I’ve worked in the Engineering and Manufacturing space for over 25 years now and something strange is happening at the moment… For some reason CAD and PLM is a hot topic for investors right now. Why could this be?
Why is CAD and PLM is a hot topic for investors?
CAD (Computer-Aided Design) and PLM (Product Lifecycle Management) are hot topics for investors because they play a crucial role in the manufacturing industry. These technologies help companies to design, develop, and manufacture products more efficiently, accurately, and cost-effectively.
Investors are interested in CAD and PLM because these technologies are transforming the way companies operate and compete in the global market. By using CAD and PLM, companies can speed up their product development cycles, reduce costs, and improve the quality of their products. This, in turn, can lead to increased profitability and competitiveness.
With the rise of Industry 4.0, there is an increasing demand for digitization in manufacturing, and CAD and PLM are essential tools for achieving this. As a result, investors are looking to capitalize on the growth potential of these technologies as more companies adopt them.
Moreover, the COVID-19 pandemic has accelerated the adoption of digital technologies, including CAD and PLM, as companies seek to digitize their operations and enable remote working. This has further increased the demand for these technologies and attracted more investors to the industry.
How much are these markets growing?
According to a report by MarketsandMarkets, the global CAD software market is expected to grow from USD 8.5 billion in 2020 to USD 11.2 billion by 2025, at a compound annual growth rate (CAGR) of 5.6% during the forecast period. The report cites the increasing adoption of CAD software in industries such as automotive, aerospace and defense, healthcare, and construction as the key drivers of market growth.
Similarly, the PLM market is also expected to grow significantly in the coming years. A report by Technavio projects that the global PLM market will grow at a CAGR of over 7% during the forecast period 2020-2024. The report cites the increasing adoption of PLM solutions by small and medium-sized enterprises (SMEs) as a key factor driving market growth.
Overall, the growing demand for advanced software solutions in the manufacturing and engineering industries is driven by the need for greater efficiency, quality, and innovation. As these industries continue to digitize their operations, the demand for these solutions is expected to increase further, creating significant growth opportunities for software vendors and investors alike.
Are there any companies growing faster than the market?
There are several companies that are growing faster than the overall CAD and PLM market. These companies are often smaller or newer players that are disrupting the market with innovative technologies or business models.
One example is Onshape, a cloud-based CAD platform that was founded in 2012 and acquired by PTC in 2019. Onshape has been growing rapidly, with revenue growth of around 60% in 2020. Another example is Fusion 360, a cloud-based CAD platform from Autodesk that has been growing at a rapid pace in recent years, driven by its ease of use and integration with other Autodesk products.
In the PLM market, one example of a company growing faster than the market is Aras, a provider of open-source PLM software. Aras has been growing rapidly in recent years, with revenue growth of around 40% in 2020. Another example is Propel, a cloud-based PLM platform that has been growing at a rapid pace by targeting the needs of mid-sized businesses.
Whilst the CAD and PLM markets are highly competitive, there are opportunities for smaller or newer players to disrupt the market and capture market share by offering innovative technologies or business models.
What are the biggest technology disruptions for the CAD and PLM Markets?
The CAD and PLM markets are constantly evolving, and there are several technological disruptions that are currently impacting these industries. Some of the biggest technological disruptions in the CAD and PLM markets right now include:
- Cloud Computing: Cloud computing is a major disruption in the CAD and PLM markets, as it offers several benefits over traditional on-premises software, such as scalability, accessibility, and cost-effectiveness. Cloud-based CAD and PLM solutions are increasingly being adopted by companies of all sizes, as they provide greater flexibility and ease of use.
- Artificial Intelligence (AI): AI is another major technological disruption in the CAD and PLM markets, as it can help automate routine tasks and improve decision-making. AI-powered CAD and PLM solutions can help companies design products more efficiently, optimize production processes, and improve supply chain management.
- Internet of Things (IoT): IoT is a disruptive technology that is transforming the manufacturing and engineering industries. IoT devices can be used to collect data from sensors and other devices throughout the product lifecycle, providing valuable insights into product performance, quality, and maintenance needs.
- Augmented Reality (AR): AR is another disruptive technology that is increasingly being used in the CAD and PLM markets. AR can be used to visualize designs in 3D, simulate product performance, and assist with maintenance and repair tasks.
- Additive Manufacturing (3D Printing): Additive manufacturing, or 3D printing, is another disruptive technology that is transforming the manufacturing industry. 3D printing can be used to create prototypes, custom parts, and even finished products, offering greater design flexibility and cost-effectiveness.
Overall, these technological disruptions are transforming the CAD and PLM markets, offering new opportunities for innovation, efficiency, and cost-savings. Companies and software vendors that embrace these disruptions and adapt to changing market conditions will be well-positioned for success in the coming years.
What are the risks to this growth?
While the PLM and CAD markets are expected to continue growing in the coming years, there are several risks that could potentially impact this growth. Some of the key risks to the PLM and CAD market growth include:
- Economic downturns: Economic downturns can lead to reduced demand for PLM and CAD software solutions, as companies may prioritize cost-cutting measures and delay or cancel investments in new technology.
- Technological disruptions: The PLM and CAD markets are highly competitive, and there is a risk that new technologies or disruptive innovations could emerge that could displace existing solutions. This could lead to market share loss and revenue declines for established PLM and CAD vendors.
- Cybersecurity threats: The growing reliance on digital technologies in manufacturing and engineering also increases the risk of cybersecurity threats. Cyberattacks can compromise sensitive data and disrupt operations, leading to reputational damage and financial losses for both software vendors and their customers.
- Adoption challenges: While the benefits of PLM and CAD software solutions are clear, there can be challenges with adoption and implementation. Resistance to change, lack of training and support, and difficulty integrating new technology with existing systems can all impact adoption rates and slow market growth.
The PLM and CAD markets are expected to continue growing. Software vendors and investors should remain vigilant to potential risks and challenges in the market. By proactively addressing these risks and adapting to changing market conditions, PLM and CAD vendors can position themselves for continued growth and success.
Want to learn more?
Nick Leeder & Co specialise in helping industrial companies with their digital transformations. We also work with institutional investors and VC’s in supporting them in their market and commercial due diligence processes. If you’d like to learn more about the CAD and PLM market space, feel free to reach out to us.