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Product Lifecycle Management (PLM) systems are integral for efficient hardware development. They help manage data across the product lifecycle, from initial concept through design, manufacturing, service, and eventual disposal. However, understanding the cost of a PLM platform may not always be straightforward.
Often, there’ll be hidden costs to address, as well as license and maintenance fees. Integrations, customizations, or the need for specialized staff can significantly increase the overall expenditure and aren’t always known about upfront.
Before businesses consider a PLM investment, they should determine the system’s role in business improvements and the Total Cost of Ownership (TCO) for a set period of time. In this blog, we’ll explore what contributes to the total investment for a PLM system, helping you confidently navigate these complexities.
Modern hardware teams face time pressures to get to market
Modern hardware teams face pressure to build complex products where hardware and software increasingly overlap. Additionally, they must collaborate with geographically dispersed teams and siloed departments while facing pressure to reduce development costs and iterate faster. The push for sustainability and efficiency has placed an additional layer of responsibility on engineers to create designs that are not only functional but also environmentally conscious.
Modern engineers require integrated software platforms that streamline workflows, facilitate communication, and provide access to real-time data and analytics to meet these evolving needs. Cloud technologies, collaboration tools, like Slack or video conferencing, and simulation software help facilitate rapid iteration and real-time design feedback. As a result, hardware companies can get more complex products to market faster.
Today’s hardware teams are constantly evolving and growing. Not only do they require easy-to-use tools, but they also need the ability to connect different applications to build a flexible tech stack and share data that ensures accuracy across every function. Connecting different applications can significantly impact the TCO, which may involve lengthy consulting engagements.
Understanding TCO is imperative for hardware companies to evaluate budgets, stay on track with tight deadlines, and meet market demands.
What is the total cost of ownership?
Total Cost of Ownership (TCO) encompasses all direct and indirect costs related to the acquisition, implementation, and maintenance of a PLM system over its entire lifecycle. Unlike the upfront cost, TCO includes hidden expenses that can significantly impact the overall budget. The TCO will be higher than the initial purchase price of your software as it factors in all associated and hidden expenses, such as installation, training, support, and upgrades.
Benefits of understanding the total cost of PLM
Understanding the Total Cost of Ownership helps businesses budget for the future and avoid unexpected financial burdens. It also helps when evaluating different PLM platforms, as they’re not all created equal. For example, PLM systems that include heavy customization will have steeper implementation and maintenance costs, which need to be factored into the overall cost. In contrast, solutions that come out of the box with pre-built integrations will likely be quicker to implement but may require changing business workflows.
The benefits of understanding the TCO of a PLM platform:
- Better budget planning: Businesses can anticipate all costs upfront, including software licenses, integrations, customizations, and ongoing maintenance. Finance teams can create a more accurate and realistic budget, avoiding unforeseen expenses that could disrupt operations or strain financial resources later.
- Better resource allocation: Understanding the TCO helps teams determine how to allocate time and people, such as IT staff and project managers, to implement and support the project or maintenance staff and dedicated time for training. Other resources include servers and infrastructure, backups and storage, and potential consulting services.
- Long-term cost savings: Businesses can implement strategies to minimize related expenses over time. This could include optimizing system configurations to reduce maintenance costs, negotiating better contracts, or investing in training to enhance system utilization, ultimately leading to better long-term cost savings and a higher return on investment.
- ROI optimization: By anticipating and managing the total costs associated with a PLM system, businesses can maximize the platform’s long-term benefits, such as improved product quality, faster time-to-market, and enhanced collaboration across teams. These benefits, realized through a well-managed TCO and tracked over time, lead to greater profitability and a more substantial ROI for any investment.
The most important measure – time to value
As discussed, modern hardware teams are under significant pressure to get their complex products to market quickly while ensuring quality and meeting requirements and market expectations. Time to Value (TTV) is when a business starts realizing the benefits and returns from an investment like a PLM platform.
TCO is directly related to delivering value to the engineering team. Implementation times, customizations, defining and sticking to project scope, investing in training and support, and utilizing the PLM platform itself all impact the time to value. Any downtime or lost productivity will impact ROI and the effectiveness of your PLM platform.
How to calculate the TCO?
Calculating the total cost of ownership for any product lifecycle management system begins by identifying all initial costs, such as software licensing, implementation fees, customization fees, and third-party services like consultants. Next, account for ongoing expenses such as maintenance, user training, system upgrades, and vendor support over the life of the PLM platform.
Finally, don’t forget to consider hidden costs like downtime, integration with other systems, scaling the platform and staff to manage and optimize the PLM system. Select a timeframe for how long you anticipate using the software, for example, a five-year period. Here’s a detailed breakdown of all the potential costs you may incur.
Upfront Costs
Initial expenses incurred when first purchasing a PLM system typically include:
- Annual software license fees: These typically include access for a set number of users and file storage. Vendors may also include training and onboarding. access for a set number of users and file storage. Training and onboarding are occasionally factored into this number.
- Implementation costs: This may be included in the license price for out-of-the-box software but check to see what the vendor provides and whether there are add on fees. You may need to hire consultants if the platform requires tailored workflows and lengthy installation processes.
- Customizations and add-ons: Add-on functionality, such as customized workflows, tailored CPNs, additional licenses, quality tools, or integrations, may be extra.
- Hardware and infrastructure to run the software: These costs will depend on whether you deploy your PLM application in the cloud or on-premises. Cloud-based software, like Duro, doesn’t require additional hardware if you deploy it in a multi-tenant environment.
However, ITAR customers or those running a dedicated instance on-premises will incur additional hardware costs. On-premises software will require additional on-site infrastructure.
Ongoing Costs
Along with the upfront costs, recurring expenses arise after the initial setup, such as training employees, providing ongoing support, and maintaining and updating the PLM system to ensure its effectiveness.
- Training: Add time and training costs to ensure administrators and product users are fully trained to use the PLM system effectively. Consider the cost of training when the new software is first implemented, as well as regular updates for staff and when new team members join. Find out whether the PLM provider includes training and support in the license price.
- Maintenance and updates: This covers the regular software updates, bug fixes, and maintenance activities necessary to keep the PLM system running smoothly and securely over time. Cloud-based solutions should incorporate regular updates for all users, but for on-premises solutions, the responsibility lies with whoever is in charge of managing the application in-house.
Hidden Costs
Don’t forget to consider unexpected expenses and longer-term upgrades that may not be as obvious when purchasing software the first time.
- Consultants: If you require consultants for your PLM implementations, be aware that they will increase TCO through high fees for customization, integration, and support. They can help tailor the system to your specific needs but often extend timelines and raise total costs. Frequent updates or adjustments can further add to long-term expenses.
- Downtime and productivity during implementation: This is the cost of disruption to daily operations when the PLM system is being installed and configured.
- Integration with other business systems: You’ll want to connect your PLM platform to CAD tools, ERP, and manufacturing execution systems (MES) to ensure an accurate data flow across departments and stages in the development lifecycle. Check to see whether there are add-ons or require additional service fees.
- Staff to manage the PLM: This includes the cost of hiring or reallocating staff to oversee the PLM system’s deployment, manage the project, and handle ongoing system administration.
- Project expansion: Over time, you may wish to add capabilities to your PLM platform, such as additional integrations, new functionality, or customizations. Don’t forget to factor in additional licenses for new users as your team grows.
- Fee increases: Consider annual increases for subscription fees and support costs. Ask vendors how the pricing will change over time so you’re not surprised when the system is up for renewal. You may want to calculate a five-year TCO, so add these yearly increases to your financial model.
- Data migration: Migrating your entire dataset from an older PLM platform can be time-consuming and potentially introduce errors. You’ll also need to assign time to cleaning and transferring data from existing platforms. Add any time spent and human resources into the cost calculations.
- Customizations: Customizing the PLM system to fit your organization’s specific processes incurs costs and extends implementation time, delaying time to value. While tailored features can better align the system with your business needs, it’s important to consider ongoing expenses and maintenance, as these can burden the organization with technical debt.
- Hardware maintenance: For on-premises or self-hosted PLM solutions, there’s a cost for maintaining and upgrading physical servers and other hardware, along with the software applications and operating systems required to run the PLM system. You’ll also want to prepare for planned and unplanned server outages.
How Duro keeps your TCO low and increases time to value
Duro’s out-of-the-box PLM platform is designed to be implemented quickly, allowing companies to get up and running in days rather than months. It keeps your Total Cost of Ownership (TCO) low by eliminating the need for external consultants or systems integrators to implement or set up integrations. Plus, a low learning curve encourages adoption and makes it easy for new team members to get up and running quickly with the platform.
One of Duro’s customers, Astroforge, had just 12 months to build and launch a breakthrough space-mining vehicle. The company chose Duro as its PLM platform as it needed to minimize downtime and start centralizing the management of part numbers, assemblies, and revisions. After the implementation, Astroforge can now get change orders submitted within seconds, saving time for the entire release process.
Additionally, every Duro user gets access to free out-of-the-box CAD integrations. The platform comes with add-ins for Solidworks and NX so mechanical engineers can stay within their CAD environment and quickly release their BOM into Duro PLM, avoiding disruption to their workflows.
An open API and availability within the Prismatic marketplace allow users to quickly set up and configure integrations themselves, bypassing the need for costly, complex IT projects. Companies like Gilmour Space and Rapid Robotics can quickly and efficiently sync their entire hardware stack, from CAD tools to ERP systems, giving every team data accuracy at every stage of development.
Duro significantly reduces ongoing operational costs, ensuring businesses can maintain and expand their PLM capabilities without the financial burden or tech debt often associated with larger, complex PLM systems.
Schedule a TCO consultation
Duro recommends performing a TCO analysis for a five-year period when considering your purchase of a new PLM solution. Understanding the Total Cost of Ownership ensures you’re fully aware of all associated costs over the system’s lifespan. It can help you avoid unexpected expenses and maximize your return on investment.
Duro provides a user-friendly, cost-effective PLM solution that keeps TCO low with easy integrations and quick implementation time. Reach out to our team to explore our PLM offerings and request a TCO consultation so we can help you plan for the future.
