Manufacturing a Road to RecoveryBy Lawrence Walsh | Posted 2009-08-23 Email Print
The U.S. and global economies remain far from healthy, but there are signs of hope and, surprisingly, manufacturing is one of those glimmers. Design and engineering software makers and solution providers are seeing increasing opportunities in factories and plants, which may be early signs of the recession cloud breaking.
The Car Allowance Rebate System—popularly known as the government’s "Cash for Clunkers" program—is credited with spurring the sale of nearly a half-million new cars and injecting the devastated automotive industry with a much-needed shot in the arm. The $3 billion, monthlong campaign was so successful that General Motors had to restart idled factories to meet demand for eligible vehicles and may have helped push the general recessive economy over the top for recovery.
Hard as it may seem to believe, U.S. manufacturing was already climbing out of the economic doldrums before the Obama administration launched Cash for Clunkers. Manufacturers—which range from behemoths like GM and Ford to local small businesses that dot the landscape—produced small, but modest gains in productivity and sales in May, June and July.
Manufacturing and the general economy are far from healthy, but that’s not slowing down Autodesk, a leading publisher of computer-aided design (CAD) and product lifecycle management (PLM) software. As a sign of its bullishness on manufacturing, Autodesk recently launched a new program around its plant design software. So far, 50 new solution providers have signed up to sell the application that plans and optimizes the layout and workflow of factories.
"Manufacturing is one of the single largest opportunities that we have," says Steve Blum, senior vice president of Americas sales at Autodesk. "The line between manufacturing and buildings are being blurred, and the opportunity that opens up to us is tremendous."
Autodesk and its peers—Siemens PLM, Dassault and PTC—are software companies to watch if you’re looking for signs of economic recovery. Solution providers told Channel Insider in the 2009 Market Pulse Report that manufacturing and engineering were among the top 5 verticals with the steepest declines in IT spending as a result of the recession. While the rest of the world woke up to the harsh realities of the recession last fall when the credit markets seized, Autodesk started feeling the decline in January 2007, when economists say the recession really began.
Organic recovery in manufacturing is partly to credit with Autodesk’s optimism, but there’s more reason for feeling good about coming out of the recession malaise. The government has hardly touched the billions of dollars in stimulus funding for infrastructure improvements, school revitalization, health care systems and investments in green energy production. With each step out of the recession will come public and private sector investments in reopening shuttered factories and adding new manufacturing capacity to fulfill stimulus projects.
"We’re going to see a U-shaped versus a V-shaped recovery," Blum says. "We’ve bottomed out and we’re seeing more and more companies looking toward their futures."
When looking to the future, companies are taking the lessons of this recession with them. The recession forced companies to rethink their operations and cost structures on all levels. Companies learned efficiency over largesse, optimization over acceptable, and flexibility over static structures. Above all, risk taking has been the ultimate casualty in the way of business—no one has room for chance in the current economic climate and few are looking to take on risk even in a revitalized economy.
The recession had a profound effect on the way Autodesk develops its software and works with partners. Blum says the company changed from releasing software and treating customers as beta users to a system in which new products are carefully vetted, improved and then slowly released to the channel. The plant design package is one such system.
"We’re ensuring that the product is not just customer ready, but channel ready. It’s a path we use for all our products. We’ll have referenceable customers, market credibility and training abilities. Without this process, it would take a partner two years before they would make a profit. We’re assuming that cost in our product development," Blum says.
For solution providers supporting manufacturing and engineering, Blum and others in the CAD and PLM market believe there’s tremendous opportunity in the anticipated expansion of manufacturing as well as upgrading the install base. More than 15 percent of the U.S. economy is heavy and light manufacturing, ranging in size from GM and Ford to small local factories and assembly plants. Many seeking greater tools for efficiency and flexibility will seek the latest in design and engineering software—particularly in 3-D design emulation.
Autodesk’s optimism in this niche software market that’s narrowly aligned with select verticals may just be the first signs of a sustained economic recovery and, perhaps, the opening of new opportunities for solution providers.
Lawrence M. Walsh is vice president and group publisher of Channel Insider. Read his research reports at [CI] Perspectives.