CIMdata PLM Industry Summary Online Archive

30 June 2009

CIMdata News

“2008 PLM Market Growth Was Strong Going into the Global Economic Downturn” by Ed Miller

According to recent statistics compiled by CIMdata, the Comprehensive PLM market experienced a 6.7% growth in 2008 with all sectors showing increases. Surprisingly, these increases fell only slightly short of earlier expectations, primarily because of a robust start for PLM investments in the first half of the year. Only in the last quarter did the market slow appreciably, which will undoubtedly continue in 2009 until the economy turns around. Nevertheless, a wide range of companies are investing in PLM to achieve short-term benefits as well as long-term strategic value throughout the product lifecycle and across their extended enterprise. Indeed, PLM may be one of the major deciding factors in determining which companies are able to weather the current economic storm and be in the best competitive position when global markets rebound.

Business Survival and Long-Term Priorities

Investments and implementation of PLM are being driven on several fronts. Small and mid-size companies continue to deploy PLM, as well as both new and expanded solutions at some of the world’s largest enterprises. Moreover, a widening range of industries are utilizing PLM including both traditional industries such as automotive, high-tech electronics, and aerospace and defense, as well as companies that have not historically been major PLM investors, such as food and beverage, retail and apparel, financial and investment services, and government. In addition, a renewed focus on PLM is taking place in areas such as utilities, petrochemical, construction and infrastructure.

In the current economic climate, many companies are primarily focused on the bottom-line benefits of PLM for controlling costs and improving operational efficiencies. The emphasis at these organizations is toward quick value, bite-size investments that will provide the fastest impact. Indeed, CIMdata research of companies that have implemented PLM solutions indicates that typical ROIs can be substantial and contribute heavily toward whether the company is able to effectively compete and even survive in today’s economy.

Even as these short-term priorities dominate the current market, long-term strategies still continue at many companies focusing on using PLM to best position themselves competitively for when the world emerges from the current economic chaos. Long-term drivers for PLM continue to be focused on initiatives that are critical for business success, including the harmonizing of global processes, managing the increased complexity of products and value chains, and improving competitiveness and pricing structures by improving product quality and lowering costs.

As a strategic enterprise investment, PLM is rapidly extending beyond engineering design to a broader range of business functions—from early-stage product strategy development and planning, to product engineering and manufacturing engineering, and through to product maintenance and support. The impact of the PLM footprint expansion is that many diverse, previously-isolated disciplines and pockets of automation are now being tightly integrated and efficiently coordinated through comprehensive PLM solutions. These solutions allow the various groups to collaborate more effectively and work more efficiently, leveraging corporate-wide product knowledge.

The Value of PLM in a Dismal Economy

CIMdata defines PLM as not just a set of technologies, but a strategic business approach that applies a consistent set of business solutions in support of the collaborative creation, management, dissemination, and use of product definition information across the extended enterprise from concept to end of life—integrating people, processes, business systems, and information. In this way, PLM forms the product information backbone for a company and its extended enterprise.

The tremendous business value in such an integrated, end-to-end environment is that processes are optimized not for individual departments or groups, but for the entire enterprise and across the full product lifecycle—planning products that fit into the company’s business, and developing product designs that meet those plans and that can be effectively built, sold, and supported. With that broad view and overall optimization of processes, companies operate more efficiently, get to volume production faster, improve quality and product performance, and have the ability to design more innovative products.

Considering the far-reaching corporate business impact of implementing such an expanded PLM strategy, the approach has become a critical enterprise investment. PLM is widely regarded as a necessity in a turbulent global economy where companies leveraging it as part of their corporate strategy will likely be among the top performers in the coming years as the economy improves.

Growth in All Segments of the PLM Market

CIMdata’s PLM market analysis provides two perspectives on PLM:

    * Comprehensive PLM covers the full product definition over the entire product lifecycle, and across all industrial industries. This includes mechanical, electronic, and software components, as well as both discrete and process industries.

    * Mainstream PLM covers a subset of the Comprehensive PLM market, but includes the subsectors that have traditionally been addressed by the major suppliers (i.e., drivers) of the PLM market.

According to recent statistics compiled by CIMdata, the worldwide Mainstream PLM market experienced 7.8% growth in 2008 to reach an estimated $16.7 billion for software and related services. Mainstream PLM is expected to continue a steady climb over the next five years, increasing at a compound annual growth rate of approximately 4.2% and expanding the market size to over $20 billion by 2013. However, with the continuing impact of the global economic down turn, growth in 2009 is forecast show a very slight decline (-0.2%) versus 2008.

Looking at the broader view of the market, Comprehensive PLM investments grew 6.7% to reach $26 billion in 2008. The boost is attributed to recognition of the enterprise-wide value of PLM in increasing efficiency, lowering costs, and improving quality for companies of all sizes in a growing number of industries—most particularly in light of the continuing global economic downturn. Investments are forecast to achieve a 4% compound annual growth rate through 2013, when market size is expected to reach $31.7 billion. Again, growth for 2009 is forecast to decline slightly (-0.7%).

CIMdata also segments the overall PLM market into three major sub-sectors:

    * Tools (applications and solutions) that create product-related intellectual assets through authoring (e.g., CAD), analysis, modeling, simulation, and documentation of product and plant/facility information.

    * Collaborative Product Definition management (cPDm) applications and solutions to capture, manage, disseminate, visualize, and collaborate on product-related intellectual (digital/virtual) information, including related processes.

    * Digital Manufacturing solutions for process planning, resource definition, factory floor layout, and product flow simulation and analysis—including ergonomics.

According to CIMdata, the Tools sector investments by companies worldwide increased 6.8% in 2008 for a total of $16.9 billion on solutions such as mechanical computer-aided design (MCAD), computer-aided manufacturing (CAM), electronic design automation (EDA), engineering simulation and analysis, architecture/engineering/construction (AEC), technical publishing, and others. The Tools portion of the PLM market is forecasted to grow at a compound annual growth rate of 3.5% (-1.1% decline is forecast for 2009 versus 2008) over the next five years to reach $20 billion by 2013.

CIMdata statistics indicate that expenditures in the cPDm segment increased 8.9% in 2008 for a total of $8.2 billion for software and services related to PDM, collaboration and visualization, data exchange, portfolio management, compliance management, strategic sourcing, enterprise application integration, workflow, functional applications such as configuration management, and solutions for specific industries or businesses. The cPDm segment is expected to exceed $10.5 billion by 2013 for a compound annual growth rate of 5.1% (flat growth of 0.2% is forecast for 2009).

The Digital Manufacturing segment of PLM increased more than 9% to a total of $530 million in 2008, according to CIMdata statistics. This segment is expected to have a 4% compound annual growth rate over the next five years (-1% growth forecast for 2009) and exceed $650 million by 2013. Because the definition of production processes is a critical part of the product lifecycle and is directly impacted by product designs, Digital Manufacturing is becoming an important element of PLM strategies. Indeed, Digital Manufacturing is a key point of integration between PLM and factory automation equipment such as PLCs and transfer lines, and many of the long-term benefits from PLM are simply not achievable without incorporating a comprehensive Digital Manufacturing strategy.

Leading PLM Solution Providers

While there are many companies participating in the PLM market, a few have distinguished themselves as “PLM Mindshare Leaders.” These companies are typically considered to be at the forefront of the market in terms of either revenue generation or thought leadership.

With broad-based capabilities that support a full product lifecycle-focused solution, these mindshare PLM suppliers all sell some or all of their products and services through their own field sales and support organizations. This is their core or direct revenue. Each also has an increased market presence associated with consultancies, systems integrators, value-added resellers, and other partners that sell and provide services based on the mindshare leaders’ technologies and products. The combined core and partner revenues can greatly expand the visibility and impact of a supplier in the industry, generating a significant market footprint.

Based on these combined revenues, the global PLM market presence (no double-counting of revenues and royalties) for the PLM Mindshare Leaders was determined, with Dassault Systèmes (Dassault) the PLM market presence leader again in 2008. Note that the revenue generated by IBM’s Dassault-based PLM services business is a significant contributor to Dassault’s market presence. Following Dassault were Siemens PLM Software (Siemens), PTC, SAP, and Oracle in that order. They all exhibited strong and growing partner programs in 2008, providing a positive basis for future growth of their overall market presence.

A widely diverse group of suppliers provide solutions and services focused on cPDm, one of the most visible and central sub-sectors of the PLM market. However, the same PLM Mindshare Leaders mentioned previously are also the cPDm market presence and direct revenue leaders. CIMdata’s analysis of cPDm market presence for the market leaders reinforces the impact that partner revenue has on a supplier’s cPDm PLM footprint.

Siemens was again the cPDm market presence leader for 2008, with both significant direct revenues and strong partner revenues from several of its partners. Dassault was second, with IBM generating the significant portion of its partner revenues, followed by SAP, PTC, and Oracle respectively.

The leader in cPDm-only direct revenues for 2008 was SAP, which continues to generate substantial cPDm revenues by selling within its installed base and into industries that have not been traditionally dominated by mechanical design issues. SAP was followed by Siemens, PTC, Dassault, and Oracle. All these vendors had good growth in 2008 as adoption of cPDm solutions as part of enterprise PLM strategies continues to grow, with many of these organizations generating substantial revenues from services.

Five-Year Outlook

Although CIMdata’s estimates for PLM market growth in 2009 reflect the impact of the current economic impact, it is expected to have solid growth over the next five years as companies recover from the current recession and continue to invest in solutions that can provide them with sustainable business advantage and profitability. CIMdata expects that the cPDm sector of the PLM market will be the fastest-growing segment as companies invest to better leverage product and plant information across the lifecycle from concept, through manufacturing, to service and operation. In addition, evolution of PLM’s definition and scope will continue to fuel growth in both software and services as PLM becomes more important than ever and companies more deeply embedded the approach within the enterprise.

Column from: Time Compression, Contributed by: Ed Miller, President, CIMdata Inc. | e.miller@cimdata.com

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