CAD Industry Update: A Stronger Market for 2005

NASA Tech Briefs, Jan 2005

Surprisingly, most of the CAD industry leaders we spoke to for this year's industry update agreed on more than one issue. All felt that the economy in general, and the CAD market in particular, had recovered to the point that they are confident about their business position in 2005. And many also agreed that outsourcing of manufacturing to Europe and Asia is greatly impacting how their customers do business.

Optimism on the state of the economy is driving CAD vendors - particularly those in the mid-range market - to invest in new product offerings and technology development. And customers are looking to invest in more long-term projects in 2005.

"For a while, people had a very unrealistic view of the world. When they thought of investments, the time horizons they'd have would be days and weeks instead of months and years," said John McEleney, CEO of SolidWorks. "As a result, they weren't committing to long-term projects. Now, people are starting to commit to projects that reach into 2006 and beyond." That, said McEleney, is a good leading indicator for his company's future business.

Kubotek USA, which offers the CAD-KEY KeyCreator product, also sees customers buying more seats of CAD software as their businesses pick up. The feedback they're getting from customers, according to Robert Bean, Kubotek USA's COO, is that "they have more work coming in and things are turning the corner. And we're selling more seats of our software than we did last year."

Bruce Boes, vice president of Solid Edge business strategy and marketing for UGS, also views today's economy as a positive bellwether for his company. "I'd say the economy is in full swing around the globe at this point," Boes said. But, he added, 'You are never really confident about anything with the economy and the way the world is today. Everybody is still cautiously optimistic, but the results we saw last year have been very positive."

Joseph Costello, chairman and CEO of thinkS, believes that because of his company's smaller size, he is less affected by a poor economy. "In some ways, a poor economy favors smaller companies. When things are tough, manufacturers start looking around and they are more open to new ideas and more radical solutions. Those factors tend to favor smaller companies and give them a good fighting chance in the bad times."

Results are the benchmark for PTC as they look at where the company is positioned for 2005. According to Mike Campbell, PTC's vice president of product management for Pro/ENGINEER, "The last couple of years have been a really tough time. But last year, we returned to profitability and the revenue trend is in a positive direction." PTC's growth, added Campbell, "is expected not only on the PLM side, but also on the CAD side, which is something we haven't seen in the past three or four years."

The Functionality Gap

There has always been a perceived gap between the functionality offered by mid-range CAD products and that offered by the high-end CAD systems. As mid-market products continue to improve, one would assume that such a gap would narrow. But according to our industry leaders, perception is everything.

"In certain areas, I think the gap is eliminated," stated Boes. "It's the way you perceive what's going on between the high-end and mid-priced markets. The high-end vendors continue to do some real cutting-edge stuff that isn't present in any of the mid-priced packages."

Other execs don't see the gap as being clearly delineated. "With the advances in mid-market products offered by Autodesk and our competitors, we're seeing that it's not a clear delineation between what you might call the high-end systems and what we're developing for our customers," explained Tom McCallion, product line manager for Autodesk's Manufacturing Solutions Division.

Said Peter Marley, manager of global offerings for Dassault products in IBM's PLM Division, there is a certain level of base functionality for modeling, and lower-end systems are adding more of that base capability. But, "it's the level of technology that will provide the return on investment." IBM and Dassault, he added, are looking at innovation through new technology, not just enhancing the base level.

"I'm not sure that I'm convinced the gap is narrowing," stated Campbell. "Certainly, the mid-range CAD products like SolidWorks and Solid Edge continue to mature functionally, but those products are owned by companies that have a broader CAD portfolio - Dassault has SolidWorks and the high-end CATIA, and UGS has Solid Edge and the high-end Unigraphics. Our belief is that there will be some artificial influencers that keep those products somewhat functionally limited and targeted at a lower end," Campbell explained.

Costello agrees that there are factors that come into play that work against closing the functionality gap. "The only vendors who can narrow the gap are the independent companies like Autodesk or thinkS. It's a strange dynamic. There's no reason why the mid-range packages can't be as good as or better than the high-end packages. Some of the mid-range vendors are constrained by their owners."