Clarity on PLM

A quick peek into some research on … how manufacturers and vendors plan to react to the market for CAD, CAE, PLM, and other engineering software in 2010. Last week I posted the first part of my research for COFES, Engineering Market Research Results from COFES 2010. Last week I reviewed how 2009 predictions played out and what the survey participants expect from 2010. Today, I plan to focus on what they are going to do about it.

The Research Findings – What Comes Next?

Let’s jump right in. 2009 was a bad experience for most companies in our market, but the outlook for 2010 looks a lot better. Stunning analysis on my part, isn’t it? More details are in the prior post, but I realize I stating the obvious based on what most of you are experiencing. So what did the survey say will happen in the engineering software market between now and this time next year (2011)? It is not all positive.

• Continued Consolidation – Over half of the respondents predict “continued consolidation within the industry.” This is not all bad, by the way. The market for suites of applications always relies on innovation around the edge and consolidation into an integrated offering. This has been true for other markets as well, for example the way ERP became such a large suite of solutions. I expect we will also see the kind of consolidation expected in most mature markets, where companies acquire older solutions to scale up their customer base and maintenance revenue. 
• Fewer New Entrants – Almost half (44%) of the participants believe there will fewer new companies coming into our market. I have heard that it is still difficult to get venture funding, so this doesn’t surprise me. I hope this changes, because I think market innovation is much easier in a “garage” than in a big corporate R&D center.
• Entry by “Others” – A third that responded to the survey see further entry into this market by “non-traditional” vendors like SAP, Oracle, and possibly others through acquisition. Interestingly, less than half that many (15%) believe those same companies will enter by developing their own solutions. See Who Will Disrupt PLM Giants? for more of my thoughts on that.

The Research Findings – What Are We Doing About It?

So that explains what we think will happen, but what are market participants planning do it about it? In a word, grow. In two words, grow profitably.

• Over 1/2 of companies polled listed “grow in existing markets” and “grow in new markets“ in their three responses. What clearer message could we get? Companies are upbeat about 2010.
• But wait, 40% say they also have “remain lean” in their strategies for 2010. I believe there are two drivers behind this. The first is caution. Yes, we are recovering. But no, I haven’t talked to a lot of people that are 100% confident that it will continue or that we won’t have a “double dip.” But there is another reason, in my opinion. That is profitability. Companies that remain lean in growth markets make nice profits. It is not sustainable over the long haul because people get overworked, but as a business strategy it works.

Implications for Manufacturers
So what does this all mean if you are a manufacturer? First, you are facing many of the same conditions. Your businesses are also planning to grow, but you will likely stay lean. One of the way to stay lean is to get the most out of the resources you have, which I believe will help fuel the engineering software market recovery. To remain lean, many manufacturers will upgrade tools and automate processes to improve efficiency. 2010 will be a busy year. But would anybody trade a busy 2010 for a repeat of 2009? I doubt it. Let’s get things rolling again, and then as growth is sustained let’s start to invest and get people back to work.

So that was a quick peek into some recent research on how companies plan to react to the recovering market in 2010, I hope you found it interesting. Does the research reflect your experiences? Do you see it differently? Let us know what it looks like from your perspective. Please feel free to review more free research and white papers about PLM and other enterprise software for manufacturers from Tech-Clarity.

A quick peek into some research on … the market for CAD, CAE, PLM, and other engineering software for 2010. 2009 was a very difficult year, no surprise. But what does 2010 look like? When will the market recover to pre-recession levels? Those are the questions we asked in a research study conducted between Tech-Clarity (me), Cyon Research, and Design Insight. Here is a synopsis of the research I presented at COFES in April.

Note: Please understand that I am not a financial analyst, and that this research is based on survey data that indicates the sentiment and beliefs of those buying, selling, and otherwise participating in the engineering software market. In other words, there is no financial investment advice here.

The Research Findings – History

The results from the 2009 engineering software market study were difficult to look at. Unfortunately, they were a pretty good reflection of the situation. Most people felt that it would be at least 2-3 years before the market recovered. More telling, however, was that the execs at the companies that buy the software said the recovery were more pessimistic than the execs at the companies the sell the software. That was a disturbing finding. We also discussed the implications for smaller vendors (specialty vendors and startups) and the projection was not pretty. So what really happened? And how do companies in the engineering software market feel today?

The Research Findings – View in 2010

The market is clearly recovering. While last year I had to start with a quote from Dilbert to lighten everybody up, this year I quotes Fed Reserve Chairman Ben Bernanke saying the economy started growing again in the 3rd quarter of 2009, and the economy was finally starting to create jobs. There was no surprise or sigh of relief in the room, everybody already knew this. Since that time, Dassault Systemes, PTC, and Siemens PLM have reported good news (quarterly results and/or big deals) compared to last year (among others).  My FABWA (financial analysis by walking around) at the conference told me that smaller companies are feeling the recovery as well. People are buying engineering software again (please insert a choir of angels here).

What did the over 400 survey participants have to say? Here are the highlights:

• The predictions from last year for 2010 were relatively accurate, 59% of of respondents said their business suffered “severe” or “moderate” negative impact in 2009 (compared to a prediction of 55%) – Mythbuster approved!
• The projections for 2010 are better, but don’t indicate we are out of the woods yet. 23% still expect moderate negative impact in 2010. But only 8% predict severe negative impact, and 20% expect a positive impact. We’ll take that over 2009 for sure!
• The channels including VARs (value added resellers) and consultants were hurt the most. Over 1/2 experienced severe negative impact. This was worse than predicted, even though the expectations were not very positive.
• Suite vendors including those with multiple engineering software solutions, enterprise software vendors (like SAP and Oracle), and infrastructure providers (like Microsoft) faired the best. Only 20% experienced severe negative impact.
• The channels are the least optimistic for a positive impact in 2010 (only 9%), while the suite vendors are the most optimistic (36%)
• Our predictions for smaller vendors were mixed, with larger vendors expecting more failures in their smaller competitors. While it was a tough year, the majority of the companies respondents had direct experience with fell into the “struggle but survive” category. The smaller vendors predicted this, and good for them. Of course there have been consolidations and failures, and as one participant commented “100% of the startups I was following failed to start“

So the obvious question is what comes next? Well, for  me it as another cup of coffee and a decision that this post is getting too long. So look for a part 2 with the future view shortly.

Implications for Manufacturers

So what does this all mean to the people using engineering software to make a living? The good news is that your business is likely recovering as well. The bad news, is that you are probably running very lean. But from this research (and related research by Cyon Research presented by Brad Holtz) you are also likely to be buying engineering software to help. I am sure that is good news to many that have had strategic programs put on hold due to economic uncertainty. Things are starting to move forward again.

And hopefully your critical vendors either survived the downturn or were acquired by a company that will support you well. The vendor shakeout is probably not entirely over, but if your vendor made it through 2009 they have proven they have some resilience and should have a much easier time going forward.

So that was a quick peek into some recent research on the engineering software market, I hope you found it interesting. Does the research reflect your experiences? Do you see it differently? Let us know what it looks like from your perspective. Please feel free to review more free research and white papers about PLM and other enterprise software for manufacturers from Tech-Clarity.

A quick peek into some research on … the impact of the economic downturn and the fledgeling recovery on the market for CAD, CAE, PLM, and other software for engineers and product developers. In 2009, I conducted a survey jointly  with Cyon Research, and Design Insight. We presented the results at the annual “Congress for the Future of Engineering Software, COFES, which generated some lively discussion. We are repeating the survey this year, and looking forward to understanding the views of the market this year as compared to last.

The Research Findings – 2010 (please take the survey)

Before getting into the results for 2009, I ask you please contribute by taking 5-10 minutes of your time to answer about a dozen short questions on this year’s survey:   COFES 2010 Survey.  Please participate, and I will make sure we share our findings and insights back with you.

The Research Findings – 2009

As I stated last year, the research was not intended to be an economic forecast, but instead an indication of the sentiment of the industry. The study was designed to guage respondents’ opinions about the market, and should be take as such.

I shared some results last year in Research Rap: Impact of Economy on Smaller PLM Vendors. I found it interesting that most smaller vendors felt that they would struggle but survive. As the calendar has turned, we will close the loop on this prediction and see how it turned out. I would dare say that the shakeout was not as bad as some expected it to be. But the big question was when did the people in the industry expect to see a return of the engineering software market to its prior strength. 

The question was: “What is your best estimate of when the engineering software market will recover (to approximately 2005-2007 levels)?” Here was the view from last year:

What we noticed, though, was that the executives at the software vendors were more optimistic about the timing of the recovery than the executives at their customers:

Who was right? Has their opinion changed? Please take the survey so we have a good comparison of this year’s market sentiment to last: COFES 2010 Survey. I promise to “mythbust” my own predictions as well as the markets.

So that was a quick peek into some recent research on the engineering software market recovery, I hope you found it interesting. Does the research reflect your experiences? Do you see it differently? Let us know what it looks like from your perspective. Take the survey, and share your thoughts with all of us and the participants at COFES.

Please feel free to review more free research and white papers about PLM and other enterprise software for manufacturers from Tech-Clarity.

A quick peek into some research on … the priorities, plans, views, and economic outlooks of companies that use engineering software. The survey-based study, published last night by Cyon Research, paints a very interesting picture of how manufacturers plan to invest and leverage engineering software (and related hardware) in the near future. I have had the opportunity to review and comment on the report during its development, and one thing that continuously struck me is not just how useful the published insights on the future of engineering software are, but the richness and depth of the information that the Cyon team couldn’t fit into the report.

The Research

The research spanned companies that use CAD, PLM, CAE, and other technical software, and included responses from almost 600 people. The report breaks down into a number of major categories, including:

• Purchasing plans, policies, and priorities
• Hardware refresh rate
• Financial outlook
• How companies differentiate themselves
• Engineering software selection criteria
• Views and plans on new releases from major software vendors (Dassault, Autodesk, Siemens)

In addition there are some interesting portions on who controls the BOM (and age-old question) and some insight into the relationship between CAE application usage and other engineering software used. The report contains a tremendous amount of information, with a number of very interesting charts. Plan to spend some time reading it if you have the opportunity, there is a lot to dig into.

Key Takeaways

There is far too much for me to give justice to in this space, but I will try to point out some of the more interesting things I learned from the report:

• Some companies have cut spending on engineering software – 29% of respondents indicated that they cut spending in the first half of 2009, with further cuts expected but at a slowing pace (for example 19% in first half of 2010). Note that these are likely in addition to cuts made in earlier budgets, so the total number that have reduced budgets from 2008 levels is probably higher.

• Many companies are playing “wait and see” -  42% are “considering or about to cut” spending if their business conditions worsen. This is what Cyon calls the “overhang” of the cuts, which includes the potential for further reductions dependent on the general economic conditions.

• Companies are planning to pick up spending (when they can) – in the words of the report, “The bright spot here is the longer-term outlook, 2010 and 2011, for increased spending in the purchases of design, analysis, and data management software.”

• Companies still have an appetite for improved solutions – the report gives details on the planned adoption of new technologies (V6 from Dassault Systemes, Inventor Fusion from Autodesk, and Sychronous Technology from Siemens PLM). I can’t share specifics, but across the board there are plans to implement the new solutions, although more Autodesk users say it is “too early to tell” given the maturity of the solution at this point.

Implications for Manufacturers

There are some valuable insights for manufacturers in this report to compare their strategies with their peers and competitors. The report provides some interesting detail on specific industries and their behavior, particularly on how each industry reported they plan to compete (product quality was the most commonly targeted differentiator overall, but this varied widely by industry).

I think this report is potentially even more valuable for software vendors.  The research gives them insight into what is important to their customers, and how they are planning to spend their money. For software companies, this can provide them with invaluable input into where they should focus their efforts to best serve their customers, particularly at a time when many are considering reductions in spending.

So that was a quick peek into some recent research on the viewpoint from engineering software users, I hope you found it interesting. Does the research reflect reality? Do you see it differently? Let us know what it looks like from your perspective.