The Market for PLM Services: Why Accenture thinks they can rattle IBM

While they might not be the celebrities of the PLM market, the consulting giants still play a crucial role in big industrial IT. Companies like IBM, Accenture, HP, TCS, Capgemeni and Deloitte are well acquainted with the problems that arise in PLM and ERP implementations.

These large service providers have historically focused on providing installation services and connecting separate systems, but today the PLM services market is undergoing major changes. "Our recent research in the Aerospace & Defense (A&D) industry shows that those who have long invested in PLM strategies and enabling solutions are looking for more", claims analyst Stan Przybylinski of CIMdata.

Stan's view is supported by Accenture's Senior Managing Director Eric Schaeffer, "Yes, we see a major change in the way we deliver our services. We not only work for a client, we work with them to jointly go to market. A good example is the joint venture that we have set up with GE Aviation, called Taleris.  That venture is about real time monitoring of critical equipment. We started with aircraft engines, but we now provide mointoring from tip to tail".

According to CIMdata this is a general trend across PLM service providers. "Their clients want help with more than just installing a solution.  They want to make the best use of the advanced features like program/project management, supply chain management, etc. Systems integrators that can provide these advanced skills, especially if they are focused on specific industries, will be better positioned for growth going forward", says Przybylinski.

Growth is one of Accenture's primary goals. Presently they are number 2 behind IBM when it comes to PLM Service revenues (2013). But IBM better watch out; Accenture is eager to become the number one PLM service provider. Accenture invested heavily during the past twelve months to buy the competence they didn't have.  They have brought a number of concrete solutions and visionary initiatives to life, such as APLS (Accenture Product Lifecycle Services) and a variant of the Industry 4.0 concept, Digital Industry 4.0.

Will this be enough to rattle IBM's top postion? I spoke with Eric Schaffer and Stan Przybylinski about the challenges Accenture face, what they are doing to meet them, and how the market for PLM services is evolving.

Many believed that IBM's PLM saga was over in 2009.  They were wrong
When IBM sold their PLM division to French developer Dassault Systèmes (DS) in 2009  for $ 600 million, many believed that IBM's PLM saga was over. They were wrong.

At the time, IBM had PLM revenues of  well over $1B, selling and implementing only DS solutions like Catia (CAx), Enovia (cPDM), and Delmia (Digital Manufacturing).  Now, IBM's Software Group is once again approaching revenues of $1B and this global giant was recognized by CIMdata as one of the "PLM Mindshare Leaders" in 2013, joining an exclusive group of PLM players including Dassault Systems, Siemens PLM, PTC, Autodesk, SAP and Oracle.

PLM Service Providers – Revenues 2013 according to CIMdata

HP is the third-largest PLM systems integrator, trailing only IBM and Accenture.

Stan Przybylinski adds that, "Accenture and HP (primarily supporting Siemens PLM Software) have major global PLM presences and could be positioned to challenge IBM in both services and PLM supporting infrastructure. This list could also include the major EDA solution providers such as Cadence, Synopsys, and Mentor Graphics, whose software tool contributes greatly to the PLM market".

This is what the PLM Service Providers top ten list looked like last year:
(Source: CIMdata, the numbers are aproximations based on a bar graph)

Not only a leading ERP implementor – Accenture's three competence areas
Eric Schaeffer set out the three competence foundations for Accenture:

1. ERP: The company is best known as an ERP consultant, systems integrator and outsourcing specialist. "I believe that we are one of the leading implementors of large SAP solutions.  The ability to connect these solutions to PLM and MES is something that Dassault, Siemens PLM and PTC values ​​us highly for", says Schaeffer.
   
   
   

During the early 2000s, PLM tools progessively
reached acceptance in the key markets
of Automotive and Aerospace. Accenture helped
many of them implement solutions from
Dassault, Siemens PLM and PTC.
2. PLM:While the 1990s were the golden decade for ERP providers, the first ten years of the 2000s brought a breakthrough for the PLM suppliers. Now the globally active industrial enterprises, particularly in the automotive and aerospace, are talking about "innovation" as the key to success. Thus, the IT-supported product development processes, as promised by  PLM, have progressively entered the spotlight. 
   
   Accenture's present PLM focus, including acquisitions, is on large multi-nationals who are about to, as Schaeffer asserts, "utilize the power of large-scale change projects in PLM."



3. The Digital Enterprise: There are many touch points to consider when it comes to PLM services, but they all have a common theme: the Digital Enterprise. "Our clients ask us, 'How do we make sure that we can harness the digital transformation waves that are coming? How will that impact the product development lifecycle processes in our company?"
   
   Schaeffer adds that, "Machine-to-machine communications, more connected products and more software in the products, combined with more digital services around the products" also are factors behind what he calls, "a completely new product realization landscape. And we can see many of our clients - often hard core products companies –moving towards these types of services."

Three acquisitions that will boost Accenture's PLM services
Accenture typically works with large implementations for large companies. They have few clients and aim for long lasting relationships.  Our key industry segments are Automotive, Industrial Equipment, Aerospace & Defense, but also for us "newer" industries like Consumer goods, Food & beverage, and Packaging", says Schaeffer.

The customer list contains well-known company names like GE, Airbus, Eurocopter, Michelin, Volkswagen, Lufthansa (MRO).

Accenture's assignments often start with a basic implemantation of either Siemens Teamcenter, DS Enovia or Delmia, PTCs Windchill or ThingWorx for example, "But we also provide things like engineering methods and engineering work that has to be done up-front including change management and a wide variety of services. We've been asked by our clients to do not only the horizonal integration from engineering to after sales but also the vertical integration in the manufacturing space; tier 1, 2, 3, 4, the ERP/MES systems and then connect to the PLM systems."

• They bought German Prion Group, primarily specializing in Siemens PLM Teamcenter environments in Automotive, Aerospace & Defense, Industrial equipment and Consumer goods.
• Accenture bought PCO Innovation, a Canadian/French company that specializes in Dassault, Siemens, PTC and Autodesk environments. PCO Innovation had 600 people, 300 in Canada/North America, 300 in Europe (France, UK and Germany).
• Earlier this year they purchased a part of the Hungarian embedded systems and industrial automation specialist, Evopro Group.

"Well in line with what IBM can offer"
These acquisitions, when added to Accenture's already existing PLM workforce, puts the company's 4,000 consultants as one of the world's largest service providers.  In terms of size, Accenture is now well in line with IBM.

According to CIMdata, "these acquisitions, and the announcement of Accenture Product Lifecycle Services (APLS) shows their renewed commitment to PLM. This will position them well against IBM and other large competitors, and expand their global team to provide the local resources industrial companies often prefer."

"Thats right", Schaeffer comments,"These purchases enhance our end-to-end offering in PLM services, but it's about more than that. Prion adds things like qualified strategic and process consulting, system implementation, data migration and application control. And with Evopro, we improve our ability to help clients maximize their ROI on investments in industrial control software and automation."

In the latter case the acquisition provides a deepening of the company's newly launched Digital Industry 4.0 initiative. "Today we see how three global trends transform our customers' value chains: Digitization is one, mobility a second and "everything as a service" ("product-as-a-service") a third", says Schaeffer. "This transformation requires digitally based solutions, intelligent processes and services within the framework of "Digital Industry 4.0".

100 million Euros on a PLM implementation with no business results
"Unfortunately, several of our clients, while in the midst of deploying their PLM solution, say: 'we've lost track of the real business value of the X million euros we've invested over the past three years'. Some of them even decide to pause the implementation, take a step back to once again take a look at the roadmap and the associated values and reconsider how to realize on the investment".

"This happened  to one of the industrial companies I worked with. It all started when the CEO came to the department and asked: I have spent 100 million euros on the implementation – what are the business results? They couldn't give him a proper answer."

Their PLM project was mainly driven by the engineering department and from a technical standpoint, Schaeffer explains, "Neither the IT department, nor any of the business departments were involved. Furthermore, they went into the implementation without having defined the objective of the vision or what the potential was in the way they currently operated. Finally  they misjudged or underestimated the impact on the product development process.  Ultimately, the integration didn't work. A specific problem was that they underused the capabilities of the solutions they had, which in turned undermined their business case."

He points out the joint venture with GE Aviation, Taleris, as a good example: "It's about real time monitoring of critical equipment. We started with aircraft engines, but we are now able to provide tip to tail monitoring. With the underlying analytics we can perform predictive maintenance, rerouting, delaying or accelerating a plane to meet the time requirements of other events in a transportation chain."

Can Accenture challenge IBM's position as the best revenue performer?
Over the last few years things like systems integration, digitalization, mobility and concepts like product-as-a-service have created an almost countless number of  new business opportunities. Unfortunately, nothing in this "brave new on-line world" is easy to carry through. Manufacturers will continue to call on service providers to play an important role in the creation of new products and distribution processes.

Many clients of consultants like IBM, Accenture and HP have only recently begun to devote energy to their evolving global customer markets and the way products are realized and shipped or used. In a survey 12 months ago, Accenture learned that, according to the top decision makers, future growth would come from markets that the participants not yet were in.

Undoubtedly concepts like PLM will play a key role in the product realization processes that will be required to drive into these new markets. Equally certain is that the C-level management will take a growing part in decisions regarding  IT systems and services that can make the product realization processes bring new products to market faster.

PLM investments are increasingly becoming C-level questions. The price tag alone puts these investments at the center of  executive attention. Top level consultants like IBM and Accenture are expert in the art of communicating with C-level executives.

2013 was not a good year for revenue growth for PLM service providers, "The major systems integrators were highly visible but few enjoyed substantial growth during the year. Companies spent liberally on software, but the services spend was delayed", says CIMdatas Stan Przybylinski.

If the global economy continues to improve in 2014 it could accelerate the services investment and boost the growth of PLM service providers. With its recent acquisitions (Prion, PCO Innovation, Evopro) and solutions initiatives, Accenture is well positioned to gain a growing share of these growing revenues.

IBM better watch out.