Dissecting Dassault's Bid for MatrixOne, Part 29 Mar, 2006 By: Kenneth Wong
A look at the road ahead for PLM vendors and customers
Last week, Dassault Systèmes announced it was acquiring MatrixOne, developer of collaborative PLM solutions for the value chain, for US$408 million. In yesterday's edition of Cadalyst Daily, we looked at the reaction of PLM analysts and Dassault competitors UGS and PTC. Today, we'll discuss what the future holds for the industry's vendors and customers.
Age of the Goliaths
Reflecting on Dassault's acquisition of MatrixOne, AMR Research analysts Michael Burkett, Kevin O'Marah and Eric Karofsky anticipate "the 'golden rule of three,' meaning mature industries consolidate down to three big players" -- in this case, Dassault, UGS and PTC -- "with niche providers surrounding the core." Research firms Daratech and Manufacturing Insights similarly view the acquisition as another in a series of consolidations.
Monica Schnitger, Daratech senior vice-president of market analysis, explained, "A company under a certain size can't gain access to the very high-level decision-makers within its prospects, or support these global accounts once it makes the sale. PLM sales are usually large, which means that they take a long time to close -- a difficult position for a small public company that has to report revenue growth (or at least a smooth pattern) every quarter." That means Agile, one of a handful of PLM vendors still operating independently, may soon find itself courted by multiple suitors.
When the MatrixOne acquisition is complete -- probably by the end of June -- Dassault is expected to juggle three major PDM (product data management) products: ENOVIA, SMARTEAM and MatrixOne. "Dassault will have to provide a clear road map for the market and its sales channels," remarked Joe Barkai, program director of PLM strategies at Manufacturing Insights. "This may prove harder than it sounds when considering the overlap and the different user communities and corporate cultures that need to be brought together."
Dassault's spokesperson Derek Lane said, "Dassault Systèmes sees value in the MatrixOne sales channel and domain knowledge, which the company intends to leverage. The company believes there will be synergies between MatrixOne's sales practices and Dassault Systèmes' sales channels, including IBM, direct sales, resellers and channel management partners."
This challenge may be further complicated by the cooperative marketing agreement recently signed by PTC and Dassault's biggest sales channel, IBM. "With much less support from IBM's sales channel," Barkai noted, "Dassault Systèmes needs to restructure its channel relationship model and combine it with the existing MatrixOne channel operation. Some MatrixOne partners may be less enthusiastic about working with the new organization due to the close relationship with IBM...."
Dassault's Lane said, "The support from the IBM channel remains undiminished in all the markets we approach jointly. [The PTC-IBM] agreement does not remove any salespersons from the Dassault channel. We lose no support on the ground. PTC gains support of IBM personnel not selling Dassault solutions."
Daratech observed, "[Dassault] has a good track record of allowing its acquisitions to conduct business without eliminating their individual identities. For example, SolidWorks, DELMIA and SMARTEAM have been allowed to continue to serve their customers using channels and sales approaches appropriate to their marketplaces."
AMR Research believes MatrixOne customers will welcome the acquisition: "The company has maintained a reputation for good data-management technology and a solid understanding of the needs of engineering. The only serious concern was vendor viability exacerbated by the recent financial audit. ... Dassault's acquisition addresses this."
MatrixOne previously conducted a review of its revenue recognition practices. Afterward, management and the audit committee concluded that errors in revenue recognition with respect to the company's Japanese subsidiary require restating its previously reported financial results.
Manufacturing Insights's Barkai said, "MatrixOne's customers will enjoy the improved financial strength and longer-term stability of their technology investment, and an opportunity to migrate to Dassault Systèmes' own offerings in the future. But ... semiconductor and consumer packaged goods customers may discover that their engineering and business needs are foreign to Dassault Systèmes' culture that is better aligned with complex mechanical engineering environments. ..."
UGS didn't circulate statements when PTC purchased Polyplan and later, Arbortext. PTC wasn't compelled to clarify its position when UGS bought Tecnomatix. Dassault's acquisition of ABAQUS didn't produce similar reactions from its competitors. So what's different about the MatrixOne acquisition? The answer probably lies in the market share to be gained from it, and its potentially significant impact on the PLM landscape.
Dissecting Dassault's Bid for MatrixOne, Part 1