As digital technology advances, the industry appears to be entering the transitional phase of platform adolescence.
Industrial software, once just a tool, is becoming a significant force.
It is undergoing a transformation like never before.
This transformation began more than a decade ago and is now beginning to take shape with the help of technological advances such as the industrial Internet and 5G.
It will take another ten to twenty years for the full impact of this change to be felt in the industry.
At that point, the instrumental aspect of industrial software may no longer exist and will instead shape the direction of the industry in a deeper and more covert way.
1 . Design and simulation integration
In the past, CAD (Computer Aided Design) and CAE (Computer Aided Engineering) were two separate domains. However, with the integration of design and simulation, some industrial software solutions now connect both areas. The integration between design and simulation is becoming increasingly apparent through keywords such as CPS (Cyber-Physical Systems), digital twin and digital object fusion. This trend can be seen in recent developments from companies such as Siemens, Dassault Systèmes and Autodesk.
Dassault Systèmes has recently focused on strengthening its presence in the simulation space, which has further boosted the company's simulation brand. Over the past five years, half of its mergers and acquisitions have been with simulation software companies. Similarly, Siemens also acquired several simulation companies, including CD-adapco, a global provider of multidisciplinary engineering simulation software, for nearly $1 billion in 2016. Autodesk is also entering the simulation market through acquisitions and the launch of its own simulation products.
This tight integration of CAD and CAE means that design as simulation will become the norm in the industrial sector. The traditional divide between CAD and CAE is being broken down by CAD vendors, and the importance of geometry engines will be reduced as physical numerical simulation precedes physical implementation. This puts pressure on manufacturers that only offer CAD and CAE solutions, including PTC's CAD division and simulation giant ANSYS. To respond to this trend, ANSYS and PTC have formed an alliance to jointly develop “simulation-driven design” solutions, providing users with a unified modeling and simulation environment and eliminating the boundary between design and simulation.
The Apex platform, launched by MSC (now owned by Hexagon) in 2014, was created to address the challenge of CAD and CAE integration. The convergence of these two technologies means that the manufacturing process is shifted to the front end, allowing design to perform more functions that were previously performed by prototyping and testing. This has made the implementation of the DFX series, such as “design for manufacturing” (DFM) and safety-oriented (DFS), more viable and widespread.
two . Machine Self-Expression: Generative Design
Generative design is software that automatically performs stress analysis and topology optimization based on component load boundary conditions, providing the most appropriate solution for various structural optimizations. With the current excitement around artificial intelligence (AI), some may see generative design as a new chapter in AI for CAD manufacturers. However, this is not necessarily so. Allowing computers to generate more topological structures by applying constraints is not a new concept. What’s new is how these structurally and materially challenging projects will come to life.
Additive manufacturing provides an answer to these complex structural shapes, as 3D printing can easily produce computer-generated designs. Autodesk has been working in this area for years, developing its Within software based on technology from Within Labs, a London-based software company acquired by Autodesk in 2014. Other spin-off design projects, such as ProjectDreamcatcher, are also in development. The seats designed for Airbus have boosted the reputation of generative design, with their complex structures being particularly impressive.
Figure 1 / Generative design of NASA's Saturn lander
In the field of additive manufacturing, there is a growing presence of CAD and CAE technologies. Autodesk offers Netfabb for network optimization and metal additive manufacturing simulation. PTC's Creo 4.0 has also simplified the process between 3D CAD and 3D printing to make it easier to create uniform networks. All of these companies are recognizing the importance of this new direction.
In May 2017, Solid Edge ST10 was released, offering generative design capabilities with improvements in design, simulation, and collaboration. PTC, a company active in the world of IoT, realized the value of this trend and acquired Frustum, a new company founded in 2012, for around US$70 million in November 2018. This acquisition allows PTC to integrate design tools Frustum's AI-based generative capabilities in its core CAD software portfolio.
Autodesk has made significant efforts to showcase the impact of generative design. Company executives even joked that “CAD is a lie” and that “generative design is making it truly worthy of its name.” However, more examples are needed to demonstrate that this is a significant advance in large-scale production.
3 . “Full screen” data delivery
Paper is considered the definitive solution in manufacturing. For a long time, two-dimensional design was the symbol of the chief engineer's authority on the design and shop floor. Instructions, also known as “paper orders,” were a conventional method of communicating decisions, much like a military post. The more complex the manufacturing process, the more complex the data transfer, leading to a greater likelihood of errors in transmitting information through paper, signage and other media.
In the 1990s, Boeing introduced paperless technology. Although the concept of paperless is simple and straightforward, implementing it in design and manufacturing, as well as throughout the factory, can be challenging. One of the first planes to be designed digitally was the Boeing 777, which has been in development since 1990, and Boeing continues to work on this problem.
Paperless is seen as the solution to this problem. Papers and forms are seen as isolated data symbols, causing a “data gut logjam” in the factory. This is a common problem in traditional factories. However, it is hoped that a complete solution will be found.
Augmented reality (AR) could redefine data transmission as a new medium. Design development engineers are already exploring the possibility of dragging and dropping objects into the air, as seen in the film Iron Man, with companies like Lockheed Martin leading the way. AR devices, supported by rich software, have also helped factory operators. The PTC ThingWorx Operator Advisor uses a new 3D design and work instructions that can be delivered to frontline operators via AR. Vestas, the world's largest manufacturer of wind turbine equipment, based in Denmark, has taken the first step into this 3D era. The company aims to solve the “breakpoint data” problem by simplifying the collection, synthesis and delivery of critical operational data.
This change in the way information is communicated to factory floor employees will be significant, marking the end of the era of “text” and “paper orders”. Three-dimensional data and instructions are not just a matter of sending data, but of transmitting knowledge through a feeling, not just a textual description. The necessary instructions are now not on a piece of paper, but on a screen and a feeling.
Paperlessness is becoming more concrete with the rise of “triage.” At Mobile World Congress 2019 in Barcelona, PTC's Vuforia augmented reality solution was already integrated into Microsoft's HoloLens 2, with new gestures, voice augmentation and tracking capabilities that eliminate the need for complicated programming work. Companies like Howden, an aerial engineering company, have already started using technology to improve the customer experience.
AR frees people's hands, allowing them to interact with data in a new way, whether in the design studio or factory. People can now wave their hands like conductors, driving data in a whole new way. The subtext behind this technology is much more significant. Companies like Caterpillar, the world's largest manufacturer of construction machinery, no longer provide drawings to their customers. Unauthorized service engineers cannot repair an oil circuit without guessing. Users can have all the details but cannot see the data.
What will the next generation of workers look like? They are workers interconnected with a “second blood vessel” through which all types of data travel. With the help of AR technology, these workers can see everything. The question arises: will “full screen” become the standard for Lean, challenging the benchmarking practices and lighthouse culture that a factory has developed over the years?
4 . Model-based systems engineering
The human capacity to resolve complex issues is limited. Systems engineering takes a high-level, holistic approach and uses models as a way to express complexity at a higher level of abstraction. This increases humans' ability to deal with complexity.
Atego, now part of PTC, is a modular-based software and systems engineering company that emphasizes a collaborative approach to building complex systems and addresses the development of mechanical, electrical and software components.
The United States has the highest defense spending in the world, crucial to national competitiveness. US Department of Defense procurement involves 150,000 people, spanning research and development, manufacturing and maintenance, with almost 30% being systems engineers.
Future design requires systems thinking, and model-based systems engineering is essential for large weapons production. However, this remains a challenge. The aerospace industry was the first to adopt this approach, but the complexity of the products makes the process slow.
A comprehensive systems engineering or model-based design approach involves multiple engineering disciplines, including machine, electromagnetic, and thermal engineering. The growing demand for smart and connected products, such as automobiles, household appliances, consumer goods and mobile devices, increases this complexity.
Model-Based Definition (MBD), promoted by Boeing, is gaining widespread acceptance. Many CAD companies now support PMI standards relevant to MBD-related product manufacturing information, and CAD software programs express support for the MBD standard.
In 2013, Solidworks introduced the MBD module, but currently enterprise users still face multiple MBD standards that cannot be unified due to the limitations of 3D software. A complete MBSE technology foundation is required to support the entire life cycle.
Boeing adopted a new “rhombic” description to enhance the traditional “V” shape of the systems engineering path. The rhombic description highlights the need for constant interaction between the virtual model and the physical world to form an interconnected environment, moving away from document-based situations.
The digital twin offers interesting possibilities, but its implementation requires a defined product based on a model. There remains a lotus floating at its base, the continuous lotus root.
Figure 2/Senior Technician Don Farr, Boeing R&D Technology 2018
For Chinese manufacturers, new concerns have emerged regarding the ongoing push towards Model-Based Definition (MBD). This push will hamper the efforts of Chinese CAD and CAE software providers, as the standards established by these models will make it difficult for users to migrate data in the future. The barriers imposed by foreign software will be even greater for users.
Storing 3D models and data separately may be a viable approach, but Chinese companies have been unwilling to form common standards and systems, making it difficult to create synergies. Furthermore, users are unable to break away from existing data structures and usage habits, making future prospects uncertain.
In addition, many domestic industrial software have been attracted to the industrial Internet, while the international standard system 10303 has nearly 200 standards, constituting a profound MBD barrier. National companies have recorded limited research and progress in this area.
The complexity of large companies, such as the aerospace industry, has increased, leading to greater dependence on large conventional software. This has caused software to become more closed and monopolized, leaving little opportunity or development space for other upstream and downstream software.
Many companies' technical exchanges are based on large-scale global solutions such as MBSE and do not mention any product or brand names. Once a company adopts a general solution, it becomes challenging for other products to access it.
5 . From one-time purchases to ongoing subscriptions
The way software tools are sold is undergoing a change, moving from a single license to a subscription model. This model does not necessarily need to be cloud-based as it can still be installed on-premises, but is accessed via a regularly licensed password as part of a subscription.
This model is beneficial for both the user company and the software company. The user company can easily adjust the number of users to suit their needs and have instant access to the latest version of the software. For the software company, it guarantees continuous cash flow from users.
Although a single-user company's revenues may decline temporarily, revenues from subscription services are expected to exceed revenues from fixed usage rights over a number of years. Furthermore, the large amount of data generated by application software can be easily linked to software tools with this model.
In terms of software development, software vendors prefer the subscription model as it provides a stable source of income. This model also makes long-term upgrades more reasonable. The success of this model has been demonstrated in international markets, with 70-80% of Dassault's annual revenue in Europe, America and Japan coming from annual rental income and just 20-30% from a one-time purchase of a perpetual license. .
Software companies in Europe and the United States are comfortable with this model, as it secures most of their revenue upfront and allows engineers to focus on research and development. Autodesk's transition to the subscription model has not been smooth, with major layoffs in 2017 related to promoting this model.
Previously, with low Internet penetration, it was a challenge for vendors or authors to use the Web for ongoing maintenance and updates, and much software was a one-time purchase. However, with the wide availability of the Internet, the conditions for anytime software updates are almost perfect, with no barriers to online implementation and seamless customer support and iterative product updates.
The popularity of subscription-based system for industrial software is increasing, driven by the growth of cloud computing. The Chinese market still resists this change due to its unique market characteristics, with one-off purchases being the preferred approach. This is because the budget for software updates is separate from the budget for purchasing software services and the value of software services is not widely recognized in China.
The subscription system may pose a threat to Chinese users' data monopoly, but it also presents a huge opportunity for domestic software providers to improve their research and development.
6 . Tools evolve into platforms
The era of seeing industrial software as just a tool may be coming to an end. In February 2019, Dassault Systèmes announced that after 21 years, the conference name SolidWorks World would no longer exist, but would become 3D Experience World. This name change sends a clear message that branding a single software tool is no longer that significant and that the platform will be all-encompassing.
Dassault Systèmes is promoting its 3D EXPERIENCE platform as a high-level strategy and industrial software, with its strong association with being a tool, is being redefined to encompass its autonomous existence. This shift in thinking is comparable to being asked if you want an ax or a piece of wood for the campfire.
The change in name and approach also signals a renewal in the business model. Industrial software providers seek to extract more value from the entire design and manufacturing process, with a focus on production as a service. That's why Dassault Systèmes is committed to connecting the front end of design with the back end of manufacturing. The company's 2014 acquisition of RTT, a cutting-edge 3D visualization software for marketing and display, aligns with this philosophy.
Recent market trends in computer-aided manufacturing (CAM) can be understood in the context of this change. The CAM software, previously independent, is now integrated with the software platform services. For example, Solidworks released a CAM-oriented version in 2017, while Hexagon acquired French company CAM SPRING in 2018.
The key factor behind the growth of these platform services is community and collaboration. The concept of a software community has been around for some time, with Autodesk supporting a partnership ecosystem in the early 1990s, leading to the emergence of many secondary industrial software development companies. However, after Autodesk acquired companies like Demeco, these secondary promoters struggled to compete and eventually morphed and dispersed.
As tools transition to platforms, small and medium-sized businesses (SMEs) may become just a small part of the bigger picture. The relationship between partners and the platform is similar to that of iron and grass; partners are just one component. The existence of such platforms will be tempting for SMEs, but it also means that platform-based companies must be prepared to play the role of “public service operator”.
Industrial software companies are also preparing to shift their platforms to serve SMEs. A recent example is Dassault's entry into the enterprise resource planning (ERP) system. In 2018, Dassault Systèmes acquired manufacturing ERP software company IQMS for $425 million and renamed it DELMIAWORKS.
The biggest step product lifecycle management (PLM) software providers can take to expand their reach is to combine design-side data with business data. This year, Dassault Systèmes SOLIDWORKS launched 3DEXPERIENCE.WORKS, which provides small and medium business users with a single digital environment to combine social collaboration with design, simulation, manufacturing and ERP functionality.
The era of tools is ending, and that's not good news for China's struggling PLM vendors. Although they may still be determined to compete, the competition has already advanced. The difference between the two generations is not just a matter of years, but of eras.
7 . N natural clouds
The concept of Software as a Service (SaaS) continues to evolve in the industrial sector, with cloud-based subscription models for industrial software becoming an increasingly popular option for businesses. These online and cloud industrial software can be accessed directly through a local browser or through web and mobile applications. Unlike traditional software installed on a local computer, SaaS is updated remotely and accessed through a subscription, usually annually or monthly.
A decade ago, the concept of cloud CAD was widely discussed, but it was considered highly complex at the time. Michael Riddle, one of the founders of Autodesk and a well-known CAD architect, noted that cloud CAD was ten times more complex than desktop CAD. This was due not only to the large number of lines of code, but also to the difficulty of modeling and the complexity that could be equivalent to chess. It was necessary to rebuild the system architecture, which was a difficult task for mature software vendors.
In 1994, Autodesk released AutoCAD version 13, but received largely negative feedback. The software completely rebuilt the architecture and rewrote the code, resulting in a costly disaster for Autodesk. In 2012, the founders of Solidworks founded Onshape to provide online CAD services, which received a strong reaction. Autodesk's Fusion360 quickly followed, and Chinese software companies such as Horton and Lich also entered the market.
In the CAE domain, new small businesses have the option of using online services. Many domestic CAE software companies, such as Beijing Cloud Road, Shanghai Digital Qiao and Lanwei, are moving to cloud-based offerings as a way to avoid competition with larger rivals and find a niche in the market.
Onshape received a total of $170 million in April 2016 after four rounds of funding, but has not received any additional funding since then. Although Onshape was one of the first to enter the market, it did not have the impact initially expected. The success of cloud CAD products depends on the quality of the underlying modeling, and many traditional CAD vendors have been spurred into action by the success of Onshape. In 2018, CATIA launched xDesign, which has a similar interface to CATIA, in response to the growing impact of online design software like Onshape. The true charm of online design is the enormous synergistic effect it brings, enabling “crowd-sourcing, crowd-creation and collective collaboration”.
As the industrial cloud continues to spread, there will be an increasing number of mid-tier software vendors offering data conversion services. For example, companies like CIDEON will connect cloud CAD engineering data with cloud platforms like SAP in a seamless and concise manner.
Figure 3 / Heterogeneous data binding
For its strategic guidance as a cloud platform provider, Dassault carefully considered the hardware capabilities of a cloud computing installation. In 2011, Dassault Systèmes made a strategic investment in Outscale, a newly founded cloud computing company. In June 2017, Dassault Systèmes increased its investment to acquire a majority stake in the company.
The 3D Experience platform offered by Dassault Systèmes is delivered through Outscale cloud services in more than a dozen data centers around the world. This platform takes full advantage of hardware and software integration and can be used by companies of all sizes.
This infrastructure-agnostic, cloud-based platform delivers Windows applications and workflows from the cloud, breaking away from traditional virtual desktop solutions like Citrix or VMware that are designed for inelastic, single-tenant data center infrastructure.
It is worth noting that the architecture of Intel's X86 on PC and ARM on mobile terminals are very different.
Figure 4 / Cloud Installations for Industrial Cloud Software
A lightweight cloud architecture designed to be flexible and meet users' elastic access needs is ideal for the industrial cloud, making industrial software popular in this environment. Industrial software migration to cloud platforms is poised to compete in the broader small and medium business (SMB) market.
“Cloud PLM” gives small and medium-sized PLM users more options to customize solutions to their unique business and engineering requirements. This shift is changing the way PLM businesses and deployments are managed.
The rapid development of the industrial Internet provides a favorable environment for the development of “born in the cloud” software.
8 . Embracing IoT and renewing the mission of PLM
The PLM (Product Life Cycle Management) concept encompasses the “one word for life” mentality. It originated from “Product Data Management” (PDM) and was initially a feature of CAD software companies. However, it never fully came to fruition.
In 2005, PLM became a field that was no longer exclusive to CAD tool companies, attracting many new entrants with impressive credentials. In 2007, Oracle acquired PLM software company Agile, and in 2009, SAP launched its own PLM for the Asia-Pacific region.
The relationship between IoT (Internet of Things) and PLM is a topic of debate, with some seeing it as IoT equals PLM, while others see it as IoT plus PLM. For PTC, the CEO firmly stated that “IoT is PLM” two years ago.
Despite the emphasis on lifecycle in PLM, many products still fail to undergo full lifecycle management. For example, a refrigerator or a car may be forgotten after leaving the factory and become “orphan products” for manufacturers. This has led to many PLM software systems being reduced to PDM and engineering change management.
In the age of IoT, this could lead to a narrow-minded approach. Products now provide companies with greater visibility and knowledge, making PLM more of a business idea than a product in itself. In this sense, IoT has become a catalyst for the activation of this concept.
Siemens' move toward IoT is driven by the roar of on-site machines rather than PLM considerations. As an automation company, IoT strategy is an inevitable choice, so it is not surprising that it is moving towards integration with PLM. However, Dassault's approach is slower. The company is gradually increasing the connection between its machines and business processes through the acquired production scheduling management software, Apriso, but this is more of a tactical solution than a strategic plan.
Figure 5/ Relationship between PLM and IoT
So, is IoT a parallel twin or the firstborn of PLM? To answer this relationship, two limits need to be identified. The first limit is the attitude towards equipment within the factory, which is consistently answered by all software companies. The second limit is whether PLM must extend beyond the factory gates and connect the relationship between people and products. This is the most critical separator for the strategic partition of industrial software companies.
PTC is the most aggressive in decision-making, aligning itself with IT companies such as SAP and Oracle. Siemens made a choice regarding crucial equipment, while Dassault and Autodesk found the courage to answer this question. The most likely advancement in simulation and automated driving will provide additional insights.
Figure 6 / The domino effect of IoT enabling automotive PLM (Source: infosys)
So how do we recognize the limits of PLM in the IoT era? Should we allow it to continue to expand and incorporate unrealized ideas from the past, or should we let it fade away and allow IoT to reinvigorate the value of the data center and further solidify the data-driven approach? The answer depends on people's habits and preferences.
9 . Software becomes infinitely more expensive: EDA from design to design services
There is no denying that the semiconductor industry is expensive.
The main reason for this is the electronic design automation (EDA) software used for chip design.
In the 1970s and 1980s, the gap between EDA software and mechanical CAD software (MCAD) was not significant, as many CAD manufacturers offered both. However, MCAD software soon surpassed EDA in popularity.
But as the semiconductor industry grew, EDA adopted a more professional approach, diverging from CAD for electrical devices. It has become closely linked to intellectual property.
Today, the main players in the field, such as Synopsys, Cadence and Siemens Mentor, dominate the chip design market.
However, electrical appliance CAD/CAE providers are eager to break the divide between the two.
In 2008, simulation software giant ANSYS entered the EDA field with the acquisition of Ansoft Corporation for approximately $800 million.
ANSYS later acquired analog software provider Apache Design Solutions for $310 million in cash, further strengthening its position in integrated circuit simulation.
In November 2016, Siemens acquired MentorGraphics, one of the world's three largest EDA software providers, for $4.5 billion.
The cost of advanced design has skyrocketed, with expenses rising from $28 million at 65 nm to a staggering $540 million at current 5 nm, a 20-fold increase. This highlights the incredibly expensive nature of the chip design.
Figure 7/Evolution of advanced project costs (source: IBS data)
With each new generation of technology from 65nm to 40nm and then to 28nm, about 50% of the software code needs to be rewritten.
As technology advances to the nanoscale, many physical phenomena are encountered for the first time, leading to a significant increase in the complexity of operations.
In many cases, software limitations are the main factor holding back physical advances.
The industry's dependence on software is now immense.
In this sense, EDA software providers are crucial to the industry, but they must learn to balance their own interests with the needs of their customers.
The same happens in the Chinese CAD market. These industrial software providers of platform tools must control their impulses and not prioritize their own profits over the needs of their agents and users.
For example, in 2018, a large CAD manufacturer increased its operating income by 10-15% without even informing its agents. Many agents and users feel like they are at the mercy of these software vendors and their aggressive business practices.
It is important to maintain balance and not take advantage of the situation.
10 . Biggest speculation: industrial software becomes intangible.
The highest level of industrial software can lead to its own elimination.
When the user wants to dig a hole in the ground, tools like chisels and drills become redundant.
It is becoming increasingly common to see the combination of software and hardware in the industrial world.
Industrial software and automation hardware are converging.
Siemens automation and PLM are closely integrated, creating a digital enterprise.
In 2017, Schneider acquired a 60% stake in AVIVA for nearly 5 billion RMB, an example of the “engineering embraces industrial software” trend.
Rockwell invested one billion dollars, representing 8.4% of PTC shares, marking the beginning of a strategic collaboration.
The first MSC simulation software was acquired by Swedish metrology equipment company Hexagon.
The era of profits from software and hardware is a thing of the past.
Software injection is generating profits from previously scarce traditional hardware as thick as a server.
The boundaries between systems are disappearing, leading to the merger of traditional mechanical design and CAD/CAM/CAE simulation software, EDA electronic design automation software, and other software such as MES manufacturing execution system and HMI human-machine interface, between others.
The ubiquity of software is key to this transformation.
Behind the Industrial Internet, software is the star.
Only software can unlock the value of machines and data.
It is no longer just a set of tools, but a game changer for the industry.
Ubiquitous but invisible, this could be the future of industrial software.
But it is only on this intangible foundation that the rise of smart manufacturing and the industrial Internet can be built.
What is intangible?
Air is intangible, but it dominates the existence of life.
11 . Final thoughts
Industrial software memory as a tool is gradually disappearing.
It is becoming difficult to categorize a PLM vendor as just CAD or CAE.
Although it is a small market, it acts as a fundamental lever in the industry.
Small and seemingly insignificant, this invisible industrial software is guiding the industry of the future and serves as a fundamental new power for the emerging industry.
