Beyond CAD: VARBusiness Q&A With UGS' Tony Affuso

Product life-cycle management (PLM) isn't a term on the tip of everyone's tongue in the channel. It's a niche piece of business intelligence born from the roots of computer-aided design. Now maturing, PLM takes disparate pieces of information built during the product-design process and creates an automated workflow. The application also enables design teams to more easily collaborate at every stage of a product's development, reducing costs and increasing time to market.

In an exclusive channel interview, VARBusiness editor Lawrence M. Walsh sat down with Anthony Affuso, CEO of Plano, Texas-based UGS, the leading PLM vendor, to talk about the maturation of this software space and the new opportunities it holds for solution providers. UGS is wading into the channel with its Teamcenter product for both enterprises and SMBs. What follows is Affuso's views of PLM's potential in the market and the channel.

VB: Some would argue that PLM is little more than ERP with a CAD component. What's the difference between the two applications and what value do they bring to users?
Affuso: ERP is really at the tail end of the intellectual property development cycle and the product- and process-development cycle. With ERP, you're managing physical assets, and you're building a product with those physical assets. Where PLM is involved is way up front in the very idea creation. Let's say you're designing an automobile; we've got 10,000 pieces and parts in a vehicle. ERP is managing the assembly of those pieces and parts coming to the factory and into the assembly line. PLM manages those 10,000 parts at the very idea creation, through the engineering cycle, through the testing cycle, through getting ready for manufacturing. Then we take that material and hand it off to ERP so the parts can be ordered by the ERP system. ERP would be a very transaction-based batch kind of environment, where PLM is very real-time oriented, very oriented around change, because you're making changes every minute, every day.

VB: How deep does PLM allow you to reach into the product-design process? How much collaboration does it enable?
Affuso: 100%. Design and marketing teams can review the packaging, do the service and repair documentation, do the owner manual; they can start clipping off images off the 3D-CAD, putting those images in. They don't need a real product because you have photorealistic imaging now. So there's a lot of opportunity. If you look at a bill of material, PLM allows you to reuse those materials in other products. For example, if you have two vehicles and you want to reuse some of the sheet metal off these new vehicles in a new redesign, all you have to do is look at the bill of material and see what sheet metal parts can be applied to the new design. PLM goes out, finds those parts and brings those parts to the design process. Design teams could never do this before; there was no way of ever finding all this information.

VB: PLM is a business application and feels like it should fit alongside ERP, CRM and financial apps. However, it seems as though this is just another piece of supply-chain management.
Affuso: Some of the consulting groups typically put PLM with supply chain. That's how, right now, we're fitting in.

VB: Do you agree with that?
Affuso: The reason they're doing it is there's a familiarity somewhat with the process, because they've dealt with ERP, for example. What we have here is a situation where they see some similarities, some common thinking, because there is a process involved, a bill of material involved, and a lot of the ERP guys are tailing off. They aren't as busy as they used to be -- they're looking for new things to do, and it's a nice fit for someone who has been in that area.

VB: OK, so what do you think? Do you think PLM will evolve beyond just being a cousin of the supply-chain?
Affuso: I think so. It will probably take another three or four years, but it will.

NEXT: PLM's channel opportunity.

VB: PLM's penetration into its potential market is 12 percent, according to some analysts, and most of that are enterprise deployments. What's it going to take to penetrate deeper and capture more mind share?
Affuso: Well, what's happening is there's a lot of value here, and also, it's going to be driven somewhat by the bigger OEMs as they ask their supply chains to get on board and interoperate with PLM. A large manufacturer may say, "I'm going to be doing my RFP with you digitally, and then I'm going to ship you digital drawings, and I want digital drawings back, but through the process, we want to manage it digitally. We don't want to go back to paper and mail; we want to do it digitally." So you're going to see that more. The other thing that's going to help it is the globalization, because companies want to interoperate globally, and it's much more efficient to do it this digital way.

VB: What's the channel opportunity in PLM? It seems as though this is a complex application suite that's only appropriate for enterprises.
Affuso: We're betting on the market. We've been in this midmarket for a number of years, but we never took it seriously. We developed a good product for the CAD space, but we really didn't build our channel. We've hired a professional channel team and are really serious about the channel because we see the market as a growth opportunity for us. We're building the program and recruiting new partners. We're going to increase our channel base by 50 percent this year and 25 percent next year. We're on track for the growth; we're probably going to beat that number.

We're not really looking for the volume channel; we're looking for the value channel. We want to be equal partners, if you will, with the VARs, who we're going to treat very, very well. We're not going to go into competition with them like some of our competitors have done. We've created a hard deck with our direct sales, and anything below $100 million goes to the channel. Anything above $100 million, it's possible the channel can have it, but you've just got to register the deal.

VB: What is your ultimate channel goal?
Affuso: We would like to get to a point where it's 50 percent of our revenue. I'm not sure what the time frame is for that. You know, you talk to five people, you get five different answers right now. We just have to watch to see how fast we can grow it.

For more about PLM's potential, read "PLM Takes Center Stage At Enterprises."