Engineers are super innovative people when it comes to the development of new products, technologies, and services. However, when it comes to the tools and software…err, engineers are super conservatives. I was puzzled by this status quo for many years while developing and selling engineering and manufacturing software, PDM, and PLM systems. Call an engineer for a data management problem and he/she will come back to you in 20 minutes with Excel files describing how to solve the problem.
Every revolution in engineering software was almost always a combination of fundamental platform shifts combined with big economical benefits for customers. Here are few historical examples to remind us about them.
1- Computers – from Mainframe to Workstations to Personal computers ($$$$–>$$$–>$).
2- CATIA V4 and other old generation CAD systems to Pro-Engineer – delivered a new design paradigm with unique features, substantial saving of time and engineering resources.
3- AutoCAD from Drafting boards – discovery of new platform (PC) with low cost and much higher efficiency.
3- Pro-Engineer to Solidworks – Windows platform combined with huge saving on hardware and also engineers’ freedom to work from home owned PCs
Cloud and SaaS are no doubt the future. Read my earlier blog about How much PLM companies will grab from a $20B annual increase in SaaS spending? While nobody is literally questioning the cloud future of CAD, PDM, and PLM, the question that everyone has is when engineering and manufacturing software will embrace cloud software? The reviews and researches done by leading analyst companies several years ago predicted cloud adoption accelerating, but it didn’t happen. Companies like Onshape and Autodesk were pioneering cloud and SaaS solutions for CAD and PLM, but adoption was slow.
The question that many industry experts are asking about engineering and manufacturing cloud software is WHEN? As it was stated by legendary investor and visionary Peter Thiel back in 2014 in his explanation about competition by saying “Competition is for losers”.
“All happy companies are different: Each one earns a monopoly by solving a unique problem. All failed companies are the same: they failed to escape competition.”
Thiel argued there were only two categories of businesses – non-monopolies and monopolies. The aim of any business should be to become a monopoly in their area of business, to create a distinct image and use it to earn pricing power. What Thiel said provides a simple framework to understand the value creation models of what were the top five Nasdaq businesses – Microsoft, Apple, Amazon, Alphabet (Google) and Facebook – that have now gone on to dominate the S&P 500. In just three years these five companies have now grown from ~10% of the S&P 500 as a percentage of market capitalization to 20%.
Rephrasing Tiel, you don’t want to be the first in the market, spend resources and efforts to educate customers and show them the right way. You want somebody else to do it and then to come to the market and get it all. According to Thiel, it was done by Google (killing many search companies before it), Facebook (killing many social networks before it), Amazon (becoming the single biggest e-commerce provider), and others.
Next week I’m going to join a discussion panel organized by AMC Bridge LLC together with a group of my industry colleagues in the webinar – When will Manufacturing and AEC embrace the cloud for engineering data and software?
Moderator: Jim Brown, Founder and President of Tech-Clarity
Igor Tsinman, Co-founder and President of AMC Bridge
Oleg Shilovitsky, Co-founder and CEO of OpenBOM
Marc Lind, Sr. Vice President, Strategy of ARAS
Lynn Allen, Global Technology Evangelist of Dassault Systèmes
As Governments adopt a cloud-first policy, analysts pinpoint cloud as a catalyst for innovation, and many prominent engineering software companies are migrating their product offerings to the cloud, still many manufacturing and AEC businesses are hesitant to adopt this platform. This panel discussion will explore the question “Is this the right time for engineering software and data to be cloud-based?” Leading cloud computing evangelists and customers will discuss this ongoing trend and the reluctance of many companies to put their faith in cloud-based solutions.
Time: 12:00 p.m. – 13:00 p.m. EDT
Join the Webinar: Registration Link
I look forward to the interesting discussion, please join me with your questions.
Meantime, what is my conclusion?
The idea of becoming first is not really appealing to CAD and PLM vendors in both manufacturing and AEC segments. Large companies are staying conservative and buying everything that moves on their horizon. Check my blog How to achieve SaaS dominance in PLM. So far, this strategy worked for them for the last 20+ years. Does it mean that the history will repeat with cloud and SaaS? Will companies be able to recognize the tipping point and react by buying other vendors and technologies? The timing is everything and it is the only thing that you cannot change. Just my thoughts…
Disclaimer: I’m co-founder and CEO of OpenBOM developing a digital network-based platform that manages product data and connects manufacturers, construction companies, and their supply chain networks. My opinion can be unintentionally biased.