Dassault Systèmes, the 3DEXPERIENCE Company, has the mission to provide business and people with 3DEXPERIENCE universes to imagine sustainable innovations harmonizing product, nature and life. This purpose has given birth to a unique portfolio of products and Industry Solution Experiences whose key strengths are in their scientific content and deep understanding of industrial processes. The Company’s software portfolio spans a wide spectrum of domains from modelling and scientific simulation to production and logistics optimization, and is applicable from Natural Resources to Cities, Transportation, Buildings, Smart Products, Consumer Goods, all the way to biological systems and chemistry.
Consumers today demand product experiences that enrich their lives in meaningful ways. Experience Thinking is a framework for innovation, focusing on engaging consumers with breathtaking product experiences that are smarter, intuitive and sustainable.
The 3DEXPERIENCE platform and apps are purpose built to digitalize the entire customer journey, with capabilities to analyze, design, simulate, engineer and deliver experiences. The platform enables innovators to develop a thorough understanding of their customer’s expectations by analyzing social and usage information in a unique data-driven approach. Enterprises can then model, simulate and optimize their offerings to best suit each customer experience. During the operating lifecycle, this model is enriched with valuable insights gleaned from the usage data, setting the stage for the next cycle of innovation.
Key Competitive Strengths of Dassault Systèmes
The solutions of Dassault Systèmes, the 3DEXPERIENCE Company, transform the way products are designed, simulated, produced, marketed and supported, leveraging the virtual world to improve the real world.
Dassault Systèmes’ focus has been on enabling digital continuity and to do so in a much broader fashion as the entire enterprise is involved in driving successful customer experiences. This digital continuity begins with Upstream Thinking, to then Design and Engineering, Manufacturing, Sales & Marketing all the way to Ownership with after-sales. The 3DEXPERIENCE platform is a critical enabler of this digital continuity.
We believe our global market leadership and financial performance benefit from key characteristics of the Company.
Growth Strategy of Dassault Systèmes
Based upon our 3DEXPERIENCE platform and software portfolio, we estimate that our current total addressable software market is approximately $28 billion (TAM).
Our growth drivers are centered in three main areas: Build on Value with the 3DEXPERIENCE platform, industry focus and cloud/mobile apps; Domain Leadership through Brand Value Creation and Improve Efficiency leveraging our sales channel coverage. Our principal growth drivers include:
- 3DEXPERIENCE Platform;
- Industry Focus, targeting 12 verticals;
- Cloud and Mobile applications;
- Brand Value Creation, addressing the principal domains within companies;
- Sales Channel Coverage in our Geographies;
- Selective Acquisitions aligned with our Mission and Strategy.
After delivering many advances in software products aimed at designing in 3D and managing the resultant products across their lives, we believe there is a new world to imagine, create and build by leveraging science, engineering and art and by taking advantage of the significant technological advances to reduce the distance between the Virtual World and the Real World. This led us, in 2012 to define our new Horizon which we call 3DEXPERIENCE with the mission to provide business and people with 3DEXPERIENCE universes to imagine sustainable innovations capable of harmonizing product, nature and life. Our software portfolio spans a wide spectrum of domains from modelling and scientific simulation to manufacturing production and logistics optimization, and is applicable from Natural Resources to Cities, Transportation, Buildings, Smart Products, Consumer Goods, all the way to biological systems, chemistry and material sciences.
We were honored to have Dassault Systèmes ranked #1 among the 2018 Top 100 Most Sustainable Corporations by Corporate Knights for our vision and for implementing this vision in everything that we do. Empowering industry and people to create 3DEXPERIENCE universes to imagine, invent, and deliver disruptive solutions that advance sustainability in domains as large as energy, mobility of the future, cities, life sciences and high-tech is at the core of our purpose and DNA and why people are joining Dassault Systèmes.
Dassault Systèmes is the 3DEXPERIENCE Company. What do we mean? Today, as consumers (whether a corporation, small company, individuals or government entity such as a city) we make purchase and usage decisions, not based per se on the product or service itself, but on our experience with it. Our objective is to help our clients create, test and evaluate these experiences to make sure they are rewarding for their users. And to then ensure that the product manufactured or the service provided meets expectation and taking this information back to drive further improvements in the end-user experience.
Our strategy is to focus on Social Industry Experiences:
- Social is centered on online, mobile and ease of use for collaboration around innovation and for bringing 3D to consumers. For example, our HomebyMe solution helps people all over the world imagine, easily create and place furniture in rooms, and experience them in a virtual reality experience.
- Industry is about creating the knowledge and know-how and needed to ensure that our solutions match closely the needs of the industries we address. We see with large clients a strong focus on deep transformations to adapt to the respective challenges of their industries. Furthermore, in all these industries, new entrants have appeared with small teams focusing on sub-segments of those markets and proposing high-value experiences with products. Our solutions appeal to industry leaders and startups, both of whom are shaking up industries.
- Experiences: Being able to model experiences is truly the manner in which companies can innovate and create new categories of products and solutions that will drive new, better experiences for their consumers. Our work with Cities, with 3DEXPERIENCity, demonstrate that we are able to do this at the most demanding level thanks to the 3DEXPERIENCE platform enabling the modeling of city experiences to improve the lives of citizens.
Our mission and strategy reflect five major 21st Century trends that are having a widespread influence on industries, governments, research and education:
- Cities for People
- Resources and Energy for the Long Term
- Global and Personalized Health
- Supplying Globally, Producing Locally
- Inspirational Education and Research
What they all have in common is that boundaries of all types are blurring, we are seeing convergence and intersections. Therefore, what is critical to have is a holistic perspective and view to ensure that what a business delivers the end-customer values it.
Our mission is perhaps ambitious but we bring a long-term track record of defining new markets, innovating in our product development and delivering durable sustainable growth over our 20 plus years as a public company. We believe our long-term market leadership and financial performance reflect our core DNA.
- Virtualization: We believe the virtual world can help improve the real world we live in thanks to science and engineering. Our 3DEXPERIENCE twin represents in the digital world a physical product and its experience before they ever existed. Today, thanks to the massive acceleration in technological innovations, computational power and cloud, our dreams are no longer “What if, but “If WE”, imagining altogether a better world.
- Science and Engineering: We are 16,222 people at Dassault Systèmes, proudly working together to shape the future. Science, engineering and technology are changing the value streams of companies - from design to engineering to manufacturing to marketing and the ownership experience. Artificial intelligence, Internet of Experiences, Generative Design, Additive Manufacturing, Virtual, Augmented and Mixed Reality, Data Analytics, Robots and Cobots, Systems of Systems, Connectivity, Computing Power are all being leveraged.
- Long-term Horizon: We believe that to succeed over the long term, you need to focus not just on this year or the next few, but to look forward to medium and decade long horizons. Renew our vision, strategy and addressable market and evaluate and adapt our strategic assets to deliver against new objectives.
- Partnerships: To succeed over the long term, we believe in partnerships, beginning first with our clients. While we are proud to be recognized for our innovation, we are proud that we work with many of the most innovative companies in the world, whether global leaders, small and medium-sized companies or start-ups. We also work with our sales, software, technology and services partners. They help us set and adapt ourselves to be more closely attuned to the evolutions within the different markets we are addressing.
- Perseverance: The problems we are looking to help our clients solve are not easy, and the science, engineering and math behind our software takes years of investment in people-power and life-long learning.
- Sustainable business model: We built a sustainable business model from the outset in 1981 and we continue to enhance it, with over 70% of our annual software revenue recurring in nature.
Every company talks about digital innovation, but for us, it did not begin in 2017, it began over 25 years ago. The importance of the virtual world’s role in innovation was truly first revealed thanks to Boeing’s historical decision at that time to rely on Dassault Systèmes Digital Mock-up technology to design its new Boeing 777 aircraft, paving the way for digital twins of products.
Today, companies are now seeing that data can become an invaluable asset with the potential to deliver massive benefits for users and their corporations. The roadmap to do so requires two key elements. First, it requires digital continuity and this is what we provide with the 3DEXPERIENCE platform. And the second key element is that to turn data into a true asset companies need to be able to make sense of the data and models enable this. A model-based approach is at the core of the 3DEXPERIENCE platform and is valuable to ensure innovation effectiveness.
3DEXPERIENCE Platform For Sustainable Innovation
Dassault Systèmes’ answer for sustainable innovation begins with a platform that enables stakeholders to navigate their entire business, collaborate more easily and extract intelligence from big data. The 3DEXPERIENCE platform is a business experience platform, leveraging knowledge and know-how, that provides software solutions for every organization in a company. It supports the value creation process in creating consumer experiences that differentiate our clients in their markets. With a single, easy-to-use interface, it is the foundation for our Social Industry Strategy that incorporates 3D design, analysis, simulation, manufacturing and information intelligence software in a collaborative, interactive environment. The platform is available on premise and on public or private cloud. We make available to our clients a critical enabler for sustainable innovation through our 3DEXPERIENCE platform which is perfectly suited to their needs. Key differentiating attributes of the 3DEXPERIENCE platform include:
Digitally Connected: the 3DEXPERIENCE platform is about eliminating silos within companies, moving from a static, file-based world to a digitally connected world, where live data drives innovation, processes and business-decisions. As consumers we live in a digitally connected world – your mobile phone, service apps – and we can help our clients do the same for their businesses. Our platform provides digital continuity across all applications and propagates changes automatically;
Data Driven: data is at the heart of product innovation. However, this data sits across many disparate systems today at many companies and is not readily visible or easily available. Capabilities of the 3DEXPERIENCE platform enable the indexation of data across different systems and create a new class of applications, in order to leverage the data of an enterprise. Further, data is not just what is generated by the enterprise; there is a lot of relevant data on the internet and with our technologies and apps, enterprises can use these applications to help them extract data from the internet and merge them with enterprise dashboards to improve their innovation, products, their brands and their consumers’ experiences;
Model-based: data can be collected, but only data evaluation in context can bring value. Precisely, our 3DEXPERIENCE platform is based on this type of model valuable to ensure innovation effectiveness. The innovation process typically calls for multiple models of varying degrees of fidelity and a variety of simulation techniques. Early in the process, a low fidelity model is employed to understand the systems interactions and behavior; while later as the product definition matures higher accuracy models are adopted to guide optimization along often-conflicting functional attributes and cost. This model-based approach is not confined to the research phase; it is employed in many activities across the enterprise. For example, planners define the process model and simulate the assembly operations to meet cycle-time constraints; service engineers define reliability models to guide maintenance planning. Thus, a model of the entire product from conception to operations is built during product development;
Virtual + Real: Virtual models can replicate real world behavior and physical tests. They can be correlated with actual behavior during the operating life of the product. The knowledge gained from this correlation can be used to enhance the fidelity of the virtual models. Any enhancements required in the operating product are first simulated in the virtual model, fine-tuned and then optimized, before incorporating in the real world. In fact, the accuracy of the simulation can be significantly enhanced by connecting the virtual model to physical systems, also called Hardware in the Loop. When the physical systems are assembled, they are just a twin of the model. The real and virtual worlds reinforce each other – modelling and simulating the real world virtually and enhancing the virtual model with experiences from the real world.
- Qualified ecosystem of industrial actors: the 3DEXPERIENCE Marketplace features a range of services with an ecosystem of recognized experts in their domains that delivers the knowledge and know-how using 3D as a universal language to reduce the distance between the virtual and real worlds. The 3DEXPERIENCE Marketplace manages all aspects of worldwide transactions such as taxes, payments, currencies and billing with full traceability.
Partner for Business Transformation for the 21st century Industrial Renaissance
Our 3DEXPERIENCE software applications portfolio is designed to enable the powering of 3D realistic virtual experiences - and is comprised of our 3D modeling applications, simulation applications, manufacturing applications, social and collaborative applications, and information intelligence applications addressing our clients’ value streams and are available on-premise and on the cloud.
Our ambition is to lead industry to the cloud with the most robust and productive cloud offers on the market. In other words, virtually the vast majority of our portfolio is available on the cloud today, on the single, unified architecture of the 3DEXPERIENCE Platform. Our cloud offer is a comprehensive one incorporating all levels of the service, with the application layer for software and content (SaaS), the platform layer for deployment, supervision and operation services (PaaS) and the infrastructure level for on demand and elastic compute, network and storage resources (IaaS).
Our 3DEXPERIENCE platform and software portfolio embeds a wide array of technologies for:
- Cognitive Augmented Experiences: As the 3DEXPERIENCE Platform is a truly big data platform, it elevates the power to discover, analyze, understand and experience the world we live in. With built-in state of the art as well as disruptive Artificial Intelligence technologies, it provides unique ways to capture and use scientific, industrial and value-added Knowledge and Know-How in an experiential approach. CAD is not only Computer Aided Design but Cognitive Augmented Design, revealing hidden information in companies’ patrimonies and guiding the creator’s hand with intelligent companions that have been fed with the industries’ latest expertise and efficiency in context of the augmented New Reality. CAM is not only Computer Aided Manufacturing but Cognitive Augmented Production with automation and agile cobots monitoring, assessing, predicting and prescribing the route of actions of the entire production system. The 3DEXPERIENCE Platform fuels all our industry solutions and our brands with a unique approach: “modeling and simulation to the power of data Artificial Intelligence” embodying a truly new approach of the 21st century with virtuous strategic dialogue between information intelligence, Artificial Intelligence, virtual twins and models;
- Generative Design: Function-driven design backed by multiphysics simulation-based optimization and predictive analytics, has led to a new design practice for innovation. We offer an end-to-end solution strategy for function-driven generative design that works for diverse manufacturing methods such as casting, milling and additive manufacturing. Designers can create functional specifications, generate and validate their conceptual shapes before conducting concept trade-offs using business KPIs (e.g: material costs, buy-to-fly ratios, scrap, etc.) and decide the manufacturing process of choice;
- Additive Manufacturing: Long used by our clients for prototyping, thanks to innovation in material sciences and equipment, Additive Manufacturing is now an active area of major investments by companies in multiple industries. Today, Additive Manufacturing creates new opportunities in many different areas such as remote fabrication for support and maintenance, rapid prototyping for realizing new concepts and experiences and, perhaps most importantly, backed by our generative design applications, they can now develop functional parts that were heretofore impossible to fabricate. Our offer leverages our multi-discipline expertise in design, engineering, simulation and manufacturing, enabling an end to end, model-based and data-driven digital thread;
- 3DEXPERIENCE Twin: A digital twin is the joining of a virtual model that represents the behavior of a product with real-time Internet-of-Things sensor data from a real product operating in its native environment. A digital twin can be used to measure, assess, predict the performance of the system and help optimize operation, including maintenance cycles, downtime, and failure mitigation. The 3DEXPERIENCE Twin is even more powerful. When the 3DEXPERIENCE Twin is connected to the original customer requirements and design data, then information can be used to not only predict current performance, but to improve next-generation products in an intelligent way. Not only is the connection between the Virtual World and the Real World reduced to zero, but there is digital continuity and seamless feedback between the two worlds that bring great potential advantages to our future society in all industries. This is a fast-moving, rapidly developing concept in its early stages;
- Augmented reality (AR), virtual reality (VR) and mixed reality (MR) are covered by what we call “New Reality”: The 3DEXPERIENCE platform is “VR ready”. Our software portfolio has long utilized virtual reality across multiple applications. Looking forward, we believe that this full spectrum of technologies from augmented and virtual reality to holograms - is one of the most transformative advantages business leaders have ever received. After 50 years of being almost exclusively confined to academic, corporate R&D and military research labs, these technologies are now available at an affordable price for use across B2B, B2C and B2B2C applications.
The 3DEXPERIENCE 2018 release unveils the value of the 3DEXPERIENCE platform both as an operating system powering our industry solutions experiences with our brand applications and as a business model powering our marketplace services. Two important developments in the 3DEXPERIENCE 2018x release include:
- The introduction of POWER’BY which will enable all customers to benefit from the 3DEXPERIENCE platform’s value immediately without any need for migration of legacy data. There are three levels: to enable social collaboration; to leverage hybrid data for product configuration and bill of materials; or to use the full capabilities of the 3DEXPERIENCE platform.
- We have also introduced 3DEXPERIENCE Marketplace, an online e-commerce environment in which business innovators are able to collaborate and transact with other industrial content and service providers. 3DEXPERIENCE Marketplace features a range of services with an ecosystem of recognized experts in their domains that delivers the knowledge and knowhow. Its first two services, Make and PartSupply, deliver on-demand manufacturing and intelligent part sourcing capabilities. Make helps businesses seamlessly collaborate with leading manufacturers worldwide across all manufacturing processes by leveraging 3D to go straight from design to parts, all while minimizing errors and risks. PartSupply enables businesses to easily search and compare in 3D millions of 3D components from hundreds of suppliers to identify and configure the right component before inserting it within their environment. Make and PartSupply are the first of many services envisioned for the 3DEXPERIENCE Marketplace.
Industries and Customers
Our global customer base is comprised of industry leaders, mid-market companies, small companies and startups and also includes government and educational institutions. Our clients include companies in 12 industrial sectors: Transportation & Mobility; Industrial Equipment; Aerospace & Defense; Financial & Business Services; High-Tech; Life Sciences; Energy, Process & Utilities; Consumer Goods & Retail; Natural Resources; Architecture, Engineering & Construction; Consumer Packaged Goods & Retail and Marine & Offshore.
The composition of our software revenue in 2017 by our twelve industries was approximately as follows: Transportation & Mobility about 31%; Industrial Equipment about 16%; Aerospace & Defense about 13%; Business Services about 8%; Diversification Industries represented about 32% of our software revenue in 2017.
Today, the Company has the largest Industry Solution Experiences portfolio on the market. Our Industry Solution Experiences are designed to address key business processes of the respective individual industry and are comprised of industry process experiences and user roles matching up to those of the respective industry.
3DEXPERIENCE Software Applications Portfolio – Addressing the Needs of our User Communities
Dassault Systèmes’ 3DEXPERIENCE software applications portfolio is designed to enable the powering of 3D realistic virtual experiences and is comprised of 3D modeling applications, simulation applications, social and collaborative applications, and information intelligence applications. The Company has successively expanded its portfolio of applications and organizes them by brand internally in order to maintain a strong research and development focus on the users served by these applications.
We continue to expand the capabilities of our brands to meet the evolving needs of existing and new users across our expanded addressable market. Dassault Systèmes’ investments in research and development, as well as targeted acquisitions, have enabled the Company to deepen and broaden its offerings for customers as well as to bring its significant assets to help advance innovation in other target domains and industries.
History and Development Summary
Dassault Systèmes, the 3DEXPERIENCE Company, has the mission to provide business and people with 3DEXPERIENCE universes to imagine sustainable innovations capable of harmonizing product, nature and life. Unveiled in 2012, this purpose has given birth to a broad portfolio of Industry Solution Experiences whose key strengths are in their scientific content and deep understanding of industrial processes. Our software portfolio is applicable from Natural Resources to Cities, Transportation, Buildings, Smart Products, Consumer Goods, all the way to biological systems, chemistry and materials science. Founded in 1981, Dassault Systèmes has been developing technologies and solutions that propel innovation through business transformation in industries ranging from aerospace to life sciences. As a company, we are participating in more than 50 global initiatives dedicated to advance world-class production technologies and processes. Dassault Systèmes brings value to over 220,000 customers of all sizes, in all industries, in more than 140 countries.
In connection with the launch of 3DEXPERIENCE in 2012, our management system is now organized along three axes with: (i) a strategy to cover customer processes through an industry-focused set of offerings, “Industry Solution Experiences” based upon the Company’s underlying software applications portfolio, content and services; (ii) a domain focused portfolio of software applications organized by brand in order to ensure a strong focus on the satisfaction of end user needs; and (iii) a global local specialized organization in order to leverage our global strengths, while at the same time ensuring a strong local proximity with customers and partners and enabling a more flexible management structure responsive to local needs at the client, partner and employee level thanks to our twelve geographic management teams.
Our Industry Solutions Experiences portfolio is powered by our 3DEXPERIENCE business platform which was designed to enable companies to bring their different departments together, in a holistic manner to drive their innovation – in products, in new business models and in customer experience successes. The 3DEXPERIENCE platform has proven uniquely suited to help companies thanks to its ability to improve and connect processes by implementing digital continuity across the principal disciplines, from ideation, design, scientific simulation, manufacturing and operations, to marketing and sales. The 3DEXPERIENCE platform feeds these processes with meaningful data analytics, and ensures the automatic propagation of changes across all disciplines.
Our investments, both through expenditures internally in research and development and through acquisitions, are closely aligned with our strategic roadmap. Our internal R&D investments are the principal driver of our product innovations and enhancements. In addition, with the expanded purpose and Social Industry Experiences strategy we are growing our addressable market along multiple axes: (i) broadening our offer to cover the key disciplines of clients, from enabling the gathering of upstream consumer insights to our core markets of design, engineering, simulation and manufacturing, and extending through to business planning and operations and point of sales and end-consumer experiences; and (ii) expanding our market coverage to address industries focused on the interaction of business and people with nature (geosphere) and business and people with life sciences (biosphere) and (iii) extending the power of 3D to people with 3D for All initiatives most notably bringing 3D to consumers in an easy manner with our Homebyme solution thanks to artificial intelligence and leveraging new advanced mobile technologies. With our Homebyme solution, consumers all over the world can imagine, easily create and place furniture in rooms, and experience them in a virtual reality experience on mobile devices. We will continue to evaluate potential external investments complementing and extending the value our Company brings to industries, clients and users. See the Company’s 2017 Annual Report (Document de référence), paragraphs 184.108.40.206 “Dassault Systèmes’ Purpose and Strategy”, 220.127.116.11 “Summary” and 18.104.22.168 “Research & Development, Technology and Science” for further information.
Research & Development, Technology and Science
Underpinning Dassault Systèmes long-standing market leadership has been its clear and strong commitment to technological innovation, enabling it to define and create new markets, expanding from 3D Design to Digital Mock-Up, to Product Lifecycle Management and to 3DEXPERIENCE.
Important principal areas of investment in R&D include, the 3DEXPERIENCE business platform foundations and services, Modeling Technologies (3D, systems engineering, natural resources and biosystems), technologies for product, production and usage realistic simulation, intelligent information technologies (indexing, dashboarding and data science) and connectivity technologies (for social and structured collaboration and program management & compliance). Moreover, the Company’s R&D efforts are centered on advancing breakthrough user experiences, and expanding the reach of its solution with native cloud and mobility and immersive solutions.
Sales and Marketing, Education
We believe the structure of our sales, well-balanced between our direct and indirect sales channels and with our geographic and industry organizations, have enabled us to develop a diverse customer base, by client size, geographic origin and industry, and to deepen our global reach. Our clients range from start-ups to global leaders. Our clients also include educational institutions and government entities.
To ensure sales and marketing coverage of all our customers, we have developed three sales and distribution channels, with approximately 57% of total revenue generated through direct sales and 43% through our two indirect sales channels in 2017. We continue to selectively expand and extend our sales radius, deepen our industry expertise and relationships, as well as domain or discipline knowledge of our three sales channels. No single customer or sales channel partner represented more than 5% of the Company’s total revenue in 2017 and 2016.
Our three sales channels include:
- 3DS Business Transformation: sales to large companies and government entities are generally conducted through our direct sales channel, the 3DS Business Transformation channel. Direct sales, including both software and services revenue, represented 57% and 59% of our total revenue in 2017 and 2016, respectively;
- 3DS Value Solutions: sales to small and mid -sized companies are generally conducted indirectly through our 3DS Value Solutions channel, a global network of value-added resellers with Industry specialization. This channel represented 21% of our total revenue in both 2017 and 2016;
- 3DS Professional Solutions (previously Professional Channel): the 3DS Professional Solutions channel is an indirect channel focused on the volume market. It is comprised of a worldwide network of value-added resellers and distributors providing sales, local training, services and support to customers. Sales through this channel represented 22% and 20% of our total revenue in 2017 and 2016, respectively.
In addition to our sales channels, we continue to actively develop and expand close relationships with system integrators with industry and domain expertise.
We see Education as critical to help enable the Workforce of the Future and see 3D as an important vehicle to help improve how students learn. With respect to the development of the workforce of the future, our mission is to help transform the education system, from primary school to university to the professional world, with innovative, holistic and interdisciplinary curricula based on Dassault Systèmes solutions and technologies, thus preparing the talents for now and the future to the needs of Society, Industry and Research. Dassault Systèmes sees Education as a lifelong learning process. It begins at the school level, where our focus is partnering with academia to help develop the 21st century global skill sets needed by industries “enjoying a renaissance”. Education has been a long-term focus for us, SOLIDWORKS is a Global Leader in 3D Design education, surpassing more than 3 million seats to date. The robustness of SIMULIA’s solver technology is well evidenced by its wide-spread usage in academic research at the post-graduate level. In total, an estimated 6,700,000 students have used our software solutions. About 42,000 schools use our software in their educational programs.
Our Estimated Addressable Market Size, Market Position and Competitors
We have sized our current software Total Addressable Market (TAM) at approximately $28 billion from $26 billion in 2017. This increase reflects market growth and expansion of our capabilities. Our total addressable market sizing uses third party estimates of software domains which we analyze and compare to our software capabilities to assess whether such addressable markets are part of what we can address currently. The third party estimates we use do not take into account internally developed software by companies but only commercially sold software.
We are the world’s leading provider in the PLM market, defined as 3D Design, simulation, digital manufacturing and collaboration software. We are also the world’s leading 3D Design and Engineering Simulation software provider with our CATIA, SOLIDWORKS and SIMULIA brands. (Based upon internal analysis and external information). In the 3DEXPERIENCE market simulating the user experience encompasses a larger definition of simulation beyond that of the individual physics or multi-physics capabilities of competitors.
We operate in a highly-competitive marketplace. As we continue to broaden our addressable market, by expanding our current product portfolio, diversifying our client base, and developing new applications and markets, we face an increasing level of competition. Our competitors range from technology start-ups to the largest technology and industrial companies in the world. For further information, see Section 22.214.171.124 “Our Estimated Addressable Market Size, Market Position and Competitors” of the Company’s 2017 Annual Report (Document de référence).
Key Competitive Strengths of Dassault Systèmes
The solutions of Dassault Systèmes, the 3DEXPERIENCE Company, transform the way products are designed, simulated, produced, marketed and supported, leveraging the virtual world to improve the real world. Dassault Systèmes’ focus has been on enabling digital continuity and to do so in a much broader fashion as the entire enterprise is involved in driving successful customer experiences. This digital continuity begins with Upstream Thinking, to then Design and Engineering, Manufacturing, Sales & Marketing all the way to Ownership with after-sales. The 3DEXPERIENCE platform is a critical enabler of this digital continuity.
We believe our global market leadership and financial performance benefit from key characteristics of the Company:Dassault Systèmes is a scientific company serving science and technology for a sustainable society.
The Company’s DNA to model and represent as scientifically accurate as possible products, nature and life has given birth to a unique Industry Solutions Experiences portfolio based on the 3DEXPERIENCE platform, whose key strengths are in their scientific content and deep understanding of industrial processes.
Dassault Systèmes has had a long-standing leadership position in its industry thanks to its ability to define and create new markets, expanding from 3D Design to Digital Mock-Up, to Product Lifecycle Management and now 3DEXPERIENCE. Underpinning this market leadership has been the Company’s clear and strong commitment to technological innovation.
Important areas of investment in R&D include, among others, the 3DEXPERIENCE business platform foundations and services, Modeling Technologies (3D, systems engineering, natural resources and biosystems), technologies for product, production and usage realistic simulation, intelligent information technologies (indexing, dashboarding and data science) and connectivity technologies (for social and structured collaboration and program management & compliance). Moreover, the Company’s R&D efforts are centered on advancing breakthrough user experiences, and expanding the reach of its solution with native cloud and mobility and immersive solutions.
Dassault Systèmes maintains a long-term focus, well supported by its financial model with a high level of recurring software revenue.
We believe that sustainable market leadership requires a long-term vision which is characterized by investing in people and a long-term financial model. We have a diverse, highly-educated workforce which totaled 16,140 at the end of 2017, from 130 countries. The Company’s long-standing financial model, with a high level of recurring software revenue, representing 70% of our total non-IFRS software revenue in 2017, has enabled us to maintain as well as increase investments in critical resources in R&D and customer support even during challenging macroeconomic environments.
Dassault Systèmes’ 3DEXPERIENCE software applications, comprised of leading market brands, have been integral to our success and continue to be principal areas of investment through internal research and development as well as through selective acquisitions.
Our 3DEXPERIENCE portfolio is comprised of 3D modeling applications, simulation applications creating virtual twins of products or production systems, social and collaborative applications, and information intelligence applications. One of our key objectives is to create a portfolio of brands, leaders within their respective markets. In support of our “Social Industry Experiences” strategy, brands are focused on providing value to end-users. The Company’s portfolio architecture has been therefore designed to offer at three levels value creation: for the enterprise, for the organization or team, and for the user role.
We are benefiting from a sophisticated organization supporting our multiple growth drivers.
In connection with our 3DEXPERIENCE strategy, the Group has organized itself along three axes with: (i) a strategy to cover customer processes with an industry-focused set of offerings, “Industry Solution Experiences” based upon the Company’s underlying software applications portfolio, content and services; (ii) a domain-focused group of software applications organized by brand in order to ensure a strong focus on the satisfaction of end-user needs; and (iii) a global-local-specialized organization in order to leverage its global strengths, while at the same time ensuring a strong local proximity with customers and partners and enabling a more flexible management structure responsive to local needs at the client, partner and employee level thanks to our twelve geographic management teams.
We believe the structure of our sales, well-balanced between direct and indirect sales channels, has enabled us to develop a diverse customer base and to extend and deepen our global reach.
Dassault Systèmes has a diverse customer base by size, geographic origin and industry. Our clients range from the smallest companies in the world to global leaders, and includes clients in 12 vertical sectors: Transportation & Mobility; Industrial Equipment; Aerospace & Defense; Financial & Business Services; High-Tech; Life Sciences; Energy, Process & Utilities; Consumer Goods & Retail; Natural Resources; Architecture, Engineering & Construction; Consumer Packaged Goods & Retail and Marine & Offshore. For marketing and sales, the Company operates through both a direct sales force and indirectly through value-added resellers, with total sales well balanced between direct and indirect sales channels. We continue to selectively expand and extend our sales radius, deepen our industry expertise and relationships, as well as domain or discipline knowledge of our three sales channels.
Dassault Systèmes has had a long history of partnering, leading to the development of a resilient and dynamic ecosystem of partners, including sales and services, software development, technology, education and research and with system integrators.
Since our founding in 1981 the Company has worked in close partnership with other professionals in software development and technology, in sales and marketing, in services and in education and research. More recently, we have extended our relationships with system integrators with strong industry expertise and regional presence for both sales and service engagements. Moreover, the Group is engaging with its ecosystem, working with more than 400 software development partners building applications complementing its software applications as well as working with key technology partners. Looking to the future, Dassault Systèmes has had a long-standing commitment and is actively growing connections with academic, research and medical organizations around the world, working to use 3D to enable an improved learning environment for students throughout the world and to collaborate in accelerating the creation of new software dedicated to help the virtual world improve the real world.
Based upon our 3DEXPERIENCE platform and software portfolio, we estimate that our current total addressable software market is approximately $28 billion (TAM). Our growth drivers are centered in three main areas: Build on Value with the 3DEXPERIENCE platform, industry focus and cloud/mobile apps; Domain Leadership through Brand Value Creation and Improve Efficiency leveraging our sales channel coverage.
- 3DEXPERIENCE Platform: the 3DEXPERIENCE platform has two potential opportunities. The first is focused on being an operating platform, applicable to all employees within an enterprise. The second opportunity longer term is to become a trading platform connecting customers and partners, and in that regard in early 2018 we unveiled our first Marketplace initiatives.
- Industry Focus: through our focus on developing specific solutions for each of the 12 vertical industries we address, including our Industry Solution Experiences, processes and roles. We see opportunities to expand our presence in each of the industrial sectors we target including through coverage of new sub-segments within target industries.
- Cloud and Mobile Applications: with the Company’s 3DEXPERIENCE platform utilizing on line V6 architecture, we are positioned to grow through our Cloud and Mobile offerings. We believe that the cloud will become a growth driver with the progressive roll-out of our cloud services offering over the coming years, as well as with the release of mobile applications using tablets because of the quick implementation time and the reduction in total cost of ownership cloud provides to customers.
- Brands Value Creation: we continue to invest in expanding the coverage of each of our brands and in expanding the disciplines we address. Within a corporation, our applications now cover a large portion of the enterprise employees engaged in contributing to the end-consumer product experience, spanning from design, engineering and simulation, to manufacturing, quality assurance and compliance, and from project management, business planning & operations and service departments to marketing and point of sales. The Company’s functional coverage in total more than doubled with 3DEXPERIENCE compared to its Version 5 software application portfolio.
- Sales Channel Coverage in Geographies: we see opportunities to grow our presence in all geographic markets. In order to strengthen and broaden our global footprint, we have established 12 regional field organizations to prioritize and drive the Company’s growth initiatives at a local level.
- Acquisitions: in 2012, we unveiled our current horizon, 3DEXPERIENCE, representing a potential doubling of our addressable market, expanded our purpose and defined our Social Industry Experience strategy. Aligned with this strategy, the Company is complementing its internal developments, in particular for brand value creation, with key selected acquisitions.