Enterprise software industry transition is in full swing towards cloud revenues. Recent acquisition of Netsuite by Oracle just added an addition pressure to already overheated discussion between rivals Salesforce.com and Oracle, which is trying to become a first enterprise software vendor reaching $10B cloud revenues mark. Salesforce’s Marc Benioff is not concerned about Oracle cloud strategy according to the following Business insider article.
Benioff pointed out that Oracle was late to the game, even though the rest of the industry’s been working on cloud development for the past 20 years. Oracle had about $2.9 billion in pure cloud revenue last year, less than half of Salesforce’s $6.7 billion. Of course, Oracle generates an additional $35 billion from non-cloud businesses.
For the last decade, engineering and manufacturing software was behind CRM and ERP vendors in adoption of new IT technologies and business models such as cloud and SaaS. However, we can see significant movements among leading vendors embracing cloud.
According to Bernard Charles, CEO of Dassault Systemes – The cloud is (being adopted) more quickly than I believed – and for the most sophisticated applications.” Although DS still believes most existing customers will stay on premise and says they’re not hearing a lot of demand for the cloud, they do believe it will open up DS applications to new companies where it was previously out of reach.
Autodesk is also actively moving towards sales of their new subscription offering- industry collections. “Autodesk has transitioned fully to a subscription business, and our subscribers expect value, flexibility and easy access to our software,” said Andrew Anagnost, senior vice president, Autodesk. “Industry collections offer the freedom to access the products you want, when you want them.”
Another data point from Monica Schnitger about PTC is here. According to this writeup, PTC customers’ appetite for subscriptions continues to surprise as it came in significantly ahead of PTC’s expectations.
While transition to subscription is currently on the priority list for some CAD and PLM vendors, the question about cloud revenues will be probably the next step in the evolution of CAD and PLM businesses. It is not clear what are current cloud revenues for main CAD/PLM rivals – Autodesk, Dassault Systemes, PTC and Siemens PLM. However, if cloud is a technology and business model that will allow to vendors to get customers in the spaces where it was previously out of reach, I can guess that cloud competition between vendors will heat up.
What is my conclusion? CAD and PLM vendors are switching to subscriptions business models. I’ve seen multiple reports about this activity, but subscription doesn’t mean automatically “cloud”. I didn’t find numbers and reports that are separating cloud and non-cloud revenues in CAD and PLM vendor reports. Maybe I missed and my colleagues bloggers and analysts can help me. Please comment and send me an email. I think, it is inevitable to see cloud CAD & PLM revenue race sooner then later. So, who will reach $1B of cloud revenues in CAD and PLM segment first? This is a good question to ask. Just my thoughts…
Best, Oleg
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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. My opinion about BOM can be unintentionally biased.
