Is PTC’s CEO Jim Heppelmann Playing with Fire?
Verdi Ogewell posted on November 24, 2015 | 17919 views

“Industry-First” PLM Software for the Internet of Things Era.

PLM developer PTC chose to put an ambitious label on the new version of their PLM suite, Windchill 11.0. The software suite was released during the company's European LiveWorx event.

CEO Jim Heppelmann, described it as “a step towards the closed-loop product lifecycle.” At one end, tools for the initial phases of product development such as requirements and product definition. At the other end, solutions to manage smart connected products through PTC's IoT platform, ThingWorx, including feedback of data to the product developers. In between, most of what you need is in terms of CAD, CAE or PDM.

The point is to gather data from these products while they are in use. This is to answer key questions like,  “Are the designed functions actually being used?” or  “Is the solution achieving the required results in the field?”

Armed with a PLM and IoT system that is equipped with an advanced big data analytics solution, development teams can learn how their products are used by customers, interpret and translate the feedback into innovative improvements of products and distribute it to the market again.  “Et voila,” the loop is closed!

“Half a billion invested in acquisitions, revenue down by $100 million last fiscal year, and substantial staff cuts … are you playing with fire”, I asked PTCs CEO, Jim Heppelmann. He didn’t appear to be too bothered: “The situation is much better than the headlines might suggest.”
“Half a billion invested in acquisitions, revenue down by $100 million last fiscal year, and substantial staff cuts … are you playing with fire?”, I asked PTCs CEO, Jim Heppelmann. He didn’t appear to be too bothered: “The situation is much better than the headlines might suggest.”

On a theoretical level it’s a brilliant idea, elegantly coherent and with data-driven predictability. At the same time, it is a tough task to complete.

Even if PTC has taken a number of steps along the way there are some pieces of the puzzle that remain to be put in place:

Gartner PLM analyst Marc Halpern asserts,  “There are some concerns that PTC has been spending too much time and investment in IoT at the expense of advancing its product design capabilities.”

PTC has made many acquisitions, he continues, mentioning MKS Integrity (ALM, Applications Lifecycle Management), Servigistics (Service Lifecycle Management), and in the IoT area, ThingWorx, Axeda, Atego and Coldlight, et cetera.  “Integration takes time and the question is: how much time? We are talking about complex systems and true, deep integration isn’t something that you can produce overnight.”


 Much better than the headlines suggest,” says Heppelmann.

It’s also true that PTC has gone through a period characterized by struggling to achieve a turnaround and gain momentum in their transition from being “one of the PLM developers in the crowd” to becoming a visible leader with IoT as the ace up their sleeve. Their struggle was apparent in terms of both closed business deals and developing a technologically ready-to-use integrated solution.

This company once owned the CAD world with Sam Geisberg’s groundbreaking parametrics. But so far, as a result of its reorientation towards IoT, it has not recently delivered revenue growth. This is probably  not well received by the investors on Wall Street who want quick returns.

I asked the chief of PTC about this:  “Half a billion invested in new solutions and company acquisitions, revenue down by $100 million last fiscal year and substantial staff cuts … Are you playing with fire?”

Heppelmann did not appear concerned, replying  “The situation is much better than the headlines might suggest. Reported revenues in FY15 were impacted in a positive way by the winning of more new business than FY14, and in negative ways by dramatic exchanges in currency exchange rates, by a significant change in new business mix from perpetual toward subscription (where revenue is not recognized up front when new business is booked) and by a decline in our Services revenue where we are moving more services projects to our partner ecosystem to drive higher margins and an expanding business.”

Heppelmann continued,  “So on an apples-to-apples basis, software revenue as transacted with the end customer grew about $65 million from FY14 to FY15. However, the combined effect of currency ($100M) plus mix of subscription (~$40M) and reduced amount of services (~$25M) left us with a reported revenue decline despite selling about 5% more software to end customers.  Because we don’t control currency, and because we have intentional and well-documented public strategies around subscription mix and services, we feel that FY15 was a solid but not spectacular year, all things considered. The company is in solid shape financially.”

 “We are excited.” The ThingWorx IoT platform described by Jim Heppelmann on stage.
“We are excited.” The ThingWorx IoT platform described by Jim Heppelmann on stage.

That covers the financial side of the business, but what about the technology?

”We are quite excited about developments,” Heppelmann responded, and stated that PTC  is a company with a rich tradition of helping manufacturers to optimize how they create and service products.

“The Internet of Things is a new opportunity, but it is also a natural extension of our PLM strategy. The Things are indeed products, and the reason why companies connect these things to the Internet are to improve service, operation and design by having feedback loops from products deployed in the field.  Any technology that is used to improve design, operation and service of products during their lifecycle downstream of manufacturing is “product lifecycle management” almost by definition. So we are confident, and our customers agree, that not only is IoT an exciting new opportunity, but it will also reset expectations in the arenas of CAD, PLM, ALM and SLM.  The incredible attendance in Stuttgart and the launch of Windchill 11.0 are both big proof points of this trend,” Heppelmann said.

He enthusiastically concluded:  “I wouldn’t trade places with anybody else!”


The Hardship of Pioneering … Not Only a PTC Problem

It’s always hard to be a pioneer. Timing is everything and instant success is rare. You’ve got to hit the right need at the right time and solve the right problem, and it is far from certain whether he or she who plows the soil will also reap its fruits. 

PTC competitors who makes pioneering hard: From left, SAP PLM’s Hans Thalbauer, Dassault’s Bernard Charles, Autodesk’s Carl Bass, and Siemens PLM’s Chuck Grindstaff.
PTC competitors who makes pioneering hard: From left, SAP PLM’s Hans Thalbauer, Dassault’s Bernard Charles, Autodesk’s Carl Bass, and Siemens PLM’s Chuck Grindstaff.

Currently there’s a lot of pioneering going on among all of the PLM providers. We are living in disruptive times (watch PLM TV News latest report on ENGINEERING.com).

However, the development sprawls in different directions. A market leader in terms of revenues, Dassault Systemes (DS, 3DEXPERIENCE) aims at everything from product development to end customer experiences with their end-to-end platform.

Siemens PLM (Teamcenter) has its focus on the marriage between product development and manufacturing, leaning towards the Industry 4.0 concept. 

Autodesk (PLM 360) made a big bet on the Cloud and SaaS, while PTC bet massively on the Internet of Things.

The common ground is that all these efforts are based on or growing out of PLM.

But it doesn’t stop there. Coming from the ERP and enterprise IT side, SAP is going after IoT, too. They have formed a specific development unit and department called “Internet of Things (IoT) & Customer Innovation.”

The new unit will broaden existing products such as SAP Vehicle Insights, Digital Farmingdale, Predictive Maintenance and SAP Connected Logistics.

SAP's comprehensive partner network can also build new applications with SAP HANA Cloud Platform for the Internet of Things (IoT) to help customers to connect application services, devices and sensors for machines and vehicles.

Furthermore, Oracle, IBM, Accenture, Infor, IFS, Aras PLM, Arena, Cisco, Rockwell, Schneider Electric and many, many others are aiming at IoT from different angles.

The competitive landscape through which PTC’s leader is navigating looks extremely hard.

Those who want to be winners must be willing to invest heavily; which is exactly what the PTC chief made clear.

In a number of investment rounds, Jim Heppelmann spent nearly half a billion dollars on various IoT solutions to build a market-leading platform. The most important purchases included ThingWorx, Axeda and Cold Light.

They have not been cheap to acquire. PTC paid $112 million for ThingWorx, $170 million for Axeda and $105 million for Cold Light.

In total they invested around $450 million, including the $65 million they recently paid for Vuforia.

Added to this is the internal development and integration costs. The result is that there’s no reason to doubt that Heppelmann and PTC are ready to back up their IoT commitment with substantial investments and the bulk of their resources.

ThingWorx is the center point in PTCs Internet of Things strategy  “integrating the connected world.”
ThingWorx is the center point in PTCs Internet of Things strategy “integrating the connected world.”


The Contents of PTC’s ThingWorx Platform

It’s clear that ThingWorx is an important hub in this venture.

It is a platform on which you can build and run IoT applications. It’s designed to quickly create or modify applications; for example, to adapt them to other data streams such as enterprise applications and unstructured data.

The ThingWorx platform features:

  • ThingWorx Composer: To model the “things”, create business logic, visualization, data storage, collaboration and security required for an IoT application.
  • Codeless Mashup Builder: A “drag and drop” solution to rapidly create rich, interactive IoT applications, real-time dashboards, collaborative workspaces and mobile interfaces without the need for coding.
  • Event-Driven Execution and 3D Storage Engine: To make business sense of the massive amounts of data from people, systems and connected “things.”
  • Search-Based Intelligence: This so-called SQUEAL (Search, Query, and Analysis) brings search to the world of connected devices and distributed data. 
  • Dynamic Collaboration: A  “module” that virtually brings together people, systems, and connected equipment and utilizes live collaboration sessions.
  • Business Process Management: Enables automation and orchestration of events, processes and communication across physical things, business systems and people.
  • Thing Management: Delivers a portfolio of standard and advanced capabilities to monitor, interact with and update connected things.
  • Digital-Physical Integration Hub: Provides an integration framework for both physical and digital information. 
  • Administration: A console for role based access for business and system administrators and developers.

 

Leveraging Axeda to Build an Extensible IoT Platform

Another important element to PTC’s IoT aspirations is Axeda.

This is a “hosting solution” to store IoT data in the cloud based on “security, scalability and performance.”

In a first integration effort, the work has involved hetting ThingWorx and Axeda to “talk to each other” in a seamless flow of data. The result is the ThingWorx-Axeda Integrator.

But other additions have been made by PTC's development team. Among them is the integration solution ”ThingWorx Converge”, which links all key sources connected via the Internet of Things.

For example, many features from third party players to PTC’s own internal software partners (such as Salesforce, ServiceMax and Cold Light) can be made available on a database.

This gives users the ability to create business processes based on everything from distribution, employee details, inventory, customers and predictive analysis.

The third component mention above is Cold Light, whose software platform Neuron will charge PTC's IoT portfolio with powerful capabilities for machine learning and predictive analysis of large amounts of data (Big Data Analytics).

 “The relationship between PTC and Bosch has the potential to significantly lower the entry barrier for customers into the IoT,” says Rainer Kallenbach, CEO of Bosch Innovation Software.

“The relationship between PTC and Bosch has the potential to significantly lower the entry barrier for customers into the IoT,” says Rainer Kallenbach, CEO of Bosch Innovation Software.

PTC’s IoT Alliances with Bosch and GE

Alongside software purchases and internal integration efforts, PTC has also initiated alliances to sharpen the capabilities of their IoT platform.

During the Stuttgart event, they announced the most recent of these partnerships: PTC ThingWorx and the German international manufacturing giant Bosch.

The cooperation enables the integration of smart, connected products with cross-sector enterprise processes.

Bosch’s IoT Suite M2M Connector for ThingWorx allows for technical interplay between the two platforms. With the technology stack, the vendors say that IoT developers can connect and control heterogeneous devices and systems to quickly and cost-effectively develop IoT applications for complex IT landscapes.

In contrast to the two traditional options – standard software and individual development – they claim that the joint technology offering is precise and cost effective. The Device Management component M2M from the Bosch IoT Suite provides reliable connection and control of devices, while operating a secure, flexible and transparent infrastructure for distributed devices.

Vorto, an open source tool initiated by Bosch Software Innovations and developed by Eclipse IoT, enables the creation and management of information models for integration into different platforms. 

"Building on the long-standing relationship between PTC and Bosch, this alliance has the potential to significantly lower the entry barrier for customers into the IoT. This alliance combines deep know-how in Product and Service Lifecycle Management, leading IoT software products and in-depth experience connecting and managing heterogeneous asset landscapes. The heterogeneous environments we normally encounter in the IoT require a new, very open approach. The ideal foundation for this is the open Vorto standard for IoT interface definitions, backed by Eclipse, the leading Open Source community,” said Rainer Kallenbach, CEO of Bosch Software Innovations.

Another important alliance: The new GE branded manufacturing solution, Brilliant Manufacturing Suite, leverages the capabilities of ThingWorx. The result is a hardened solution that features flexible dashboards and data analytics, integrated with GE’s plant floor abilities.  “And so, we can run our factories much more productively,” said GE’s CIO, Jaime Miller.
Another important alliance: The new GE branded manufacturing solution, Brilliant Manufacturing Suite, leverages the capabilities of ThingWorx. The result is a hardened solution that features flexible dashboards and data analytics, integrated with GE’s plant floor abilities. “And so, we can run our factories much more productively,” said GE’s CIO, Jaime Miller.

Prior to the Bosch partnership, GE and PTC announced in late September that the two companies would partner to deliver an innovative manufacturing solution within GE’s Brilliant Manufacturing Suite.

This new GE-branded manufacturing solution leverages the capabilities of PTC’s ThingWorx Industrial Internet of Things application enablement environment.

The result is an industry-hardened solution that features flexible dashboards and powerful data analytics integrated with GE’s software capabilities on the manufacturing plant floor.

The joint solution connects disparate systems – from the shop floor to the ERP – and offers a dashboard and differentiated user experience with consumer-like drag-and-drop capabilities tailored to each user’s role.

GE and PTC will align their respective global manufacturing sales and marketing teams to jointly pursue opportunities worldwide. As GE is one of the world’s largest manufacturing companies, the GE-PTC solution will be implemented within GE’s internal manufacturing plants as part of its Brilliant Factory initiative.

“The Brilliant Factory integrates engineering and manufacturing design, leverages data to run our factories much more productively and optimizes the entire supply chain,” said Jamie Miller, GE CIO.

She continued, “This solution gives us the ability to see that data clearly and easily in a format that makes critical decisions possible, so we can increase machine uptime and predict maintenance before it is needed.”


Dreams Take Time to Realize – IoT is No Exception

So, Heppelmann has gone all-in on the Internet of Things. 

The initiative is huge even for a company of PTC's size. It creates demands from shareholders to increase revenues and over time to also create profits that make waiting for results worthwhile.

As a publicly owned company (NASDAQ), the demands on PTC and on Heppelmann as president to achieve these goals is a reality that cannot be ignored.

Investors are often nervous, seldom long term and tend to be very sensitive of what is happening to their assets.

Meanwhile, progress with the Internet of Things is going the way of most other “new” technologies: it takes time for new concepts to become established, and even longer before they are transformed into complete applications and solutions that will find their way to a wide industrial acceptance and use.

Immediate breakthroughs like Autodesk’s 2D electronic drawing board, PTC's breakthrough with parametrics in Pro/ENGINEER or SolidWorks’ desktop-based 3D CAD on the Windows platform are rare.

A more realistic outcome is that success – if it happens at all - comes slower than imagined.

The good news is that if a new concept can make it through the phases in Gartner’s Hype Cycle (Technology Trigger, Peak of Inflated Expectations, Trough of Disillusionment, Slope of Enlightenment and lastly to the Plateau of Productivity) it can turn out to meet the dream of product innovation; increasing revenue and growing profits.

This makes for a dramatic period, and raises questions about where we are heading in terms of product realization, manufacturing and end customer usage.

Even the concept of what we mean by the term “products” can be questioned in the light of trends like Product-as-a-Service.

Cleary the era of life beyond PLM is approaching, and the “Big Three” (Dassault, Siemens PLM and PTC) are all struggling in a battle for dominance.

But they are not alone: Autodesk and CEO Carl Bass wants a piece of the pie, which also applies for SAP PLM’s SVP Hans Thalbauer, and PLM service providers like IBM and Accenture.  

Let’s take a look at last year’s top list when it comes to revenues related to PLM, specifically cPDm, collaborative Product Data management.

Here’s what analyst CIMdata found out regarding 2014 (direct and partner revenue only, royalties are excluded):

1) Siemens PLM $2.166 billion

2) Dassault $1.815 billion

3) SAP $1.469 billion

4) PTC $1.294 billion

5) Oracle $784 billion

ThingWorx founder and serial entrepreneur, Russ Fadel, discusses how an IoT enablement platform is key to making IoT happen.
ThingWorx founder and serial entrepreneur, Russ Fadel, discusses how an IoT enablement platform is key to making IoT happen.

The Numbers Speak PTC´s IoT Language

So, who is on the right track?

Jim Heppelmann is confident, and he has good reason to be.

Although there are many Cassandra’s speaking right now, there's a lot to be said in favor of this project.

Not the least of which is that analysts such as Gartner, ARC Advisory and IDC are entirely convinced that this is the future.

The number of connected products and devices is expected to rise exponentially, and new technology platforms on the Internet make it possible to create completely new business models (which can provide significant additional income) and give better grounds for design decisions.

But how big can it get? What is the potential in numbers?

Analysts looking at this information together with calculations from Statista and Gartner are pointing out that the M2M market (Machine-to-Machine) will be worth a staggering $62.7 billion this year alone, a figure that is a reflection of the estimated 5 billion connected devices existing in 2015.

Still, this isn’t the tsunami expected to happen within the next five years. In 2020, Gartner expects 30 billion connected devices (“things,” according to the Internet of Things terminology).

The M2M services market is expected to land at a value of nearly $200 billion by 2017.

And there's more: according to a report by the McKinsey Global Institute titled “Disruptive Technologies: Advances that will transform life, business, and the global economy,” IoT has the potential to create economic effects worth amounts in the range of $2.7 to 6.2 trillion by 2025.

Furthermore, McKinsey says that 80-100 percent of all production in any way will be linked to the Internet of Things.


Windchill 11.0: A bridge between the the digital and physical worlds

With this major new release, PTC offers a PLM system that bridges the digital world and the physical world.

Furthermore, executive vice president Brian Shepherd claims that customers benefit through an improved systems-engineering process informed by real world usage and quality data from smart connected products.

 “This benefit is extended through broad and easy access to the definitive source of truth of product information enabling richer collaboration and faster decision making,” Shepherd said. He adds that the data stream from smart, connected products opens up new worlds of possibility,  “driving new business models, creating new service opportunities and improving design decisions.”

 

“Faster, better decisons and richer collaboration.” PTC’s EVP, Brian Sheperd, claims that customers benefit from improved system-engineering processes informed by real world usage of products which then can be improved according to this type of quality data. The company’s PLM suite Windchill 11.0,  “can provide all of this,” he adds.
“Faster, better decisions and richer collaboration.” PTC’s EVP, Brian Shepherd, claims that customers benefit from improved system-engineering processes informed by real world usage of products which then can be improved according to this type of quality data. The company’s PLM suite Windchill 11.0, “can provide all of this,” he adds.

But to fully capitalize on this potential, companies need a product lifecycle management strategy equipped for this revolution.

In Shepherd’s world, this strategy needs a PLM approach enabled by a modern IoT platform.  “Windchill 11 is enabled by ThingWorx technology to integrate data from physical products, web-based resources and enterprise software systems to deliver unparalleled access, insight and value in a modern and easily consumable user experience,” he stated.

He added that, “smart, connected products are the future, but are intrinsically more complex to design, build and service.”

 “Products that once operated in isolation are now part of a connected ecosystem with extended interdependencies,”PTC vice president Shepherd concluded.


 A revolutionary connectivity,” claims PTC

PTC points out specific enhancements in Windchill 11.0 as important:

  • Role Based Apps: PTC Windchill 11 offers instant access to relevant product information based on who you are and what you need to accomplish. 
  • Windchill Search: New, multifaceted search capabilities to quickly filter and find specific product information.
  • OSLC Standards: PTC has incorporated OSLC standards for greater collaboration and connection to other systems.

But the truly revolutionary enhancement is Windchill 11’s connectivity between products and the people who design, develop, test, build and service them. The new version closes the “lifecycle” loop with IoT data captured in real time during the operation of physical products.

 “Product planning, design and quality teams can learn from the product’s operational behavior to improve features that customers use most, configure offerings to usage patterns and redesign parts or systems to improve quality and save on costs while meeting design requirements,” says Brian Shepherd.

Another interesting improvement is the growing need for effective collaboration tools in light of complex products and the increasing number of engineering disciplines involved.

There is no doubt that important features in modern product realization processes include advancing the ability to manage complete product definition and helping companies develop a process that is managed through a part-centric bill-of-materials throughout the entire closed-loop lifecycle.

Changes made in one area need to be realized and integrated throughout all the others. 

This requires comprehensive Bill-of-Materials (BOM) management encompassing system models, requirements, mechanical designs, electronic designs, software, documentation, quality planning and analysis and production information shared across engineering, manufacturing and services organizations. 

PTC claims that Windchill 11 can leverage all this.

NOT A WALK IN THE PARK. A company undergoing a transition of the kind PTC is can expect to face trouble. New competences are needed, and old ones are phased out. It’s a hard situation both for the staff and the management. A leader who wants to win popularity prizes should avoid these types of environments. However, the rewards for those who can stand tough processes of change can be huge.
NOT A WALK IN THE PARK. A company undergoing a transition of the kind PTC is can expect to face trouble. New competences are needed, and old ones are phased out. It’s a hard situation both for the staff and the management. A leader who wants to win popularity prizes should avoid these types of environments. However, the rewards for those who can stand tough processes of change can be huge.

Will PTC’s Combined PLM and IoT Venture Succeed?

During the last year, I’ve heard many rumors on the market related to problems in PTC’s organization.

This is to be expected for a company in the middle of a deep and dramatic transition. Change in itself brings along that drama.

New competences are needed, and old ones are phased out in order to create a competitive market player.

People who worked in PTC for decades have been forced to leave. New people have been recruited or have come along with the corporate acquisitions.

At the same time, the sales figures have to be sustained. It’s like a war on two fronts: on the one hand a quest to cut costs, on the other a hunt for revenues.

The pressure is intense and, right or wrong, this is a breeding ground not only for tough changes in terms of staff reductions, but also for unsubstantiated rumors, and PTC is no exception.

Furthermore, the overall effect of these tensions can negatively affect both integration and sales, said Gartner’s Halpern, pointing at a couple of examples.

“There’s disappointment at the rate of progress of enabling MKS Integrity (the ALM module connected to the Windchill suite) and PDM Link (the PDM solution in Windchill) to work well together. Additionally the biggest issues when it comes to software renewals is that PTC is way too aggressive in pushing new software sales at contract renewals. The primary business need was to extend the functionality, which was good, but now they are trapped in orchestrating these new units into functionally coherent structures,” Halpern explains.

He added that,  “there’s a difference between integration and interface. Integration is a deep thing, and my general observation in this context is that you need to be able to create  workflows without too many interruptions. Sometimes integration is the measure to obtain this, sometimes an interface is sufficient.”

But generally the Gartner analyst feels positive toward what PTC is doing.  “IoT fits well into PTC’s SLM vision,” he concluded.  “It’s a natural fit and an angle that has differentiated PTC from Dassault and Siemens.”

Will Heppelmann and PTC succeed in establishing a combined PLM and IoT platform?

My view is that they are facing a  “per aspera ad astra” situation: a project of this magnitude surrounded by zero difficulties is not a trustworthy scenario.

Tough problems will always accompany changes of these proportions. Unexpected things will happen when you’re moving in new, partly unknown directions, and the market isn’t always quick to react strongly to new ideas.

Not even if they are pure genius features.

Jim Heppelmann has a strong vision and a passion to get things done. Moving along that path won’t win him any initial popularity prizes, but will eventually lead to a great PLM/IoT solution and a stronger market position.

Isn’t that good enough?

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