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.

I had the chance to talk with … Chris Randles and Blake Courter of SpaceClaim recently to better understand their role in the broader engineering software market. SpaceClaim hase certainly managed to shake things up, from their initial introduction to the market with direct modeling, their tongue in cheek Twitter plugin, and now their demonstration of the potential use of multitouch manipulation in 3D modeling. This is a company that is clearly set out to change the status quo, and has succeeded in doing so. Other than shaking things up, though, where is the unique value that SpaceClaim offers, and why do they believe there is room in a consolidating CAD market for a new entrant?

Some History and Perspective

Stop me if you have heard this one (or better yet, skip to the next section). SpaceClaim has definitely made an impact on the CAD market.  The company splashed onto the scene with a very different message than the major CAD players. They bashed the limitations that parametric modeling brings with it, and offered “direct modeling” as the next generation of 3D CAD modeling. While most will agree that parametric modeling provides significant benefits, they will also agree that it requires training and knowledge about how to model parametrically, and that existing models require an understanding of how the part was modeled in order to change it. And, in some cases, what appears to be a small change to the design may in fact be fundamental change to the steps in which the CAD model was created (known as the “history tree”) and require fundamental model changes.

Suffice it to say, there was a weakness in the armor of the major CAD vendors, and the weakness was tightly embedded in the strength of their parametric modeling capabilities. That gave SpaceClaim a very strong competitive opening to target. Two other companies, CoCreate and Kubotec, also had direct or “history free” modeling capabilities. But SpaceClaim was the first to really exploit the chink in the armor, primarily because they have very strong roots and credentials in the CAD industry. Founder Michael Payne for example was also a founder of PTC, one of the most successful CAD (and now PLM) vendors in the world and SolidWorks, the disruptive technology that brought 3D CAD to the desktop. So these new entrants came with pedigree, experience, and a differentiated message. The results? Whether the incumbant players viewed it as a competitive necessity, were already developing something in parallel, or just reacted to the interest generated by SpaceClaim, the big vendors have responded:

• PTC acquired CoCreate to offer a parallel solution to their flagship CAD offering Pro/Engineer, and since has announced direct modeling capabilities in Pro/E

• Siemens PLM introduced feature-based, history-free modeling called “synchronous technology“

• Dassault Systemes developed CATIA Live Shape with direct modeling as a part of their V6 solution

• Autodesk announced “Fusion Technology” which aims to incorporate the best of both parametric and direct modeling

What do they Offer? A Different Approach to Design

So why is this important? Other than shaking up the market (which they are pretty good at), they are offering a design paradigm with much lower barriers to entry, and much lower barriers to change. Will this replace parametric modeling? It’s not likely in my opinion. There are inherent advantages to both parametric and direct modeling, with parametric modeling offering less flexibility but more power to develop families of similar parts or parts designed for mass customization. What impresses me, though, is that SpaceClaim does not seem intent on just fighting a battle between the two modeling paradigms. Instead, SpaceClaim is focusing on where each should be used, and how direct modeling can open up new business opportunities.

In particular, SpaceClaim is trying to promote earlier 3D modeling by non-CAD-jockeys. They are focusing on the advantages available from early digital, 3D models to help companies validate their designs early in the product development process. Today, this isn’t as easy because engineers frequently have modern-day draftsmen that translate their designs into 3D models. This is not the formula for rapid design and iteration. SpaceClaim, then, is targeting industrial design, conceptual design, and modeling for simulation and analysis. The designers and engineers involved in these functions are not as well trained on CAD, and require solutions that are more efficient and require less upfront investment (in time, training, etc.). The large CAD vendors recognize this, of course, and are working to increase ease of use in addition to offering direct modeling capabilities. But clearly SpaceClaim has a window of opportunity and some real value to offer.

Implications for Manufacturers?

There is a phrase that I like, “Love me, hate me, but don’t ignore me.” I believe SpaceClaim lives that mantra. They have a place in the market, they are not satisfied with the status quo, and they are innovating. Manufacturers should take a look at SpaceClaim, and consider using them either as a main modeling solution if they don’t have an incumbent tool and don’t require parametrics, or more likely as a complementary solution to address more free-flowing design by non-CAD-jockeys.

So that’s what I hear from SpaceClaim, I hope you found it useful. What do you think? What else should I have asked them?