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| UK CAD, CAM & CAE market review April 2001 | ||
| Each year, Cambashi researches the performance of the vendors and resellers in the UK CAx (CAD, CAM & CAE) market, by consolidating information from a wide variety of sources, including the SEC and Companies House, company annual reports, financial press releases, discussions with the players involved and other information. We resolve inconsistencies by bringing this information into a model, and producing a figure for EUE (End User Expenditure) to include software, hardware and services bought by end users from the CAx vendors and their intermediaries. This figure includes the PDM revenues of the major CAx players, but excludes the revenues of the PDM, document management and workflow vendors not directly involved with CAx product development. New Millenium - new strategies There is no doubt that 2000 was a year of change, both in terms of the applications purchased and the distribution and sales models employed by the vendors and their channels. Developers' adoption of Internet strategies to streamline distribution and sales channels caused many channel members concern. The prospect of competition from their own suppliers for software and hardware sales via Web-stores, and the increased pressure this put on margins, was not well-received by those resellers who also display their products and pricing on their own Web-stores. However, it did cause many to re-examine their current and future business models, with the resulting understanding that they will have to add more value to their sales and service offer - availability and ability to discount are not enough. In parallel, we have seen a lot of merger and acquisition activity in the reseller arena, as these organisations looked for a critical mass to provide both a wider product portfolio and the staff and knowledge to leverage more services from these products. In some cases this lead to resellers dropping long-held vendor associations and forging new relationships with other vendors or groups of vendors. 3D takes off - finally 2000 was also a watershed for the uptake of 3D systems in Mechanical CAD. Whilst 3D systems were approaching 49% of new seat sales in 1999, in 2000 that percentage increased to over 50% for the first time, reaching nearly 53%. This is another indication of a mature market, where saturation of CAD has reached a plateau; rather than purchase new 2D CAD seats, users were upgrading their existing 2D to the latest versions and at last starting the transition to upgrades and new purchases of 3D solid modelling systems. That is not to say that 2D is dead - it still forms at least 55% of the installed Mechanical CAD base according to our model, but that proportion is slowly decreasing year on year. Overall CAx spending has fallen slightly…. Providing comparable figures each year is always part of our aim. Taking into account the changes in the companies that make up our model (sale of product lines, mergers and acquisitions, etc), we found that overall spending on MCAD systems was down from £301m in 1999 to £293m in 2000 and AEC from £88m to £83m in the same period. Together, this shows a decline of nearly 3.5% in end-user spending during 2000. However, this masks growth in some sectors, whilst reflecting the further decline in hardware prices and the pressure on prices in certain sectors of the software market. …hardware EUE has fallen… Looking at the mix of spend, we see that hardware fell from 30% of EUE to 27% in 2000; software EUE from 29% to 28%; and that services rose to 44% of EUE in 2000 from 40% in 1999. |
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Certainly, it should be expected that hardware expenditure in CAx would fall - PC and peripherals pricing has been subject to heavy discounting by those who need to keep the volumes high to maintain their quotas and own discounts - but it also reflects the IT mix required by companies today. CAx expenditure has to compete with other IT projects for it's share of the budget and it seems reasonable to expect that all departmental budgets would be reduced to pay for basic infrastructure to e-enable enterprises. (Spending on networks and tele-communications for Internet-enablement of enterprises is not included in our CAx figures). We also suspect that the re-use of some lower-specification machines as servers on NT networks and the upgrading of graphics capabilities and memory in existing CAx installations has also reduced the demand for new PCs. This is particularly true in the mid-range modelling base - as users become more proficient and build larger models and assemblies, they require more power to manipulate and display these models, but they do not need to buy a completely new desktop. …software holds it's own… Software spending, as a percentage, was reasonably stable (one percentage point down), even though absolute spending fell slightly in 2000. We saw price competition in the commodity CAD business reduce margins significantly, whilst many users were upgrading their systems to the latest releases or trading-up from 2D to 3D, rather than pay for full-price new systems. There were also moves by some vendors to reduce the base-price of their high-end MCAD software to compete with the cheaper, mid-range MCAD modellers that have been so successful in replacing some of the high-end seats over the last 3 years. In fact, this is one of the hot areas in the MCAD market. The 55% of the installed base still using 2D design systems represent a sizeable revenue opportunity and this perhaps partially explains why some of the high-end players are looking at this market to re-invigorate their MCAD revenues, following a decline in market share over the last couple of years. (Those companies that focussed on their PDM market development appeared to take their eye off the ball and let their position in MCAD suffer as a consequence). We estimate that sales of these mid-range modellers reached 5,000 seats in 2000, up at least 15% on 1999. ….whilst services have grown Again, an indication of a maturing market: more installed seats paying software maintenance will show a steadily growing service revenue stream. However, as some of these "new" seats are actually replacing £20,000 seats that carried much higher maintenance charges, the increase in maintenance revenues has not been exponential. We saw a 4% increase in services overall in 2000 over 1999. Service provision in the 2D design market is a tough business - users are knowledgeable and reluctant to pay for external help - whilst new 3D accounts require on-going training to reach acceptable productivity in the shortest possible time. There are also more transition services required in the move from 2D to 3D - conversion of drawings and digital archives, for example - and more opportunities for systems installation, configuration and administration revenues to be leveraged April 2002: there is a 2001 UK CAx market review now available
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