Stability In The CAM Software Market

The CAM software market continues to exhibit an amazing degree of stability. This is one of the key factors in its remaining viable, even as the technology matures. Market consolidation has not occurred, mergers and acquisitions have been rare, pricing is stable, user expenditures continue to increase, and most CAM-centric vendors appear to be profitable. This is unlike most other markets, including the broader CAD/CAM market, which has experienced considerable volatility.

The reader may remember names of CAD/CAM vendors such as Applicon, CADAM, CADCentre, Control Data, ICEM Technologies, MCS, Strassle and others that have either been acquired or have fallen by the wayside. The demise of these companies left the CAD/CAM market dominated by the Big Four companies: IBM/Dassault, PTC, UGS and SDRC. And with the impending EDS acquisition of SDRC and its subsequent merger into UGS, only three major CAD/CAM companies will remain. Moreover, the turbulent CAD market was further disrupted when products such as SolidWorks, SolidEdge, think3 and IronCAD created a new mid-range CAD market that has severely impacted the mainstream CAD/CAM vendors.

In contrast, excessive consolidation has not occurred among the CAM-centric vendors. The market is greatly fragmented, but the players have remained essentially the same for the past 10 years or so. The primary exceptions occurred with the Matra acquisition of Cisigraph, the CAMAX acquisition of Point Control and the acquisition of CAMAX by SDRC. The most significant recent CAM software-related acquisition occurred this year when Missler announced the acquisition of CN Industries. Both are French companies and conduct most of their business there. Prior to the acquisition, CIMdata positioned Missler as the worldwide tenth largest CAM software vendor with $17 million in revenues in 2000, and it named CN Industries as the 20th largest vendor with 2000 revenues of $7.3 million.

CIMdata believes that the limited number of mergers and acquisitions among CAM vendors are based in part on these reasons:

• The major CAD/CAM companies have not seen the need to further acquire CAM-centric vendors since all have acceptable CAM capabilities.
• The CAM-centric vendors are all relatively small and are not in a strong position to acquire each other.
• These firms are not soliciting buyers, as they are viable entities.
• Most of the CAM-centric companies are privately held, so an acquisition requires full cooperation among the parties.
• Many of the firms are still controlled by the founder or founders. Founders are entrepreneurial by nature and typically do not want to relinquish control. Also, some want to maintain private ownership until the time is ripe to launch a profitable public offering.
• The product capabilities provided often have extensive overlaps, and merging product lines is difficult to rationalize.

Having said the above, it should be recognized that these circumstances could change at any time, as a vendor could elect to take the merger/acquisition route to gain market share and market dominance.

The CAM software market is further exemplified by the stability in product pricing, even though the marketplace is highly competitive. Based on a CIMdata survey, 85 percent of vendors maintained their published software prices in 2000. In 2001, 83 percent of vendors indicated that they plan to maintain list prices. Of those planning a price change, as many vendors plan price increases as decreases. Hence, even though price discounts are commonplace in competitive procurements, debilitating price wars have not occurred.

Although some users might prefer to see rapidly falling list prices, CIMdata believes that stable pricing is healthy for the industry. It permits vendors to better plan their revenue stream and helps engender adequate profits. Competition among vendors can and does occur on other fronts. This pricing stability is also in contrast to that of the CAD market, which has experienced sharply declining prices for the past several years.

Finally, end user expenditures for CAM software and services continue to grow at a modest but steady rate. Based on CIMdata estimates, there was an average growth of approximately 10 percent per year from 1993 to 2001. Moreover, at no time during this period did end user expenditures decline from one year to the next. This steadily growing market has created an environment in which most vendors have been able to continually increase revenues and achieve an acceptable profit margin.

The stability of the CAM market should comfort users and vendors alike.