Issue: Volume 33 Issue 8: (Aug-Sep 2010)

Slow Going


Kathleen Maher
The CAD arena is among the most recession-sensitive markets in the world. The architectural sector feels good and bad news early, as regions build up their infrastructures, people move to new areas for jobs, and money dries up for loans. In fact, the architecture and construction industries have been feeling the effects of the recession considerably before it hit the pocketbooks of people living in the US and Western Europe. And, recovery is coming slowly.

Recently, McGraw-Hill published its “Top 400 Contractors” survey and reports, and to no one’s surprise, the building industries remain challenged. In fact, most recent numbers for June show that US construction is down in the second half of 2010. Fortunately, there is growth in transportation and power, with the promise of coming growth in manufacture-related building and infrastructure projects.

Manufacturing, which is heavily influenced by consumer markets, is more responsive to the vagaries of the economy, and it responds faster to both good news and bad news.

The overall CAD market dropped an unprecedented 23 percent in 2009 to levels lower than 2008, and for some companies, something closer to 2007 figures. This year, the picture has begun to get brighter. Remarkably, and contrary to expectations, CAD vendors are rebounding in 2010. Manufacturing is coming back as consumers find their wallets, but this is going to be a cautious growth in the West. The European Union is nervous that its weaker members—most notably Greece at the moment (but also Spain, Portugal, and Italy)—will dampen Europe’s economic standing and will slow growth. In the US, there have been signs of a faster recovery as stimulus money has been put to work on long-range infrastructure projects. However, there is not much appetite for government spending in the face of high deficits, so when the stimulus money runs out in 2010 and 2011, it’s unclear whether the US Congress will turn on the tap again.

The combined oil and gas segment remains one of the important levers in the world economy. President Obama has said that alternative sources are not going to be able to make a significant dent in the West’s energy requirements in the near future, thus oil is not going to release its grip on the economy or politics any time soon. So it comes as no surprise that oil and gas is one of the few areas where there has been growth through the recession.

Green energy and globalization are two flags the CAD companies were waving before the recession. They will return as important enablers for growth as the crisis mentality ebbs in some quarters. Finding new efficiencies in construction and data management are already strong themes for the CAD industry, both pre- and post-recession.

For obvious reasons, there is always a strong focus on 3D CAD at the expense of 2D drafting. A 3D model provides a wealth of information, and that information can be built upon. For instance, material properties can be added, analysis performed, volume understood, and so forth. However, software vendors, and analysts are coming to the realization that basic drafting and modeling will always be a requirement. Still, maintaining 2D information for drafting, printing, and illustrations is increasingly being seen as a function that could well become free.

Most recently Dassault has sought to speed the process by releasing DraftSight, a free 2D drafting product built on the ARES CAD engine developed by Graebert Systems.

We’ve seen the ranks of the rank-and-file 2D drafters thin out. This recession is throwing people out of work—the first to go are those with the least skills. In 2006 to 2007, the ratio between 2D users and 3D users was closer to 70 percent versus 30 percent. In 2009, the shift to 3D picked up speed as jobs disappeared on the low end. Unfortunately, those jobs aren’t being replaced by high-end positions. Rather, professionals are picking up tasks that were performed lower down on the pay scale. The positive side is that people “own” their data if they have a more direct role in creating it, but in terms of sheer numbers, fewer people are doing more.

Evolution Now

Not all modeling (3D included) is part of a large enterprise or huge project. There is a growing interest in direct 3D modeling as an easier way to get to a design, and this is happening on the high end as well as the low end.

One of the most fascinating trends we have seen is the growth of design hobbyists. Interest in industrial design is expanding beyond the small, talented group of people who train in this area. In addition, it’s possible that the availability of 3D printers and CNC machines is stimulating interest in design in much the same way that YouTube has helped stimulate an interest in video creation. (If so, we’re just on the very cusp of this movement.)

In the US, it has been commonplace to worry about the reluctance of young people to study science and engineering, but now there are two trends that, while not altogether positive, point to a renewed interest in science, engineering, and building. First, US colleges and universities have had to raise tuition and cut back on programs to help subsidize students. And second, in a related trend, people are reconsidering college as a requirement because money is tight. Thus, when people do consider college, they are more interested in disciplines that will result in better jobs when they get out, so there are more people signing up for the sciences and engineering.

Conclusion

No doubt about it, 2009 was a very rough year for CAD. (See the related story “Alibre Grows While Others Slow” in the August/September issue Online Extras on www.cgw.com.) It’s still unclear whether the drop in CAD licenses represents more people leaving the industry or people just waiting for times to get better before they renew their subscriptions or upgrade their software. There’s obviously a little of both.

The positive side of any “correction,” a noxious term when it’s applied to people’s jobs, is that it forces efficiency and helps lay the groundwork for more long-term growth. At this midpoint, we at JPR have updated our outlook for 2010. The major CAD companies are reporting good growth in 2010, especially for their design products. The larger PLM market is conforming to the more cautious outlooks from analysts, including JPR, issued at the beginning of the year. There are still rumblings of a double-dip recession, but we believe the market will return to solid growth in 2011, thanks to emerging markets and renewed strength in manufacturing.

Kathleen Maher is a contributing editor to CGW, a senior analyst at Jon Peddie Research, a Tiburon, California-based consultancy specializing in graphics and multimedia, and editor in chief of JPR’s “TechWatch.” She can be reached at Kathleen@jonpeddie.com.
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