India strategic to MSC's global VPD initiatives

Douglas Peterson had founded a company called StatDesign Inc. in the eighties that was late acquired by Mechanical Dynamics, where he served as vice president of product development and CTO. In 2002, Mechanical Dynamics was bought out by MSC, where he is currently serving as vice president, VPD Application Software, MSC.

MSC is the market leader in virtual product development or VPD. Its clients read like a Who's Who list in the automobile and aerospace sector. MSC is also closely associated with NASA (National Aeronautics and Space Administration) and partnered with them on the Apollo lunar missions.

Douglas seems to be quite reticent by nature but his eyes light up when speaking on VPD and computer aided engineering (CAE) or all the magical kind of products that MSC is going to roll out in the near future. Shashwat Chathurvedi of CyberMedia News caught up with him in Pune for an interview. Excerpts:

Can you briefly describe what exactly VPD is? How big is the global pie and where is MSC placed in the whole picture?

VPD or CAE can be described as simulating real-world behavior on a computer. It is heavily relied on in the automobile and aerospace industry, where traditional methods of product development can be quite expensive and time consuming. With VPD manufacturers can reduce the time to market. For instance, it takes a minimum of a month for an automobile manufacturer to conduct an extensive crash test, but with VPD these tests can be carried out on a daily basis and the results achieved immediately. Thus, VPD is used before the before physical prototypes are built. So we can validate the design, before it is actually built.

According to Daratech, the digital simulation or the VPD market is worth $2.1 billion (2004) and growing at the rate of 12 percent annually. MSC is a market leader in this segment; in fact its products are the de facto market standards in the automotive and aerospace industries.

Can smaller companies employ VPD or is it for big manufacturers only? What is the ROI that can be achieved by VPD?

Actually, the smaller companies cannot afford, not to implement VPD in their design process. The only way one can be successful in the market is to get the right products to market quickly and efficiently. That is where VPD comes into the picture, not only does it reduce the cost of development but also ensures that you have the right product at the right time. We have companies all the way from top 100 companies in the world to Tier 3, 4, 5 investing in using our technology.

One can look on the benefits in terms of ROI on internal practices, namely how much time did it take to design a product with VPD and without VPD and the cost savings associated with it. The other benefits are the soft returns, the benefit that you get by getting the product to market sooner and getting a better product by using VPD.

Automotive and aerospace industries have been the largest spenders on VPD, which vertical or industry will drive the VPD business in the years to come?

The automotive and aerospace industries have traditionally been the early adopters and leaders in using VPD technology. We do believe that they will continue to lead the charge in terms of investment and usage of VPD technology.

The new emerging markets are Bio-medical and electro-mechanical industries.

VPD is employed very heavily in the electro-mechanical market. Companies like Sony are using this technology to validate all the different mechanisms within the digital camera to ensure that they are working correctly. Bio-medical market is also adopting VPD technology in a big way, all the way from designing hip replacement equipment to designing stents for the blood vessels. For instance, companies are using VPD for testing new material properties in heart stents that are thermally activated at a certain temperature. The only way that they can come up with these innovative designs is by employing simulation technology. In fact, the standard software that is used by the bio-medical companies for designing heart stents is Marc (a MSC product).

Which are the key markets for MSC products?

Right now, our revenues is very evenly split between Asia Pacific (APAC), Americas, European and Middle East & African (MEA) markets. We are currently witnessing significant growth in the China and India region.

MSC was founded in 1963 with an initial investment of $18000, over the four decades the company has grown to over $230 million (2003) with an employee base of around 2000, will you term the growth as modest compared to other IT companies?

Over the years, MSC has relied heavily on research & development, ensuring that the products are the best in the market. Now, that our products are market leaders in the different verticals, we are ready to burst forth in a big way. There is a new team in place at MSC and we are putting everything in place. There are going to be major announcements from MSC in the near future.

Over the years MSC has acquired a number of companies, do you feel that M&A (merger and acquisition) is a better stratagem in comparison to organic growth? Will MSC acquire any company in India as well?

As MSC is a public company, we cannot talk about any specifics on M&A activity that might or might not be going on. Will we do mergers and acquisitions in the future? I positively expect it to be so.

But you need to have organic growth, as M&A by themselves don't make much sense. M&A complements organic growth. M&A by themselves don't make much sense. MSC's strategy is to have organic growth that exceeds the growth of the market place, so we are adding our competitors market share. I do expect there will be more mergers and acquisitions in new regions to expand our reach in new industries and technologies in allied sectors.

How much does Indian development center contribute to MSC's global development initiatives, how strategic is Indian center vis-à-vis other centers?

India is indeed very strategic for our global initiatives. Hence, we have brought Gerard Rego on board and a have partnership with GSSL. We have a roadmap going forward in terms of development in India. We will be growing our Indian staff by over 50 percent by the end of 2006.

The reason we have chosen India is simply because we want to attain our growth targets quickly. India fits the bill, as there is a highly skilled workforce in the same space we are in. India is the place where you go if you want to build up a team of highly skilled professionals quickly. Now that we have a core development center in Pune, there could be more work done out of India like technical support, services, etc. We are looking at India to be the global hub in product development in the CAE space. We have over 100 members right now in India and we are looking at increasing those numbers soon. We are quietly putting every thing in place here and the coming months will see a lot of action from us.

India is renowned for its prowess in the IT Services domain. There is a large workforce of engineers, thanks to premier institutes like IIT (Indian Institute of Technology), etc. How does MSC intend to tap this skill force?

There is indeed a lot of engineering academic talent in this country, which is of immense use in the automotive and aerospace industry. We are going to work very closely with all the major institutes like IITs, etc. We will ensure that we leverage the talent that is available here and also create a veritable talent pool that will help our clients and other companies and compel them to come to India.

Is MSC pitching its product development tools to Indian domestic companies as well?

Of course, our VPD applications are targeted for Indian companies as well. In fact Tata Motors is a very valuable client for MSC. India is an important emerging market like China. A lot of automotive and other design related work is being and will be outsourced to India. As our products are de facto industry standards in quite a few verticals, we would like the companies to adopt the same technology for their benefit as well.

MSC has collaborated with NASA for development of space technology; will it do so with ISRO (Indian Space Research Organization) as well?

ISRO is also a client of MSC and is using VPD applications as well.

MSC is being restructured with a change in the management team, what is your take on it?

From my personal experience, I can say that the new board members have made positive contribution to the company in terms driving the market thereby creating value for the shareholders.

MSC started a new branding exercise (April 2005) in which the company has rebranded its universe of software products into three lines: SimOffice, SimDesigner, and SimManager, how has this strategy paid off till now?

There is a lot more to come in this area, we have some big plans. We have a very aggressive marketing plan for the next six months. Till now the market is very excited with our initiatives. It is really changing the way simulations are done.

Do elaborate your partnership with hardware companies in the industry like IBM and SGI.

IBM is a partner with us in the development of SimManager for our customers. While one of the kernels used in SimManager came from an acquisition we did from SGI around six or seven years back. I really see IBM, SGI, Sun as our partners. VPD applications like Nastran can be very high computing jobs. As these companies are developing new high-end computing platforms like grid computing, we partner with them to ensure that our applications like Nastran work efficiently on these systems. We can then go to the market with a robust hardware and VPD applications platform.

Can VPD be used by the service sector?

Indeed a lot of service companies that work with the manufacturing units very heavily use our technology. There are companies that provide engineering services for the OEMs (original equipment manufacturer) use our solutions. There are big engineering service companies like MSX and Quest that extensively use our solutions.

Views on India?

Well, this is my first trip to India and I have enjoyed immensely till now. But, we also have a lot of people from India working with our organization throughout the world. Thus, you could say that I have a lot of exposure to India in a broader sense. What I love about Indian developers is that they understand and really get into the technology thus they are invaluable to MSC. We intend to leverage this talent in the future.

Reasons for choosing Pune?

If you look at it from our viewpoint a lot of companies that are in our (product development) space are doing work in Pune. The city also has a larger pool of talent that we can leverage. In terms of development and training that fits into our space, we felt that we could do that more efficiently in Pune.