cPDm Market Size
According to CIMdata, industry analyst firm tracking the industry, cPDm reached $4.5 billion in 2003 an increase of 8% over 2002. EDS was the industry leader in total cPDm related revenue at ~$800 million (about $560 million in service) with IBM + Dassault Systemes a strong second at over $500 million in total revenue (~$320 million in service) and SAP coming in third at $350 million in total revenue but leading in terms of software license and maintenance revenue at around $275 million. This does not count revenue from system integrators related to these product offerings.
CIMdata predicts that cPDm will exceed $5 billion in 2004 and $9 billion in 2008 or a CAGR of 15%. Software and software maintenance were under $2 billion in 2003 but should reach that figure in 2004. In 2008 this should account for around $3.5 billion. Service revenue already accounts for over 50% and in 2008 will be 60%. Of course this service component is the hardest to measure.
The ways in which the vendors report their cPDm revenues makes it difficult to make a meaningful comparison. Service revenues from IBM, EDS, SAP and System Integrators such as Accenture and CapGemini do not appear in financial statements. Verbal statements from marketers regarding service revenue from other divisions or even other companies are not verifiable. SAP reports only software license revenue for its PLM sector. PTC has sold its PLM solutions directly, while Dassault Systemes has sold its solutions indirectly, mostly through IBM and IBM Business Partners. Only MatrixOne and Agile Software are pure cPDm vendors. UGS PLM Solutions, the industry leader, provides no data on its PDM segment.
The downturn from the previous quarter is due to the strong seasonality that Dassault and mySAP PLM experience.
Background on PLM Vendors
In 1983 MatrixOne began as Adra Systems, a CAD/CAM firm. Adra subsequently acquired PDM technology developed internally by a large end user. When introduced by Adra to the general market, this PDM technology sported a novel user interface well ahead of then-available commercial PDM products like Sherpa and Metaphase. The first commercial version of Adra's business collaboration software shipped in November 1993.
Adra management renamed the company MatrixOne in October 1997 and in May 1998 sold off its legacy CAD business. In June 1999 MatrixOne introduced the eMatrix product line. In March 2000 the company completed a successful initial public offering with net proceeds of $132 million. MatrixOne revenues climbed until September 2001, when license revenue suddenly fell by two thirds to $6.9 million in the quarter. While license revenue results rebounded in subsequent quarters, they never regained pre 9/11 levels. Service and maintenance revenue has been relatively constant at around $17 million per quarter. Since 9/11/01, the firm has endured a constant stream of red ink for a cumulative loss of over $60 million, leading to several rounds of personnel layoffs.
MatrixOne heavily leverages partnerships with System Integrators such as Accenture, CGEY, Bearing Point, and Fujitsu. IBM Global Services is also a partner. On October 22, 2003 MatrixOne announced an OEM agreement with Cadence, a leading EDA vendor. Under this exclusive agreement, Cadence will embed MatrixOne technology into advanced PLM solutions that will be marketed and supported directly by Cadence. It is too soon to tell if this relationship will make a significant contribution to either company.
Agile Software was founded in March 1995. Agile netted $67 million in its IPO in August 1999 and another $275 million in a secondary offering in December 1999. At the height of the dot.com boom, Ariba offered to acquire Agile for $2.55 billion. The deal was called off when Ariba's stock plummeted and the value of the offer was reduced to $414 million.
As shown in Table 3, Agile has consistently lost money (but it still has $195 million in current assets).
*F2001 included a one time $55 million impairment charge and $36 million in goodwill amortization.
On August 11, 2003 Agile completed the acquisition of Eigner for ~$20 million ($2.85 million in cash). Back in November 2001 venture capitalists had invested $17 million in Eigner & Partner, a German PDM firm. The company's name was changed to Eigner and its HQ relocated to Massachusetts. A new management team was recruited with the then-likely intention to take the company public in the US market. Eigner had ~250 customers (800 deployments and 250,000 seats) to complement Agile's 850 customers. Agile said the combined annual revenues of the two companies would be approximately $100 million.
Headquartered in Walldorf, Germany, SAP is the world's third-largest independent software supplier overall. For 2003 SAP had total revenue of £7.25 billion, software license revenue of £2.15 billion, and net income of £1.1 billion. SAP reports 12 million users, 20,500 customers, and 67,500 Installations. SAP has been the unquestioned ERP leader for years. SAP has been very successful in leveraging its huge ERP customer installed base to branch out into CRM, SCM, SRM and most recently PLM markets. SAP Introduced SAP PLM in February 2000 built upon existing PDM and Project Management modules. SAP divides its mySAP PLM offerings into the following categories:
|Life-Cycle Data Management||Program and Project Management|
|Life-Cycle Collaboration and Analytics||Quality Management|
|Asset Life-Cycle Management||Environment, Health & Safety|
While the first two categories form the core of most PDM product suites, the last four are unusual. The company claims 3,200 businesses are using mySAP PLM.
SAP reports software license revenue on a product segment basis. Software maintenance revenue is only reported on an aggregate basis across all product lines. The latter has been slightly greater than software license revenue on an annual basis. mySAP PLM accounts for 12% of SAP software revenue, about half that of the CRM and SCM sectors and a quarter of ERP sector. Note the large fourth quarter spikes in revenue.
PTC was founded as Parametric Technology in 1985. PTC revolutionized the CAD industry by providing inexpensive, interactive variational solid modeling on early computer workstations in its Pro/E product line. Based on a two year lead in technology and extremely aggressive sales tactics, PTC “zoomed” over some 13 years to nearly a $1 billion in annual revenue.
Despite this success, PTC management concluded by the late 90's that CAD was no longer a high growth industry. PTC turned to product data management where it saw great potential for professional services revenues. In June of 1998 PTC introduced a product suite using acquired systems from Windchill Technology. In its subsequent quarterly earnings releases and conference calls PTC began reporting the figures and touting the successes of Windchill even when Windchill accounted for less than 10% of total PTC revenue.