Dassault Systèmes’ 2023 Analyst Days: The Strategy Is to Focus on Experiences, Outcomes, and Health

Dassault Systèmes expects to hit its 2024 targets in 2023 with Year-over-Year (YoY) revenue up 9%, 15% growth in subscriptions, and 22% growth for 3DS and Cloud. The main shift is to transition from a platform and solutions company (i.e., discrete products) to a “virtual twin experience company.” In the future, this could mean that Dassault becomes more of a content entity (i.e., IP enablement, coordination, facilitation); however, the pace of adoption is heavily dependent on the acceptance, readiness, and skills of customers. Its central strategy is to leverage deep vertical market expertise to support outcome-based business models, and more specifically, experience as a service, rather than the data or applications behind that.

The company has 12 vertical markets that map to one of three business pillars: 1) manufacturing (70% of software revenue); 2) life sciences & healthcare (20% revenue); and 3) infrastructure & cities (10%), where Dassault maintains a challenger position.

Most recently, for the first time, the company’s Life Sciences and Healthcare business revenue outranked Transportation & Mobility. Furthermore, 1/3 of new customers are cloud-based, meaning broader unfettered access to 3DS capabilities, and the potential to support other aspects of the customer’s business.

Dassault Systèmes is creating a future where customers can subscribe to a twin, shifting software revenue dependencies from the number of users to the success of the customer. This sentiment is generally shared across 3DEXPERIENCE platform components (CATIA for Design, DELMIA for Manufacturing Execution System (MES), plant, and process simulation, Apriso for Manufacturing Operations Management (MOM), ENOVIA for Product Lifecycle Management (PLM), SIMULIA for product simulation, and NETVIBES for analytics, etc.). The significance is that the product lifecycle equation is expanding from a single product focus to multi-domain requirements that consider software/application lifecycle management, after-sales service/support, and recyclable materials/processes that engender circular—rather than linear—product development and lifecycle management.

The most strategic opportunities that will fuel that company’s 2040 vision are in quantum computing, new space endeavors, green battery development, synthetic biology, Three-Dimensional (3D) printing organ support & virtual twin of humans, Artificial Intelligence (AI) and precision medicine, and MODSIM (modeling + simulation) for a range of topics, including infrastructure and smart city innovation. The essence of MODSIM is to not just to model the past, but to simulate the future across product and process. French automaker Renault, for example, engaged with 3DS to model and simulate the business impact of raw material cost volatility to optimize its production schedule. MODSIM enables concurrent design and engineering, and is already allowing 3DS to win back business from Ansys.

Dassault grew from US$3.5 billion in 2018 to nearly US$6 billion in 2023. The company projects a US$45 billion Total Available Market (TAM) and US$100 billion Potential Available Market (PAM) if it were to lead in every market it entered. While the life sciences business has seen strong growth following the acquisition of Medidata in 2019, manufacturing remains the big base. For infrastructure and cities, the thesis is that autonomous electric mobility requires new expertise and development on infrastructure and systems, such as Electric Vehicle (EV) charging. The dominant approach across the board is to define the problem statement through the lens of each industry to diversify overall company growth alongside natural levers, including the 3DS platform and cloud.

At a high level, there are three big places people spend time and money that Dassault Systèmes is positioned around: 1) health, 2) home, and 3) work. The opportunity for 3DS is within and across these domains, and accelerated by change agents including but not limited to:

• Sustainability, Urbanization, and Development: Including Do-It-Yourself (DIY) and custom high-rise building at scale
• Software: As a strategic growth lever for 3DS, customers, and the customer’s customer
• Life Sciences: Maximizing health span (quality of living) in addition to life span (duration of living)
• Science-Based and Model-Based Systems Engineering (MBSE): Foundational to the company

There are potential development opportunities in Application Lifecycle Management (ALM) and Simulation Lifecycle Management (SLM) to be competitive with PTC and Siemens, but Dassault has several irons in the fire, including 12 of its own data centers via cloud brand OUTSCALE. Dassault also has a clear, central environment for collaboration for customers and their suppliers using shared data models in the cloud—via the 3DS platform. For example, optimizing factory layout designs in collaboration with suppliers, or modeling 5G in factories to determine the efficacy and deployment options ahead of virtual commissioning are tasks that could be performed via the 3DS platform. Dassault does not lead in every market, but it wants to. To do this requires a combination of organic and inorganic growth, making this its most pressing strategic task to prioritize.