Welcome Sanjeev Pal with this guest post. Sanjeev is a Sr Analyst at IDC covering PLM, engineering software, EAM and project & portfolio management in my Software Business solutions group.
Its hard to disagree that the survival through the recession for most firms equates to lowering the spending, overall cost reduction and trimming the fat around the company. In other words, make cuts in every aspect of the business until the market turns around. In this blog, I will try to answer the question - What are the PLM/CAD/CAM providers doing to cope up with this recession. Is it a sound business strategy for the PLM companies including the digital manufacturing firms to invest in enhancing the existing technology & software in these hard economic times?
What measures have the digital/PLM software providers taken to survive the recession? Let us look briefly at each of the big provider.
Dassault - No formal announcement on reducing workforce, but unofficial consolidation that may have been a direct effect of recession.
Siemens PLM - No formal or informal announcement of consolidation.
Autodesk - 10% reduction in workforce (750 employees approx), other cost saving measures like hiring freeze etc, resulting in savings 130 million a year starting from 2010.
PTC - Started its first quarter with 5,264 employees, planned to work with 5,000 employees.
It has been proven time and again that manufacturing is the backbone of any healthy economy and the software supporting manufacturing processes- an essential element for achieving higher productivity. We should not forget that the present recession has been brought about by failure of the financial industry and not by decreased demand for manufacturing or failure of the manufacturing industry. On the contrary, manufacturing firms across the globe remain profitable and are still in stable to good financial health. Government’s increased focus on encouraging manufacturing will act as a catalyst to fire up the activity in manufacturing, with any slight up turn in economy.
I believe this is the right time for CAD/CAM/PLM vendors to invest in the future because: -
1. The importance of manufacturing to the well being of the economy is understood around the world.
2. Easy availability of over qualified labor.
3. Opportunity of acquiring small niche vendors.
4. Increased flexibility of vendors to form partnerships to increase their revenue stream.
5. Competition around the world has changed; Emerging markets of India and China are still growing.
6. The most important point - Waiting to invest in innovation and new channels until the market turns around means increased time to market , greater marketing costs (increased labor as well as operating costs in a boom) and probability of lower profits, there will always be someone ready to market their innovation.
In short, What are CAD/CAM/CAE/PLM vendors doing to position themselves? The answer seems to be not much!!!
Dassault , Siemens and Autodesk remain in overall good health and do indicate that they want to invest in small niche software providers. Cloud computing or the SaaS bug has bitten them , but has not been a revenue driver . I believe Cloud computing will definitely gain some traction in the small and medium business markets.
These vendors are expanding and developing the VAR, ARE, ISV channels with great interest. I am not sure if this channel expansion is being done to reduce their financial liability or increase their respective product penetration in the market. I see it more as a consequence of the recession than as a measure to increase the product penetration in the market or even product innovation that VARs can offer.