Product lifecycle management software is growing steadily in the UK and Europe, but growth is softer here than in the US. Jim Heppelman, CEO and President of PTC tells Will Stirling how PLM helps manufacturers and why the US software company is confident of global PLM leadership.
Manufacturers pay heed. Product lifecycle management (PLM) software is here and growing. Mainstream PLM revenue in EMEA – Europe, the Middle East and Africa – increased from $6.1bn in 2007 to $6.7bn in 2008: a 9.7% growth year-over-year, according to data company CIMdata’s PLM analysis. 2009 was a tough year for the PLM market, but in the UK sales bounced back in late 2009.
Sales of software vendor PTC’s Windchill PLM products grew 52% year-on-year in the quarter ending December 2009. The company says the take up in this period was notably strong for small and medium-sized businesses, where companies like Park Air Electronics replaced their incumbent data management system with Windchill. However, CIMdata only expects compound growth rates for PLM of 2.4% for the next five years in EMEA.
How does PLM software benefit manufacturers? PLM takes design projects, produced in CAD software, and places these components at stages through its lifecycle, as part of a larger product assembly. This enables multiple users such as different company departments – design, manufacturing, supply chain, finance – and companies in its supply chain to view those component designs and collaboratively comment on and adapt the designs.
Perhaps the component can be produced with less material, or perhaps it needs to be strengthened, but that conclusion can only be made at a forward point in the lifecycle, which PLM software simulates.
At the company’s 2010 media and analyst day at Needham, Mass, Jim Heppelman, President and CEO of PTC, told The Manufacturer there are three key areas where PLM can reduce costs. One is globalisation, where companies evaluate potential global factory locations to capitalise on low labour costs, for example. How would a new engineering centre in Asia collaborate with those existing engineering centres in the UK or US? PLM helps to improve that vision, says Heppelman.
A second example is to avoid mistakes.
“Understanding that there is a design flaw, or a problem with the product, or that you’re not meeting a specific requirement,” he says. “If you spot that early, you can fix it with almost no cost. If you understand such failings late, when it has been delivered to the customer, or even just moving through the production line, then it can be expensive.” The third category is plain productivity. “We have examples where customers are simply more productive. They’ve shown that the same team can produce more, or the same amount can be produced from a smaller team.” The fourth category Heppelman highlights is simply managing software costs. Companies, he says, are now very interested in integrated software solutions from one vendor, “rather than having all these little tools which do something special but, when you add them together, they make this expensive mess which doesn’t really create any competitive advantage.”
As environmental compliance tightens software has evolved to help companies assess if products comply with the raft of regulations. Launched in January, PTC’s solution is InSight Environmental Compliance.
InSight sits above the Windchill PLM platform, feeding data to Windchill on four main green product analytics: restricted or hazardous substances, recyclability and reuse, energy and carbon use and material efficiency.
While historically the environment hasn’t driven PLM software, in the last year it has become a very hot topic, says Heppelman. Companies are far more switched on to environmental regulations like the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) in Europe, their products’ carbon footprint, the conversations coming out of Copenhagen and the constant changes in this field which are difficult to track. “Companies conclude that they have to start managing this upstream in product development. Eighty per cent of carbon emissions from a typical manufacturing company come from the product and its development, not enterprise activities. It’s too late to change that on the factory floor, you have to change the design of the product so it doesn’t imply such high carbon emissions, and too much hazardous material that would contravene with REACH.” What are the real drivers for making carbon a more important factor to manufacturers? In an age where everyone claims that environmental preservation is a top priority, Heppelman is honest about the reasons. The first is that companies are afraid of regulations, and how these can hinder productivity and profits.
“The second is, yes, companies want to be greener, and consumers now prefer companies which show they’re concerned about the environment.” The third factor is financial. “It’s interesting to understand your energy costs, and how your product costs are indexed to energy costs. If you understand where you are using, and perhaps wasting, energy, and you understand strategies for managing that, you can save a lot of money while giving yourself a marketing advantage and preparing for regulations.” PTC’s Insight software reveals the regulation compliance status of products and components on a dashboard. Once all the data is fed in, a product’s compliance to regulations like REACH, JIG and RoHS, the hazardous substances directive, is revealed by simple green ticks and red crosses.
Further analysis reveals where the product is failing to comply with the regulation.
A growth market to go after
PTC’s total revenues (-12%) and the whole PLM market took a hit in the 2008-2009 financial year as the recession took hold. Now, it is recessionary pressures that are expected to drive PLM software.
Market research company IDC says the PLM market is expected to undergo several promising changes in 2010, as companies see that this kind of forward scenario simulation for products and assemblies will save money in the long term. These will give rise to increased end-user buying power which will bring extreme pressures on existing PLM vendors to mould their applications and “increase the opportunities for aggressive PLM applications suppliers”, meaning that vendors can’t sit still and have to adjust their software more constantly than ever to satisfy customers.
Heppelman and PTC’s team of senior chief executives were bullish about the company’s prospects in this growth market, stating that PTC is targeting “unambiguous PLM leadership”. Its 2010 guidance for PLM growth is $500+ revenue and more than one million active seats. To achieve this PTC needs to post double-digit organic revenue growth within its target timescale, which requires growth of Wind-chill at double market rates – no mean feat.
“PTC wants to be the leader in PLM like Oracle is with databases,” says Heppelman.
“If you can help customers get business value out of this product better than anyone else, then you are the value leaders – that’s our goal. Our recorded compound growth rate of 19% includes the bad year of 2009. With [PLM] growth at three times the market rate six years in a row you’re winning a convincing market share.” The challenge for PTC and other PLM software vendors is now to capitalise on patterns like the gradual adoption of PLM in the Cloud, and to persuade larger numbers of SMEs in markets like the UK and Europe that this software can augment their CAD and compliment their ERP investments.