Much of the auto industry is contracting and downsizing, but not EDS. The information technology company founded by Ross Perot and later partly owned byCorp. has been quietly executing a growth strategy that promises to drastically alter the way North American auto makers and suppliers access and trade product data.
The strategy began in September 2000 when EDS acquired EAI Inc., a specialist in animation. Then last May, EDS acquired and merged Unigraphics Solutions (UGS) with Structural Dynamics Research Corp. (SDRC).
The SDRC deal was valued at $950 million in cash ($25 a share), while EDS got the remaining 14% of UGS that was publicly held for about $170 million ($27 a share).
The potential is enormous: UGS is the primary supplier of computer-aided design/computer-aided manufacturing (CAD/CAM) systems forCorp., while SDRC is Motor Co.'s vendor for the technology.
Today, EDS is combining UGS, SDRC and EAI into a new organization known as EDS PLM Solutions, which is short for Product Lifecycle Management Solutions. Sounds like alphabet soup, but it's more than that. PLM strives to manage all data from the moment a product is conceived to the point it is recycled. The new unit will generate annual revenues in excess of $1 billion and will lead to better interaction between previously competing systems from UGS and SDRC.
Bruce Jenkins, executive vice president of marketing research firm Daratech Inc. of Cambridge, MA, has studied the CAD/CAM market for 20 years and says the EDS PLM strategy is a “credible road map for bringing UGS and (SDRC's) I-DEAS systems together.”
Later this year, Jenkins says he expects UGS users will be able to operate on data originally created with SDRC software, and vice versa. In 2003, he says both systems are expected to be completely open to each other. “In a natural way, the functional capabilities of each system will be brought forward into a common converged system,” Jenkins says.
Still, the deal is not likely to drive the auto industry toward a singular language for CAD/CAM, as several significant players will remain in the market and surely will become more territorial, Jenkins says.
Dassault Systemes SA, for instance, still remains larger than the new EDS PLM, with estimated 2002 sales for CAD/CAM and product data management services of $1.7 billion worldwide. That compares to an anticipated $1.4 billion for the new EDS PLM, Jenkins says.
In the auto industry, DaimlerChrysler AG,AG and Volvo Cars will continue using Dassault's popular CATIA software.
Jenkins says the EDS acquisitions “do not create a juggernaut to which all will be attracted,” and he notes thathas not said whether it will change its CAD/CAM strategies in light of the purchase of SDRC.
But in the end, he understands the thinking behind the merger of SDRC and UGS. “To maintain two competing CAD systems is not viable or a sensible strategy,” he says.
John Marmaduke, executive program manager for EDS PLM Solutions, says the merger will “cut across chimneys for enterprise solutions” within the auto industry. “Ask an engineer how much time they spend designing products, and how much time they spend looking for information,” Marmaduke says. “You'd be surprised how much time engineers spend just looking for information even within their own companies.”
EDS PLM wants to make that engineer's job easier.