Being the brightest star of global CAE industry

On September 10th, 2010, I interviewed Mr. James R. Scapa, the CEO of Altair at Altair 2010 HyperWorks technology conference at shanghai.

Mr. James R. Scapa, the CEO of Altair

Mr. James R. Scapa, the CEO of Altair

On September 10th, 2010, I interviewed Mr. James R. Scapa, the CEO of Altair at Altair 2010 HyperWorks technology conference at shanghai. James talked about the progress that Altair have made in the last three years and the trend of CAE technology and application, he also gave some advices to Chinese manufacturers to improve product innovation ability through CAE application. Mr. Herbert Qi, the General Manager of Altair Greater China, and Mr. Richard Yen, Executive Director of Product Design, also joined the interview.

Pei Huang: I’m very interested in the name of ALTAIR. Why do you choose this as the company’s name?
James R. Scapa: It is really an interesting story. We wanted a company name beginning with the letter A, so that our brand can be listed at the top, my father’s company also has the name with letter A. We have several name ideas, Altair is one of them. We prefer it also because of its meaning. Altair is one of the brightest stars in the galaxy. We hope to build the company as a bright star in CAE industry.

Pei: I interviewed you three years ago in shanghai. Please give me an overview about the progress that you have made in these 3 years, globally and in china.
James: OK. I think in the last 3 years the company has continued to grow, not only the revenue is growing, but also the company is becoming more and more mature in many ways. I think we are much more established in the market place as a real leader, and I think most of our customers seem to change the way how they see us. I feel that a lot actually when I visit our customers. We are recognized at the high-end of the market as probably the leading CAE company, even though our revenues are not as large as a couple of other players, we are growing faster and our breath of our offering is really much more powerful than the competition. Many of our customers and many people in the PLM market are perceiving Altair as the leader of high-end CAE now.

Pei: What’s your view about the Chinese manufacturing industry?
James: The local market in China is huge and very hungry for good products, so, it creates a lot of opportunities for Chinese companies and international companies to basically penetrate this huge market. For the Chinese companies, it is a great opportunity to learn how to do manufacturing in the very competitive way, not just the manufacturing because China has been doing contract manufacturing for many western companies for many years. But now to do the full scope, they have to create their own products, do their own innovations, develop those products and bring them to the market. In that area, China is not yet completely competitive with the western countries, but they are rapidly moving towards it. By having this very large market at home, to sell products and continue to improve, within 5 or 10 years, China will be the power house worldwide with no question.

Pei: Mr. Qi, would you please give us an overview about the growth of Altair in China in these 3 years?
Herbert Qi: Altair is as a fast growing star in Chinese CAE market, because we have very good corporate culture, we have very stable team, and also we have the strategy to sincerely help our customers to be successful. That is the most important thing. And our business model is really helpful. Right now there are about 55 employees of Altair in China. Five years before, we had only 13 employees in China.

Pei: What‘s your view about the global CAE market?
James: There have been some kinds of consolidation in the CAE market in the last few years. For example, Dassault acquired Abaqus, and a number of small CAE players which have been acquired, including Altair acquired RADIOSS and some others. So, that‘s an important direction. I do think the global CAE market is maturing, and it is very natural that as the market matures, then you will have a smaller number of major players. Altair is clearly becoming one of those fewer companies remaining.

Pei: CAE vendors are mentioning more and more about multi-disciplinary simulation and optimization, and recently, Chinese Ministry of Science and Technology gave a very large funding project to local CAE companies to do the research system simulation using MODELICA. So, in your view, what will be the key innovation areas of CAE technology?
James: Right. All the major vendors are talking more about the multidisciplinary nature and also communicating sorts of full solution set. As an enterprise CAE solution provider, even though Altair is not so big, we offer very complete offering and that offering continues to expand and integrate more and more. I think it is a kind of natural evolution.
About key innovation areas of CAE technology, on the solver side, we have integrated all the solutions into RADIOSS, including multi-body dynamics, explicit, implicit, linear and nonlinear. So, we have a true multidisciplinary offering on the solver side. In the pre process and post process side, we also have very open and multidisciplinary solution that customers can build solutions on.
CAE technology is expanding to do more realist simulations, and the users’ experience is becoming more and more paramount. Being able to automate processes is also very important. That is why we provide HyperMath offering. Through HyperMath and our coming products for systems modeling, we will also support MODELICA.
Because that level of system modeling is important, and that‘s why Altair has been investing for many years. And I think people will find that because of the way that HyperMath is introduced, especially into our user base, where we can leverage the integration and all of the translators that we have. That’s a great power that we have. Also for doing optimization, HyperStudy leverages all of those translators, so that we can not only do optimization around our offering, our solvers and our solutions, but even other third parties’ solutions. It‘s quite important. So, I think this integrated users’ experiences is what is becoming most important, and I think we have been a big lead actually on the competition.

Pei: As I know, there are several businesses units in Altair, including car design and even some new energy products. What‘s the relationship between your several strategic business units?
James: Altair has an innovation culture. Because we have so many very talented technical people, we have a lot of ideas, and we are getting involved in so many different types of markets, so we end up with a lot of intellectual property sometimes. That’s why we have some of this spin-off happening. We have another one actually that we are looking very seriously, for liquid nature gas containers. So we have quite interesting innovation there.
One thing about how we run the company is there is a lot of communication. Richard Yen is with the services side of the business, but he hears and knows quite a bit of what‘s happening in the other areas of the business. He is primarily focus on the Asian market, but he knows a lot of what’s happening in the other markets. And that‘s kind of our philosophy is taking a lot of communication between the different areas. So, everything we do is involving pretty high powered engineering, and typically the application of simulation to drive design. So, even though lighting or a new city bus that we were doing is driven by a lot of high powered engineering and a lot of simulation.
Right now, for example, we are using HiQube, which is our business intelligent software. In the next release of HiQube, we add the capability to manage the bill of material with unbalanced hierarchy and some other innovated things you won’t find in typical business intelligent software. Because we have that, now we can actually handle math and cost data for bill of material, so, the bus project will be the first one to use HiQube to do its math reporting. These projects become the learning experiences driving where our products are going. That‘s never been done by another services company for example. So our business units are quite interrelated.

Pei: Several years ago, many CAE vendors began to release add express solution on CAD software. What’s your view about this type of solution?
James: I think there is a place for this type of solution. We have an offering on CATIA which we call HyperShape/CATIA. It can do topology optimization and we have some customers use it to do some very basic simulation on component. But really where the simulation is really making big impact is not on simple component, but more at the system level so that the idea of offering CAE solution inside the CAD system probably sounds good, but it doesn’t really work well in practice. CAE is very different from CAD. It needs much more expertise and use different technology. So, I think there is a place, but the main place of CAE is probably outside the areas that most companies have recognized.
Herbert: Our optimization solution could guide the designers to deliver better design. It’s ahead of what their model really is. We also have a computer aided industrial design solution called solidThinking Inspired used in concept design phase to finish styling design.
James: We invented completely new technology for concept design. We think that just taking a regular CAD system and putting some CAE inside is not really the right answer. Making something completely new to drive concept design is what our vision is.

Pei: In China, these are still many automotive OEMs. How could Altair help these automotive OEMs to improve their product innovation ability?
James: We are working with many of them and we are very open to work with all the customers. Some large automotive OEMs, such as Ford, GM, even FIAT, Hyundai and Toyota buy thousands and thousands of HyperWorks units.
Recently I met with the CTO and the head of Engineering and the head of purchasing of a very large US military company, they are using primarily HyperWorks as their tool, but they have thousands of engineers and only a very small number of HyperWorks units. There are thousands of HyperWorks units in one of the automotive companies. It gave them a perception of how much more CAE could be applied. It is a complete mindsets change how CAE is really driving the product innovation of those companies. I think that revolution will probably happen in China too, as the market consolidates. I think in many ways the opportunity will be bigger for us.

Pei: As I know, Richard is familiar with Chinese manufacturing companies or industries, so, in your view, what are the problems of Chinese manufacturers of applying CAE?
Richard Yen: Actually, from the working experience that I had with the Chinese OEMs, I think every company recognizes CAE is the way to go, and they actually hired a lot of employees from US and European companies. I think it just takes time. Right now what I can see is that some people recognize these tools will help, but some of the upper management still because time crunch, they need to produce the vehicles, and they need to skip some process. So they omit those kinds of CAE process to meet the design. I think it still takes time when they start to compete, and then they know the CAE is necessary to them, but right now because the market is so hot that everybody is jumping into the manufacturing immediately, they haven’t really spent much time on CAE.
Herbert: CAE application should be collaborated with physical test and gradually reduce the times of test. But in many Chinese manufacturing companies, CAE and physical test departments are still separated, and some senior managers still don’t trust CAE result and they do not think that it is necessary to do CAE, so they do not support the CAE application.
Richard: I think every company is very interested in building CAE application and process knowledge. It should be gotten the reinforcement from the upper management. They recognize it but they haven’t really reinforced it. I think it will take time because up to now, not every Chinese company has certain standard operation processes as the companies in advanced countries. Right now, a lot of companies in China are still trying to figure out the right processes of CAE application.

Pei: In most manufacturing companies there are a lot of different brands of CAE solutions, what’s the strategy of Altair to deal with this situation?
Herbert: I learned from the case of Jaguar UK. They seriously thought about reducing the types of CAE software. So they made the investigations and chose Altair as the main CAE tool. GM also uses RADIOSS and HyperWorks to replace other CAE software, so that we also create HyperMath. The idea of this product is actually coming from our customers.
James: Most of our customers are consolidating to primarily HyperWorks and then a few specialized software usually that we can call and use in a whole process, but I would say that the mindset used to be there is one CAD system, and then many and many CAE tools. Today in the more developed companies, there is one CAD system and usually with one major CAE system. So I think probably in China, they maybe don’t realize that just yet.
Herbert:They begin to realize it, so that’s why we are discussing it with SAIC. They are trying to find a strategic CAE partner. It seems that Altair should be the best fit.

Pei: Could you introduce how the partners help you to be more successful in global CAE market and especially in China?
Herbert: We find there are still so many CAE solutions and there are still some new CAE solutions continuing come out, so we cooperate with all kinds of vendors. We have a very smart business model. So far we work very well, and customers really like us to have such a kind of model. So it’s like a natural organized system. We also encourage our sales partners to sell and offer the service for Altair in China. The channel sales of it accounts for more than 30%.

Pei: Please summarize the strategy of Altair in the next 3 years.
James: First of all, we plan to continue to provide complete offering, in combination with the partner program and our own products, so that we can provide complete solution to help our customers simulate their products accurately. And then, we will provide enterprise application solution to manage engineering desktop data, and also to work in teams and manage data in team. More and more automation, math-based tools, optimization and analytics information will grow in the product development market. Finally, you will see our software as a service. I don’t’ think this model will take over, because in CAE area there are so much data, so that it will meet much challenge. However, many customers will not want to buy too much hardware, so they will want to buy some hardware and also when they have a big burst either because they have a very big project or because they want to be able to run a crash model with 2000 CPUs in one run, and they can’t afford to buy so many CPUs, so they will want to rent the CPUs on demand. So, SAAS model will become more and more relevant over the next 3 years. I think Altair will actually become more and more important over the next 3 years, even outside of product design, because some of our technologies which is the core competence of Altair will have more relevance in some other market also, but product design will still be 90%-95% of our business in the next 3 years.

Pei: Do you have any plans to offer on demand service in China?
Herbert: We are thinking about the possibility of offering on demand service seriously. I just talked with a mechanical research institute, and they were trying to do that. One of our customers don’t want to buy hardware and software by themselves, and then the local computing center buy our software and the customer rent the resources from them.

Mr. James R. Scapa, Mr. Herbert Qi (left) and Pei Huang (Right)

Editor: Sophie Shi ss@e-works.net.cn

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