Historically, a business model of CAD, PDM and PLM vendors was to sell “seats”. To sell CAD seats was a core business model for vendors for many years.Nothing wrong with that. It created great businesses in the past. Analysts and industry pundits are still using seat model to make predictions and analysis about the size of CAD market. Jon Peddie 2012 CAD report estimates the number of active CAD users worldwide to be 19.3 million. Similar report from 2015 makes an estimation that CAD software market to be an $8 billion market with 5.15M annual users.
PDM systems are also using “seat” based sales model. Traditionally PDM seats were sold as an addition to CAD seats. However, in my view, PDM sales was transformed significantly for the last decade. You can learn more about it in my earlier article – How CAD vendors murdered PDM businesses. In addition, I think we will see more cloud infrastructure coming from CAD vendors and taking PDM tasks under control. Read more here. So, to me PDM “seats” business doesn’t look rosy. CAD vendors (especially cloud CAD vendors) will be absorbing PDM functions in order to deliver reliable cloud CAD solution. Read more in my article cloud CAD will have to solve PDM problem at first place.
Although PLM systems were sold using seats model, it never worked well in my view. The model was blurred with the options like floating seats and site licenses. In other words, despite the fact PLM vendors has a formal “seat license model”, PLM systems were sold as a contract covering licensing and services for implementation.
These days businesses are transforming to sell solutions differently. Forbes article – Why building a better mousetrap doesn’t work any more gives you an interesting perspective on future of building products and businesses. Here is my favorite passage from the article:
Once upon a time, you could succeed in business by building a better mousetrap—a product that was better than your competitors. Yesterday, you could succeed by building a better ecosystem. Today, you need to build a better ecosystem that continues to be perceived as better and that somehow generates revenue in a world where customers expect things to be free. A better product is not enough.
So, building ecosystem seems to be a key element of success. Forbes article is making analysis of successes and failures in building of different eco-systems – Nook, Apple, Samsung, etc. The following passage is explaining a success of Apple eco-system:
The Elastic Enterprise (2012) by Nicholas Vitalari and Haydn Shaughnessy explains how Apple [AAPL] met the diverse needs of hundreds of millions of individual iPhone users by launching its own ecosystem—a technology platform that enabled hundreds of thousands of developers to create Apps that could meet every conceivable human need and to offer them directly to customers. The result is an ecosystem that is easily adapted to meet the needs, preferences and passing whims of every single user—a feat inconceivable with traditional management practices.
Although more people today buy a Samsung phone, with its Android ecosystem that emulates that of Apple, iPhone purchasers spend much more time actually using their phone and living in the environment that Apple has created and the users have personalized. As a result, customers are willing to pay premium to Apple.
So, what we can learn from this and how it can be applied in CAD, PDM and PLM realm? Although CAD and PLM vendors are still looking into “seats” and user based models, I predict the future will shift into building of data platforms and ecosystems of users and partners.
Check out my earlier article – Data as a platform and future manufacturing intelligence . The future of manufacturing competitive intelligence will be directly dependent on the ability of manufacturing companies to use data. The era of local file management systems is coming to the end. The company that will provide a platform capable to handle a diversity of product data, share it in an easy way with other people, to collaborate and gather intelligence will win. There is no company in the world that can afford to work in a disconnected mode. The future manufacturing platforms will be dependent on the ability to integrate all systems of records to drive product data intelligence.
Onshape Inc is an excellent example of data platform vision capable to store, manage and share design information. Read my article – Onshape quietly developed “Google Drive for CAD”. I’m sure companies will be interested to store variety of product data information inside of Onshape storage.
Autodesk and its Forge platform is another example. Autodesk Forge made a long way of transformation and failures originally started as Autodesk 360 to manage projects and social collaboration. Recent Autodesk Forge announcement brings under a single umbrella A360 and Forge API to manage any type of design information integrated with Fusion 360 CAD system.
However, products are not enough. How to build an eco-system and business model?
For the last few years, CAD and PLM vendors have been trying to create ecosystems and communities of users. In my view, none of them can be compared with the example Forbes article made about Apple. A unique example in the universe of CAD communities and ecosystems is Onshape App Store. Onshape is combining 3 things together – technological platform, user experience and e-commerce solution. The last one is important. It creates one stop shopping experience:
One-Stop Shopping – All apps are available in one place, with no need to search multiple websites to find what you need or if an app is compatible with your software. For most apps, purchases are automatically charged to your Onshape account.
What is my conclusion? In the future, CAD, PDM and PLM products will use cloud as a foundation to build ecosystem of users and not only to deliver product and technology. Data platform together with one-stop-shopping experience can create a difference. Data will be available, intertwined and shared. Future platforms like Onshape can potentially depart from “seats-oriented” business model towards “data and usage oriented” business models. Just my thoughts…
Best, Oleg
Want to learn more about PLM? Check out my new PLM Book website.
Disclaimer: I’m co-founder and CEO of openBoM developing cloud based bill of materials and inventory management tool for manufacturing companies, hardware startups and supply chain.
