The potential for CAE: 10 million licenses?

One of the questions I am most frequently asked is the rate of CAE penetration: how many possible users are there for CAE applications? How many of these are actually using CAE today? How is this likely to grow? Investors ask because they don’t necessarily understand CAE but know all about adressable markets; CAE companies want to know so that they can get a sense of how much more opportunity there is in any particular market niche; and CAE users want to know so that they can see if they are keeping pace with their competitors.

But despite the level of interest, it’s a very hard question to answer. For one, CAE is constantly evolving as new analytical methods enter the commercial realm. Too, the number of possible users is growing as user interface and process enhancements make the technology easier to use. It increases again as market forces drive manufacturers to invest in anything that can help bring a better product to market more quickly, such as CAE, changing what they are willing to pay to grow their advantage.

Add it all up, and what initially started as a fairly small number of potential customers — the PhDs working at companies large enough to afford the IT infrastructure to run simulations — has the potential to grow to include every engineer and designer working on a digital platform.

But is that practical? Or even possible?

No. For the simple reason that not every designer or engineer spends all of his/her time simulating in the FEA sense of the word. They do what-if designs, create CAD models, deal with manufacturability and perhaps do a motion study to ensure that no elements of their assembly physically interfere with one another. An FEA analysis is therefore an occasional task which means that it is likely that users would share floating licenses of their primary FEA tools. This would decrease the size of the total potential market.

But balancing that is the undisputed fact that some design disciplines may use dozens of different analytical tools to really understand product behavior or may buy many licenses of a single code to enable distributed computing of particularly complex problems. Both of these will bump up the addressable market to some extent.

ANSYS CEO Jim Cashman said at an investor conference hosted by Oppenheimer & Co. that ANSYS has broadened its footprint in the average account from two installed seats of ANSYS tools ten years ago to an average of 20 seats today.* Note, however, that ANSYS has consolidated a number of brands under its own while continually creating new products and moving to new platforms. So it’s probably not correct to assume that the number of CAE users has jumped by a factor of 10 in 10 years, but it has surely grown by something.

Let’s use that 20: If we assume an average of 20 seats of all types of CAE from all vendors in every manufacturing enterprise, that would mean something like six million CAE seats in the US alone (using census data from 2007). Add in greater Europe and the booming economies of Asia, and we’re near ten million potential licenses.

Investors and CAE vendors love those kinds of numbers because they show that we have barely scratched the tip of this giant iceberg in the 40 years since CAE became commercially available. But how quickly we get to the ten millionth license sold — or even what that license might be — is totally unknowable.

Bottom line: The potential for CAE is huge because of growing functionality, usability and the competitive advantage it can offer. An increasing companies are simulating more and therefore buying more seats of CAE tools of all sorts. Of course there is an upper limit — but I certainly don’t know how to quantify it.

* Source: Transcript via Fair Disclosure Wire. Sorry – I can’t link to it since I get it via a research database.