The Hidden Costs of Sticking to an On-Premises PLM Solution

Whether it’s acquiring a new vehicle or the latest software, we’re always in pursuit of the best value for our purchase. Especially with today’s economic uncertainty, product companies are increasingly cautious about expenditures that could compromise their financial stability.

When selecting an enterprise product lifecycle management (PLM) solution, the initial purchase cost often takes precedence in the decision-making process while the long-term operational costs are sometimes overlooked.

On-premises PLM software purchases come with IT infrastructure and maintenance expenditures that significantly increase your total cost of ownership. Here, we examine these hidden costs and illustrate how opting for a cloud-native SaaS PLM solution can reduce expenses and accelerate your return on investment (ROI).

5 FACTORS THAT IMPACT YOUR TOTAL COST OF OWNERSHIP

Total cost of ownership (TCO) is a metric commonly used by businesses to assess the financial impact of a purchase. It encompasses all the costs associated with maintaining a system over its lifetime. This includes installation, operation, support, and disposal.

When calculating the TCO of an on-premises PLM solution, it’s important to include these key expenses:

1. Infrastructure Setup (Hardware and Software)

As part of the IT infrastructure, you will need physical servers ($5,000 – $15,000 each) as well as an enterprise-grade data storge solution (est. $10,500). Additionally, your organization will require networking equipment (i.e., firewalls, routers, switches), a disaster recovery system, software licensing, and IT setup. In total, these items can cost around $80,000.

2. Off-Site Data Center/Hosting

Many companies prefer to host their servers at an off-site facility. Depending on their size and location, data centers range from $6,000 – $18,000 per year. Along with the facility storage cost is an annual fee for security and utilities (est. $12,800).

3. IT Support and Personnel

System administrators and other IT personnel are typically outsourced or employed on a part-time basis to provide network, database, and user support. Their annual salaries range between $25,000 and $45,000.

4. Hardware and Software Maintenance

Organizations also incur an annual expense for ongoing hardware maintenance which is usually 10% of the hardware cost. Likewise, they must pay an annual software maintenance fee (approx. 20% – 25% of software licensing cost).

5. System Upgrades

Companies pay an exorbitant amount for custom coding and upgrades to tailor the system to meet their unique requirements. Commercial PLM vendors typically charge upwards of $20,000 for each software upgrade (avg. 50 users). If they outsource to external consultants, the rates are higher ($50K – $100K).

Aside from the recurring maintenance and upgrade expenses, companies accrue extra service charges for issues commonly encountered with on-premises PLM. They include frequent downtime, VPN connectivity problems, limited functionality, and security vulnerabilities.

As organizations grow or their business needs evolve, new expenses may be introduced. For instance, companies operating under stringent export controls and cybersecurity regulations (e.g., ITAR, EAR, CMMC) may incur additional servicing costs to implement the necessary security measures and avoid compliance risks.

Ultimately, most companies end up spending more than anticipated when adopting an on-premises solution.

WHY CLOUD-NATIVE PLM IS A MORE COST-EFFECTIVE CHOICE

Frustrated by the subpar performance and escalating costs of their on-premises platform, more and more manufacturing companies are making the switch to cloud-native SaaS PLM.

Cloud-native solutions eliminate the customer’s financial burden of IT overhead and maintenance since the software vendor handles their own infrastructure, security, and technology stacks. There’s no need for physical equipment or software installations on every workstation. All it takes is a web browser for teams to securely access the system from any location.

Unlike on-premises solutions that require a large upfront investment, the SaaS framework allows you to pay with a monthly or annual subscription, thereby eliminating long-term capital expenses.

Customers benefit from regular software updates that are automatically pushed to users without any downtime or IT intervention. With continual access to new PLM capabilities, companies accelerate the payback period for their investment.

MAXIMIZE YOUR ROI WITH PROVEN PLM PERFORMANCE

A proven cloud-native solution like Arena PLM provides companies with operational advantages that extend beyond the tangible cost savings associated with other cloud-based systems.

A team of seasoned solution consultants and coaches partner with customers from day one, helping them quickly transition from their legacy PLM system to Arena. As former users of on-premises PLM, the Arena team understands what it takes to achieve new product development and introduction (NPDI) success. Their extensive data migration and implementation services are provided at a fixed price—far less than what you pay with an on-premises system.

With access to supply chain collaboration, engineering change management, process automations, integrations, analytics, and other advanced PLM functionality, companies report significant quality and efficiency improvements using Arena. They include:

• 58% faster engineering cycle times
• 46% reduction in scrap and rework
• 60% reduced NPI cycle time
• 40% increase in quality process efficiency
• 50% faster response to audits

Ongoing PLM training, education, and support are included in the subscription, ensuring companies reap the most value from Arena. Plus, frequent software enhancements are seamlessly delivered to meet customers’ evolving needs.

With a robust suite of PLM capabilities and a team dedicated to your success, Arena offers the complete package at a fraction of the cost of a traditional on-premises solution.

Don’t let on-premises PLM compromise your bottom line. Schedule a demo to see how Arena can transform your business.