Innovation
Design for profit
New products and new markets set the stage for success at ANSYS.
By Ray Marano
Smart Business Pittsburgh | December 2004
With the enthusiasm and energy he must have displayed on his first day on the job at ANSYS in 1997, Jim Cashman darts off to retrieve a chart or an article to illustrate a point or explain something that the company's software has helped a customer accomplish.
The company's president and CEO doesn't hold back when he talks about ANSYS, of which he's been president and CEO since 2000.
"We're very, very bullish on the technology and what it can do," says Cashman. "On the other hand, we're very conservative when it comes to financial discipline. Just as we've mapped out a model of aggressively fulfilling our vision, we've also got a discipline of how we run financially."
After perusing the public company's long-term financial performance, it's easy to see why Cashman can sustain his fervor for ANSYS. In 2003, it reported $113.5 million in revenue and $21.3 million in profit, with no long-term debt and $83 million in cash and short-term investments. Moreover, the software firm has racked up 27 consecutive quarters of growth and profitability, a record most companies would envy.
That kind of performance is rare among publicly traded software companies. A 2002 study by Cape Horn Strategies Inc., a management consulting firm, found that of more than 200 publicly held software firms, only 15 had more than five consecutive years of profitability and growth.
And while strong product growth has done its part in building both the top and bottom lines at ANSYS, Cashman's tough fiscal management policies take a hard look at where to deploy the 550-employee company's resources and how to plot its future.
"We have a multidisciplinary team that every year reviews all of the assumptions, looks at all the potential streams of revenue, how quickly they're coming in," he says. "In some cases, we start staffing years in advance. But we want to do it in such a way that it doesn't look like we're betting the farm or (are) desperate."
ANSYS has sustained its profitability while funneling about 20 percent of its annual revenue back into the company to fund research and development. The firm develops and sells engineering simulation software that is used in the design of products by companies in industry segments ranging from aerospace to consumer goods.
With nearly 9,000 customers, ANSYS software is used on about 85,000 desktops and at 90 percent of the top industrial companies worldwide, Cashman says, and its use is spreading more broadly as companies in nearly every industry look for any edge they can muster to beat their competition.
Simulation software was a tool used early on in fields such as automotive and aerospace, but today it is trickling down to other industries, such as medical products and consumer goods. Increased demand for performance, miniaturization, environmental impact considerations and product liability concerns are attracting more users to simulation software. Cashman points to the example of a customer in the electronics field that pared down its development time from a year to three months, nearly doubling the time it has to sell its product by getting to market faster.
"Companies are saying they need to get out a rich stream of products to survive," he says.
And simulation software is one way they can gain that edge. It can give engineers and designers accurate assessments of how designs will respond under a nearly unlimited range of stresses, thermal conditions and operating environments. It can minimize or eliminate the need for real world prototypes for testing, replaced by prototyping on the computer screen.
Designers can look at a long list of "what ifs," says Cashman, testing models that they might never have considered in the traditional design environment. For automobile designers, for example, simulation software can gauge how well a cooling system maintains an engine's operating temperature, taking into consideration variations in materials, vehicle speed, ambient temperatures and the coolant used, all in virtually unlimited combinations.
It also allows engineers and designers to free themselves from applying only the "tried and true," Cashman says, encouraging the innovations that can provide breakthrough solutions.
Time and talent
For engineering and design teams, the demands are increasing. Downsizings squeeze more work from fewer people. The older generation of engineers is heading for retirement, and the pool of new engineering talent is shrinking.
U.S. engineering schools are turning out fewer graduates. Immigration regulations have tightened, resulting in less access to foreign engineering talent for U.S. companies. The federal government, for instance, has reduced the number of H1-B visas it will issue to foreign workers in 2005 to 65,000, down sharply from the 195,000 it granted in 2004. H1-B visas are usually issued to high-skill workers, including engineers. And competition is compressing development cycles, requiring that designers and engineers come up with new products faster to increase speed to market.
ANSYS has responded, Cashman says, by creating products that can be used by a wider range of professionals on design teams. Earlier versions of its design software were geared toward engineers at the top tiers of design teams. ANSYS software solutions have moved past dedicated computer rooms and simulation specialists to other design team members involved in product design.
"We had to get the tools so that they were not just used by the traditional high-end scientific community but could be used by the greater number of designers," he says.
That has come, Cashman explains, as computing power available to potential users has increased and the software has become more user-friendly. The typewriter, he points out as an example, was an improvement over longhand, but it had its limitations; mistakes were relatively hard to correct and editing had to accomplished by retyping.
Early word processing programs offered more options, but required the use of numerous keystroke commands and formatting. As operating systems, software and hardware improved and became more user-friendly, it became more accessible to a wider group of users who didn't need as much specialized knowledge about the program. Similarly, ANSYS has developed and improved its software to allow other than the most computer savvy users to employ it.
Cashman says there's another factor at work -- reaching a wide audience. To accomplish that, he is planting seeds in young engineers' early experience by placing the company's software in universities, giving students early exposure to its products and thereby encouraging them to use its software in the workplace.
Strategic acquisitions
While expanding its reach to students and a wider range of design pros and continuing to upgrade its software, Cashman is also augmenting ANSYS' portfolio of offerings through strategic acquisitions. The company acquired ICEM CFD Engineering in 2000, a firm that offers computational fluid dynamics software and services, and in 2003 bought CFX, a division of a British company located in Ontario and another firm involved in computational fluid dynamics software.
In 2001, ANSYS bought CADOE S.A., a French company involved in parametric analysis. CADOE develops industrial solutions that can be applied in areas such as computational fluid dynamics, structural analysis and acoustics, and allows engineers to make design decisions earlier in the product development process.
The ICEM CFD and CFX acquisitions brought capabilities for simulation of fluids and gases in dynamic environments, complementing the strong position ANSYS already held in the solid mechanics segment, its original focus.
"When we do an acquisition, we make sure first that it fits with our strategic direction and we do have a chance of getting synergy out of it," says Cashman.
And just as important is that an acquisition doesn't have a negative effect on the corporate culture. One of the keys to ANSYS' success, Cashman says, has been to encourage employees to be both candid and creative when it comes to building its future.
"We struggle very hard as we grow to maintain a family orientation here," he says. "And as we bring in new people with an acquisition, we try to make them feel like part of the family."
How to reach: ANSYS Inc., www.ansys.com
"We're very, very bullish on the technology and what it can do."
Jim Cashman, president and CEO, ANSYS Inc.
"When we do an acquisition, we make sure first that it fits with our strategic direction and we do have a chance of getting synergy out of it."
Jim Cashman, president and CEO, ANSYS Inc.
"Companies are saying they need to get out a rich stream of products to survive."
Jim Cashman, president and CEO, ANSYS Inc.
"We had to get the tools so that they were not just used by the traditional high-end scientific community but could be used by the greater number of designers."
Jim Cashman, president and CEO, ANSYS Inc.
