Four important acquisitions since 2006 have changed the complexion of the product life cycle management (PLM) software market for manufacturers. Dassault Systemes (DS) acquired MatrixOne during 2Q06. Siemens' Automation and Drives group acquired UGS during 1Q07. Oracle acquired Agile Software during 2Q07, and, in a smaller yet significant purchase, PTC acquired CoCreate during 4Q07. These four vendors plus SAP and Autodesk have annual revenue close to or exceeding $1 billion, with substantial customer bases that would need to be supported for years. All six have been moving toward fulfilling Gartner's PLM vision. Large manufacturers making substantial long-term PLM investments are protected with any of these vendors, considering the size of their customer bases. These vendors have different strengths and vary in their support for different manufacturing sectors. Therefore, large manufacturers still need to assess the vendors for strengths that align with their priorities and support for their industries.

PLM has emerged as a key business discipline and is one of the top nontraditional IT areas that CIOs at manufacturing firms address today. Gartner's EXP CIO survey highlights improving enterprise competitiveness, addressing global competition, revenue growth and competitive advantage as expected top priorities for 2009. PLM addresses these through product strategy and execution support. Because product innovation and quick delivery to market are key to business growth, increasing numbers of manufacturers are now investing in PLM, because it focuses on product strategy, planning and execution. IT professionals also recognize that they must deliver business value to retain their corporate stature, and PLM enables them to engage in IT activities that contribute to corporate growth in a more proactive way than traditional IT functions. Recognizing these opportunities, technology providers such as Oracle and Siemens have made significant investments in this space.

The acquisitions have created greater PLM value propositions for manufacturers. The triad of DS, PTC and Siemens emphasize the ability to design for the entire product life cycle by using modeling and simulation in virtual environments to detect and correct sources of unnecessary cost and quality risk. Manufacturers use data resulting from these virtual activities to guide the actual activities of the life cycle. The Siemens acquisition of UGS further enhances this potential by bridging the virtual world to the physical world of producing products, even using Siemens equipment, and enabling continuous improvement of design for manufacturability through factory performance feedback. SAP and Oracle complement those vendors by enabling manufacturers to leverage the product and manufacturing-related output of the virtual world for actual business operations, addressing the financial and resource-intensive aspects of life-cycle-related activities such as sourcing, procurement, inventory management, production and service. Although the core capabilities of Oracle and SAP complement the core capabilities of DS, PTC and Siemens, all these vendors increasingly compete to become the systems of record for the product by continuously enhancing their abilities to manage a broader set of product content.

Autodesk impacts the dynamics of the PLM market because the company makes well-understood functionality, such as product design tools and basic product data management functions, available to a broad market at affordable prices. Autodesk also has a major impact on the market because as its PLM scope increases, it continuously forces other PLM vendors to pursue higher-margin value propositions.

It is important to note that the concepts of PLM apply beyond manufacturing. Service industries such as insurance, software development and publishing have seen PLM emerge as an area of interest, and some of the vendors in this Magic Quadrant have had notable success in serving markets beyond traditional manufacturing. Companies other than manufacturing enterprises are cautioned not to use this Magic Quadrant as a basis for evaluating PLM vendors.

PLM-related activities span the virtual and the physical domains. In the virtual domain, manufacturers design and simulate product performance, production plants, manufacturing processes, service and maintenance procedures, the customer experience, and even the impact of product disposal. Such activity in the virtual world enables manufacturers to take corrective action and innovate quickly before making large capital investments in resources, facilities and production of the physical product. As the Internet continues to grow as the key medium to reach consumers, PLM will enable immersive virtual experiences for consumers before they purchase products. Best-of-class PLM enables interfaces so the developments and discoveries of the virtual world can be leveraged in the physical world of ERP, supply chain management (SCM), manufacturing execution system (MES) and CRM vendors. For example, content describing plant designs, manufacturing processes, and bills of material created and validated in virtual environments can be leveraged to build the physical plant, products and processes. In best-of-class PLM practice, manufacturers leverage product and performance data (including "as-built bills of material," cost data and quality data) from the physical plant and field operations to continuously improve product families in ways that enhance their contributions to business performance.

Manufacturing PLM software supports the processes necessary to create, evolve and support product families from idea through retirement. The software supports product life cycle activities at five levels:

1. Creating product strategy to continuously cultivate portfolios of products that generate business growth.
2. Planning the development programs that bring products from idea to reality.
3. Governing product life cycle activities to keep actual financial investments and invested time to plan and guide products to deliver the greatest business benefit, including analytics to diagnose and address setbacks.
4. Capturing, controlling, and communicating product-related content.
5. Providing the set of tools to create product-related content and collaborate with partners including suppliers and customers.

The types of activities considered part of PLM software include supporting and capturing decisions about product definitions and designs; expediting product changes; capturing lessons learned about product creation and realization activities, and continuously improving those; and capturing product performance metrics and factoring those metrics in continuous product improvement programs.

PLM software does not execute transactional activities such as streamlining order-to-payment transactions; enabling supply chain "order to cash" transactions; allocating resources for production, sales and support operations; and making products increasingly accessible and visible in the market.

Minimally, a vendor must have an environment that brings together critical functionality to define, develop and evolve a product throughout its life. We place the emphasis for inclusion on creating and managing the data and information that define the "blueprint" or DNA for a product. It also includes support for the governance and processes that make defining, designing, refining and evolving the product possible. Vendors included in this PLM Magic Quadrant provide users with the best opportunity to buy software and services that help them support these types of needs:

1. Supporting the product development process. The vendors do not need to own the design software tools. However, they must be able to interface with design tools so product designers can easily access the applications to collaboratively modify designs and manage product data.
2. Monitoring the status of a product definition, its subsystems, its parts and related product information at any stage of a product's life, spanning design, production, service and retirement. The capability incorporates stage-gate methodology or alternate, possibly superior, approaches to governing product life cycle phases.
3. Enabling the creation and management of product portfolios. The vendor supports software and infrastructure that enables product stakeholders, including R&D, sales, service, marketing, procurement and production, to view the portfolio and influence portfolio decision making.
4. Tracking the assignment of resources, their performance and the status of tasks throughout all stages of a product's life. This includes ability to analyze the time and cost impact of shifting resources across projects and programs.
5. Supporting search capabilities across structured and unstructured content and the ability to analyze and communicate relevant information with customizable views. This influences decisions that affect product definition, part reuse and the processes used to create, evolve, and support products and product platforms throughout their lives.
6. Streamlining the access and use of product content in complementary classes of applications such as ERP, SCM, storage resource management (SRM) and CRM to produce, sell, service, improve and expand product families. Software should also enable visibility of any content from those complementary classes of enterprise applications that might be useful for making product-related decisions at any stage of the life cycle. In 2007, Gartner placed additional emphasis on integrating PLM with manufacturing operations management.
7. Streamlining the capture, communication and analysis of product-related metrics data from production, sales, use/performance, service, maintenance and service experience so manufacturers can continuously improve products and the execution of life cycle activities.

Vendors must also meet criteria that govern protection of the investment through 2012. Given the ongoing evolution of the market, vendors must have PLM revenue of at least $100 million to be included in this evaluation.

Siemens PLM was added. Siemens Automation and Drives acquired UGS and re-branded UGS as Siemens PLM.

We dropped these vendors listed from this PLM Magic Quadrant because they were acquired or they did not meet minimum revenue requirements:

• Agile Software was dropped because its software capabilities and organization are being merged with Oracle.
• IFS did not meet the minimum revenue requirements for this Magic Quadrant, which focuses on the needs of large manufacturers. However, manufacturers interested in PLM functions integrated into ERP — particularly for maintenance, repair and overhaul — should still look at IFS.
• Infor also did not meet the minimum revenue requirements for this Magic Quadrant. However, small to midsize manufacturers should consider Infor if they are seeking PLM functionality.
• UGS was dropped because Siemens has absorbed UGS's technology and organization in Siemens' Automation and Drives business. Siemens also re-branded UGS as Siemens PLM.

Gartner analysts evaluate manufacturing PLM software providers on the quality and efficacy of the processes, systems, methods or procedures that enable the vendor's performance to be competitive, efficient and effective, and to positively affect revenue, retention and reputation. Ultimately, we judge the providers on their ability and success in capitalizing on their vision.

Gartner analysts evaluate manufacturing PLM software providers on their ability to convincingly articulate logical statements about current and future market direction, innovation, customer needs and competitive forces, and how well they map to the Gartner position. Providers must demonstrate strong evidence that they are investing in the PLM vision and that their customers are investing in the vision as well. We validate vendor input with customer adoption to give credit for PLM vision.

Manufacturing PLM leaders command not only a firm grasp of today's evolving PLM market conditions, they also see and convincingly communicate the future opportunities of cross-functional, enterprise-oriented PLM applications that support commercial activities with product-centric content. PLM leaders have reorganized and built capability to deliver PLM value to the first generation of PLM users (engineering-oriented) and are now also delivering their second-generation value propositions (cross-enterprise and business-value-based).

PLM vendors in the Leaders quadrant typically:

• Own at least 10% of the total market for product development software, such as product data management and engineering collaboration software, as measured by revenue.
• Have an established, strong track record of successfully selling PLM-related solutions that address marketing, sales, service, sourcing, production and product portfolio management dimensions of PLM, as well as providing engineering-centric product development support.
• Provide applications with a modular architecture that enable customers to adopt select applications (PLM business solutions) in any order. The software enables visibility of data across all applications. Users control the visibility across modules, and lack of visibility is not a software limitation.
• Have customers who use the vendor's software as a strategic PLM platform and view the vendor as a strategic partner instead of adopting the vendor's applications "piecemeal" for tactical purposes.
• Provide software that has flexibility to support any views or combinations of product content, financial data, process information or resource data to support product-centric decision making.
• Report at least $200 million in PLM software revenue with a consistent track record of revenue growth and profitability.
• Have a presence and execute reliably in multiple regional markets worldwide.
• Are not just developing but also successfully and consistently selling nine out of 11 classes of PLM foundation capabilities (see Note 1) and have customers validating that they use them in production.

Additionally:

• Any vendor with stronger discrete manufacturer emphasis must support bills-of-material-centric change management and provide three out of five of the remaining applications or interface with them. Customers validate the value. They must also provide evidence through architecture or functionality that they can grow into process- manufacturing verticals.
• Any vendor with stronger process manufacturer emphasis must support formula and recipe management and provide two out of three of the remaining applications or interface with them. Customers validate the value. They must also provide evidence through architecture or functionality that they can grow into manufacturing verticals with discrete manufacturing needs.
• At least 10 major customers (this can include the three or more reference clients plus Gartner clients or any other well-documented evidence from other manufacturers) clearly indicate that the vendor is their choice to support their engineering-centric product life cycle processes from ideation through service.
• The same 10 customers clearly validate that the vendor's solution supports PLM-related needs outside of engineering. They use it across a value chain associated with enterprise-centric functions such as procurement, manufacturing, sales, marketing, product strategy and service employing the vendor's capabilities.
• Manufacturers report that their PLM environments enable them to manage, and not just produce product platforms and families, with strong support of part and assembly reuse for new products.

PLM vendors in the Challengers quadrant execute well on a well-defined but narrower engineering-centric value proposition. While their product/technology/market visions continue to expand from an engineering-centric heritage in computer-aided design (CAD)/computer-aided manufacturing (CAM)/computer-aided engineering (CAE) or product data management (PDM) — including recipe/formula management — they do not recognize, articulate or deliver on the more complete enterprise PLM vision in the marketplace today. They typically:

• Perform consistently well in the area of product development and PDM. The leadership team espouses a broader PLM vision, but corporate culture, strategy execution and field execution do not yet reflect the broader vision.
• Have a strong, ongoing reputation and presence in the PDM and CAD/CAM/CAE markets that preceded PLM.
• Have a strong ongoing reputation in the market for formula/recipe creation and management software and the software for process manufacturing design in markets that preceded PLM.
• Report at least $200 million in annual software revenue for PLM-related applications.
• Execute reliably and have a strong presence in multiple regional markets worldwide.
• Have the resources to invest in next-generation enterprise-centric applications.
• Are inconsistent in their marketing, sales and support of enterprise-centric PLM applications that extend across the enterprise value chain, including trading partners.
• Do not yet adequately execute on a credible vision for PLM that extends across the value chain and deliver value to life cycle management stakeholders across marketing, service, sales, production, procurement and engineering.
• Have major customers that standardize on the vendor for engineering-centric function but depend on other vendors for enterprise-centric PLM functions related to sourcing, service, marketing, sales, production or product-related regulatory compliance.

Manufacturing PLM vendors in the Visionaries quadrant understand current market requirements and future market dynamics/directions. They also articulate a comprehensive strategy to provide value to users and capitalize on opportunities arising from that superior market understanding. Their current product/feature set channel, culture, management, financial resources, organization and core competencies do not allow them to execute on their entire value proposition at this time. They typically:

• Advance a compelling message regarding the broader enterprise value and impact of PLM for commercial dealings with the potential to revise the "rules of competition," impacting the dynamics of the market and change manufacturer priorities for selecting vendors.
• Convey an understanding of the architecture that will drive PLM adoption among all product stakeholders across the enterprise.
• Convey an understanding of the technology drivers that will enable PLM users to interact in cross-functional activities, projects and decisions throughout the product value chain.
• Convey an understanding of the data, presentation and decision support capabilities various enterprise users will require to effectively use PLM.
• Have not established a consistent sales or profitability record in PLM business.
• Lack four or more of the classes of applications we have summarized that are needed to deliver enterprise-centric PLM value to clients. Or, customers do not validate that they use those applications in production.
• Lack the financial and/or human resources required to consistently deliver enterprise-centric PLM value.

PLM vendors in the Niche Players quadrant make a focused offering to the market in terms of a limited set of functionality provided or serving limited industrial and geographic markets. A niche player may, alternatively, have broader market presence and aspirations but possess a limited vision and an unproven ability to execute on it. Niche players may be appropriate choices for users in certain situations; we advise those users with limited PLM requirements, or those seeking to supplement a legacy environment with particular functionality, to discuss all niche players with Gartner. Pending your development of requirements, we can help you understand your best options, because some providers in other categories may be able to offer viable stand-alone options for your focused initiatives and projects.

A PLM vendor in the Niche Player quadrant typically:

• Has established a presence and performed in a subsegment of the PLM market, typically providing eight or fewer classes of PLM applications in Gartner's PLM framework.
• Articulates a focused or incomplete vision for delivering enterprise-centric PLM.
• Makes a marginal investment in enterprise-centric PLM, indicating it is executing a focused or incomplete PLM strategy.
• Delivers a limited set of services directly and/or via channel partners, indicating it is executing a focused or incomplete PLM strategy.

• Autodesk's key PLM offerings for product design, PDM, collaboration and design-to-manufacturing workflow are highly cost-competitive, particularly for existing AutoCAD and Inventor users.
• Early adopters have validated that Autodesk's PLM offerings deliver good value. This is the first year we are seeing a rise in production use with such validation.
• Autodesk's PLM user community will continue to grow rapidly, providing small and midsize business manufacturers a large community to share experiences and best practices. We also see potential for large manufacturers seeking a low-cost solution, particularly at the departmental level.

• Although Autodesk's applications are proven in production, it is still early in its evolution and early adopters report more "bugs" than we hear regarding other providers' offerings. In response to Gartner's observations, Autodesk shared data reflecting strong improvements in software quality. Autodesk's PLM applications should continue to improve in quality and functionality.
• Because Autodesk's PLM applications are still relatively new, it remains difficult to find customers with useful best practices and service providers skilled at implementing and supporting Autodesk's PLM applications.
• Autodesk has fewer enterprise-centric PLM capabilities that Gartner describes as part of the PLM foundation than other vendors. Manufacturers will need to build their own or find partners that support functionality such as regulatory compliance and product portfolio management.

• DS has widely adopted and proven mechanical design software, CATIA and SolidWorks, addressing small and large manufacturers.
• The company has a broad range of 3-D applications addressing digital manufacturing, CAE, simulation and virtual environments.
• Its strong vision and emerging enabling product content management capabilities via a highly intuitive and graphical user interface.
• DS's strong global sales and service presence addresses large and small manufacturers.
• The company has a comprehensive emerging strategy for enterprisewide PLM since its acquisition of MatrixOne.

• Gartner clients report that DS is more inflexible on software pricing and discounting for its design and PLM software suites than competitor PLM vendors.
• Gartner believes that developments such as 3DLive, acquisition of companies such as Seemage and the partnership with the Pro-STEP organization will continue to improve the ease of interfacing third-party data with DS's PLM applications.
• Clients report that the released interface between CATIA and Enovia MatrixOne needs to improve. Enovia MatrixOne does not provide adequate support for multiple releases of CATIA. A comprehensive interface remains a work in progress.
• Although DS's management articulates a compelling strategy and road map for ongoing development of enterprise PLM software infrastructure, the field organization is not well versed and customers get conflicting information from DS management and the technical organization. Gartner understands that DS is investing heavily in ongoing education for its field organization.

• Agile Software brings strong PLM capabilities and expertise serving high-tech, medical devices and process manufacturers, particularly process manufacturers in processed food industries as validated by multiple customers and Gartner clients.
• Agile Software customers express satisfaction with Agile 9 after a rough transition period from earlier versions of Agile's applications. This rough transition was due to major changes in software architecture. Now that the software is stable, customers are reporting productivity gains over previous software versions.
• Oracle has been successful at acquiring and integrating companies such as PeopleSoft and Siebel into its operations. Related to PLM, Oracle was successful at transforming software from its 1996 acquisition of Datalogix into its well-respected Oracle Process Manufacturing software. Such experience at generating value from its acquisitions suggests that Oracle will generate value from its Agile acquisition as well. Manufacturers invested in Agile will be protected.
• Given Oracle's strong track record, the Agile acquisition promises a compelling software evolution path, bridging access to design data and proven workflow support for product development to a broader suite of back-office applications.

• Oracle's ERP customers that have adopted Advanced Product Catalog application for PLM should consider migration to the Agile 9 platform by 2012. At the 2007 Oracle Open World, Oracle made it clear that Agile's software is the new path forward. Although these customers will continue to be supported if they remain on Advanced Product Catalog, they will have more limited opportunities for software enhancements than they will if they make the move to Agile.
• Although Oracle is responsive to customer requests, Agile customers express concern that service will degrade if Oracle replaces their current contacts with Oracle personnel. Oracle reports a decision not to replace current Agile customer contacts. However, if Oracle does make a change, and a customer is not satisfied, it should be prepared to make its discomfort known quickly.
• Customers are reporting changes in pricing for software, maintenance and services since the transition. For example, one client that benefited from concurrent licensing must now buy named-user licenses. Some customers reported maintenance increases on new licenses purchased.

• PTC has a strong legacy and expertise in electromechanical product development with a large customer base.
• PTC's Windchill-based PLM software architecture proves scalable and extensible, and it should serve the company well over the long term. The company is executing well at migrating applications to Windchill, such as Arbortext for publishing and MPMLink for manufacturing process management.
• PTC consistently moves fast and proactively to address industries new at adopting PLM such as medical devices, durable consumer goods, high tech and apparel. Arbortext positions PTC to support nonmanufacturing markets as well where service products are document driven.
• The company has a large base of mechanical design users to sell complementary PLM applications spanning PDM, technical publications, manufacturing process management, project management and engineering calculation tools.
• PTC's purchase of CoCreate reflects the company's awareness and responsiveness to developing market trends in design software.

• Several Gartner clients reported that PTC's technical support is not as consistently satisfactory as that of other vendors. However, PTC shared a survey performed by an independent third party that reports three years of improvement.
• The majority of Gartner clients that inquire about PTC report difficult negotiations with PTC on licensing and maintenance. They describe PTC as inflexible compared to other vendors.

• SAP has a broad global ERP presence across many manufacturing verticals. SAP leverages its strong ERP base to promote its PLM offering.
• CIOs promote SAP's PLM software because SAP bundles much of the PLM functionality into the core ERP offering. These endorsements by executives with ties to senior management give SAP a selling advantage.
• SAP's PLM vision with a strong focus on streamlining interdepartmental workflow appeals to senior management.
• For enterprises with PLM needs in nonmanufacturing areas, SAP has demonstrated the ability to accommodate those needs as well. (However, given the scope of this Magic Quadrant, this factor carried no weight in the positioning).
• Integration with ERP functionality provides information consistency and can streamline design through manufacturing workflow during new product introduction plus service and support advantages during the active product life cycle.
• The NetWeaver SOA environment enables composite applications that federate heterogeneous data for unique process support. It also fosters an ecosystem of third-party developers that can build third-party applications that are SAP compliant and enable data transparency.

• SAP's PLM software is reportedly difficult to configure and deploy. Gartner clients and references most frequently cited issues with cFolders, xPD, and Integrated Product and Process Engineering (iPPE).
• Several manufacturers have told Gartner that while the SAP architecture enables visibility between engineering and manufacturing operations as an advantage, it constrains the way engineers are accustomed to working. In Gartner's opinion, it is also difficult to manage CAD content with the degree of granularity available in PLM software from PLM specialist firms. Gartner perceives that SAP customers invest in customization to gain acceptance among engineers more than customers of other PLM software providers.
• Many Gartner clients and SAP references report that SAP's support organization responds quickly. However, the customer feedback also suggests to Gartner that it is more difficult to access knowledgeable PLM resources than with other PLM software providers. To alleviate this, our end-user contacts also contract service firms that specialize in SAP's PLM offerings.
• Gartner perceives, based on SAP customer feedback across multiple industries, that SAP will typically charge each of them a consulting fee to implement enhanced functionality of general value, and implementation of that functionality back into the commercial offering takes longer than with other PLM software providers.
• Product features in SAP applications change from version to version. In Gartner's opinion, this complicates licensing and upgrade issues more than we see with other PLM software providers.

• Siemens acquisitions bring an infusion of financial resources and manufacturing expertise.
• The company's PLM vision, and progress toward that vision, bridges product design and manufacturing operations given the collective resources of the PLM team and well-recognized manufacturing expertise at Siemens.
• Siemens gets consistently positive feedback regarding customer support.
• There is strong positive feedback on TeamCenter's functional breadth, depth, openness and ongoing progress toward a common PLM platform.
• TeamCenter's major market share reflects a major PLM software market presence.

• The mismatch of Siemens' conservative culture and the UGS legacy of proactive adaptive behavior in a dynamic and cutthroat PLM software market could undermine the PLM software group's responsiveness to market trends over the long term.
• Over an extended period, Siemens' corporate priorities could encourage the PLM group to focus on design-to-manufacturing integration and miss important developments in design software advances.