Goldman Sachs appreciates few things more than companies that grow fast and need money. The bank has a track record of picking companies where there’s the distinct “scent” of a good—and hopefully fast—return on their investment. Right now, the PLM market is garnering investment not only from Goldman Sachs, but also generally among venture capital firms, including Silver Lake Kraftwerk, JMI Equity and Northwest Ventures.
Arena PLM, Propel PLM, Jama Software and Aras PLM are all software companies who have attracted substantial investments in the past two years.
Today, engineering.com can reveal another major venture: Goldman Sachs is investing $70 million in Aras PLM for a stake that is, “significantly less than 20 percent,” says Aras’ CEO Peter Schroer.
What is it about Aras PLM that convinced Goldman Sachs to open its wallet?
“Our focus is on high-growth companies with significant barriers to entry, leading technology and experienced management teams. These characteristics drove our interest in Aras,” said Hillel Moerman, head of Private Capital Investing at Goldman Sachs.
“Globally, industrial businesses are wrestling with the transition to the digital era, whether refreshing mission-critical enterprise applications or positioning themselves for new opportunities. Aras’ innovative software platform enables them to execute digital transformation projects,” Moerman added.
Aras lives up to all of these parameters.
“Three years in a row we’ve had growth in the 60-65 percent range, on average,” said Schroer. “Mostly because we moved from midsize customers up to companies like GM, BMW, Audi, Nissan, Airbus, BAE Systems and Kawasaki HI—large OEMs, primarily in automotive and aerospace, but also in heavy machinery and medical.”
Schroer also points out that the company expanded its PLM capabilities, “We have traditionally been very strong in areas like configuration, quality and supply chain management. The recent acquisitions of simulation process data management (SPDM) company Comet and Impresa, covering the MRO (Maintenance, Repair, Overhaul) area for aircrafts, have broadened the scope considerably.”
In PLM, the purchase of an SPDM solution exemplifies a proactive and well-spent software investment. According to PLM analysts, Simulation and Analysis (S&A) is the star of PLM, and SPDM could turn out to be the “sleeping beauty” in S&A.
CIMdata reports less than five percent of all simulation specialists worldwide use some form of commercial SPDM technology to manage and archive their S&A models. SPDM will become necessary in the future, where simulation is more important in every respect.
In this article, I discuss PLM and the Goldman Sachs investment in an exclusive interview with Aras’ Peter Schroer. We will also hear from Gartner analyst Marc Halpern, who has strong opinions about challenges and opportunities connected to SPDM.
THE COMET ACQUISITION IS A KEY INVESTMENT. Simulation is often far from reaching its ultimate potential due to its limited connection to the rest of the company. The SPDM capabilities in Aras’ recent Comet acquisition make it possible to extract and use repeatability, reusability and traceability for simulation throughout the product life cycle. The critical factor is reliability of the CAE that the technology automates. The nature of the embedded ‘know-how’ determines the degree of reliability. This might be Aras PLM's biggest reason for its purchase of Comet Solutions.
“I view Traceability, Searchability, Re-usability and having a record of managed simulation models and results as the value of most SPDM. The componentization is what differentiates Comet,” commented Gartner’s Marc Halpern.
A Market in Transition – From a Technical Solution to a Business Platform
“PLM investment is a trend among investors,” claims Schroer. “Look at the history; PLM was once all about 3D CAD. Today, the world has changed, and the investors are responding to what has become a business solution. We are managing product realization processes, products and software, and our customers are managing supply chains, manufacturing and after-market activities with the PLM tools.”
Now that PLM has become an end-to-end technical solution, and a business platform, the decision maker is no longer the VP of engineering.
“It’s the CEO, CFO or the CIO,” says Schroer. “And when the investors are looking at markets, a VP of engineering making the decision to invest is not very compelling. But if you have enterprise software, the outlook changes. We cover things like simulation, embedded software and maintenance. Combined with the complexity of products, PLM becomes more than a ‘technological-based’ investment.”
A Challenger Enters the PLM Big Leagues
AGREES WITH SCHROER. A lot of what Dassault’s Bernard Charles has to say is in line with the views of Peter Schroer. A PLM or Product Innovation Platform is no longer just a technological end-to-end solution; it’s a business platform, and as such is a subject for C-level executives to decide on, reducing the VP of Engineering’s role in decision making processes. (Image credit: Singapore Press.)
These thoughts about the changing importance of PLM are reminiscent of the views espoused by Dassault Systèmes’ Bernard Charles. PLM installations solely in product development and manufacturing departments isn’t enough. The new PLM/Product Innovation Platforms should become the foundation for an entire company's business, to match what he calls the “experience economy.”
Charles is hardly alone in these views, and Dassault is being challenged on all fronts by competitors like Siemens PLM, PTC, Oracle and SAP. But even Aras, a newcomer in CIMdata’s “PLM Mind Share Leaders” category, has taken on the challenge. Today the company is still small in relation to the big players, but is one of the fastest growing players in PLM.
Presently, Aras PLM employs around 450 workers, and Peter Schroer is expecting another year like 2017, with 50 percent growth which will bring the figure up to 600-plus employees.
Aras doesn’t disclose any revenue numbers, but according to CIMdata’s 2018 PLM reports they landed in the neighborhood of $65 million during 2017. If the growth continues at the same rate as in the past three years, Aras should be able to pass the $100 million milestone within two years. This makes Aras a good prospect to attract Goldman Sachs’ capital.
How will this new capital affect Aras’ operations and business model?
Peter Schroer emphasizes that the Goldman Sachs investment is a minority investment. They get one board seat and, “significantly less than 20 percent ownership.”
“It’s not a controlling position. This was very important to us, since our business model is quite unique, as is our sales model, and the way we build our product together with the open source community. It is a journey we want to continue,” said Schroer.
He adds that Goldman Sachs is comfortable with this. The employees are still the major owners of Aras, while Silver Lake Kraftwerk, General Electric, Goldman Sachs and a couple earlier investors are minority owners with varying proportions.
As part of the transaction, Hillel Moerman and Holger Staude of Goldman Sachs will join Aras’ Board of Directors as a board member and as an observer, respectively.
CLOSING THE LOOP BETWEEN PRODUCT DEVELOPMENT AND FIELD DATA. Manufacturers must continuously innovate next-generation products and offer the flexibility of capacity-as-a-service offerings. As a result, they need to transform how they develop products and service them in the field. Connecting PLM to MRO provides a path to achieve both goals. This is the overarching explanation of why Aras bought Impresa MRO.
“Companies choose Aras as a digital transformation partner to modernize their most complex engineering and manufacturing processes – and have been asking for an MRO application to extend their journey. With the acquisition of Impresa, we are adding a highly-talented team and proven solution to further expand our MRO capabilities and to be first to connect MRO to the Digital Thread on a single platform,” Peter Schroer commented.
Attractive Price Tags
In September 2017, Aras announced Silver Lake Kraftwerk’s $40 million investment.
“We used this money for two strategic investments: Impresa related to MRO and Comet related to SPDM. If you ask me: ‘What is the use of the Goldman Sachs money’, my answer is that we will do new strategic investments to complement our PLM solution,’” said Schroer.
Schroer added that he does not want to reveal the purchase price of Impresa and Comet, but admits, “We got them both at a very attractive price.”
This means that some of the $40 million from Silver Lake Kraftwerk was spent on acquiring these two companies. Additionally, Aras bought two of their channel partners in Italy and the UK.
In addition, Aras recruited new employees to the headquarters in Andover, Massachusetts, resulting in a 50 percent growth in headcount. “And we spent money in marketing as well,” Schroer added, pointing out that the company had a high organic growth rate during the past year.
“If we look ahead, considering the Goldman Sachs money, we will see a similar thing. There will be acquisitions and organic growth. We have a lot of good ideas for our roadmap.”
Is SPDM a “Sleeping Beauty?”
The acquisition of Comet is a good example of how investments are “nourished” in Aras’ care, and Schroer sees great potential for this software.
“For 10 or 15 years, there have been SPDM products on the market, but they don’t get used very much. There are two problems. Firstly, SPDM standing by itself is less useful than SPDM connected to the PDM vault and all the manufacturing workflows. Connectivity increases the value. Secondly, I also think the use cases and user interfaces of these early SPDM systems did not really excite the users. Instead, they ended up working with their homegrown tools.”
Schroer added that many of Aras’ customers complained about simulation management problems. “We listened to the problems and we did some thinking around what could be done, especially in the early simulations and simulations in the field, and then decided that the right approach was to put simulation management into PLM properly. But generally, all of our solutions come from the open source community, which Aras PLM is based on.”
It’s clear that as simulation becomes more common, the need for SPDM increases, “It’s not enough anymore that you simulate every other version of the CAD file or only simulate some variations of the car. Now, it’s absolutely required that all of variants have been simulated and all the versions that come through design and manufacturing have been simulated. In this context, you need some automation and control around simulation.” Schroer said.
“More simulation is coming in the earlier phases, when all we have are MBSE system models. The traditional simulation during design, we can all understand that. But the next phase is actually simulation with the customer.”
In order for that to happen, you need to have a digital twin—an accurate configuration of an airplane, a car or a train.
“If you want to simulate in real-time you have to take into account all the parts that have been changed. This is the reason we acquired Impresa, and why we’re going after the MRO market. We think it puts us in a unique position to have the real-time true representation of the digital twin with all the maintenance history and everything embedded in it. And then you can simulate and drive predictive maintenance.”
So, is Comet the right sort of tool for S&A— a “sleeping beauty” that holds great, but so far hidden, potential?
Can Comet Close the Gap Between Simulation and Mainstream Design?
Performing simulation and analysis using computer aided engineering (CAE) software has traditionally been a domain reserved for experts. The problems delivered into their hands are both theoretically and practically complicated—unsurprisingly, the environments they work in reflect this complexity.
Today, there are companies realizing huge gains by developing SPDM platforms to manage simulation and analysis data and processes. Analysis processes can be shortened from months to days—or even in the most extreme cases, to hours—provided the proper knowledge of CAE and simulation is embedded into the design model.
This means that getting SPDM to work is a key to success in a world where the use of simulation tools is continually growing—no longer used only in “normal” design processes, but also in earlier phases as a part of the product development process and even in end-users' hands.
But how well is SPDM working?
“A lot remains to be gained if we can close the gap between simulation and mainstream design by providing simulation analysts with the means to repeat and reuse simulations while connecting their analysis to through-life product configuration and cross-discipline design,” claims Marc Lind, SVP Strategy at Aras.
Closing that gap is why Aras bought Comet Solutions in late September 2018. But it’s a huge challenge; according to CIMdata, less than 5 percent of all simulation specialists worldwide use some form of commercial SPDM technology to manage and archive their S&A models.
Understanding the Behavior of Designs is Indispensable
A QUESTION OF TRUST. One of the issues surrounding complex software technologies in the CAE arena is the bottleneck effect that occurs in workflows when complex simulation is required in product development processes. Gartner’s Marc Halpern, also points to the question of trust in, and the interpretation of, simulation results.
These software environments are not easy to share or understand for most members of a product development team. At the same time, the capabilities demonstrated, and results produced, are indispensable to understanding the physical behavior of designs, validations of designs against requirements and regulations, functionality and stress tests. The overall impact has been bottlenecks in the later stages of the process flow: longer time to market, and longer time before earning revenue.
Gartner’s Marc Halpern also points to the question of trust in and interpretation of results.
“These are big questions,” he said, “Such as, ‘Does the model we used for the simulation sufficiently reflect reality so that we can use the results?’”
Interpretation of results is another concern. Those reviewing results must have enough familiarity with the mechanics and design of the product or system being evaluated, so that they know what to look for.
He offered an example “A long, slender rod subjected to a large compression load can buckle before it reaches a load where it ‘plastically yields.’ But, someone without the proper experience designing and analyzing such structures might not look for buckling behavior. This is exactly what happened in an analysis of stacked containers. The simulation said that X number of containers could be stacked on top of each other, but the actual bottom container sustained damage due to buckling. The buckling was not detected because the person performing the analysis never thought to do the proper nonlinear analysis. They only did a linear analysis.”
The complexity of simulation leads to the question of how to simplify the tools and processes to make them more useful, both for the analysts involved as well as for the wider community of participants and teams in the product development chain?
There is more than one answer to this question, but "Democratize CAE with SPDM" is an interesting one.
“I have always understood SPDM to be managing the models and results. A single CAD model can be used to create many different models to perform many different simulations. Even if simulation models and data are perfectly managed, CAE is hard to democratize. Even process templates do not solve the fundamental problem,” said Halpern.
SIMULATION MUST BE USED DAILY, on every product and across the entire product lifecycle, to study and improve every aspect of performance. One of the strongest trends in product development today is an increasing demand for simulation technology—not only in the development phase, but also in later parts of the product life cycle. This trend is driven by a number of factors, such as product complexity, competitive pressure and the potential of digital twins and IoT.
Automation tools aim to capture processes that can be repetitively used and improved throughout the enterprise. Simulation is being democratized to support a broader user base and audience of “consumers” of S&A results using purpose-built web-based applications. For example, 3D interactive visualization can be effectively and safely used by engineers who are not experts in the underlying S&A tools that perform the engineering calculations.
Can Comet contribute to democratizing simulation? Halpern regards its ability to embed functionality and knowledge into the CAD models as a plus factor, “Whoever is doing the simulation or evaluation doesn’t have to worry about the ‘intricacies’ to do the simulations,” he stated. The encapsulated knowledge takes care of that.
The real impact of SPDM on the democratization of simulation comes from its tools that allow experts to package that knowledge into a design model in a manner that allows many designers without advanced simulation knowledge to perform simulations.
CIMdata is “Extremely Disappointed” Over Low SPDM Adoption
The number of simulations being conducted has increased over the past decade, which is a trend mirrored in the growth of investments in simulation and analysis tools. According to CIMdata, this growth made S&A tools “the star of PLM,” with annual growth numbers just under 10 percent during the last couple of years; each of these showed substantially higher growth numbers than PLM investments on average. In 2017, the market investment in S&A was worth $5,7 billion, representing 13.1 percent of entire PLM investments.
CIMdata concluded that, “end user interest in SPDM specifically has grown substantially over the past decade.” However, CIMdata is “extremely disappointed” over the effective industrial adoption of SPDM, which has been slow over the past 20 years outside of the major automotive and aerospace OEMs.
There is a good reason for this. In stark contrast to Enterprise Resource Planning (ERP), which delivers immediate cost-saving efficiencies that drop to the bottom line, SPDM makes engineers more productive – which from the point-of-view of executives, does not have the type of immediate, short-term benefit that ERP offers.
“Since few senior people understand SPDM, they are not going to be overly supportive,” claims Halpern.“Also, lots can go wrong between the product design and the actual delivery of the product (e.g. sourcing, manufacturing operations, etc.) that senior execs tangibly see and want to fix because the loss of money and time is obvious to them. They know design and engineering are important, but the pain points and the implications of engineering design pain points are too far removed from them. So, most of the support I see for SPDM comes from engineering groups – and most notably, the simulation community within those engineering groups.
On top of it all, SPDM is hard to implement – of the same difficulty, if not more difficult, than PDM. These are all reasons I see for its slow growth.
It makes for tough circumstances, and CIMdata’s 2018 PLM report on S&A confirms this hard reality.
“Industry estimates indicate that well under five percent of all simulation and analysis specialists worldwide use some form of commercial simulation data management technology to manage and archive their S&A models and to collaborate with other simulation specialists as well as other design disciplines within their organizations,” CIMdata wrote.
A Shortage of Commercial SPDM Solutions
This shortage can be judged in several ways, of which perhaps the most reasonable interpretation is that the developers of commercial SPDM solutions have not been able to produce the easy-to-use, yet competent tools that are required. Most assessments agree that the exponential growth of CAE and simulation-related data that comes in the wake of digitization, changing technologies and disruptive product realization methods requires sharper management systems. Without SPDM tools, it becomes difficult to efficiently grasp this part of the product creation process.
Simulation is an indispensable element throughout this evolving process:
- Distributed product development and manufacturing is growing more common
- Realization of business benefits of model-based systems engineering processes (MBSE)
- Operation of digital twins
- The serious formation of IoT, IIoT and Industry 4.0 concepts among the world's businesses
SPDM platforms will be essential for working in conjunction with PLM, digital threads and digital twins, as well as enabling collaborations with other enterprise platforms such as ERP, MES and MRO—all in order to realize Industry 4.0 concepts in the coming years.
“Companies will need to better manage simulation models, results and related design information; improve collaboration and reuse; and better integrate simulation activities into the PLM environment,” noted CIMdata. “Doing this supports a wider audience of product development engineers, engineering managers, product line managers and others in the extended organization and supply chain who can benefit from access to the S&A information to make informed decisions.”
This is generally true, commented Halpern. “But there are elements of data governance I am learning about through my digital twin research that apply to SPDM. There is also a strong link between the concept of a digital twin and SPDM.”
Breaking Up Departmental Silos
So, why would Aras invest in a solution with a commercial base that presently seems relatively weak? The answer is "potential."
CAE is traditionally one of the more well-preserved silos of product development. Only in recent years have we seen silo-breaking effects thanks to cross-communication between the analysis and simulation departments and the rest of the product development chain. Disruptive technology can be a catalyst with the power to break up this kind of isolationism.
This is only one side of the coin; the other side is software developers in the industry. As discussed above, the question is whether these software developers have managed to develop the solutions that could meet the new demands for broader collaborative capabilities.
For example, how can you facilitate easy-to-use results from previous simulation sessions? Is it possible to parametrize the thermal analysis of a microprocessor on a board, so that it can be applied to similar configurations and variations without concerns about meshing?
Gartner’s Marc Halpern examined the concept during a NAFEM presentation, and he characterized it as “encapsulated behavior,” according to a report on the event by engineering.com’s Roopinder Tara.
“Others call it ´appification,’” Halpern continued. “Either way, it spares the engineer from having to be a full-time analyst. The specialized terminology, conventions and peculiarities of simulation can be kept under the hood and the interface is greatly simplified. A complex problem could be solved with a handful of parameters. This would bring simulation to not just engineers, but others who have a stake in the product and its design.”
Aras’ Acquisition of Comet is On Target
This is exactly what Aras was aiming for when purchasing Comet, as the acquisition is an important step in Aras’ roadmap to develop platform-based SPDM to support higher volume simulation for complex scenarios.
The goal is to improve Aras’ Innovator PLM’s ability to handle simulation data, and Comet has developed solutions for managing simulation processes. Using Comet’s technologies, manufacturers and product developers can reuse complex simulations to scale the application up or down and broaden the use of simulation results. One outcome of this is that the Aras platform now has the ability to connect simulations and to access experts in the field by offering traceability, access and reuse processes during the product life cycle.
Comet's products are largely based on a series of powerful customer developed, web-implementable SimApps, with embedded expert knowledge and methods.
Marc Halpern says this is key. “I believe that the embedded knowledge and know-how is what differentiates what Aras is selling from what I typically see from SPDM technology.”
Extending the Digital Thread to Include Simulation is Critical
Comet’s vendor-agnostic application mirrors Aras’ open approach by connecting with a wide array of CAD, FEA, meshing, 0D/1D simulation tools and in-house applications—which CIMdata says is a requirement to support organizations’ heterogeneous simulation tool environments, and essential for SPDM to work.
Aras claims that a broader use of simulation has been impaired because the SPDM tools are lacking effective connections between simulation users and the extended enterprise.
“Extending the digital thread to include simulation tools and processes has emerged as a critical enabler for future business models. Simulation can add significant value to product development, manufacturing and field operations, but has not yet reached its potential due to limited connection to the rest of the enterprise. The addition of Comet's capabilities will allow us to bring repeatability, reusability and traceability to simulation across the product lifecycle,” said Rob McAveney, chief architect at Aras.
McAveney sees a market that will grow exponentially due to the need to further reduce physical testing. He also pointed out that the complexity of smart connected product design and MBSE are important trends that will support the need for this type of platform.
“We view simulation in the context of overall systems engineering processes together with configuration and change, variants, requirements, validation testing and others. The fact that simulation management is completely disconnected from mainstream engineering processes is a problem while there’s no closed-loop traceability,” McAveney said.
Aras also mentions the development of the digital thread and a push for predictive maintenance through digital twins as important factors.
"With Comet's technology, Aras closes the gap between simulation and mainstream design by providing simulation analysts methods for repeating and reusing simulation, coupling the analysis to product configuration and design throughout the product life cycle," McAveney added.
He also points to Comet's ability to handle mixed fidelity models, different data types and representations of the same product; it can do the same for assemblies to be simulated. Overall, this offers, "an important aspect of managing system simulations across multiple engineering disciplines."
The ability to extract intelligence from simulation models and results—rather than just managing file-level data—is also a big advantage that Comet claims over other SPDM systems on the market.
More Efficient for Simulation Experts
For Aras, an important effect of the Comet deal is that these new technologies can help make simulation experts more productive. How would that be accomplished?
“By creating simulation processes for reuse and automation of the tool chain needed for the job, such as coupling simulation tools to perform a complex function or analysis,” McAveney explains, claiming there are a number of features to increase the volume and efficiency of the simulation.
“Experts now have the opportunity to quickly analyze product variants, options and concepts. For example, requested calculations are performed with the predetermined CAD and CAE software and that software manages tool chain runs, including job server, data extraction, file pulling, cloud operations, high performance computing clusters and more.”
Comet is Available to Aras Subscribers Free of Charge
“Joining the Aras family turbo-charges Comet’s vision to bring simulation to the enterprise. Comet's philosophy and approach to simulation align well with Aras' approach to PLM. We see significant increased value for both Comet and Aras customers,” said Malcolm Panthaki, CTO and founder of Comet Solutions.
Aras’ competitors among the PLM mindshare leaders, such as Dassault Systèmes and Siemens, have invested heavily in simulation solutions during the last couple of years. PTC is also working hard to develop easy-to-use simulations solutions, implementing ANSYS’ Discovery Live product in Creo. Dassault’s Bernard Charles, Siemens’ Tony Hemmelgarn, and PTC’s Jim Heppelmann aren’t investing in simulation for the fun of it—they are doing it to create business platforms.
Another reason for this activity is the demand from customers in industry segments already convinced of the value of S&A and SPDM, such as automotive and aerospace. Aras also competes successfully in these segments, and buying a competent, easy-to-use SPDM solution is a good way to maintain their competitive position. For example, early adopters of SPDM such as BMW saw value in traceability of simulation results that either certify or lead to design decisions.
IN SERVICE AT GERMAN AUTO GIANT BMW. BMW Group implemented Aras PLM as its backbone for test data management. The system will support planning, scheduling, execution and documentation of vehicle tests and test results at various stages of vehicle development. The platform connects a large number of existing IT systems to exchange data, and is to be used by around 5,500 employees in the BMW Group's Engineering division.
During Aras’ PLM event ACE 2018, Verena Held, project lead for the IT project verification management at BMW said, "We chose Aras Innovator because we test in so many domains. We need to find similarities, but must allow them to have differences. We needed a flexible platform that we can customize."
My take is that Aras made a good move, and so far, they’ve done a great job with their business model.
Aras’ PLM Innovator has shaken up the market over the past few years and developed into a solution that—with its fundamentally license-free, open source model—has been bought by big customers like General Motors, Airbus, BMW, Micronic and others.
Of course, the term “free of charge” needs to be taken with a grain of salt, because you can hardly survive if you give away for free what you create. Instead, Aras earns their revenues on system customization, special modules and consultation.
That business model combined with the technological capabilities of the platform has impressed the capital investment market. In its last round, Aras raised $40 million in venture capital. This enabled Aras to purchase the maintenance solution Impresa Maintenance, Repair and Overhaul—and now, the simulation company Comet.
It will be extremely interesting to see what Aras can produce around the Test Data Management (TDM) capabilities they are developing with BMW. The combination of SPDM with next generation TDM can lead to powerful insights into the behavior of systems being designed or evaluated.
Will a SPDM solution help Aras in their efforts? In light of the arguments above, I believe that it will. Selling this kind of platform isn’t a walk in the park, but despite the significant cost of implementing an enterprise-level SPDM system in automotive and aerospace environments, the business case and the return on investment to implement SPDM have been compelling.
Simulation process data management is showing huge potential, representing one of several good reasons for a major venture capital investment. Anyone for SPDM?