components and the finished products are made in low-labor-cost countries all over the world.”

According to Przylibinski, these complexities are all extremely important business drivers for PLM. Design and supply chain management is critical to being able to serve these growing and diverse markets. “To support this, PLM enables design sharing around the world, product visualization, configuration management, and engineering change management,” Przylibinski said.

Another complicating factor is the tangential field of satellites, earth stations, search and navigation equipment; specifically, product complexity and time-to-market.

“These are all major issues that PLM can address. Much of the work is done using subcontractors, so communication with suppliers is essential. The ability to handle complex product structures and engineering changes, and provide visualization of complex designs, is essential for companies in this field to deliver new products at target cost and on time,” asserted Przylibinski.

DIGITAL DISRUPTION. “The world is changing at an unprecedented speed, and during 2016 digital disruption will come to every industry,” said Ericsson’s president and CEO Hans Vestberg at the recent World Mobile Congress. He claimed that Ericsson is a leading force in this transformation. “Innovation is the key to being competitive,” he concluded, and it’s easy to see that PLM/PDM will play a leading role when the company replaces its mainframe system, PRIM, with a modern innovation supporting PLM solution.

Ericsson’s CEO: “Digital disruption will come to every industry during 2016.”

Few people know more about the technology-inspired transition occuring in the telecom industry than Ericsson’s CEO and president, Hans Vestberg.

“Things are moving fast, and the speed is constantly escalating,” Vestberg said during the World Mobile Congress in Barcelona, adding that, “Digital disruption will come to every industry in 2016, boosted by 5G, the Internet of Things (IoT) and the Cloud.”

From the stage in Barcelona, Vestberg spoke of an industry that used to be all about hardware, but which now mainly deals with IT and software solutions.

“Ericsson is on a journey of transformation. Today, 66 percent of our business comes from software and services; just years ago the majority was hardware. The majority of our principal competitors are ICT players, rather than telecommunications businesses. Our portfolio is constantly evolving to keep pace with customer demands. Now, with industries and even whole societies being disrupted by mobility, broadband and the Cloud, we are accelerating our own transformation."

During his speech, Vestberg identified 5G, IoT and the Cloud as the hottest topics in the ICT industry - and made major announcements in each area:

5G - Ericsson has agreements with 20 major operators around the world to work together on 5G and continued radio prototype network field trials. The plan is to ensure the commercial launch of 5G in 2020.
IoT - Ericsson's new IoT Transformation offering is a modular set of IoT professional services and software solutions that can be tailored to operators' needs and IoT ambitions. The Swedish telecom giant is also collaborating with AT&T to bring the operator's Digital Life solution, which uses IoT technology to transform home security and automation, to service providers outside the US.
The Cloud - Ericsson has announced plans to form a global business, technology and services alliance with Amazon Web Services (AWS) to accelerate cloud transformation for telecom service providers.

NEXT GENERATION. Ericsson showcased a number of new 5G-related technologies at Mobile World Congress 2016, as well as announcing its latest collaborations with leading mobile operators and technology platform providers. This next-generation radio based system will be realized around 2020.

Vestberg underlined the fact that many of these announcements are based on industry partnerships, since no single company by itself is capable of capturing every opportunity in an increasingly complex ICT landscape.

“With the pace of change being faster than ever, strong and long-term strategic partnerships are a necessity to drive growth, accelerate innovation and speed the digital transformation demanded by customers and consumers across all industries," Vestberg said.

PLM is one of the major tools in this.

My Take and a Couple of Remarks

A brave new world is forming, and Dassault Systèmes will supply a strategically important part of the tool-set that will support innovation at Ericsson.

Is it a daring move to jump on the Dassault Systèmes train and the 3DEXPERIENCE platform, which so far is not a clear cut, industrially proven solution?

This is not an easy question to answer. However, we can rest assured that the heavy decision-makers at Ericsson – CIO and former McKinsey leader Anders Thulin, and CTO Ulf Evaldsson – have carefully considered the options, and based their decision on a solid business case.

IMPORTANT PLM DECISION MAKER AT ERICSSON. Ericsson’s CIO Anders Thulin, a former McKinsey consultant and executive.

My take, considering all the reasons discussed above, is that Dassault’s charismatic leader, CEO and president Bernard Charles, made a clear committment to Ericsson not only to deliver the required functionalities at a guaranteed price, but also to support the project with capable implementation partners such as IBM and Tata Consultancy Services (TCS). On top of that, Dassault has probably promised to deliver on time.

It would not be surprising if Charles makes Ericsson a technology partner, as an assurance of transparency and the ability to influence how things are done.

That’s how important this deal is to Dassault.

My experience with Ericsson for IT generally, as well as PLM and ERP, is that while value creation is the number one requirement, cost is by no means unimportant.

However, the fact that Dassault already had an implemented ENOVIA license base was probably one of the factors affecting the offered price – upgrades are always cheaper than new seats – which in turn could have given them an advantage against the competion.

To swap from a mainframe to a standardized high-end PLM/PDM system is a tough job. Normally this would require a period of at least 15 months. During that period, Ericsson can probably expect limited business value to appear, if at all.

Things like education, training, learning new processes, establishing new methodologies and developing best practices takes time. The big gains will come later.

A key question in this context is: How long will that process take?

The posterchild project with 3DEXPERIENCE at Jaguar Land Rover took much more time to implement and get up and running than expected. Neither Ericsson nor Dassault Systèmes, can afford to take the same amount of time as the Jaguar project.

It’s a tough challenge, and one that will determine how mature the 3DEXPERIENCE platform has become.