Parametric Resets Design Software
To Match Engineers' Internet Needs
By WILLIAM M. BULKELEY
Staff Reporter of THE WALL STREET JOURNAL
WALTHAM, Mass. -- Parametric Technology Inc.'s customers use its
mechanical-engineering software to design Audi roadsters and Atlas rockets.
But for the past 18 months, it has been working on a problem its Ph.D.
mathematical modelers couldn't handle: redesigning itself for the Internet. "We
were mentally prepared to bet the whole company," says Steven Walske,
chairman and chief executive, who has run Parametric since it started selling
software in 1988.
The transition has been painful, involving costly acquisitions and reduced
earnings and sales from 1996 to 1998, as well as an 18-month slide in its
once highflying stock to the low teens for most of the year from $33.75 in
April 1998.
New Internet Product
Now the company's moves are starting to pay off. Customers are raving
about its new Windchill software, which uses the Internet to link computerized
design with purchasing, outsourcing, manufacturing and long-term
maintenance. They say it puts Parametric at the heart of manufacturing
companies' strategy for rapid change and "mass customization" in the next
decade.
Some say Parametric could capture a
role as fundamental as that of SAP AG,
the German company whose enterprise
resource-planning software remade the
way many companies track their costs
and internal operations in the past 10
years.
"Windchill lets us manage the most
important asset we have -- it takes all
the intellectual property from design
inception to the launch of a rocket,"
says Curt Bigelow, program manager at
Lockheed Martin Corp.'s Astronautics
unit, which makes satellites in Denver.
Fifty Astronautics employees use the system, and that number is expected to
jump to more than 2,000 by March, after which the company will encourage
lead suppliers to buy it, Mr. Bigelow says.
Windchill "is a prime-time product, and they've captured first-mover
advantage," says David Burdick, an analyst with the technology-research firm
Gartner Group Inc., who predicts "collaborative product commerce" will
characterize the way companies work together. "Their market has the
potential to be five times bigger than what they do now."
Shares Increase
Wall Street is starting to believe. Since September, Parametric's stock has
roughly doubled. According to First Call/Thomson Financial, analysts expect
per-share earnings to rise 34% in the fiscal year ending Sept. 30 and 25% the
next year. Jay Vleeschhouwer, a Merrill Lynch & Co. analyst, says, "We're
beginning to see Windchill take shape as a complete solution, and that is
manifesting itself in a growing pipeline of sales opportunities."
Mr. Walske says Windchill sales are rising even faster than Wall Street
expects. "I think we'll exceed $300 million" in the current fiscal year, up from
$80 million last year, he says. That would far exceed the $230 million Mr.
Vleeschhouwer "conservatively" forecasts.
Like most CAD/CAM (it stands for computer-aided design/computer-aided
manufacturing) software makers, Parametric focused on making design
engineers more productive. From its start in 1988, it became the market
leader in eight years, thanks in part to its technology for automatically resizing
products when one dimension was changed.
Then, with $800 million in annual sales, Parametric decided it needed to
reconsider its business. "Once you become the market leader, you can only
grow as fast as the market," Mr. Walske says. And Parametric wasn't having
much success in dislodging entrenched rivals Dassault Systemes SA,
Structural Dynamics Research Corp. and Computervision Corp. from
engineering departments at major auto makers and aircraft firms, the two
oldest and biggest markets for CAD/CAM.
Worse, "the market for design workstations has slowed down considerably,
and it's become a commodity," says Charles Foundyller, president of
Daratech Inc., a Cambridge, Mass., market-research firm. Mr. Foundyller
says that in the mid-1990s, SolidWorks Corp., Concord, Mass., which has
since been acquired by Dassault, started selling $4,000 workstations with
about 80% of the capability for three-dimensional modeling that Parametric's
$20,000 ProEngineer offered.
'Lucky' Acquisition
At the end of 1997, Parametric agreed to acquire Computervision, the
debt-ridden industry pioneer, in a bid to expand its customer base. The deal
added $237 million in debt to cash-rich Parametric's balance sheet, but it
brought a host of new customers. And unexpectedly, it brought Windchill.
"It's in the category of 'it's better to be lucky than smart,' " Mr. Walske says
of the unplanned acquisition of the Internet product.
Parametric's new technology opens the door for customers to order
customized parts from suppliers by getting into their design libraries with an
Internet browser. Using Windchill, the customer can make the design changes
and the suppliers' software will automatically generate the blueprints and
instructions for suppliers' machine tools. Windchill can track parts even if they
are recorded in different databases in different ways. It can synchronize bills
of material generated by the engineers with the ones that are used on the
manufacturing floor.
"It's not just for engineering," says James Baum, executive vice president of
Parametric. "It's for the complete life cycle." For example, Caterpillar Inc.'s
Solar Turbines, the world's biggest maker of gas turbines, needs to keep
track of the machines during their 30-year life. If a customer on a North Sea
oil platform orders a replacement compressor, Solar needs to know where to
drill the bolt-holes for attaching it to the deck. "If you're off half an inch in the
connection, you have a week of retrofitting," says Paul Lewis, a Solar
manager.
Kevin Hamm, a former computer manager with Lockheed Martin's
government electronics group, says that Windchill's Web-connection enabled
Lockheed to speed up Naval design reviews by 35% to 40%, saving
$73,500 in four months. Instead of sending voluminous paper reports to
Pentagon contract reviewers, "we eliminated paper and sent an e-mail with a
Web link," so the reviewers could directly access Lockheed's database to
check parts costs. Avoiding sending hard copy of blueprints to Navy bases
saved $35,000 in nine months, he adds.
He likes Windchill so much he has left Lockheed to start a new company that
will host Windchill software under contract from small companies that want to
use it by tapping into a central computer.
Write to William M. Bulkeley at william.bulkeley@wsj.com |
