Q&A Tuesday: It’s not all about CD-adapco

Jan 26, 2016 | Hot Topics

… though most of your questions over the last two days have been focused on CD-adapco and Siemens PLM.

There is other news out there worth your consideration. First, keeping to the CAE theme:

SIMSOLID (about which I’ll write more thoughtfully soon) announced today that it’s received initial seed funding from New Enterprise Associates . SIMSOLID says it will use the undisclosed new investment to accelerate the development of its structural analysis application, SIMSOLID. SIMSOLID is trying to stand out from the crowded field of structural CAE by using the actual CAD geometry for analysis, without translation or simplification. According to CEO Ken Welch, SIMSOLID intends to help design engineers perform preliminary structural analyses on their desktop computers, quickly and with no geometry translation and meshing

But that’s not the only investment in CAE up and comers. Union Square Ventures in December invested in German SimScale, which offers cloud simulation with a pricing model that’s a bit like OnShape’s: free public project simulations by community members but for-fee simulation if you want to keep the project private. The business model is interesting (and potentially quite disruptive); the platform is accessible via a standard web browser, with an interface that supports structural mechanics, fluid dynamics, thermodynamics, acoustics, and particle phenomena as of late last year.

On a more general basis, you been asking about earnings, IPOs and subscriptions, and what it all means:

Yes, companies pre-announce. Here’s my take on why they do it. We haven’t had any negative pre-announcements so far about the December quarter (though SAP preannounced in a positive way; they often do that). It means that the companies in our universe are under control, that the sales and expenses came in more or less as expected. PTC announced results last week but things really heat up with Dassault Systemes, Hexagon and others telling investors about 2015 and their prospects for 2016 next week.

No, the Bentley Systems initial public offering (IPO) didn’t happened while your attention was elsewhere. Recall that last November Bentley execs told me that they were waiting for market volatility to die down; they wanted a market that would pay them as much as possible for the part of the company they want to sell. That happens when investors are feeling optimistic and right now, they’re not. One measure of this is the VIX, a volatility index based on the S&P 500. The VIX was around $16 when Bentley filed its paperwork with the US Securities and Exchange Commission last summer; yesterday the VIX closed at around $24 — way, way more volatile than most people consider IPO territory.

PTC’s earnings last week highlighted something that I think we all know, but that is really hard to quantify: who wants a subscription and who doesn’t?  The benefits and drawbacks are individual. Some like the lower cost of initial entry but really hate the idea that, after about 3-4 years, they’re paying their vendor more than if they had bought a perpetual and paid maintenance every year. Others like the repeatability — same amount every month/quarter/year — and aren’t worried about the total over time. Others like buying software out of operating budgets (OPEX) and not CAPEX (capital, usually needs more signatures). And yet others hate all of this, believing that software should be sold the way it always has been, because change is scary. All points are valid but what’s proving hard for everyone concerned is predicting which way any particular buyer will want to buy. Autodesk has taken the hard line, and no longer offers perpetual for many products in many regions as of the end of this month. This makes forecasting, sales incentives and compensation, accounting and a lot of other things easier. PTC is in a transitionary period, offering both options for many products, even as is adds subscription-only elements to many offerings to drive the buyer to subs. Until the offering, pricing and sales issues settle down, it’s going to be difficult to forecast revenue in any given period.

Finally, back to CAE. Late last week, I was at ASSESS, the first-ever Congress on Analysis, Simulation, and Systems Engineering Software Strategies. It was held outside Washington, DC, which meant that one major topic of conversation was the looming snowstorm. On Wednesday it sounded bad and by Thursday night, thousands of flights were cancelled. What happens when you have such a huge, model-able event taking place during a simulation-focused conference? Yup. Everyone talked about the simulations, that the European and North American models were converging, how the data was being reported out to amateurs — we were constantly analyzing the analysis. Meta-weather forecasting, as it were. My favorite image of the snow event, however, is the image above, from Commander Scott Kelly on the International Space Station. It shows how gigantic this storm was as well as how insignificant in the greater, cosmic scheme.

Keep the questions coming!