CIMdata Press Releases
CIMdata Reports PLM Market Growth Exceeds Forecasts
Heavy investments in software and services better than expected for all sectors during 2005
ANN ARBOR, Michigan, April 6, 2006 – According to recent statistics compiled by consulting and research firm CIMdata, Inc., the worldwide Product Lifecycle Management (PLM) market experienced an excellent year in 2005 and demonstrated significant growth. CIMdata research shows that the overall PLM grew 8.7% to reach $18.1 billion in 2005. This growth rate exceeded earlier estimates, with the boost attributed to continued strengthening of the global economy and an increased recognition of the value of PLM in improve companies’ business performance. PLM investments are forecast to continue their climb over the next five years, reaching an estimated $26.3 billion by 2010 (as shown in Figure 1), for a compound annual growth rate of approximately 7.7%.
The PLM industry is a broad market encompassing investments in many different types of technologies and services. PLM is 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. PLM forms the product information backbone for a company and its extended enterprise.
CIMdata segments the overall PLM market into two primary sub-sectors: PLM information authoring and analysis applications (Tools), and collaborative Product Definition management (cPDm). Historically, the Tools sector has received the largest amount of investment, although growth of that sector has slowed noticeably over recent years. According to CIMdata, $12.1 billion was spent in 2005 by companies worldwide on PLM Tools such as mechanical computer-aided design (MCAD), electronic design automation (EDA), engineering simulation and analysis, technical publishing, and others. Growth in this sector was primarily driven by investments in areas such as mid-range MCAD. Areas such as high-end MCAD experienced very low growth. The Tools portion of the PLM market is forecasted to grow at a CAGR of 4% over the next five years to reach $14.7 billion by 2010.
The fastest-growing sector of PLM, and the remaining portion of the overall PLM market is for expenditures on cPDm, which is focused on collaboration, management, and sharing of product-related information. This segment covers technologies and approaches such as PDM, collaboration and visualization, data exchange, portfolio management, digital manufacturing, enterprise application integration, workflow, functional applications such as configuration management, and solutions for specific industries or businesses.
CIMdata research indicates that the cPDm portion of the PLM market exceeded previous forecasts for growth and reached $6.1 billion in 2005, representing an increase of approximately 14.7% over 2004. The cPDm segment is expected to continue its strong growth to $6.8 billion in 2006 and reach $11.6 billion by 2010 for a CAGR of 13.9% (as shown in Figure 2).
“Manufacturers of all sizes are continuing to implement PLM in record numbers. Increased levels of investment in both new and expanded PLM solutions affirms that companies clearly recognize PLM as fundamental to improve their top and bottom line performance,” explains CIMdata President Ed Miller. “More companies are committing to PLM while current users are continuing to expand their PLM solutions.”
According to Miller, PLM investments are fueled by executive-level awareness of the tremendous business value of PLM as an enabler in compressing time to market, reducing cost, improving quality, and achieving product and process innovation.
“With so much at stake, PLM is truly a competitive necessity,” says Miller. “PLM supports initiatives that can make or break companies in today’s global economy: integrated product development, design collaboration, intellectual supply chain management, and global resource utilization. The approach allows businesses to transform their processes so that they can operate more efficiently and bring profitable products to market more effectively. In this respect, manufacturers that implement PLM will most likely be among the top performers in the years to come.”
All Sectors See Strong Growth
Looking further into the fast-growing cPDm sector of the overall PLM market, CIMdata statistics indicate that cPDm growth continued in all industry and geographic sectors. The Americas continued its strong rebound and led all major regions worldwide, growing by 19% and regaining overall parity with EMEA (Europe, Mid-East and Africa). Growth in EMEA was solid with a 13% increase. While Asia-Pacific is still a major opportunity, its 10% growth reflected that within Japan (the currently dominating market in Asia-Pacific) economic factors still delayed many major investments, and in major new countries, PLM suppliers are still establishing their sales channels. While many AP deals were announced in these emerging markets, revenues are just beginning to flow (see Figure 3).
As shown in Figure 4, companies in a wide range of industry segments invest in cPDm. Automotive and High-Tech continue be the largest cPDm adopters in 2005. Aerospace & Defense, Fabrication & Assembly, and consumer focused process industries (Consumer Packaged Goods, Food & Beverage, and Pharmaceuticals) all showed strong growth. This distribution demonstrates the universality of PLM in providing business value across such a diverse spectrum of industries.
Wide Range of PLM Providers
CIMdata Director of Research, Ken Amann, explains that a wide range of companies supply PLM-related software, applications, and services. Overall, companies from many different sectors derived substantial revenues from the PLM market. Some of these suppliers focus on specific technologies or industries such as MDA, EDA, CASE, or engineering simulation. Others supply broad management systems that provide a backbone for overall PLM initiatives. Some PLM solution suppliers combine complementary technologies from multiple partner suppliers to deliver enterprise PLM solutions.
Companies that have broad product suites designed to manage the full lifecycle – the comprehensive technology suppliers – represent the foundation of cPDm. These suppliers are expanding their product suites in response to market requirements. “Increased investments were driven by the broadening scope of enterprise-wide implementations, expansion into new areas such as digital manufacturing, portfolio management, industry-focused packaged solutions, and integration with other business initiatives such as customer relationship management,” explained Amann. Comprehensive PLM technology suppliers are packaging their products into solutions that focus on, and support the practices of specific industries (automotive, aerospace, high-tech electronics) and business problems, e.g. compliance. “The growth of supplier-developed ‘packaged solutions’ significantly enables small- and medium-sized businesses to adopt PLM solutions,” according to Mr. Amann. “The mid-market PLM expenditures continued their solid growth. PLM solution providers are fine-tuning their product suites and pricing models to better meet mid-market requirements for PLM adoption. PLM suppliers (such as Arena Solutions) have differentiated themselves by focusing on small and midsized businesses, Some other suppliers such as Prodika, Selerant, and Lascom are good examples of companies that have differentiated themselves by focusing on specific industries. Many of the larger PLM suppliers provide multiple solutions, each focusing on specific industries and sizes of companies.
Independent consultancies, systems integrators (SIs), resellers, and VARs (e.g., Accenture, Deloitte Consulting, TCS, T-Systems, etc.) experienced continued solid growth as both the scope and pace of implementations expanded. Major comprehensive technology suppliers also expanded their direct service delivery programs and development of alliances with SIs and resellers. “Consultancies and SIs with growing PLM business programs are teaming with one or more of the comprehensive technology suppliers to enable them to respond to diverse client situations,” stated Amann.
Focused application suppliers are those suppliers concentrating on specific technologies and functions that are part of overall PLM strategies. Suppliers such as Accept Software, Centric Software, RuleStream, and Eurostep are examples of companies that are adding extended capabilities and value to PLM implementations. Major areas of growth include digital manufacturing, portfolio and program management, service-after-sales, and materials compliance solutions. The area of mechanical simulation and analysis has received substantial emphasis recently, with expanded solutions to manage these environments and integrate them more fully into a full PLM program. Suppliers such as MSC and Ansys have been quite visible. These solutions are emerging as an important part of a PLM strategy as new and improved capabilities are being offered by leading comprehensive PLM technology suppliers and many focused application suppliers.
Supplier Rankings
Many companies providing PLM-related technologies and services generate substantial revenues by focusing on particular niches within the broad PLM market. A few companies, however, distinguish themselves as “PLM Mindshare Leaders” and 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, this group of PLM Mindshare Leaders for 2005 includes Agile, IBM/Dassault Systèmes, MatrixOne, PTC, SAP, and UGS.
Full PLM-based revenues from these companies are shown in Figure 5. In Figure 5 and some subsequent figures, a special note is included that describes alternative views of IBM and Dassault Systèmes (DS) to better understand the market impact of this special “team.” These alternatives provide insights into the revenue achievements of DS as an independent entity and the combination of DS along with IBM as DS’ sales partner (based on the long and unique relationship that has existed between these two firms for many years). As another special note for Figure 5 and some of the subsequent figures, the names used to identify the various vendors include some special notations. These notations apply only to 2005 figures, and include:
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“Dassault+Abq” includes the full year revenues for both Dassault and Abaqus (acquired by Dassault in 4Q 2005)
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“PTC+AbT” includes the full year revenues for both PTC and Arbor Text (acquired by PTC in 3Q 2005)
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“UGS+Tecno includes the full year revenues for both UGS and Tecnomatix (acquired by UGS in 2Q 2005)
As can be seen in Figure 5, DS combined with IBM (its strategic sales partner) was the PLM mindshare market revenue leader in 2005, regardless of whether one is considering only DS’ direct PLM revenues or the revenues of the combined IBM (DS) entity. UGS and PTC generated the second and third highest PLM revenues respectively, with all of the top three revenue leaders having excellent growth during the year. Also as can be seen, PLM revenues for the top three suppliers are still dominated by revenues generated from the Tools portion of their product suites (i.e., their MCAD offerings). However, their cPDm revenues are growing faster than their Tools revenues and becoming a larger portion of their overall business.
All of the mindshare-leading PLM suppliers provide some or all of their products and services through their own field sales and support organizations. This is their core or direct revenue. Most also take in partner revenues by leveraging consultancies, SIs, resellers, and other partners for additional sales and services. 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, global PLM market presence (no double-counting of revenues) for the PLM Mindshare Leaders is shown in Figure 6.
As can be seen in Figure 6, DS was the PLM market presence leader in 2005, with UGS a relatively close second. DS’ partners’ revenues were substantial, and the revenue generated by IBM’s Dassault-based PLM services business is a significant contributor to DS’ market presence. UGS’ partners also generated substantial UGS-based revenue, and EDS was the most significant. Both MatrixOne and PTC also exhibited strong and growing partner programs in 2005 and these provide a very positive impact on their overall market presence as well.
When looking at the cPDm portion of the overall PLM market, a somewhat different perspective emerges. According to CIMdata’s revenue estimates for 2005, the top market revenue leaders among the comprehensive cPDm technology suppliers are shown in Figure 7.
As can be seen in Figure 7, determining the direct cPDm market revenue leader depends on how one considers the IBM and DS businesses. IBM, whether viewed as a separate business or in combination with DS, generated the most cPDm revenues of any supplier. UGS and SAP both generated substantial cPDm revenues and were second and third respectively, If viewed as an independent business, DS followed UGS and SAP, and generated cPDm revenues that were slightly higher than those of PTC. Agile and MatrixOne both achieved revenues of over $100 million during 2005. IFS, Oracle, and NEC completed the top cPDm revenue leaders. As can be seen in the figure, many of these leading organizations generate a substantial portion of their revenues through services. IBM (DS) as a combined entity benefits from IBM’s large service organization, which has delivered PLM and cPDm services for many years.
Market presence as an indicator of a supplier’s overall impact on the market was described previously. Based on these combined revenues, CIMdata’s analysis of cPDm market presence for the overall PLM mindshare leaders is shown in Figure 8 and illustrates the impact that partner revenue has on a supplier’s PLM footprint.
As can be seen in Figure 8, UGS was the cPDm market presence leader for 2005 with both significant direct revenues and strong partner revenues from EDS and other partners. DS was second with IBM generating a significant portion of their partner revenues, followed by SAP, PTC, MatrixOne, and Agile respectively, MatrixOne and PTC also had strong cPDm partner programs, which contributed significantly to their market presence.
The PLM market remains robust and will continue to have significant growth over the forecast period (2006 through 2010) as companies continue to invest in solutions that can provide them with sustainable business advantage and profitability. 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. Evolution of PLM’s definition and scope will continue to fuel growth in both software and services as PLM becomes more important and embedded within a business’ overall enterprise.