think3 Washed Up? Think Again
Joe Costello is on a mission. But then, Joe Costello is always on a mission. His latest assignment, however, might just be his most challenging yet: pitting his self-proclaimed “upstart” company think3, which owns barely more than a zero share of the mechanical computer-aided design market, against MCAD goliaths such as SolidWorks, CATIA and Pro/ENGINEER. A formidable task certainly, but never count Costello out. His marketing acumen, combined with his dramatic presence (enhanced by his physical stature, offbeat wardrobe and kinetic energy), have earned him an almost legendary reputation as one of the computer industry’s best salesmen.
A private company based in Santa Clara, California, think3 develops MCAD and product data management software for companies that design everything from housewares to sports cars to industrial machinery. Costello joined the company in 1998 after high-profile stints at Oracle and at Cadence Design Systems, which, thanks to his leadership climbed from its deathbed to the pinnacle of the microchip design market as a billion-dollar enterprise. Now, Costello is hoping to work the same magic with think3.
The Revolution That Never Was
“A year ago we scaled back our sales and telemarketing operations in North America because the sales model we implemented in the year 2000 simply wasn’t working,” Costello says. “Back then we thought we could create a sort of grassroots revolution, using telemarketing and our website to grab engineers, hoping to sow seats. We did manage to sell about 400 seats of thinkdesign in one quarter alone. But it was rare that we could sell two to four seats and then build that up to 50 seats. It’s no longer a bottom-up market. We found out that there’s not much chance to build the kind of scalable business we had envisioned.”
Version 6.0 version of thinkdesign, released in 2000, was aimed at the industrial design market because that sector reflected the program’s strength at the time. “We decided to go after that market, but even if our grassroots revolution had worked, the industrial design market is probably only about 15% of the total MCAD market – not enough to sustain us.”
By the end of October 2001 think3 had laid off most of its sales and marketing staff, a reduction of some 30 to 33 employees. The company was losing money - but only in North America. It Italy, where think3 was founded, its system of direct sales/VARs was a great success.
“With its vertical marketing plan think3 went from last place in the Italian 3D MCAD market to number one. That’s a first -- no company had ever gone from being a 2D leader to a 3D leader in one country before. The Italian effort became the new model for us here in North America, as well as in France, Germany and Japan.”
On the Comeback Trail
By the summer of 2002 think3 boasted a revamped management team - including former PTC senior VP Scott Rudy, now heading up worldwide sales – and $10 million in additional capital from the venture firm New Enterprise Associates. The funding came on the heels of winning several major new customers. These customers came from the sector think3 is now aggressively courting: machine design.
Specifically, think3 is targeting mid-sized manufacturers, those with revenues between $50 million and $1 billion. “This group is the largest and also the most neglected segment because the higher-end MCAD companies go after the bigger fish,” Costello says. “This mid-sized range is also the domain of 2D CAD, which plays to our strength, since thinkdesign is a 3D system embedded with a 2D core.”
Costello explains that the latest release of thinkdesign, version 8.0, is made to order for the machine design customer. “It’s got everything you need for sheet metal, large assemblies and it’s 3D. There is a large, untouched market within this mid-sized niche – perhaps 40% or more of the mechanical design market itself. So that’s what we’re going after now.”
Whereas thinkdesign sells as a subscription package for just $1,995 per user and runs on Windows PCs, the established players such as Dassault Systemes, and PTC sell programs for much more. In addition, those programs are difficult to learn and require significant investments in extensive training whereas think3's software can be learned relatively quickly over the Web, according to Costello.
In addition to their expense and high learning curve, those high-end rivals possess another disadvantage: lack of 2D to 3D compatibility. “think3 is built on a single system that embeds a 2D core within 3D. thinkdesign can even operate in 2D mode – that’s instant payback. This is especially useful in the area of machine design, where there are so many existing legacy drawings and so much of that is used over and over.”
think3 offers another important advantage, says Costello, and that is its integrated Product Data Management (PDM) program thinkteam, which allows the capturing, organizing, automating and sharing of valuable engineering product information, including standard components, documents, part numbers, bills of materials and active projects. thinkteam is available as a stand-alone product or can be integrated into thinkdesign or into Microsoft Office. “Neither CATIA nor Pro/ENGINEER currently offers such an outstanding collaborative workgroup software tool.”
A Case in Point
Italy’s I.DE.A Institute S.p.A for automotive design illustrates the benefits of think3, Costello says. “For thinkdesign, IDEA paid only one-fifth the cost of a higher-end system, yet acquired practically the same functionality. They also estimated a 90% time savings in design modifications. One task in particular that would have taken a high-end system a week, took only a half hour in thinkdesign. This offers a great advantage to clients who need to make changes late in the design cycle, changes they otherwise afford. So they’re getting all the power and more, plus ease of use.”
In 2001, the company brought in about $15 million in revenue. This year, Costello has a goal of earning $27 to 30 million, thanks to new accounts from such customers as U.S. Filter, Buell Motorcycle and Boeing, which is one of the world's biggest users of CAD software. Most of Boeing’s vast army of engineers and designers currently use CATIA.
That may not last for long, if Costello can work his sleight of hand one more time.