A PLM Supplier Analysis

In a recent article that appeared in this publication, we provided an analysis of the PLM industry in terms of the investments being made in PLM across the world and the primary trends driving those investments. Building on that analysis, this article provides a perspective on the performance of the various major suppliers of PLM technology-based solutions. The information provided here is a summary of information that CIMdata has included in its annual analysis of the Product Lifecycle Management (PLM) market. The full analysis (available from CIMdata) provides a perspective on PLM across a variety of industry and geographic sectors, identifies market trends, reviews investments in PLM-related software and services during 2004, and forecasts PLM investments for 2005 through 2009.

As with the previous article, although PLM technologies and methods can be applied to a wide range of industries (e.g., financial services, insurance, health care, etc.) this analysis is focused on PLM investment and usage in industrial markets — PLM’s current primary focus. CIMdata stresses that PLM is not just a technology, but rather, is 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, and spanning from product 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. As such, many different suppliers of technologies and services provide offerings to the PLM market. In this article, we concentrate on the major suppliers that are currently driving the market’s growth and evolution.

One of the easiest ways to evaluate the impact of various suppliers to the PLM market is to analyze the direct revenue that each supplier generates. Their direct or core revenues are those paid directly to them by end user companies and in royalties paid by partners. But this isn’t the only way to assess a supplier’s impact in the industry. A suppliers’ “Market Presence,” includes the revenues of a suppliers’ partners associated with developing and implementing PLM solutions. Combining a supplier’s core and partner revenues establishes their market presence or their overall “footprint” on the PLM market.

Market presence is an important consideration when evaluating the PLM impact of a supplier. While many of the suppliers provide technologies primarily through their own field sales and support organizations, others heavily leverage system integrators, resellers, and other partners for additional sales. These partner revenues expand the visibility and impact of a supplier within the industry. Market presence provides an understanding of the penetration of a supplier’s technology across a wider market and number of customers than might be indicated by only their core revenues. Market presence also provides some insight as to how other solution providers have adopted and support a given supplier’s technology and products.

PLM includes both Tools and collaborative Product Definition management (cPDm). While most people perceive PLM revenue leaders as those who are comprehensive lifecycle management providers, in fact, several other companies generate very significant revenues in the overall PLM market. These include companies from all sectors of this market and from multiple categories within the market—tools suppliers, comprehensive technology suppliers, service suppliers, and suppliers of focused applications. It is important to note that when considering the core revenues of all companies providing PLM products and services, a wide range of companies are represented and many of them do not compete with each other at all. In fact, many of them are partners and work collaboratively in customer implementations to deliver a comprehensive PLM solution.

While many suppliers concentrate only on PLM; there are also many suppliers that pursue markets in addition to PLM and only a portion of their business is actually directed toward PLM. In our analyses, we focus only on the PLM market. It is important to note that for those PLM suppliers who also focus on businesses outside of PLM (e.g., IBM, SAP, Oracle, EMC Documentum, etc.), only the portion of their revenues pertinent to PLM is included in these analyses.

In the broad market, a small number of PLM suppliers are generally considered to be the industry leaders; these are the “PLM Mindshare Leaders.” These mindshare leaders have generally achieved this industry recognition based on:

• the size and scope of their PLM implementations at customer sites.
• their technology and thought leadership in the PLM market.

Definition of IBM+DS Combined Entity
Because IBM and Dassault Systèmes (DS) have an industry-unique relationship we generally group their results together (noted as IBM+DS). However, IBM works with multiple PLM technology suppliers and their large services business has a major impact on the overall IBM+DS rankings when compared with other suppliers. In some of the figures included in this article, we have included a blue arrow beside IBM+DS metrics to indicate the equivalent measure for DS if they had been treated as a separate entity in the analysis. These indicators for DS have been included to provide more detailed understanding of the full market situation and their size and relationship to other suppliers.

Most PLM suppliers are companies that have a single business unit focused on PLM products and services. However, IBM and DS have a long-time (20+ years) unique relationship within the industry. Since readers of this publication are typically customers and users of solutions produced and delivered by IBM and DS, it is worthwhile to describe this joint business partnership in a bit more detail to understand how its market successes are included in this analysis. Due to their unique relationship, a combined IBM+DS business entity is included in the market analysis to represent the joint partnership. But there are multiple business units within each company, and it is useful to understand how these are combined into a single IBM+DS entity.

DS has primarily provided the development organization for the partnership; however, they do have some direct sales of products and services. IBM has, to date, been the primary sales and marketing organization for DS via their IBM PLM Solutions business unit. However, IBM also provides PLM services through its Business Consulting Services (BCS) group. BCS, as an independent systems integrator, also supports and implements other PLM technology suppliers’ products, e.g., MatrixOne and SAP. Further, DS has direct sales beyond IBM for several of its business units, e.g., SolidWorks and DELMIA. In order to accurately reflect the presence and impact of IBM and DS, CIMdata defines the business program entity IBM+DS to include:

• IBM DS-related revenue (ENOVIA, SMARTEAM, CATIA, etc.)
• IBM non-DS-related revenue, e.g., implementation of other suppliers’ technology
• DS direct revenue (DELMIA, SolidWorks, DS Services, etc.) not received through IBM (DS and these units have their own direct sales forces and partner relationships)

Regarding allocation of IBM+DS revenues between the major categories of PLM, SolidWorks is included as part of the Tools segment as are DS Services revenues in support of CATIA. ENOVIA, SMARTEAM and DELMIA revenues are included in the cPDm portion of PLM. The following figure presents the elements of the IBM+DS entity for both MDA (i.e., Tools) and cPDm, and then for the combined PLM.

Figure 1. IBM+DS Revenue Components

Note: The blue arrow is the total PLM direct revenue received by Dassault Systèmes including payments from IBM, other third party companies and its own sales and services as reported in its financial statements

PLM Mindshare Leaders’ Results
The following figure presents direct revenues of the PLM mindshare leaders, with their PLM revenues for 2004 allocated between revenues derived from Tools and cPDm.

Figure 2. PLM Mindshare Leaders Revenue—2004

Note: The blue arrow represents Dassault Systèmes direct PLM revenues
Note: For 2004 MatrixOne estimate includes a full year (calendar 2004) of revenues from Synchronicity which was acquired by MatrixOne in August 2004.

Of the PLM mindshare leaders, the top three direct revenue leaders (IBM+DS, PTC, and UGS) supply comprehensive solutions that are comprised of both Tools (primarily for discrete manufacturing MDA) and cPDm solutions. The other three (Agile, MatrixOne, and SAP) provide cPDm solutions only. As can be seen in the figure, the amount of revenue that is derived from Tools is substantial for each of the top three companies – these companies are the largest suppliers of high-end mechanical CAD systems. In the overall PLM market, expenditures for Tools exceeded expenditures for cPDm by almost two to one. Thus it is not surprising that the major market leaders continue to derive a substantial portion of their revenues from MDA. But as was described in our previous article that analyzed PLM industry investments, the cPDm portion of PLM expenditures is growing at a much faster rate and is expected to approach parity with the Tools portion by 2009. Therefore, each of these suppliers have very serious programs focused at cPDm as a fundamental component of their overall PLM strategies.

As described earlier, core or direct revenue is not the only way to evaluate the impact of suppliers to the PLM market. A key perspective is to consider their market presence. Please remember that “market presence” is a measure of the “end customer investment” that is directed toward solutions based upon technologies provided by the technology developing firms. For market presence estimates, double-counting of revenues is eliminated by deleting royalty pass-through revenues. Note that for market presence, DS is the reported business entity (not IBM+DS) as it is DS’ product suite and technologies that are the base offerings for which we measure presence. IBM’s DS-related PLM revenues are included within DS’ partner revenues. The following figure presents CIMdata’s estimates of the market presence of the major mindshare leaders.

Figure 3. PLM Mindshare Revenue Leaders Market Presence—2004

Note: For 2004 MatrixOne estimate includes a full year (calendar 2004) of revenues from Synchronicity which was acquired by MatrixOne in August 2004

For 2004, DS was the overall PLM market presence leader, followed by UGS, PTC, SAP, MatrixOne, and Agile. As can be seen in the figure, DS, UGS, and MatrixOne all derive substantial amounts of market presence revenue from their partners. For Dassault, IBM is the partner that contributed the most to extending Dassault’s presence. EDS provided the most presence contribution for UGS.

This figure clearly illustrates the results of MatrixOne’s focus on development of a substantial network of partners for their solutions. MatrixOne’s partners generated more revenue based upon MatrixOne technologies, than MatrixOne generated in direct revenue themselves by almost three to one. MatrixOne committed to partner development early in their history and has effectively leveraged partnerships for extended services (in regions where MatrixOne sells directly) and as full resellers (in regions where MatrixOne has no direct sales operations). Other PLM suppliers are working diligently to leverage partnerships to this same level of success.

It is clear that becoming a market leader requires a successful partner program. This is true both in overall PLM and particularly for cPDm (as shown in the next figure). Those suppliers with established programs are able to have their products and technology adopted across a broader range of customers. Their partners also can add significant value, not just in sales and implementation, but also by developing business solutions based on the partner’s specialized expertise. This also increases a supplier’s ability and opportunity to penetrate new customers while growing their presence with established customers.

PLM Mindshare Leaders’ cPDm Results
Comprehensive cPDm technology suppliers are companies that offer a full range of cPDm functionality, have demonstrated scalability, whose products can be distributed across multiple server networks, and have a track record of selling their products for use throughout an enterprise. This group of suppliers has been closely-watched as it includes those companies that historically drove the PDM market—the precursor to the PLM market. The leader of this group is generally perceived as the overall cPDm market leader and driver. This is true even as the service providers gain a larger share of the overall cPDm market using the technology and products of the vendors in this category as their platform for services delivery.

However, as the cPDm market has grown, there can be many different leaders and drivers. Segmentation by industry and geography and solution focus varies widely across the vendors. The importance of service is dramatic. Each of the major comprehensive suppliers continues to develop their service organization(s) and is using that organization to create addition, on-going revenue streams. Because it has a major separate service business unit, IBM+DS received a significant portion of its overall revenue in services. These include services for the company’s own products as well as third-party products supported by the services (e.g., IBM BCS).

While the Tools market has become relatively stable with lower growth rates, the cPDm market continues to have significant growth each year—with the threshold as a top five revenue-generator rising considerably. At the same time, the market is gradually concentrating – reflecting a maturing market. Over the next years, we expect to see trends such as acquisitions or partner alignment consistent with market maturity. These trends represent a drive to increase market share, and achieve economies of scale in development, sales, and support. The leading suppliers have clearly established their position and are penetrating further into the market. Some smaller suppliers have been able to establish solid businesses with a focus on narrow market segments. Focused products companies continue to align with the major comprehensive technology suppliers to provide tighter integration of their solutions; in order to increase sales and marketing coverage as well as expand and enhance their product offerings, partnership programs are even more important.

The following figure presents the cPDm market presence for the PLM mindshare leaders. Note that as with PLM, the IBM+DS market presence is based on DS since they are the developer of the technologies and products.

Figure 4. Market Presence Revenues of cPDm Mindshare Leaders—2004

Note: For 2004 MatrixOne estimate includes a full year (calendar 2004) of revenues from Synchronicity which was acquired by MatrixOne in August 2004.
Presence = Supplier direct PLM revenue + Partners’ direct PLM revenue (adjusted for royalty payments to eliminate double counting)

As the preceding figures illustrate, partner revenue, when added to a supplier’s core revenue, can significantly change that supplier’s market share. In this segment, UGS held the overall lead in market presence, followed by DS, then SAP, MatrixOne, PTC, and Agile.

PLM Services Supplier Results
The total amount of PLM-related service revenues continues to grow. From market revenue results for the various suppliers, it is clear that services are a substantial portion of the PLM market. Almost all of the major suppliers of PLM solutions offer services along with software, and many of them derive a substantial portion of their revenue from services. Of course services, especially for the large implementations, continued to be provided by a growing number of systems integrators. Most major consulting and systems integration firms experienced solid increases in their PLM-based revenues in 2004, and that growth has continued during 2005. Many smaller and regional systems integrators increased their PLM business also. All systems integrators continued to develop partner relationships and industry focused solutions.

Services are also a major revenue source for all major comprehensive cPDm suppliers. Until recently, as the market has developed, the single biggest source of PLM-related services has been from the software suppliers themselves. This history continues to be visible in the 2004 PLM service revenues but the balance is shifting toward the independent suppliers. After selling its UGS business unit, EDS remains a significant supplier of PLM services. It is a major services partner for the new UGS standalone business entity. Accenture continued to grow and delivered a sizeable amount of PLM services, but several other systems integration firms also shared in the market, with a fairly broad distribution of service revenues among these firms. There are a large number of independent service firms that derive some revenue from PLM, some providing services globally while others are regionally focused.

Figure 5. PLM Services Providers Revenues—All Suppliers—2004

EDS was the largest supplier of PLM-related services in 2004, followed by IBM. In fact, five firms that are major PLM software suppliers are among the leading overall suppliers of PLM services—UGS, IBM, DS (independently from IBM), SAP, and PTC.

In the figure above, we split the services delivered by IBM from those provide by DS. In this case, DS by itself was the sixth largest supplier of PLM services—again illustrating the point that PLM software-based solutions providers continue to be a major source of expertise for PLM services in the industry, even when teamed with major service suppliers as partners.

Closing Comments
The top suppliers generated a substantial portion of the overall market revenues. The major suppliers’ programs are well-established and growing, and their dominance makes it difficult for new suppliers to break into the top group. However, as new technologies are developed and incorporated into PLM solutions, and/or merger and acquisitions occur, opportunities still exist for new suppliers to move up in the rankings and to obtain significant revenues from PLM.

CIMdata expects continued consolidation and alliance within this market, e.g., in 2005 DS acquired ABAQUS, UGS acquired Tecnomatix, and PTC acquired Polyplan and Arbortext. Larger suppliers, both technology suppliers and service companies, will either buy smaller companies or partner with them, in order to obtain selected capabilities that can be incorporated into their solution offerings. This will cause re-alignment of relationships within the market community and may force some end-user companies to introduce new products into their environments. Further, we continue to see the major independent service vendors consolidating their initiatives primarily around either a single vendor’s technologies, or limiting their partnerships to no more than two or three suppliers.

In order to be successful, new entrants will have to offer new and different capabilities that expand current solutions or address business problems that current solutions and products are not solving. Continued technological developments offer such opportunities. Integration of business functions in a more seamless manner is also an area of opportunity particularly as PLM solutions encompass extended enterprises and intellectual supply chain partners. 2004 was a good year for the major PLM suppliers, and, to date, 2005 has been even better as their offerings become more substantial and industry becomes more hungry for approaches that can help transform their businesses to become more successful.

About the Authors
Ed Miller is President, and Ken Amann is Director of Research, for CIMdata Inc., a global firm providing consulting and research in PLM solutions, best practices, and technologies that help companies develop products in the evolving global environment. Contact them at e.miller@cimdata.com or k.amann@cimdata.com.

About CIMdata
CIMdata, an independent worldwide firm, provides strategic consulting to maximize an enterprise’s ability to design and deliver innovative products and services through the application of Product Lifecycle Management (PLM). CIMdata provides world-class knowledge, expertise, and best-practice methods on PLM. CIMdata also offers research, subscription services, publications, and education through international conferences. Visit www.CIMdata.com for more information.