Cambridge, MA, July 7, 2004 — By Daratech’s forecasts, end user spending on product data management technology is expected to increase a moderate 1% in 2004 to $1.73 billion, but is projected to rebound strongly in 2005. Our findings suggest that many organizations today are still looking for what Daratech terms 3-6-9 solutions—software that can be implemented in three months, have paid for itself in six, and create ROI in nine.
The PDM market, with traditionally long and training-intensive implementations, does not satisfy today’s demand for short-term returns. So while IT spending in general is projected to climb in 2004, investments in PDM technologies will remain relatively stagnant this year while organizations continue to be cautious about undertaking large-scale IT projects.
Nevertheless, the outlook for 2005 and beyond looks very strong as manufacturers embrace PLM and begin to fix their sights on longer-range goals. The growing recognition and acceptance of PLM in the manufacturing sector will elevate the PDM space, because in Daratech’s opinion, a strong PDM backbone is necessary to implement PLM. Additionally, we look for developers to introduce new technologies that tap into new and existing markets, and for manufacturers to move away from internally developed solutions, and to increase budgets as confidence in the economy gains.
With IT industry intrinsically marked by technological innovation and market evolution, market maturity for PDM is still a long way off. We see opportunity for strong and profitable growth for both existing and new players in the PDM market space. Indeed, we believe there exists ample evidence to be optimistic about the PDM market in the years ahead and therefore we project end-user spending on PDM technologies will expand at a compound annual growth rate of 12% through 2008.
The introduction of more open component technologies, coupled with new middleware applications, will begin to ease the strain of PDM implementations and will gradually lessen time to ROI. To meet the market’s current appetite for short-term returns and to quell the notion that PDM translates into large and expensive implementations, many of today’s providers have begun to introduce "lighter" versions of their traditional PDM system to offer a less expensive, and sometimes function-specific, alternative. These solutions are opening the doors to PLM at small- to medium-sized organizations that heretofore wanted better data management and collaboration capabilities but considered the size and expense of a traditional PDM installation a barrier to PLM.
Another market driver is the desire among manufacturers with proprietary PDM systems to rid themselves of costly in-house development and maintenance. Once thought of as competitive differentiator, organizations are finding that the cost of maintaining in-house PDM systems is becoming untenable as technology evolves and as knowledge is lost alongside a retiring workforce. Many of these companies will turn towards commercial systems to reduce cost of ownership expenses. Since many of the systems are becoming more and more template-based with multiple options for custom configuration, companies are finding that they can still configure the system to many of their own methods and processes without the expensive upkeep of a fully custom implementation.
Manufacturers expect suppliers to know their business, whether it be aerospace, automotive, consumer products, etc. Consequently, many of today’s providers are offering industry-vertical and project management applications based on expertise and best practices developed and cultivated over the years at customer sites. These solutions are seeing a surge in popularity at organizations that do not have the time or manpower to teach their suppliers how their business operates. We expect this trend to continue.
We think product positioning also plays a key role in the PDM market. The vendors in this space seem to be moving away from the technology-focused marketing message of "do it better/faster/cheaper," to messages that emphasize the ability of these tools to reduce risk—cost, schedule, rework, product failures and the like. We think these messages will find resonance, especially as they coincide with widening budgets and increased spending confidence over the next four years.
Projected to lead the PDM market in end user spending in 2004 are UGS with Teamcenter ($475.1 million), Dassault Systèmes with its ENOVIA and SMARTEAM lines ($473.4 million), SAP with mySAP PLM ($317.4 million), and PTC with Windchill ($237.0 million). This year’s revenue growth leaders are think3 and its thinkteam product (60% growth), Dassault with the ENOVIA and SMARTEAM lines (23% growth), MatrixOne with its Matrix platform (12% growth), and CoCreate with OneSpace (8% growth).
Note: Market growth expressed in US Dollars differs from market growth rates expressed in other currencies when exchange rates change. These differences can be dramatic when there are large shifts in exchange rates. Daratech converts all reported information to US Dollars. As the US Dollar dropped in value against other currencies in 2003, this methodology increased in US Dollars the revenues from European and Japanese companies. In prior years, when the US Dollar was appreciating, the opposite was true.
