Investment in technology to support innovation is eating up a larger share of most manufacturers' IT budgets. Technology investment among mid-size manufacturers is expected to grow healthily over the next three to five years, with several segments growing at double-digit rates, according to tracking studies by AMR Research Inc. Consider the following:
- Mid-market manufacturing (defined here as companies with between $30M and $999M in annual revenue) is the fastest growing segment of the computer-aided design (CAD)/PLM application spending category, projected to grow at 12% annually. This is substantially higher than the overall market average of 9%.
- PLM and CAD packaged application software sales, along with associated vendor services, will grow to $7.2B in 2009 from approximately $4.2B in 2004.
- Non-CAD PLM applications like product data management (PDM), collaborative design tools, customer needs management, and portfolio management will grow to $4.2B in 2009 from $1.9B in 2004, more than doubling in size.
Perhaps more important, many of these organizations are funding these innovation initiatives at the line-of-business level, and not within the centralized IT organization's budget. In stark contrast to many of the other major enterprise software application categories that AMR tracks, PLM clearly is a business sale. According to survey work conducted by AMR Research over the past two years, more than half of customers' PLM projects are funded by line-of-business managers -- predominantly R&D and engineering. Allowing business management more control over project funding helps the business identify and achieve the strategic and business benefits of the investment in innovation.
David O'Brien is Vice President, Quantitative Research at AMR
Research, Inc. in Boston.