A changing climate for CAD

NASA Tech Briefs, Mar 2002

When we last visited the state of the CAD industry in March of 2001, the industry leaders we interviewed focused on the Internet, ease of use, and consolidation of CAD vendors. For this year's look at CAD, our experts were outspoken on ease of use, 2D to 3D migration, and how the changing economic climate has affected the CAD software market.

As a general rule, most of the vendors we interviewed are not changing their marketing strategy for new customers as a result of the economic downturn. If anything, many vendors are focusing more on their current customers than targeting new ones.

"We're marketing to the people who are already our customers," said John McEleney, CEO of SolidWorks. "As the economy gets a little more challenging, and some of our competitors try to drive their price down in the market, the one good thing about having a large installed base is that you're going back to people you already have a relationship with, so your cost of sales should be lower," he explained.

"Our initial installed base provides a very rich, fertile ground for continued building of those relationships and a nice business. There is a lot of opportunity for new business," said Brian Shepherd, senior vice president of MCAD technical marketing for PTC. " A lot of companies feel they need to be ready when the economy turns with a stable full of great products. The way they cut costs in the short term to weather the storm usually starts in their manufacturing organization where they ramp down production. They're trying to minimize physical inventory, but they're still very focused on creating intellectual inventory," Shepherd added.

Some vendors such as VX Corporation, a CAD/CAM supplier, are actually increasing their marketing efforts. "It's a real opportunity at this point," said Bob Fischer, vice president of sales and marketing for VX. "Companies have to do as much as before but with fewer people. We've changed the amount of face time, doing things like Web seminars. We need to go to the people they won't come to us."

While much attention has centered around the economy since September 11, there were signs of a downturn at least six months before that, according to David Primrose, MCAD product marketing director for EDS PLM Solutions. "The economy took a knock, but life goes on, and people are purchasing products that have to be manufactured. In economic times like these, companies turn to tools that will increase their productivity and help recover costs as a way of solving the problem. Those companies that are far-sighted will look upon a CAD investment as one that will give them a very high return, rather than a cost they can't afford," Primrose explained.

The Cost of CAD

The type of CAD system a company can afford is more important now than it was in the past. Cost-cutting and budget-watching have taken a front seat to flashy features. According to Robert Kross, vice president of Autodesk's Manufacturing Division, "Companies look at a lower-cost solution in economies like this. There has been much more awareness of the engineers who hold the intellectual property of the company in their heads. Everyone believes that this year, we're going to see the economy blossom again. Companies are using the downtime to train more."

Companies with low-cost CAD products are finding it much easier to sell their software. Bob Mayer, executive vice president of sales and marketing for IMSI - which offers its TurboCAD V8 Professional program for just under $500 - believes that customers are getting the message that you don't have to spend a lot of money to get professional functionality. "In the past, we had only one product that sold for $99, and the perception was that a $99 product couldn't have much functionality. Over time, we've raised the retail price by about $200 on that product, and most importandy, we put in the CAD functionality that CAD professionals expect," Mayer said.

Relatively new companies with new products face the challenge of competing both in pricing and in functionality with established "legacy" systems. "The economy, as far as who we're marketing to, hasn't changed," said Shaun Murphy, vice president of marketing for IronCAD. "There has to be a higher level of confidence before people will take their wallets out of their pockets. Since we're a new company and we just introduced our Innovation-- Suite last October, we didn't need to make any adjustments. We brought it out value-priced and packaged for the price-conscious. Right from the beginning, we targeted our packaging, our products, and our pricing to the small- to medium-sized business," Murphy explained.

For the leading mid-range and highend CAD vendors, it's more a question of whether customers can afford not to invest, according to Geoff Rogers, marketing manager of the Americas for IBM. "You have to look at the entire cost of what you're implementing. Look at the entire cost of what it's going to take to implement that solution, and then look at the benefits you'll receive therein. In this economic environment," Rogers said, "I think the question is not `how can I afford to invest in product lifecycle management,' but, `how can I afford not to invest in a product lifecycle management solution?'"