Clarity on PLM

A quick peek into some research on … the economic state of manufacturing in the US. I don’t research the market or financials, but the least 12-24 months have been tough on manufacturers and all of those that are a part of the manufacturing ecosystem. I saw this press release from the Associated Press, and realized how long I have been waiting for some positive indication for all of us. And here it is…”Stocks higher on improving manufacturing data.” It’s about time!

 The Research

The statement was based on two reports. Here are the findings from the release:

On Thursday, investors were encouraged by news that factory activity in the mid-Atlantic region jumped back into positive territory in August, reaching its highest level since November 2007, before the recession began. The report from the Philadelphia Federal Reserve Bank echoed findings earlier this week in a similar survey for the New York region.

Implications for Manufacturers

Maybe these reports are a sign that brighter futures are ahead. Although these two reports are not enough to build a strategy around, I thought we could all use some good news. For those that have been diligently working on product innovation during the quiet time, maybe 2010 will finally be the time to take the wraps off of your new products to greet a receptive market. Good luck to us all on this.

So that was a quick peek into some recent research on the manufacturing market, I hope you found it interesting. I look forward to sharing some more of my own research on PLM with you over the next month. Does the research reflect your reality? Do you see it differently? Let us know what it looks like from your perspective.

A quick peek into some research on … how the economy has impacted smaller companies in the engineering software market. This is a follow up to last my post on the impact of the economy on the engineering software market as a whole, with the detail I promised on smaller vendors. Last week I tipped my hand by saying that  smaller companies believe they will weather the storm, and some feel they will come out stronger on the other end. That generated some interesting discussion, so I thought I should hurry to post some detail, so here it is…

Research Background
My presentation at COFES indicated that the engineering software market is staying positive in challenging times. The research, conducted jointly by with Tech-Clarity, Cyon Research, and Design Insight, was presented at the annual “Congress for the Future of Engineering Software” and was the result of 1,000 survey responses. As I stated last week, 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.

Research Results – Smaller Vendors
The survey allowed respondents to classify themselves as customers (those that use engineering software), vendors, or channel (among others). Vendors were then broken down into the following two major categories:

• Broad Vendor – (broad suite) – a software company that offers a broad range of solutions
• Targeted Vendor – (targeted solutions) – a software company that offers one (or a few) best of breed tools

I was particularly interested in how the smaller vendors were weathering the financial storm. These smaller vendors play an important role in the PLM ecosystem, frequently pushing the boundaries of current functionally (I call these companies “innovators”) or serving a niche solution or population (I call these “specialty vendors”). These companies typically provide deeper capabilities for a specific industry, user population, or process that the larger vendors don’t support as well. These companies help to fill in the gaps for manufacturers while they wait for the larger vendors to address these needs (of which, some will probably remain unmet).

So what is happening to these vendors? The chart above shows that 75% felt that these companies would struggle, but survive. Given how drastic and unpredictable this economic downturn has been, I find that a surprising level of confidence. Still, 32% of respondents believed that smaller companies would go out of business, and 28% believed they would get acquired. Note that while this was supposed to be the “most likely” outcome, respondents could pick multiple outcomes. I believe this data is showing that respondents believe that some smaller companies will survive, and others will be acquired or go out of business. This is not an “either-or” situation, the scenario will be unique for each of the smaller vendors.These results are far away from the “doom and gloom” that are prevalent in some other industries.

My favorite view into this subject can be seen in the table below. When you analyze the opinions of what will happen to the smaller vendors based on who is commenting, you find a few interesting things:

• Targeted vendors don’t think they are going away
• Bigger vendors think they will be acquired (by them, I assume?)
• Bigger vendors are the most pessimistic about specialists, but interestingly the customers disagree

So the view from the smaller vendors’ perspective is not as bleak as some might thing. On the other hand, few believe it’s “business as usual.” These are tough times, and there have already been corporate casualties.

My Thoughts
What does all this mean? My opinion is that the engineering software market – as a whole – will struggle but survive.The smaller vendors, who are more nimble but also more vulnerable, believe they will stand the test of time. This is good for all of us, as they typically push the limits of the current solutions and help bring more innovation to the software market.

Implications for Manufacturers
For manufacturers, you should make sure to know how healthy your vendor is, but don’t panic. I don’t believe that a “rip and replace” strategy to save on software and maintenance costs will be easy to justify as a short-term reaction. Stick with your strategy, but update it based on the economic realities. If you are in the position to take advantage of it, this might even be a pretty good time to look for some deals from your vendors.

So that was a quick peek into some recent research on the impact of the economy on smaller vendors, 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.