Aras recently wound up another record year, so I decided it was time to catch up with CEO Peter Schroer and find out how Aras keeps growing when other PLM vendors have been posting "lackluster" results.
JM: Aras just announced 5 years of record growth. That's a big accomplishment under normal circumstances, and it's even more impressive given the global economy for past several years. How did you do it?
Peter Schroer: Like most ventures, we can attribute our growth to a combination of good timing, good preparation and yes, luck. As the worldwide economic situation began to shift, global business leaders began looking for enterprise solutions with a better risk balance between the customer and software vendor. It was at this time that we launched the Aras enterprise open source model.
JM: Obviously, the new business model has worked out well for Aras. What type of customers have you attracted?
PS: About half of our business each year is with companies new to PLM. We believe we have brought a lot of companies into PLM that couldn't have got involved otherwise. There's no way they could have afforded typical legacy pricing models. And, perhaps most interesting of all, we've also done a lot of PLM system replacements.
JM: That is interesting. Why are so many companies replacing their PLM systems?
PS: The life expectancy of a legacy PLM system seems to be about 3 years. In acquiring those enterprise applications, the company has made a big expenditure, typically between $5 - $10 million, for a large number of software licenses and consulting. Around the 3 year mark, they realize that they've had to compromise and reduce the project scope to the point that the software can actually be used and the number of users getting any value from the PLM is much less than planned. This is when CFOs re-evaluate the ROI on the project. It also doesn't hurt that our software has a reputation for actually working.
JM: Speaking of CFOs, Aras recently brought on a New CFO. What drove that decision?
PS: 5 years ago we were primarily a U.S. company with about a dozen partners. Today, we have established operations on 3 continents, we do business in 4 currencies and we have over 80 partners around the world writing contracts and implementing Aras. We needed a CFO with worldwide experience to improve our internal systems and procedures, and help us prepare for future growth as we take the company to next level.
JM: Sounds exciting!
Stay tuned for part 2 of my chat with Peter, when he tells us more about what's driving PLM replacements, even among legacy PLM providers' most valued customers.