What Could Be Some New Frontiers for Large CAD/PLM Providers?

My attendance of Siemens’ two-day product lifecycle management (PLM) analyst summit in the late summer of 2011 was like trying to drink from a fire hose. Even without the plant automation and manufacturing execution system (MES) discussion (which was also included in the 2010 event), there was an abundance of products and related information, and I am still trying to wrap my mind around the main messages of the event. Look for a separate article on my impressions from the summit, eventually.

In any case, the event ended with a question and answer (Q&A) session between the analysts/bloggers and Siemens PLM top executives. One question was whether, in light of Dassault Systemes recently acquiring Intercim’s MES and Enginuity for process PLM capabilities, and PTC acquiring MKS Inc. in the application lifecycle management (ALM) space, Siemens will also make any acquisitions in the near future. The diplomatic answer by Siemens was to look for some acquisitions down the track, both for technology and functional scope expansion.

My guess at the time was that Siemens might want to expand into the realms of enterprise asset management (EAM) and ALM (for the software work-in-progress part, not necessarily for the requirements management capabilities). Also, in order to penetrate the small-to-medium business (SMB) sector and the construction vertical (where Siemens is not really present), Autodesk could be an attractive target for the giant. Certainly, one can go crazy thinking about possible acquisitions in vertical sectors (e.g., retail apparel, consumer goods, life sciences, aerospace original equipment manufacturers [OEMs], etc.) and/or geographic regions where Siemens still has room for improvement.

More MES

Well, Siemens has since acquired two smaller companies and proved me wrong with my bolder guesses in terms of functional scope (but I was at least partly correct in terms of target industries). First, in late September 2011, Siemens extended its industrial software portfolio through the acquisition of Active SA, Santo André, Brazil, a supplier of MES software principally applied to the pharmaceutical and bioengineering industries. This takeover enables Siemens Industry Automation the division in which Siemens PLM Software also sits, to further develop its leading global position in the industrial software market.

Founded in 1995 and operating chiefly in Brazil and Mexico with a staff of around 50 employees, Active is one of the leading MES providers of pharmaceutical and bioengineering software in Latin America. The company claims that around half the medicinal drugs manufactured in Brazil are produced using MES solutions from Active. Following the takeover, the company has become part of Siemens’ Industrial Automation Systems Business Unit. In recent years, the Division has acquired a number of leading industrial software providers in their respective fields including UGS in the US in 2007, Innotec in Germany in 2008, and Elan Software Systems in France in 2009.

Siemens has been playing the differentiation card due to its ability to marry product development (PLM and computer-aided design [CAD]) with plant execution and automation capabilities. Indeed, the ability to have a complete feedback loop and a single version of the truth between the as-designed, as-manufactured, and as-serviced/maintained product stages is of paramount importance. Siemens PLM software is a leading global supplier of software and services with the capability to optimize the entire lifecycle of products and reduce their time-to-market.

But the tricky issue is that MES and automation applications are really vertically specific. Even more, in the same industry some companies will heavily customize and perhaps even develop their own in-house plant solutions. There are indications that, for example, Valspar has different MES solutions for high volume paints, Food and Drug Administration (FDA) controlled or reactive products, and its smaller batch business. This trend shows the market opportunity for Siemens to address it all with one vendor that can handle the cost of upgrades and support, which most manufacturers’ IT groups do not want to burden themselves with.

As for process manufacturers, Siemens has long had the SIMATIC IT R&D (PLM) suite, which is a formulation/recipe management solution, and this is tied tightly to Siemens’ MES system as well. Siemens Teamcenter has changed its data model some years ago to handle formulated product data. And with the Active acquisition, Siemens now has MES solutions to span the major vertical categories (i.e. highly formulated, highly engineered, make to stock [MES], etc.). PTC and Dassault do not have this capability that I am aware of.

Tackling Design and Manufacturing of Composites

Then in November 2011, Siemens further expanded its industrial software portfolio with the acquisition of Vistagy, Inc., the Waltham, Massachusetts, US-based leading supplier of specialized engineering software and services with emphasis on designing and manufacturing structures made of advanced durable and lightweight composite materials. Companies that use composite materials such as carbon fiber components in their products are faced with the task of further reducing costs and time-to-market in order to sharpen the competitive edge composites offer. With their unique combination of low weight, high strength, and durability, composite structures are already used extensively in the aerospace industry and for rotor blades of wind power turbines (as well as for the cutting tips of machining tools).

Composite materials will likely continue to experience more widespread use – primarily in the automotive and marine industries – as the complexity and time required for developing and producing composite structures is reduced. This is precisely the aim Siemens is pursuing by adding industry-specific engineering software to its industrial software portfolio for PLM. Already today, Siemens is among the technology leaders for the automation of production lines for carbon fiber components. With the acquisition of Vistagy, Siemens hopes to become the only company worldwide to support the whole value creation for carbon fiber components with its software tools from product definition and development to manufacturing and service.

Around 300 customers worldwide apply Vistagy’s software products for a variety of applications ranging from composites engineering and design and manufacture of complex assemblies and large aero-structures to design and manufacture of transportation seat systems and interior components. Siemens is planning to integrate the software supplier and its products, services, and support into its PLM Software Business Unit, which is, again, a part of the aforementioned Siemens Industry Automation Division.

What Does All This Mean?

In general, I would expect big PLM/CAD vendors to continue to buy their way into smaller sub-vertical segments to achieve incremental growth. The Vistagy and Active acquisitions by Siemens were along those lines, and can be seen as an attempt to penetrate industries and regions where it has had less success in the past (i.e., aerospace and defense [A&D], where PTC is still the leader). To clarify further, PTC may have a number of of OEM airframe accounts (e.g., Airbus), but Siemens has been selected by the lion’s share of engine manufacturers (e.g., Rolls Royce was a featured case study at the analyst summit). If one accounts for the CAD, product data management (PDM), and MES aspects of the lifecycle, Siemens might claim the leadership position. Vistagy also has a solution for seating, which means handling the softline portion or apparel PLM aspect to the product.

As for composites, they are lighter (have lower specific weight) but stronger materials than the individual components. In other words, they need lower amounts of materials that are manufactured offshore, which means importing less steel from China and balancing trade deficits for the indebted Western World countries. These materials probably need advanced manufacturing skills and should be made on shore. This is how Germany and Switzerland have been protecting their manufacturing sectors, and how the US could too if its politicians ever wise up. Last but not least, composites are cheaper to transport and heat, which implies green and sustainability concepts. Bundled with on-shore manufacturing jobs creation, composites could be considered quite politically correct materials of a sort. .

Vistagy’s main product, FiberSim, has integration with all major CAD systems, including Dassault CATIA, PTC Pro/E, and Siemens NXDassault also has its own CATIA Composite competitive product, whereas enterprise resource planning (ERP) vendors do not have any design capabilities whatsoever, only viewing/visualization capabilities at best.

Co-opetitive “Business as Usual” Likely

Siemens’ well-established open business model that serves the needs of all customers regardless of their mix of IT solutions and CAD platforms should help ensure the ongoing support and satisfaction of all Vistagy customers. Basically, PTC has had a long-standing, mutually-beneficial partnership with Vistagy, which may well continue to thrive despite the acquisition. It's too soon to tell, but it certainly wouldn't be the first time the IT industry has witnessed this kind of "co-opetition." In fact, Parasolid, Siemens’ 3D kernel for CAD products is used in Dassault SolidWorks, accounting for 40 percent of the Parasolid install base base, meaning that a big chunk of Siemens’ Parasolid revenue ironically comes from its archrival Dassault. There is also precedence here with cooperation such as the JT 3D data visualization tool by Siemens that PTC has licensed for compliance management and openness.

With that said, with PTC’s recent release of Creo Simulate, PTC supports some modeling and simulation of advanced composite materials directly within the novel PTC Creo product family. But what Creo Simulate does is not quite at the same level as what Vistagy offers (particularly around curved surfaces). In the worst case scenario, there are a number of other vendors that offer similar capabilities to what Vistagy offers, with which PTC has partnerships (e.g., Helius:CompositePro, ESAComp, etc.). So, while there's a good chance that the PTC-Vistagy relationship will remain basically intact (at least the integration will), PTC has several other choices it can offer to its customers should there be a change in Siemens’ direction (assuming the acquisition is completed early next year).

Dear readers, what are your comments and opinions with regards to composites design and manufacturing, and Siemens’ aforementioned acquisitions. I would certainly be interested in your experiences with this software in general and with Vistagy and Siemens PLM in particular.
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