Feb 15 - Growth Slowing in World CAD Market

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Growth Slowing in World CAD Market - Cambashi

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CAMBRIDGE, UK, Feb 15, 2008 - According to the latest figures released by engineering and enterprise IT applications market research and analysis consultants, Cambashi, in 2007 users of engineering applications software worldwide increased their spending by 13%. Cambashi predicts they will continue to increase spending in 2008 through to 2010, albeit at a lower rate than that seen in 2007. By 2010, spending will rise to $19bn from the nearly $15bn spent in 2007.

Growth in all areas

According to Cambashi, in 2007 demand for engineering software grew in all regions and in all engineering disciplines: mechanical; architectural and civil; and geospatial. Regional growth was fastest in the Asia Pacific region where demand has increased sharply in the last two years.

In 2005 worldwide growth was 10%. It has increased to a peak in 2007 and Cambashi forecasts that in 2008 demand will increase about 11%, then fall back to high single-digit growth by 2010.

Mike Evans, Director of Research at Cambashi, comments: “Competition between companies causes them to continue to invest in new design and engineering tools despite the economic and geo-political uncertainties which we have seen in 2007.”

Currency plays its part

All growth figures quoted are in US$. The depreciation of the US$, against a basket of currencies over the past year, boosts the reported growth in US$. In the Europe, Middle East and Africa (EMEA) region, where the working currency is the Euro, the weakening of the US$ in 2007 boosted regional growth seen in US$ by 9%. Similarly the Asian currencies appreciated nearly 6% against the US$, boosting growth in US$ in the Asia Pacific region.

Leading software providers grow better than market

The ‘Top Four’ engineering applications software providers are Autodesk, Dassault Systems, PTC and Siemens PLM Software. They have produced an impressive run of double-digit revenue increases. Together their revenues account for 60% of user spending, up from around 57% five years ago.

A significant part of the larger providers’ growth comes from acquisitions. Since 2005, nearly a quarter of the growth of the Top Four providers and over half the growth of the top ten providers has come from acquisitions. Autodesk has announced 14 acquisitions; PTC ten, Dassault Systems seven, but Siemens PLM just one.

Other factors driving growth are: an improvement in pricing power, with smaller discounts available to the reseller channel; and a trend for users to buy higher specification, more sophisticated editions of software.

Cambashi predicts continued revenue growth for the Top Four, but expects that the trend will be for lower growth excluding acquisitions. It expects that merger and acquisition activity will continue as market conditions tighten and company valuations are likely to be more attractive.

Autodesk - Pervasive Technology: Executing well

In 2007, Autodesk grew 17% worldwide. With more product introductions in the pipeline, and niche application acquisitions, there seems little doubt that Autodesk has found the right formula.

Autodesk has the broadest target market of the Top Four, including architecture, engineering and construction (AEC); geospatial; manufacturing; and entertainment.

Until recently, in AEC applications, the core design tool has been sold by Autodesk and its competitors, whereas surrounding niche applications such as heating, ventilation and air conditioning design (HVAC) have been supplied by best of breed independent providers. In the past two years Autodesk and its great competitor in AEC, Bentley Systems, have been acquiring these niche application developers in order to be able to offer a single integrated system to clients.

Autodesk has been particularly successful in moving its large 2D customer base onto newer 3D applications. It helps the transition to occur at a pace and price that customers can accommodate.

Dassault Systems - Technology vision: In it for the long haul

In 2007, Dassault Systems grew at nearly 18% worldwide. Growth of the SolidWorks business continued at over 24%. Even the CATIA business grew at over 13%. Large acquisitions in the last few years have boosted revenues. The MatrixOne acquisition ensured that their ENOVIA business grew by about a third in 2007, whilst the ABAQUS acquisition ensured SIMULIA grew at about 15%.

Dassault Systems takes a longer-term view than most providers and offers big customers their unique vision of the future. With IBM as their sales partner for large accounts, Dassault Systems provides a comprehensive portfolio that assists nearly every engineering task, all using a single information hub.

There is an ongoing change in the IBM relationship. Dassault Systems is taking on more sales responsibility for CATIA business partners who mainly sell into medium sized customers. This change did not really impact revenue in 2007. In 2008, it will raise Dassault Systems’ revenues. Partners will become resellers on a lower margin than IBM could negotiate. However, Cambashi believes that this extra revenue will be moderate as reorganization of sales channels and partners may disrupt some business.

PTC - Comeback kid – Recovery on the horizon?

In 2007, PTC appears to have turned a corner and grown by about 10%, though new license revenues stalled towards the end of 2007. With Pro/Engineer WildFire, PTC is unique amongst the top developers to have the same product in both the mainstream 3D modeling market and the high-end.

Windchill continues to make progress – Cambashi estimates that it is now around 38% of software product revenues, compared to 35% last year. Large implementations tend to be limited as much by available human resources as by the vagaries of sales and economic cycles.

The resilience of PTC is underlined by their large user base, partly resulting from years of acquisitions. Maintenance revenues are over 43% of total revenues.

PTC’s series of small acquisitions have broadened what was already a wide portfolio of applications. The inclusion of revenues from the CoCreate acquisition should ensure that, in revenue terms at least, similar growth should be seen in 2008.

The revitalization of the reseller channel for Pro/Engineer WildFire is one of the reasons Cambashi sees indirect revenues back to the levels they were in 2004, at nearly 21% of total revenues.

Siemens PLM Software - A Safe Pair of Hands

Cambashi estimates that Siemens PLM Software grew at about 13% in 2007 driven in part by a pent-up demand from their user base. NX, including analysis products, looks to have particularly benefited. Before now, ownership and product integration issues have prevented many existing customers from committing to the next product line. Cambashi estimates NX growth of around 14%; it now accounts for over half of total revenues. In 2007, synergies from the Siemens ownership helped produce Teamcenter PLM and Tecnomatix growth at just under 10%.

Cambashi expects these synergies within the Siemens group to help speed the uptake of PLM in manufacturing enterprises, integrating design and automation within manufacturing IT. With the acquisition of UGS PLM, Siemens now has a leadership position in both automation and design, two of the three pillars of manufacturing IT. Siemens now only lacks an ERP offering to deliver a full set of applications to industry.

About Cambashi

Cambashi, based in Cambridge, provides independent research and analysis of the business reasons to use of IT in industry world-wide. Its specialist fields include Engineering and Enterprise applications and the infrastructure to enable industrial firms to use IT effectively. Cambashi publishes market size estimates in the Engineering Applications Market Observatory. Its clients vary in size from small to large and include most of the leading software vendors and many pioneering IT users. Cambashi is a member of CATN, an international association of consultants. For more information visit at www.cambashi.com.

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Source: Material used in press releases is often supplied by external sources and used as is.