The day before Thanksgiving, Siemens PLM dropped a bombshell on the automotive vertical by announcing the winning of Daimler AG as its latest CAD customer right under the nose of its archrival Dassault, which has been the CAD provider for the giant German car maker for years.
Later that day Dassault, fresh off a public snubbing from one of its biggest customers, issued a press release basically suggesting that it didn’t know it was coming. “This decision came as a surprise to Dassault Systèmes as no CATIA V6 evaluation has been performed by Daimler A.G.’’
It wasn’t the first time this year that Siemens PLM was able to pull a rabbit out of its hat, stunning everyone in the close-knit world of selling highly specialized applications to just a handful of global automotive OEMsthat in turn wield considerable influence over the IT decisions of their army of tier-1 and tier-2 suppliers.
In July Siemens PLM announced that Chrysler – after using its TeamCenter solution for product data management – has decided to add Siemens NX for design automation as well. Chrysler was also a Dassault CATIA user when it was part of Daimler and remained so even after it was sold to Cerberus, a US private equity firm, in 2007.
What’s at stake is that the future of selling CAD applications – especially those that are instrumental in helping auto makers develop a new generation of vehicles using alternative energy – will never be the same.
That business – along with other applications like PLM – amounted to an estimated $424 million in software revenues in 2009 just for Dassault, the No. 1 leader in the sales of enterprise applications to the automotive manufacturing segment. Siemens PLM was about half of that and that’s why it has been super aggressive going after Dassault’s installed base.
Dassault products have been a constant presence at Daimler and its past and current subsidiaries. At one point it accounted for as much as 5% of its total revenues with thousands of licensed seats of CATIA and other products like ENOVIA, amounting to tens of millions of dollars in license and maintenance revenues. In the automotive vertical, Daimler, when combined with Chrysler, was among one of the top five customers of Dassault over the past 10 years.
In fact, Dassault was so confident about its relationship with Daimler, suggesting that the giant German auto maker, which has been running CATIA 5.0 since 2005, would upgrade to CATIA 6.0 along with its powertrain development partners including Toyota and Tesla when announcing the win at Tesla, the electric car startup, during a conference call a few weeks earlier. Daimler has also been using DELMIA, ENOVIA, SIMULIA, and 3DVIA from Dassault.
Dassault may be able to retain some business with Daimler, but it is clear that the rift between the vendor and one of its biggest customers has reached a point of no return. A bigger question is whether Dassault can contain the damage by persuading other major OEMs including BMW, Ford and Toyota to proceed with their plans to upgrade to CATIA 6.0.
Meanwhile, Siemens PLM is expected to milk the glory to its fullest extent by gaining both mind share and market share in the automotive vertical. The next challenge for Siemens PLM is to handle the sudden surge of excitement with sustainable market momentum, while managing customer expectations.
On one hand, Siemens PLM will be able to use the planned implementations, which will consume all the parties involved the next 12 to 36 months, as the template to demonstrate the scalability and performance of its design applications as well as the integration into its Teamcenter product data management solution for real-time collaboration.
On the other hand, it is going to be important for Siemens PLM to quickly develop best practices from change management, performance optimization and integration standpoints. For one thing some users at Daimler, Chrysler and their suppliers are likely to be running Dassault CATIA for an extended period of time and their expected move to Siemens PLM NX will be fraught with difficulties when it comes to seamless integration and reusing 2D and 3D data that reside in other legacy systems.
Whatever the case, the market for selling applications into the automotive vertical is expected to go through radical changes with such high-profile customer defections becoming more common as the underlying technologies become more interchangeable with the advent of open standards and Cloud Computing.