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.