Siemens PLM, Boston, Rain

Last week I got to spend several days with the Siemens PLM team at their annual analyst event. Rain poured down outside as the remnants of another hurricane washed by but we were toasty dry inside, taking in over 20 hours of presentations, demos and meetings. I know I can’t do the whole event justice, but here is what I found most compelling: The business is doing quite well — I think. Siemens PLM is part of a very large public company and is constrained in what it can make public about its financials. Chairman and CEO Tony Affuso said that Siemens PLM has seen six quarters of “steady” growth, with license growth in the “strong double digits: 50%, 25%” and that 3,000 new customers were added in the last 12 months — leading to a total of 70,000 with 7.2 million seats deployed. Paul Vogel, EVP of Global Sales and Service, gave a number of data points to show that 2011 has so far been a good year: by geo, sales in the Americas are up 12% (US, up 11%); EMEA up, 23% and revenue from AP is up 31%, excluding Japan (no word on the total if Japan is included — but one could guess that it’s less impressive). By vertical, the year-to-date data shows growth in auto, aerospace & defense and CPG of between 8% and 9%; fashion, energy and technology of 11% to 12%; and machinery of nearly 20%. Shipbuilding, on a very small base, is up nearly 80%. According to the company, Siemens PLM “outperformed everyone with the strongest organic license growth” in 2008, 2009 and 2011 YTD (yielding 2010 to PTC). I’m still working on my model, but it looks as though the arrows are pointing upwards. The channel strategy is solidifying. (Pun intended.) Mr. Vogel also shared data about the company’s channel strategy, saying that its named accounts team, some 5000 feet on the street that belong to Siemens PLM and its partners, has seen 37% year/year revenue growth and accounts for roughly 50% of revenue. The midmarket represents the other 50% of revenue and includes 220 new partners since 2008, yielding over $50 million in license revenue. Like Autodesk, Siemens PLM uses a pyramid model (although without the visual) to describe the opportunity: 5,000 accounts at the named level, 15,000 in territory sales at the midmarket and another 25,000 in channel sales to the midmarket. Siemens PLM does not, at this time, appear to be addressing the consumer market. Mr. Affuso characterized the outlook for 2012 as “strong” and “robust”. Where is the growth coming from? Siemens doesn’t talk about many of its deals but did say that it is winning technical benchmarks across the board and believes its collaboration tools are the best on the market, that it is regularly displacing competitors (always a contentious claim, since vendors rarely 100% displaces all others), and that it is executing more effectively. It would appear that some of the growth is coming from untapped markets like Brazil and shipbuilding, and from increased marketing of Velocity/Solid Edge — but the majority of the growth seems to be coming from churn as the major PLM vendors vie for a relatively small number of named accounts. A new org to focus on growth. Siemens PLM President Chuck Grindstaff gave a whirlwind tour through his vision of the PLM word and how Siemens PLM will drive it. He unveiled a new organization structure that, he said, “will sharpen our focus on the industries we serve with new business segments that clarify ownership of decisions within our business.” Mr. Grindstaff’s new organization creates business segment leaders (Jim Rusk/Product Engineering Software, Karsten Newbury/Mainstrean Engineering Software, Zvi Feuer/Manufacturing Engineering Software, Eric Sterling/Lifecycle Collaboration Software and Kevin Eustace/Product-driven Services) that have profit and loss responsibilities and draw upon sales, service, development and operations resources in a “simplified and lean structure” that will “work hand in hand with our industry organization”. Establishing P&L responsibility is a proven way of focusing people’s minds on growth but can also be divisive as groups jockey for limited resources; it’s an interesting shakeup and one that the Siemens PLM staff at the analyst event seemed to find exciting. This new structure would also appear to enable Siemens PLM to more readily absorb acquisitions; it hasn’t been on a spending spree like PTC and Dassault Systemes. This new structure and the (apparent) financial success seem to position the company to start looking outwards, at opportunities that may not have been possible a few years ago. Perhaps an industry-specific acquisition is in the cards … The focus on CAE is strong — although it’s often not that visible in the complexity that is Siemens overall offering. Synchronous Technology lets people (experts and casual users alike) tweak models for analysis and some of the advances in multi-discipline simulation certainly deserve more time than they got on the program — and I’ll be taking a closer look. Presidents blog, too. Mr. Grindstaff was putting the finishing touches on his first ever blog entry using his smartphone during the event’s opening cocktail party. [Such a dedicated guy.] Check it out here, as well as links to other content from Siemens about the event. We were also treated to excellent customer presentations showcasing large and small companies using Siemens PLM technology to “make better decisions” (the theme of the event). In all cases, the problems were multidisciplinary and required collaboration by a broad cross-section of stakeholders. The key takeaways: customers rely on Siemens PLM software to accelerate product development — move faster but with fewer errors, create collaborative structures within their enterprises, improve sustainability by consolidating information for tradeoff studies and, oh yes, enable them to design, engineer, evaluate and manufacture higher quality products. One of the concepts Mr. Grindstaff introduced was “future proofing”, the idea that Siemens PLM needs to anticipate future developments, take action to minimize any negative consequences and also to seize opportunities that these changes might present. His comments focused on IT infrastructure but I think he was also taking a much broader view, looking at work processes, long-term needs and business issues. It would appear that Siemens PLM has begun future proofing itself, taking the first steps to a more growth-oriented market approach. I’m looking forward to the strategic initiatives that come out of the new org structure. And maybe an acquisition or two. Note: Siemens PLM provided lodging but did not in any way influence the content of this post.