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e-Xpertise in Industry Issue #27
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June 2006

In this issue...

Quote for Today

"I have tried simply to write the best I can. Sometimes I have good luck and write better than I can."
Ernest Hemingway

Feature Article: The PLM Universe

We dislike TLA's (Three Letter Acronyms - even though we are just as guilty as anyone of using them) and express dismay at the haphazard way in which terms like PLM are used by the various vendors. We regard PLM as a concept, not a product to be sold; we prefer to use the term Engineering Applications.

This Universe includes overlapping application areas:

CAx = Computer Aided Design, Computer Aided Manufacture & Computer Aided Engineering
PDM = Product Data Management
EDM = Engineering Document Management
GIS = Geographic Information Systems and Mapping (part of)
EDA = Electronic Design Automation (small part of)

Many vendors use PLM (Product Lifecycle Management) to describe their combined CAx and PDM/EDM offerings, whilst others will include all or some of the above overlapping application areas as PLM. Enterprise Applications vendors also offer PLM, but we would classify most as downstream of the design process, where design has already been fixed. Some vendors do nothing other than pure-play PDM and EDM; others integrate these products with other specific business systems like Enterprise Resource Planning or Content Management. In our view, PLM functions are a sub-set of both Engineering and Enterprise applications.

CAx and PDM/EDM

The picture above provides a visualisation of the definition of this Universe from an applications perspective. Using this definition, Cambashi focuses on groups of vendors in these key areas to build a picture of the universe and develop market sizing and other data. We have reported on the overall Engineering Applications market in our previous Web-article; we now look at the Product Data and Engineering Document Management and CAx parts separately. (Note: the GIS revenues of CAx players have not been separated from CAx revenue estimates).

PDM/EDM

Despite a lot of media promotion, growth in the PDM/EDM market remained lower than that in the CAX market in 2005 - see above. Although there has been an undoubted increase in the number of PDM/EDM applications in use, this has been tempered by the replacement of older implementations by lower-cost systems that attract less maintenance and implementation revenues. Hosted systems and on-demand web-based solutions are gaining traction in the market and are starting to present real choice for users as they offer attractive alternatives to owning and managing non-core IT functions. Hence, Cambashi sees lower than generally expected revenue growth in PDM/EDM. One factor which holds back this growth is the essentially flat performance of mySAP PLM, which led the way as a provider when it entered the market. Other vendors in this space have embarked on strategic or technical acquisitions to grow - Agile and Eigner; Dassault and MatrixOne for instance. Even without SAP, the market would have shown only slightly higher growth at 7% in 2005.

Note: We have used the same scale on the PDM/EDM applications graph as in the selected CAx vendors below to allow true comparison of revenues.

CAx

In contrast, the CAx portion of the market grew at double-digit rates in 2005, following an equally good year in 2004. The marketing and sales execution of CAx players has improved significantly in this period. End-of-life programs, upgrade and replacement offers have kept prices competitive and made it cheaper for existing customers to move to new platforms and applications, whilst maintaining investments in staff and data. Management of partnerships and channels is becoming a key area again, as much of the growth exhibited in the CAx market is driven by small and medium businesses (SMB's) which are uneconomic direct sales targets. With a couple of profitable years behind them, CAx vendors are also on the acquisition trail, though they are now generally looking for smaller acquisitions that fill technology or installed-base gaps in their portfolios, rather than those that increase revenue or bottom-line contributions. Autodesk and Alias; Dassault and ABAQUS; or Bentley Systems with REI and RAM International; AVEVA with Tribon; Ansys and Fluent are all examples.

Looking forward

Overall, we see that, whilst new 3D and especially task-specific CAx applications are now being accepted in the market, PDM/EDM remains an area that users are still unsure of. We expect growth in CAx to continue in 2006, but at a slightly lower rate of around 10%, compared to 2005. Areas that are attracting interest are simulation and analysis and emerging territories like EU Accession States and former Soviet Bloc members, plus China, India and South America, as these economies take on manufacturing from the developed economies of the West.

PDM/EDM will continue to grow. At the lowest level - simple document vaulting in the design office - acceptance of some sort of document management is gaining ground in smaller accounts, though low-cost or free tools (included with CAx) continue to dominate this market. On-line and on-demand/pay-for-use systems which extend and control the use of design information throughout project teams are also gaining customers, particularly in large-scale civil and architectural engineering companies. Here the emphasis is on leveraging design information for costing and planning purposes. With prospects still somewhat confused on what to expect from these technologies, we see growth of only half that in CAx for 2006 - 5% to 6%.

Nick Ballard

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Hot Topic: Everyone likes Sausages.....

Geoffrey More (after Bismarck) once joked that market numbers are like sausages: No-one who consumes them wants to dwell too closely on their content! But behind this flippancy lies a certain truth: most market numbers contain a certain laxness in their definition.

For instance "installed base" figures are often bandied about by companies and press alike as though they were cast in stone, yet even this seemingly simple definition can be misleading. At an industry event one analyst was prompted to exclaim that "some companies seem to count installed base differently to others!" Is that the installed base figure for cumulative sales; or those in use; on the current version; on maintenance; or on subscription? All these different definitions would produce widely differing numbers - so which is the correct one, or rather, which one does the vendor use?

That may depend upon the role of the individual within the company. The PR department probably prefers the cumulative total; the bigger the number, the more impressive it will sound. We have all seen the press releases proclaiming, "n thousandth copy sold".

The sales team requires much more precise market data to plan sales campaigns, set targets and project revenue streams. Installed base in these terms could be seen as systems actually in use and a product's share of the total in use, rather than cumulative totals.

The marketing team also likes these definitions for installed base. They will however, require an additional view of the market in terms of the potential in a particular sector or for a particular product; installed base and market share are then viewed from different angles, especially when penetration and saturation are an issue.

So there are a number of potential uses for a simple "installed base" figure. At Cambashi, we understand these differences and tailor the data format according to the requirements of the final users, rather than hand out an off the shelf report. Everyone likes sausages; the trick is to get the right blend!

Nick Ballard

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Book Review: Competing for the Future by Gary Hamel and C.K. Prahalad

ISBN 0-87584-416-2, Cost $24.95. First published in 1994 by Harvard Business School Press, Boston, Massachusetts, USA, 296 pages plus notes.

Competing for the Future, written in 1994, extols senior management to create a sense of direction, discovery and destiny to beat the competition to 'get to the future first'. Gary Hamel and C.K. Prahalad, both eminent corporate strategists, introduce two theories on management thinking. Firstly creating strategic intent, and then understanding the core competencies to achieve the intent. As with so many books on management, the question is has the content stood the test of time, and are the messages still relevant?

Although the corporate examples quoted in the book, such as DEC and TWA, may now seem somewhat dated, the essential messages still hold good in that senior managers spend too much time pursuing the current business model of operational efficiencies, profit and 'down' or 'right' sizing (means less people). By definition this means that too little time is spent on the future strategy in terms of foresight, intent, commitment and competencies.

Hamel and Prahalad argue that managers become comfortable re-engineering' today's business processes to maintain the status quo, and do not spend enough time 'regenerating' business processes to meet future competition. An essential element is attracting new thinking by younger minds, and listening to their ideas. To ensure future competencies, the next generation of managers must learn faster, epitomized by the younger generation who have less to 'unlearn'.

The assumption that senior management is in control of the company strategy is challenged by this book. To this end a management questionnaire is offered which I suspect some managers may be wary of taking, even after 12 years!

This book is about strategy, a cynic might suspect that its prime goal is to generate consulting fees rather than inform an open mind, but this is too harsh a view. Perhaps the book should be described as a 'should read' rather than a 'must read', but its content has stood the test of time, and its messages are possibly more relevant today than when the book was written. The faster the business world changes, the less time is dedicated to future strategy. A quote by Gary Hamel encapsulates the book; 'On the road to the future, who will be the windshield, and who will be the bug?'

Ian Wallace

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Noticeboard

DMS - Design, Engineering, Manufacturing : 21-23 June 2006, Tokyo, Japan

DAC: 24-28 Jul 2006, San Francisco, USA

SIGGRAPH 2006: 30 Jul-3 Aug 06, Boston, USA

CeBIT Asia: 17-20 Sep 2006, Shanghai, China

CATpro: 19-23 Sep 2006, Stuttgart, Germany

PLM Road Map 2006: 27-28 Sep 2006, Dearborn, USA

A full list of industry events can be found at IT industry events on the Cambashi website

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