Nemetschek Forms US Strategic Base—Learn What Comes Next

A little over a month ago Vectorworks, Inc., held its second annual design user conference, called the Vectorworks Design Summit, in Chicago. Just days before the show the company surprised many in the AECO software industry with the announcement that its CEO, Sean Flaherty, would be stepping down to take a new global position as Chief Strategy Officer, with the parent holding company, Nemetschek SE.

Already a member of its Executive Board, Flaherty has been helping steer global strategy initiatives for a few years. Now the “Group”—as it is often simply called internally—is setting up a new US-based company whose sole purpose, ultimately, is to further drive global growth—particularly in the United States where the company sees large upside potential. I sat down with Flaherty in Chicago to talk about his new role and what comes next.

The Interview

(Architosh:) So you will be creating a new office for the Nemetschek Group in the US. Where will this office be located? 

(Flaherty:) We will be creating the office in [Washington] DC. It is important that I have distance from the Vectorworks folks, yet I will still have a seat on their managing board. The four pillars of my new job focus on the reasons for how we run this holding company. Part of it is to be able to look at the ways the brands can work together and if there is something missing or preventing that then that is when we say, “let’s go acquire this company.”

Tell me about the PR component in the new job? 

We have PR but it is primarily directed at the capital markets. So one of the four legs of my new role is to address this limitation. In other words, once we are ready to communicate a cohesive strategy for the group, then we can go drive that message into the market.

Is this more about driving up messaging in the United States where the Group has smaller share? 

No. Industry PR will be a global effort and we will do that from the new US office but in conjunction with our capital markets PR. Of course, there are no customers at the Nemetschek Group level, so all our go-to-market strategies are at the brand level. We are not going to do traditional marketing and lead-generation because there are no customers there. That is why I label it as “industry PR.” We want to make people aware of what the Group strategy is and how the brands are going to work together to achieve those strategy goals.

Can you give me an example of Group strategy global PR messaging that can be better?

Sure, you take something like Open BIM. It comes out in pieces through the brands, but we can do better by telling the whole strategy from the Group, where we position ourselves as an alternative to the other players who don’t see Open BIM as important as we do. I think the Nemetschek Group is known for its “open standards” focus but it’s not because we have contacted a member of the press to tell that story.

So where will the people come for the new strategic team you will be building out in the new DC office? 

Well, I’m going to add strategic staff to help with the planning and particularly the M&A. Those folks will work for the strategy team. We have a kind of council that comes from the 12 brand CEOs and those folks come together as a body. We meet twice a year. Ultimately, I’d like to see about half of the Nemetschek Group staff come from the brands themselves, rather than it be a completely separate entity with its own culture. So I’m one of the very first in that line.

How many people are actually working for the Nemetschek Group company itself—the holding company, not ALLPLAN? 

It’s a small company at the top, about 25 people. So we are relatively light at the top for a holding company. Overall in the group, we ended 2015 with 1,750 employees. Yet, we will be close to 2,000 by the end of the year. So the Group is growing very rapidly.

I see that. So the Group’s organic growth rate has been around 14 percent but Bluebeam has brought the Group’s growth to something like 30 percent, right? And so you are getting to the point where in a recent analysis piece I projected approaching on or over the $100 million mark in profit. That’s sizable. 

So it is fair to say that you guys want to be pretty aggressive with your acquisitions in the short term going forward? 

Yes. We’d like to buy two or three [companies] a year…companies that you have heard of. Not the little ones.

Can you talk a little about possible investment target areas? Are there domains or industries you can mention?

Well, it’s pretty early in the planning process but that is one of the things that we want to accelerate with a strategy team. There are also a lot of adjacent industries that could be interesting to us as a group. We have this focus on BIM for buildings…so that is the “heart strategy” of the group. But then around it SCIA does a lot with bridges and tunnels, and ALLPLAN is kind of an expert in the concrete fabrication design. So markets like infrastructure are huge. So I wouldn’t say we have a “coordinated” strategy there yet, we have a “spill-over” strategy.

And then you look at Bluebeam, they have a large customer base in AEC but their technology is widely adaptable. They are attending here in Chicago at the Vectorworks Design Summit because they want to grow beyond construction and into design markets. So any industry that deals with paperwork and markups is a potential sector. So they have a focus on the Oil and Gas market sector as well.

Would you guys target companies that are operating regionally only in specific markets like say Japan?

Absolutely, whatever can extend the ecosystem around our current brand companies. Our general guidelines are published. We are looking at three acquisition targets. We have larger acquisitions—these are mature companies, with financials of over $10 million in revenue every year, with strong management that is going to stay on. That is our “classic strategic” buy. And then there are brand-level acquisitions, we are sort of accelerating, for example with Vectorworks, ESP Vision is one to expand further in the entertainment market. Graphisoft has been acquiring some distributors to continue their global expansion, and are also open to acquiring technology companies…and the third category of acquisitions is incubation and we did two incubation level acquisitions last summer: Sablono and Hartmann Technologies. Those are in cost management so they are 5D companies.

We don’t have an incubation infrastructure today, so that is a difficult acquisition category for us right now. We are used to running stand-alone companies with strong management. So when you have a company that doesn’t have any revenue, and only costs, it hasn’t traditionally fit neatly into our system. And that is the fourth big area where the strategic team will focus.

So Solibri was one of the last acquistions. Can you talk about why the group bought Solibri?

Yeah. While Solibri is great because they are a blue-ocean product; there is no direct competitor to Solibri. They are the only complete model quality checker for BIM models.

You wouldn’t consider Navisworks a competitor of sorts? 

Some people say that because Navisworks is used by the same people—BIM managers. But Solibri does quality control of the models, much more than just navigating the federated model. I don’t know if you have used it but they give you a “quality of model” score. For contract delivery you have to get that score above a pre-determined level. This can help specify what a “high quality” model delivery means for a given project, driving the entire BIM process to more concrete deliverables. And Solibri will score it for you. And that’s really the core value of the product—improving BIM model delivery. It does that process. Navisworks is really just federation of BIM model viewing. It has a purpose, but the product is actually not in the same place as Solibri.

And I would say every Open Standards based project involves Solibri. I can’t think of any customer operating in the “open standards” arena who is doing BIM that doesn’t have Solibri involved. So we have gotten into this critical step. So when you look at the UK’s Level 2 BIM requirements…it is coming down to this: you have to have a good model. And how do you verify that you do when it leaves your system?

So that is where Solibri comes in. It is the only way to have a high quality BIM process. That is a pure move into making sure “open standards” BIM is really possible.

Thanks for talking to me here in Chicago. 

You are very welcome.