This licensing model has appealed to many companies including Boeing, GE Aviation, MAN Diesel, Hitachi, and Xerox to mention a few. Obviously these large users have vetted the technology. So what's the catch?
The Aras business model looks a lot like the approach that Red Hat used to build a valuable business around the Linux open source operating system:
- Make advanced technology freely available
- Sell optional enterprise subscriptions
- Sell support and customization services
- Repeat until world domination is achieved
Aras was founded in 2000 with a traditional sales and licensing model. After seven years of slow growth Peter thought it was time for a change. He gathered up his sales team in 2007 and literally fired them. "We're going to distribute the software over the internet", he declared. And he reasoned that with an open source free-of-charge solution he didn't need a sales department. The Internet and a global chain of partners (today 82, e.g., Minerva, Hitachi and T-Systems), he argued, would generate the revenue stream the software "deserved".
"Instead of spending lots of money on marketing and selling expenses we could direct our resources to develop the software even further".
That was the idea. And it worked:
- The install rate for the free downloaded copies is over 30%. Of those, 5%-10% end up buying support from Aras.
- Companies using the system join the growing user community and share best practices and modifications. Aras takes the best of these along with their own ideas and continuously upgrades the product suite.
- The power of the community becomes a real differentiator. Software upgrades happen faster and are more targeted to direct customer needs.
A consequence of this approach is that the size of the user community dictates success. For Aras, the community is growing fast.
Profits are derived directly from having a large and "happy" user community, which Peter Shroer explains is the case, "Aras has experienced 60% annual growth for the past 6 years. We are on track to continue that trend in 2014." He adds that the annual revenues are below $50 million.
Comparatively speaking, Aras is a small player in a market dominated by large developers like Siemens PLM, SAP PLM, Dassault Systems, PTC, Oracle, and Autodesk with cPDM/PLM related revenues in the range of $100-600 million. But Aras has set their ambitions high. Schroer asserts, "there are many a good reasons for our success, ranging from our modern technology and solutions to our flexible, low risk business model. However, the reason that stands out for me is that buyers are becoming more educated and experienced, and they are demanding more of their PLM solutions and vendors."
Aras customers are not buying their first PLM system
PLM isn't easy to deploy and it's not getting any easier thanks to rapid innovation in new product development, manufacturing and supply chain processes. Also, trends like the Internet of Things, Big Data and 3D printing are speeding up the rate of change in product realization and adding higher levels of complexity. Even without those changes, PLM takes time and is expensive to implement. The idea of redoing the procedure 3, 4 or 5 years "down the road" has sent shivers down the spine of many a CIO.
"You need to have a resilient PLM system. A truly resilient PLM will last 20 years or more. In fact, it should last indefinitely," says Peter Schroer, adding that most of Aras' customers are "not buying their first PLM system. They've either implemented one in a previous company or they're replacing a legacy system at their present company. These buyers have been through all the slick demos. They've been through the long, arduous and expensive implementation processes, and they've been burned by systems they can't customize and can't upgrade."
This experience makes it easy for chastened PLM implementers to recognize the value of Aras; from technology that is easy to customize, to a business model that includes PLM software upgrades in its annual subscription, to low-cost of entry. "And perhaps the biggest difference of all is that our technology actually works. It's really that simple," claims Schroer.
According to analyst CIMdata, Aras have
redefined customization in the PLM market.
So what is it that differentiates Aras technology from their competitor's? A couple of capabilities stand out and the most important one is that "Innovator" is engineered to be highly customized and sustainable.
According to analyst CIMdata they have even redefined customization in the PLM market. The core message is that you don't have to worry about problematic upgrade loops anymore.
Unlike traditional object-based systems with static data models, the Aras architecture is built around a modeling engine coupled to a web services catalog of PLM services. The modeling engine allows dynamic creation/maintenance of business objects which are linked as required to the appropriate web services. "This creates a clear separation between business logic and the web services, enabling real-time, drag and drop changes to applications - no coding required, and it means our PLM can be easily upgraded without impacting previous customizations", explains Schroer.
Clearly the ability to deploy quickly with real-time customization of predefined best practice solutions is a key market differentiator. Also, by extension, the structure provides protection for investments and ensures future adaptability.
In this context the Aras chief underscores the benefits of Open Source and the power of the community, "Thousands of community members around the world are using Aras PLM and sharing and contributing their solutions, projects, ideas and advancements every day. These contributions accelerate the advancement of our framework and solutions in ways traditional PLM providers can't achieve."
Modules covering most of the product lifecycle
As a PLM solution Aras Innovator cover most of the product life cycle, including product development, global manufacturing, supply chain operations, quality compliance etc. Innovator has modules for all the basics like CAD file (multi-CAD), document, engineering changes, PDM, PLM, and BOM management, as well as environmental compliance, manufacturing process planning, part traceability, new product introduction, maintenance and calibration, and more.
release features a series of CAD-focused enhancements.
Typical users of Aras solutions are from industries such as Automotive, Aerospace & Defense, Consumer Goods, High Tech Electronics, Industrial Manufacturing and Medical Devices.
The REAL promise of PLM in the Cloud
Furthermore, Innovator is a Cloud-ready platform (you can deploy it from the Microsoft Azure Store) and Peter Schroer is enthusiastic about that, "There is big-time value in the cloud. But while everyone is focused on cloud infrastructure, another really important thing is going on – cloud-based datasets are growing, becoming aggregated and available as Web services. This is happening quite rapidly and I believe that the REAL promise of the cloud comes into play when we move away from isolated resources to master information sources and use them in ways previously not possible. Connecting the cloud into our processes is where we're headed. And it will change the way we all do business."
Aras suite and ERP developer Infors’,
Charles Phillips did.
Indeed these capabilities of the Aras system can be attractive to more than the customers listed above. Earlier in 2014 the company announced an OEM Licensing program. The bottom line is that other vendors can license parts of or the whole suite of PLM tools.
OEM integration is a strategic growth initiative that will enable Aras to bring its technology to new markets and expand their community faster than they could have done on their own. "New OEM partners will allow us to focus on the key business applications for our primary PLM user base, while leveraging our core technologies into new markets that we haven't even considered yet", Schroer asserts. He further claims that the company's core technology is well-suited for providers of ERP, MES, SCM and other global enterprise applications.
However the Aras technology is not limited to these markets, according to Schroer, "Any company that wants to extend its product offerings with PLM or PDM can benefit from our technology, as well as companies that need a subset of the Aras Innovator framework, such as workflow or version control."
Furthermore he reveals that Aras are in talks with other potential OEMs – some large, some smaller, "We are open to new ideas. It will be interesting to see what partnerships develop over the next year or two."
Does Aras have any Independent Software Vendors (ISV) already in their OEM program?
Yes, Schroer claims to have "a couple partners who have embedded our technology in their products". With their latest licensing partner, Infor, the company decided to formally announce its OEM program.
Companies using Aras technology in their products today include:
- Infor – Rebranding Aras as "Infor PLM Innovator – powered by Aras" and integrating with its Infor 10x platform technology and ERP systems.
- PACE Aerospace Engineering – has embedded Aras technology for complex configuration structures, revision & versioning, lifecycle management and file vaulting in the Pacelab product line. That product provides aircraft cabin interior design to companies including Airbus, Boeing, Bombardier and Embraer.
- CAE – has embedded Aras technology for configuration management of asset structures along with secure federated integration capabilities which connect Esri GIS mapping package and 6 other applications into an Integrated Emergency Management System (IEMS).
From the CASE BOOK of Aras: GE Aviation dealing with BOM problems
Aras customers often already have a PLM system. It's also true that these "legacy systems", as Schroer calls them, weren't able to solve all the data and process problems. GE Aviation is one example where Aras Innovator succeeded in solving issues with the BOM (Bill of Materials) that one of the traditional systems failed to do. Peter Schroer points at two factors as to why Innovator succeeded:
- The key problem facing GE was the complex configuration management challenges of large Engineering-BOM's that must be mapped (transformed) into plant-specific Manufacturing BOM's with different effectivity for changes, and BOM re-restructuring driven by process differences in the plants.
"With a rate of engineering change averaging 30 design changes per week, you can easily imagine how many different configurations of mBOM's there are in all the plants at any point in time. In fact, the rate of change and the complexity of the mBOM restructuring leads to a BOM by engine serial number. This is a very complex configuration management problem to solve. The Aras Innovator framework includes a Configuration Management web service that can handle the configuration behaviors required to model the GE scenarios." - The second factor driving the GE Aviation success, was the flexibility and ease of configuring the Aras Innovator framework. GE Aviation has truly unique business processes that were not going to fit anyone's out-of-the-box PLM software.
"These business processes are what drive high product high and innovative aircraft engines. It would not be appropriate for GE to change its business to fit some software limitation. GE's success with Aras is due to how rapidly they could tailor Aras's PLM rules to exactly fit the competitive GE processes", Schroer concludes.
support extensive customization while avoiding
the otherwise common upgrade problems”.
The cPDm market is expected grow 5.7% to $1.7 billion in 2014, and the midmarket player´s (like Aras) share is expanding, CIMdata predicts. Presently Aras' revenues are just below $50 million. Being a relatively small player, Aras is more "susceptible to the impact of economic variations than the larger providers".
On the other hand the company is growing significantly faster than the average. I can understand that; Aras Innovator is a good solution. In fact it's surprisingly good. It's robust, highly configurable, easy to deploy, has no penalties for customization, and is not associated with complex version-to-version upgrades or re-implementations.
I am especially impressed by the ability to support extensive customization while avoiding the otherwise common upgrade problems. Time and money are scarce resources in the light of the pressure on companies' development and manufacturing departments, and no one really wants to spend time to solve operational IT problems.
The value of a PLM or a cPDM system is determined by what you can do with it, how it can support innovation, or solve specific issues. To put man-years of hours on cPDM administration does not necessarily help to create flexible, smooth processes and innovative products. One of Aras' top benefits is that you can avoid much of the "depleting" bureaucratic aspects of the traditional cPDM administration.
Alongside this there are several bonuses like the BOM capabilities, the competent Engineering Change Management, and more.
Altogether, Innovator is a robust long-term viable cPDM solution. And it is probably no coincidence that German engine manufacturer MAN Diesel & Turbo chose Aras. They have to keep track of product data for 20 – 30 years or more …