Cambashi's Observatories Focus on the Expanding Universe of Technical Applications10 Oct, 2013 By: Cyrena Respini-Irwin
Tony Christian, director of independent market research firm Cambashi, expects to see steady growth in the global demand for CAD, PLM, GIS, and related software.
Cambashi is a UK-based research and analysis firm that focuses on the business value of information technology — including CAD and product lifecycle management (PLM) solutions. The company's market data offerings include the Cambashi Market Observatories, a portfolio of research reports covering various aspects of the global markets for design, engineering, PLM, and systems engineering applications. For example, the Provider by Industry Observatory explores the competitive landscape for solutions providers in categories including AEC, automotive, and consumer goods; the Country Observatory examines market demand by region.
In August, the company released the Q2 2013 editions of these reports. They indicate that in 2012, technical application software spending in emerging countries grew 12% to $1.7 billion. This group includes the fast-growing BRIC nations — Brazil, Russia, India, and China — as well as a second set of nations that account for 11% of technical application spending in emerging countries: Columbia, Indonesia, Vietnam, and Turkey. The research also predicts continued growth on technical application investment in these emerging economies, driven by the modernization of manufacturing and construction and the expansion of industrial capabilities.
Following that release, Cambashi Director Tony Christian shared his perspective on the global market for technical applications.
Cadalyst: What kinds of software do you cover in your research?
Christian: We use the term technical applications to define the scope of the market that we study — we haven't been able to come up with a better one yet! The scope covers CAD, CAM, simulation, analysis, PLM, and associated data management applications and geographical information systems [GIS] across all manufacturing (discrete and process), AEC, and utility industries. In fact, the scope also includes visualization technologies used in film, TV, and computer games applications — there is increasing overlap of these and the applications used for virtual visualization of products or buildings. Hence the difficulty in defining an all-inclusive term!
Which type of software is the biggest contributor to the growth you report?
At the highest level, both AEC and manufacturing had single-digit growth worldwide in spending on technical applications (AEC, 7%; manufacturing, 6%). We split AEC into twelve different "categories" of application and manufacturing into eight; at this level of individual categories of application, for AEC the strongest growth was in applications that support infrastructure planning (12%) rather than, say, facilities management (3%). On the manufacturing side, the strongest growth areas were in simulation and analysis applications (10%) and applications that support schematic representations (for example, control diagrams, electrical diagrams, wire harnesses, and pneumatic diagrams) of designs (also 10%).
In all [geographic] regions, the largest industry in terms of spending on technical applications remains AEC. The relative level of spending on technical applications by industry for each region is shown in the chart below:
Is growth being driven by new types of users, or by familiar types of users located in new regions?
A bit of both. In emerging economies, it is certainly mainly about familiar user types gaining access to established software tools that they had no access to before, but in developed economies it is a combination of existing users buying better tools and new types of user. The latter is driven by the vendors’ progress in what they call "democratizing" their applications through things like better user interfaces making software easier to use, or more attractive pricing and access to more computing power through the cloud. This means that, say, it is not necessary for every design engineer to have an expensive software license and a high-powered desktop to run simulation applications. This democratization does not result (or has not yet, anyway) in high growth in terms of aggregate spending because although there are more users, the revenue per user falls.
Do you expect current growth trends to continue for the foreseeable future?
Barring any significant economic shocks (and that is by no means a safe bet), we do expect the worldwide technical applications market to grow modestly but steadily, with highest growth in [the Asia Pacific region], then in [the Americas], and [Europe, the Middle East, and Africa] lowest.
The underlying reason is that exploitation of technical applications supports all of the business imperatives of today’s market: better innovation, faster time to market, lower costs, etc. For the developed economies, growth of the use of technical applications in emerging markets is a bit of a double-edged sword — on the one hand it is good revenue for the vendors who are mainly from the U.S. and Europe, but it means that the capabilities of companies in the emerging markets are catching up with those of the developed world. They have moved from the low-wage manufacturing work up the value chain to the knowledge-based design areas — and they continue to educate massive numbers of engineers and scientists!
Are there any up-and-coming geographic regions that you expect to join the high-growth emerging nations soon?
Currently, the traditional high-growth BRIC countries are suffering their own series of economic problems, so that the highest growth in technical applications adoption is now in the "next wave" of emerging markets like Indonesia.
Vietnam fits into [this] category and is gaining industry at a fast rate. However, just to put it into perspective it must be said that its technical applications growth is coming from quite a low base, so a relatively small increase in aggregate spending equals a high growth rate (2011 spend was about $13 million; 2012 about $15.7 million).
Your research indicates that "China accounts for the largest share, at 42%, of the market for technical application expenditure in emerging countries." How does software piracy in nations such as China affect spending on technical application software?
It is undoubtedly a problem and, according to The Software Alliance (BSA), the piracy rate in China is about 77%. The vendors see the trend towards cloud/SaaS [software as a service] models for application delivery as a means of gaining better control over software use, and it will be interesting to see how this works in practice.