Regardless of whether you like the deal DS struck to buy the IBM PLM business, it does change the dynamics within the PLM sector. From a competitive perspective, DS will now face the same issues of access that PTC and Autodesk face: can their sales reps get in to see the people who make decisions and sign checks? IBM has historically been seen as not having any problems with access a the highest levels. Siemens has a slight advantage in traditional PLM markets in that its giant corporate parent has tentacles into many aspects of manufacturers’ operations, but that advantage disappears as PLM reaches into new market areas with less of a focus on heavy-duty industrial processes.
The best plus for DS may be its gain of control. By having the sales resources in-house, it can strike the deals it wants to — to make a quarter or win a strategic account or to implement with a non-IBM SI. With this control, though, comes the issue of managing channel expansion (direct sales are expensive resources) and conflict with its existing sales mechanisms. DS has been gaining experience here and is bringing aboard the VP of the IBM PLM organization so it could be argued that DS can withstand this 20% increase in direct sales/support capacity at one stroke.
From a customer perspective, the deal is both very good and just OK. On the very good side is the leverage gained by dealing with only one vendor: there’s a clear source of problem and resolution. Of course, some customers will always seek a non-IBM/DS implementation partner, so for them this is no different. With IBM lessening its presence in PLM, its also possible that we’ll see the emergence of a strong PLM implementer not closely coupled with any software house. One can hope that a strong, neutral SI might be able to break some of the logjams of proprietary software and closed systems that can hamper current implementations.
Investors seem happy with the deal, although I’m still not sold. As DS suggested, I’m looking for a comparable business to see how it might be valued and what kinds of infrastructure costs DS must add to the business as it separates from IBM. But I may yet be won over as more information is released. DS shareholders seem to like the deal; DS’s share price in Paris is up 6.65% for the day.
For IBM, the sale of the PLM business is probably just a natural part of their business expansion and contraction. Their history with DS has, at times, been harmonious and, at others, fractious. IBM had been contributing less and less to DS’ revenue as DS took on more of a sales role for certain customer sets and geographies, so the importance of PLM to its overall business has been declining. Too, IBM inked a technology pact with Siemens earlier this year that raised questions about its commitment to DS. All said, IBM can now focus its resources on partners that may be less contentious and technology areas that it sees as having greater potential across more diverse customer segments. [I have questions in to IBM regarding its continuing support of Siemens, PTC and other PLM/engineering software vendors and will update once that conversation happens.]
One interesting area of speculation opened up by this announcement: is the industry again veering away from an indirect sales model? Over the years, vendors have played around with their sales models, sometimes focusing on direct, at other times opting for indirect or tele-/e-sales. In general, direct sales are expensive, so the deal value must be high; indirect sales are cheaper, can reach more prospects but are harder to manage; tele- and e-sales cost the least and offer the least amount of control but can have unlimited reach. The proper balance of the three will reach each prospect at a level where cost to the vendor is commensurate with the deal value, and with the correct amount of hand-holding given the product’s level of sophistication. It will be interesting to see how PTC (aiming for a higher indirect proportion of revenue) and Autodesk (increasing its direct sales) comment during their earnings calls over the next few weeks.
I’m sure there’s more to say but I’ve got to move on to other topics for the day. Send me an email (monica AT schnitgercorp DOT com) if there’s something specific I can address.