Siemens PLM may be taking share — but we’re not sure
It’s been a busy couple of weeks and I’ve been remiss. One of the highlights of September was the Siemens PLM analyst event held here in Boston about 10 days ago. I wasn’t, unfortunately, able to attend the whole thing but here’s what stood out to me:
Siemens PLM is doing well, thankyouverymuch. (Sooner or later, the company is going to have to back up these claims with data but) Siemens says it is taking share from competitors Dassault Systèmes (DS) and PTC; beat DS in the first half of the fiscal year ended September 30 2013 and consistently beats PTC in organic license revenue growth. License revenue is on plan while maintenance is ahead of plan for F2013. Indeed, revenue per sales rep is up 5% year over year, to what Siemens believes is an industry-leading level. The only flaw in the rosy picture is that services revenue is below plan.
Just about the only number the company was willing to share is that total revenue has had a compound annual growth rate (CAGR) of 8% in constant currencies (cc) in fiscal 2009 through 2012. Let us compare and contrast, shall we? Siemens benchmarks its progress against PTC and DS, so let’s start there.
PTC’s revenue in fiscal 2009 (ended September 30) was $931 million while F2012 revenue was $1.26 million — a CAGR as reported of 11%. PTC sometimes does give full-year info in constant currencies, but not always, so let’s go with a 3-year CAGR of 11%, including acquisitions.
DS’s revenue in fiscal 2009 was €1253 million, and in 2012, €2028 million, including a LOT of acquisitions. That’s a CAGR as reported of 17%. DS often gives cc data but not necessarily organic cc data; but if we look only at cc data, revenue was up 20% in cc in 2010, up 16% in cc in 2011 and up 9% in cc in 2012. My math makes that a cc CAGR of 15%, including acquisitions.
It’s also be useful to compare Siemens PLM’s 8% to the last public data we have (there are private numbers out there, but we’re looking at published data for consistency). In 2008 Siemens said that revenue in 2005 was $1.15 billion, and in 2006, $1.2 billion. That’s just 4% growth.
So what does this mean? Lots of numbers, I know. I think the story Siemens PLM is trying to tell is two-fold: Siemens PLM (1) is growing faster than it had historically been growing and (2) isn’t as far behind as the competition wants the market to think, especially given the acquisitive trends of the arch rivals. More data would help with both arguments.
Of course, Siemens PLM gets a distinct selling/marketing advantage by not disclosing more. Its Siemens parent doesn’t allow it to give real data that its rivals could actually compete against, yet it can show tables (no numbers, just logos) that let it tell a story of beating the public company competitors in key categories. The company says it outpaced (on an organic basis) reported license revenue growth by PTC and DS in 4 of the last 6 years. If I copied the slide correctly, Siemens might be taking share since new license revenue leads to future maintenance billings and ongoing services contracts — but we don’t have enough information to confirm that claim.
Moving on from the business of software to the business of selling software, Siemens PLM has a large, complex product portfolio that needs to be packaged so that it makes sense to buyers. When you’re selling at the highest levels within your customers, you’re not touting the advantages of NX over CATIA or ENOVIA over Teamcenter. You’re selling an entire value proposition that happens to be made up of some of everything in the portfolio. You need to ask what they do, understand their problems, find the gaps in their processes. DS realizes this too, and so we have a bunch of interesting, new go-to-market strategies to look at.
A couple of years ago, Siemens shifted its organization to an industry focus and this month announced an Industry Catalyst Series — essentially, mappings of functionality/products to customer processes with added content to help speed up install times and reduce customization. Catalysts can include many things (templates, best practices, symbol or part libraries, specific Teamcenter configurations, user interface tweaks to match industry terminology and so on) and will be licensed and versioned just like software releases. Pricing is unclear to me — I think some will be nominally priced but others might be more expensive.
Details were scarce, but here’s what we know about one of the shipbuilding industry catalysts, Integrating Core Operations and the Supply Chain. It includes what Siemens is calling “deployment accelerators” like recommended products, network design, configuration procedures, best practices and user training options. It also includes preconfigured elements for defining data objects and roles to automate workflows covered by the Catalyst. Specifically for shipbuilding, this Catalyst includes weight information management (critical to ensure that the ship is stable), assembly planning for outfitting (since the ship is probably built in modules away from the assembly site), templates for generating electronic work instructions … and probably more that I couldn’t write down fast enough. It’s a combination of software add-ons, templates and best practices — but you still need NX, Teamcenter, Tecnomatix, etc. to actually do the job.
The Catalyst term has a double meaning here, I think. The dictionary says that a “catalyst” is a substance that increases the rate of a chemical reaction and it seems that Siemens is counting on their Catalysts jump starting several different reactions. The first is to focus internal resources on solving industry-specific issues, and the second is to target specific customer issues and give the sales force concrete, quick ROI products to bring to an account.
One of the problems software companies have when selling across industries is that someone has to arbitrate: is electronics more important this quarter or is shipbuilding? These Catalysts, according to the company, will have 70% industry-neutral content, 20% industry-specific content and only 10% customer-specific customization. R&D can now concentrate on the common 70% and on the underlying product platforms. That 20% is still open for review each period, but it’s a smaller problem than before.
I can definitely see how Catalysts will make it easier to sell the complex menu that is Siemens PLM’s portfolio. The sales team can go in with a message tailored to that executive’s problems, offer solutions and, if the templates etc. are set up correctly, services can get the installation up and running quickly. Quicker time to value makes the next sale that much easier, and the cycle continues.
Minor quibble: DS’ Experiences often have whimsical names, like the recently announced “Smarter, Faster, Lighter” for the electronics industry. Compare that to Siemens PLM’s “Integrating Core Operations and the Supply Chain”. Hmm.
Siemens intends to have an industry catalyst for every industry in their sector map by the end of 2014 and will eventually have several/many per vertical. Right now, the company is targeting aerospace/defense, automotive/transport, consumer products/retail, electronics/semiconductor, energy/utilities, industrial machinery/heavy equipment, marine, and medial devices/pharmaceutical.
Finally, Geolus. I had to miss day two of the analyst event but flew back for a briefing on this because it’s becoming ever-more important to find, control and access existing data, even if you don’t have the metadata to go with it. Geolus searches by geometry/shape to find whatever you’re looking for, independently of CAD file type, and finds both duplicate and similar parts.
Geolus isn’t new. It was originally developed by a Capgemini subsidiary and was acquired by UGS in back in 2006 to help the company build out a capability to quickly locate 3D models based on geometric similarity. Purchasing departments can use Geolus to identify like components from different suppliers and add value to what had been a cost center. But I especially like the idea of using it in an oil & gas setting, where an old item is laser scanned and its point cloud compared to a database of spare parts — just think of the potential for rationalizing the billions of dollars in like parts with different part numbers!
Back to the main topic: Siemens PLM’s industry initiative is starting to get interesting. Last year, the industry team was clear that it was investigating what each user set needed from Siemens and what, in that giant arsenal of software products, was appropriate for any given industry. This year, we started to see results as the team overlays customer workflows with product capabilities, identifying gaps and points where Catalysts could have the greatest impact.
By working on offerings that quickly lead to value, Siemens PLM’s industry teams are on to something important. Simply saying that a solution built for automotive will work for pharmaceuticals, too, isn’t enough. Showing customers how that can be done, and done quickly, is far more effective. I’m looking forward to watching these catalysts grow and talking to early adopters.
Note: Siemens graciously covered some of the expenses associated with my participation at the event but did not in any way influence the content of this post.