The Onshape Acquisition – A Closer Look
Roopinder Tara posted on February 28, 2020 |
How could the next big hope of CAD not make it on its own?


So modern. After acquisition, Onshape will help future proof PTC products. (Image courtesy of Onshape.)
So modern. After acquisition, Onshape will help future proof PTC products. (Image courtesy of Onshape.)
Last year, we were surprised by the news that Onshape was being sold to PTC. Onshape was the next, great, modern CAD application. We were sure it would make it on its own. It was like betting on the team that won last year’s Super Bowl.

Along with news of being acquired, Onshape revealed it had 5,000 paid users. Up until then, Onshape had not revealed the number of users, neither paying users or those who used it for free.

What led to Onshape to pitch in with PTC, rather than try to dominate the CAD world on its own? Time to play Monday morning quarterback.

The Coaching

You couldn’t ask for a more experienced and capable management team than Onshape. The team had led the last CAD revolution successfully and changed the landscape of mechanical design with a “mainstream” CAD product that embraced Windows.

The Product and the Platform

Feature by feature, Onshape was able to hold its own. The first releases were a bit low on functionality, but enhancements were fast and furious. Competitors have long since stopped referring to Onshape as a toy CAD—a sure sign it had reached maturity.

But a mature CAD application needs to start a family. The others, like AutoCAD and SOLIDWORKS, had their “ecosystems” of peripheral software applications that users could apply, sometimes within the same UI, taking their application to the next level of design, analysis and manufacturing. Onshape introduced several third-party applications and was building out its own ecosystem. However, Onshape may have had trouble finding other true, cloud-based applications with which to partner. Also, a small userbase does not draw third-party applications because they cannot recoup their development costs and justify their support costs.

Sales

In the end, sales just didn’t take off the way it was expected. This could have happened for various reasons, some of them listed below.

Was the Price Right?

The cost of the premium product, Onshape Standard, is $1,500 a year. It jumps up to $2,100 a year for Onshape Professional. In just two years, you will have paid the same as a lifetime of SOLIDWORKS. “Why not just buy SOLIDWORKS?” said an industry analyst.

If you factor in the $1,295 annual subscription, which entitles you to support and upgrades, the breakeven is quite a bit longer. Let’s do the math using $3,995 as the initial cost of SOLIDWORKS and the equation below. On the right, we have the cost of SOLIDWORKS over time. On the left, is the cost of Onshape. We solve for the time (t) in years, where the costs of each are equal, to get the breakeven time of 19.5 years.

$3995 + $1295 (t) =$1500 (t)

Onshape changed its pricing several times. At first, Onshape Pro was $100 a month. In late 2016, the price went up to $125 month. In 2018, it went up to $175 per month.

Instead of paying $125 a month (Standard) or $175 a month (Professional), users had to pay $1,500 or $2,100.

Strategy

Free Version

Onshape gave away a lot for free. Was it too much? The free version of Onshape could do everything the Pro version could do. Onshape was following the GitHub pricing model. The popular programmer platform also gave away a capable free version, though it limited storage, privacy and collaborators. In the CAD world, we had Google giving away SketchUp and Dassault Systèmes giving away DraftSight.

Risking Exposure

One big catch to a free version of Onshape was exposure. Your model was visible to every other Onshape user. If you paid the premium, your Onshape models were private. Your valuable intellectual property was safe, hidden from possible competitors. Onshape leaders may have thought that would be sufficient to convert freeloaders (not their word) into paying customers.

Here’s an ideal scenario. An engineering student acquires Onshape easily enough since it is free and doesn’t require a workstation. You can run it on a simple Chromebook. There’s no reason to keep your model private, and you don’t have large models while in school. Once students graduate, they start working for a company. Models become valuable IP and must be secured. At that point, the company would be forced to pay for a premium version of Onshape for their new engineer, right?

Selling Direct

Selling directly to the CAD user, rather than setting up a reseller network, was necessary. A reseller network may have been necessary for an application that needed installation and updates, but Onshape didn’t need installation and updates were seamlessly piped in. Resellers did provide valuable training, either at the company’s location or in their own offices, as well as project support. Onshape countered with a decent set of online tutorials. For that, Onshape used an active and well-staffed online forum.

Selling direct is not only modern, but it also lets companies keep the full ticket price. They don’t have to share any of it with the reseller.

Fighting Their Own Success

Ironically, Onshape’s biggest competition is SOLIDWORKS, started by the same people who founded Onshape. SOLIDWORKS is the No. 1 professional 3D mechanical CAD software in every respect. The number of SOLIDWORKS users is now in the millions and continues to climb. It attracts new users faster than any other CAD program. A recent study showed 70 percent of new CAD users picking up SOLIDWORKS or its closest competitor, Autodesk’s Inventor. Onshape does not even register in the study.

“We’re fighting our own success,” said Jon Hirschtick in 2017 about how difficult it has been trying to dislodge users from a well-established SOLIDWORKS.

Is It the Right Time and Place for this Game?

Was Onshape just ahead of its time? Was this game being played in the right arena? In the arena of consumer applications, there is one remarkable success for business application (SalesForce.com) that all others try to duplicate. In the CAD arena, mentioning the cloud was enough to get you booed. In the post-Hirschtick SOLIDWORKS, a CEO publicly pledged full support for the cloud. It would haunt him for years. Many big customers and government agencies flatly refused to consider a product that would store models, IP and its deepest secrets to a dot.com on some amorphous computing facility somewhere, who knows where.

Not Even a Download

As pointed out early[i] and often to Onshape founders, Onshape gains advantage from, and suffers from, being online. Without a connection, you are dead in the water. Nothing works. The CAD program resides on the cloud. But if you have no Internet connection, you cannot get to it. Onshape is not loaded on your computer or your device[ii]. An enormous effort went into making a cloud-based CAD program run quickly and smoothly over long distances.

Onshape’s main online CAD competitor, Fusion, which is downloaded on your device. Fusion continues to operate when there is no connection, thereby alleviating much of the no-connection anxiety. Every other popular application—Dropbox, Evernote, Outlook, etc.—works offline. With Onshape, being altogether on the cloud was a moral imperative, determining a certain future.

Marketing

The success of SOLIDWORKS can be attributed in large part to leveraging the 80/20 rule—80 percent of the functionality, 20 percent of the price—over Pro/ENGINEER. Also at play was sheer marketing genius.

Blasting out of the gate in 1995, SOLIDWORKS appeared at every major trade show. There it was with a big booth next to Autodesk or PTC. Like the big bank building on the corner, seeing the big booth inspired confidence and created credibility. It also attracted press like flies. CAD shoppers assumed success. SOLIDWORKS took out big spreads in CAD magazines, the best promotion method of the day, with a clear message: We have arrived, we are on Windows (so modern!) and we can do everything you need. This masterful illusion that SOLIDWORKS was big, going to be bigger, had pulled even with established leaders (when it only a few users) and that you were a fool to not get with the program, was marketing at its best.


A small company can easily look big on the Internet compared to the days it had to be done with trade shows and magazines. (Image courtesy of The New Yorker.)
A small company can easily look big on the Internet compared to the days it had to be done with trade shows and magazines. (Image courtesy of The New Yorker.)
Fast forward to now. Marketing got a lot more complicated. The conferences have disappeared (Autofact, NDES, Comdex) or downsized. The two leading CAD magazines (CADENCE and CADalyst) have gone out of print, and print industry publishers struggle in an increasingly online world. All the information you got from the shows and magazines you now get online.


With conferences and magazines out of the picture, getting the message across is done with the Web and social media, but there is little consensus on the most sure-fire approach.

VARs and User Groups

To a lesser extent, SOLIDWORKS benefitted from a loyal VAR network, invariably staunch champions of the product, many of them veterans of the wars with Autodesk. It also had a network of user groups second only to Autodesk. Onshape doesn’t user VARS, preferring selling direct. In recent months, Onshape has been trying to create user groups.

Happy Ending

The story of Onshape as an independent company is told with a happy ending. The company was sold for more than was invested in it, it had thousands of customers, it is under the wings of a mature and well-heeled benefactor, and it retains its top leadership. A new disruptive technology remains alive. It took a  lot of guts to make big innovations, especially when things seemed to be going along just fine. To PTC’s credit, it watched Onshape try different approaches to sales and marketing with a new technology, approaches it could not attempt, and eventually showed its faith in the potential of the technology and the value of the team that created it. PTC has pledged to take in Onshape’s core values and form a new division that will make its present solutions future-proof.


[i]Connectivity—the Achilles Heel of Onshape, CAD Insider, Roopinder Tara, June 1, 2016

[ii] A tiny download was unavoidable on iPhones and iPads.

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