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On desktops and tables in offices and homes around the world, and on the laps of latte-sippers from Miami to Mumbai, you will find computers made by Dell, the world’s biggest PC manufacturer. For a company that shifts tens of millions of boxes each year it is a mammoth task to keep track of all the different components that go into each of its various models, and to ensure that 400 suppliers around the world are kept informed of changes in design or specifications—even as similarly global teams of designers are continuously updating its product line to stay ahead of the competition. Like many other large firms, Dell uses clever software to handle all of these tasks. It is called product life-cycle management (PLM) software, and it is becoming integral to the operation, growth and profitability of many big companies.

As its name suggests, PLM software can manage the entire “life-cycle” of a product, from concept and design to production, marketing and even recycling. Using PLM software, for example, when Dell’s engineers design a new computer, they can reuse parts of previous designs, and so keep to a minimum the number of new parts and suppliers. The software also ensures that old and new components fit together perfectly. But according to PLM devotees, there are many other benefits: lower prototyping costs, reduced time-to-market for new products, less waste, improved product quality and faster turnaround of marketing materials.

PLM software, in short, provides the framework within which companies can take new ideas and implement them quickly in actual products. “PLM is becoming the enabling tool for innovation,” says Navi Radjou, a PLM guru at Forrester, a consultancy. As a result, PLM is currently the fastest-growing segment of the business-software market, according to AMR Research, another consultancy. Last year the PLM market was worth $9.65 billion, and grew by 10%; AMR expects 8% growth this year (see chart).

A brief history of PLM

PLM‘s sudden growth is largely the result of its spread beyond the niches where it first evolved—in the aerospace and automotive industries—into the broader markets of consumer electronics, clothing and packaged goods. In the past, says Walter Donaldson, IBM‘s general manager for PLM, he would find himself talking to the vice-president of engineering. But these days he is more likely to find himself talking to a company’s chief operating officer about how to use PLM to become more competitive. The latest trend, says Mr Radjou, is that large retailers are starting to invest in PLM to manage their private-label goods and compete better with big consumer-goods firms such as Procter & Gamble and Unilever.

Vendors of PLM software, such as Cadence, UGS, PTC,SAP, Dassault and Agile, generally sell suites of software that do many things, and which have formed by accretion over many years. PLM‘s origins go back to computer-aided design (CAD) software, a range of computer-based design tools which engineers and architects began using in the 1980s.

In the 1990s, this evolved into product-data management (PDM) software, which features CAD design tools combined with a database of information about components. This makes it possible to work out quickly how much a design change or a new product might cost, among other things.

PDM systems also helpfully centralize product information into a single, authoritative database—sometimes called the “system of record”—thereby doing away with paper plans and reducing the scope for error or misunderstanding. And any changes to a product’s plans are quickly visible to the team designing the production line on which it will be built. Nikon’s camera division, for example, used to produce around 15,000 design drawings a year that had to be distributed and approved. Using PDM, it has reduced the amount of paperwork by 80%, and drawings can be retrieved five times faster.

Such systems have now been extended so that they are not just for designers and engineers, but also include tools for use by senior managers and marketing people. According to AMR, CAD still accounts for 53% of spending on PLM, but non-CAD spending is growing twice as fast, or 13% a year. The latest PLM systems may include “requirements management” and “portfolio management” tools, so that managers can, for example, look across the range of products in development to make sure they match the demands of the market in question. If they do not, then specifications can be tweaked or products killed off.

PLM systems also allow packaging to be mocked up quickly and then displayed to focus groups via the web, so that the most effective packaging can be identified. In theory, all of this means that the needs of the market can be anticipated and communicated back along the chain to the research and development department. PLM has, then, evolved from humble design tools into elaborate systems that help companies develop and manufacture products that their customers actually want to buy.

The desire for greater competitiveness and faster response are two reasons why PLM is growing so quickly. But its adoption is being driven by other factors, too. One is globalization. When firms start to design, manufacture and sell products in many different countries, each with their own requirements and regulations, they face a huge increase in complexity. Heinz uses PLM software to keep track of the different ingredients that go into its ketchups and other products in various countries, to cater to local tastes. By centralizing this information, it has been able to optimize its recipes and reduce costs.

For companies that rely on outsourcing or have multiple design and manufacturing centers around the world, PLM can simplify things by allowing people in different countries to communicate and collaborate within a single, secure environment. Rolls Royce, for example, used PLM to facilitate around-the-clock development by engineering teams in Britain, India and America of the Trent 900 engine for the Airbus A380.

“PLM software provides the framework within which companies can take new ideas and implement them quickly in actual products.”