PTC’s SLM Market Strategy – Built Solidly on the Intersection of SLM and the IoT (and Its Partnership with ServiceMax Doesn’t Hurt, Either!)

[With permission; excerpted transcript from an internal PTC Podcast, recorded on October 9, 2015, by Bill Pollock, President & Principal Consulting Analyst, Strategies For Growth^SM (SFG^SM).]

Foundation of PTC’s SLM/IoT Strategy

The most important component of PTC’s evolving strategy is that it is built on a foundation of powerful technology as well as its existing base of more than 28,000 customers. And upon this foundation, PTC provides a full suite of solutions to an expanding global marketplace. As a result, I believe that PTC has been able to leapfrog the competition in a number of ways:

• First, through the early recognition that the adoption and use of the Internet of Things, or the IoT, will be pervasive and ubiquitous;
• Second, that it will need to actually guide and help the industry understand the potential of the IoT. And by that, I mean, using a consultative sales approach to tell customers how to begin their IoT journey, as the customers may not actually know their respective needs themselves; and
• Third, by continuing to build its portfolio of IoT-supported Service Lifecycle Management, or SLM, solutions to provide total support for its global customer base.

However, the success of PTC’s vision will ultimately lie in the execution. That is, its ability to build such an all-encompassing strategy on a solid footing to ensure homogeneity, consistency and, ultimately, acceptance by the global marketplace.

Early on, PTC recognized that the IoT would have the most significant impact on, and fastest adoption in, Service Lifecycle Management (or SLM). In fact, PTC CEO, James Heppelmann has repeatedly said that the first use case for IoT is SLM. Why would a manufacturer/OEM want to embrace an IoT strategy? The answer is to better serve its products – and, by doing so, its customers.

Accordingly, the company took several ground-breaking initiatives to prepare itself – and its customers –through a well-planned, and highly orchestrated, mix of internal development and external acquisitions.

PTC recognized that the pervasive adoption of the IoT in SLM would lead to a succession of sea changes that would ultimately change the industry forever – quickly, completely, and with little tolerance for laggards, late bloomers or followers. Further, based on the extensive analysis of market research conducted both internally, as well as by us at Strategies For Growth^SM, PTC foresaw the coming disruptive change, and took concrete steps to prepare itself, as well as its partners, and its customers.

For example, one shining moment for PTC in the SLM space was its January, 2013, acquisition of Servigisitics.

Acquisitions of Servigistics, ThingWorx and Axeda Systems

The Servigistics acquisition, in retrospect, was a critical component of PTC’s strategy to help manufacturing companies capture the enormous revenue potential in after-market services. It also set the stage for PTC’s vision in building out a technological infrastructure, based on the IoT, to enable these firms to transition to, and realize the big opportunities coming from, an outcome-based services strategy. This is generally referred to as “Servitization”.

Over the past year or so, the main message that the market is hearing from PTC is that it is “extremely serious about the importance of the IoT” – and that it is driven to strengthen its continuing leadership role by integrating the IoT into all aspects of service.

While PTC may have surprised many industry observers by acquiring ThingWorx back in December of 2013, in retrospect, that was the move that propelled PTC into the forefront of the IoT – and all of its numerous lifecycle management applications. The IoT is extremely important, not only to the company’s SLM solutions, but also to its PLM and ALM solutions. This acquisition, more than any other, served to communicate the following two messages to the services community in a big way:

• First, it solidly positioned PTC as the global leader in each of its respective sectors within the Enterprise Lifecycle Management world (that is, Product/PLM, Service/SLM and Application/ALM, ).
• Second, it clearly put the global business community on notice that PTC was placing the future of its entire solution portfolio in the connected hands of the IoT.

The acquisition of Axeda Systems in June of 2014, further bolstered PTC’s IoT hold on the marketplace by filling in one of the few remaining gaps in the company’s ability to support connected products, people and technology – that is, the software solution vehicle by which its IoT offerings can make their way into the marketplace.

Together, the ThingWorx and Axeda acquisitions have paved the way for PTC to execute on its pervasive IoT- based strategy. But there’s more to it that finally cements everything together – namely, the partnership that PTC has just forged with ServiceMax in April of this year. I believe this partnership represents the capstone of what provides PTC with the ability to fully support the global SLM marketplace.

The PTC-ServiceMax Partnership

ServiceMax and PTC share a common vision for changing the relationship that companies have with their customers by shifting service delivery from reactive, to proactive and predictive. The two companies have highly complementary technology offerings, and the combination of ServiceMax’s innovative service execution capabilities with the proven technical information, parts management and revenue optimization solutions from PTC stand to be unparalleled in the industry.

PTC’s Heppelmann has said that “Empowering the entire portfolio with Internet of Things (IoT) connectivity, will revolutionize service. Service organizations will now be able to capture new business, increase revenue and heighten customer loyalty faster, more effectively and with more ease than ever before.” And I believe that its partnership with ServiceMax will make that happen – not only sooner, but better, as well!

What the partnership brings to PTC and its customers is both a powerful and modern cloud-based field service management solution, fully supported throughout the implementation, management and delivery of services. For ServiceMax, the partnership broadens its portfolio with the addition of service information and parts management functionalities, extends its market reach to a global base of more than 28,000 PTC customers, expands its distribution channels multifold and, most importantly, empowers its entire portfolio through PTC’s state-of-the-art ThingWorx IoT platform.

But, why ServiceMax? ServiceMax was the first complete field service software solution to help companies of all sizes manage workforce scheduling, while also providing solutions for social, portals, and analytics – all delivered in the cloud, to any mobile device. And PTC offers the “book ends” to that critically important scheduling function: that is, technical information on one end; and parts management on the other end.

This combined functionality now allows customers to directly leverage product information to ultimately transform service from a reactive product repair function, to a proactive and predictive customer success function – all IOT-enabled, with the prospects of blowing everyone else out of the water. As a result, the company’s customers can expect to fully realize the promise of predictive service – as well as the lofty goals of Servitization.

With its corporate strategy built on the solid foundation of the intersection of SLM and the IoT, we can only expect PTC – and its customers – to continue to evolve as quickly as the IoT itself!

The Internet of Things (IoT) Is Also the Internet of Payment Options

When it comes to Product Lifecycle Management (PLM), Application Lifecycle Management (ALM) and Service Lifecycle Management (SLM), everybody talks about the need to be fully connected to the Internet of Things (IoT).

It seems that everybody wants to embrace it; everybody wants to implement it; and everybody wants to deploy it. However, some organizations are more sophisticated than others with respect to their understanding of the realities of the IoT, and some are not – but the common thread is that everyone acknowledges that it is (or, at the very least, will be) a necessity for developing and designing the products that the market wants, the software that makes them work, and the services that will keep them up and running over time.

However, there is one key area regarding the IoT where the market still remains largely fragmented in its understanding; that is, how do you pay for the IoT? And this may be particularly true on the SLM side of the equation.

Let me explain.

It may be argued that each business component supported by the IoT has its own lifecycle, and that each lifecycle, in turn, reflects its own conceptualization, development, implementation, duration, complexity and ongoing need for management and support moving forward.

The findings from Strategies For Growth℠’s (SFG℠) 2014 Field Service Management Benchmark Survey reveal an industry migration from an historical premise-based SLM user market (i.e., roughly 70 percent of existing SLM implementations are described as premise-based, vs. 30 percent as Cloud-, or SaaS-based) to a Cloud, or SaaS-based, SLM user market quickly evolving over the next 12 months (i.e., 67 percent planning to implement Cloud, or SaaS-based vs. 33 percent premise-based). The numbers are surprising in their magnitude, essentially representing a sea change from the “way things used to be”, to the “way things will be” (or already are, among the more sophisticated users).

Even more surprising is the lack of clarity currently resident in the SLM marketplace, among both vendors and users, with respect to how to price – and how to pay for – the desired SLM solution. Historically, services organizations sought either an (allegedly) all-inclusive SLM solution from a single provider, or a cherry-picked custom solution from among two or more of the best-of-breed providers. Depending on the specific case (e.g., type, size and complexity, etc. of the services organization) one could easily argue the respective benefits of either type of approach.

The thing is that times have changed – but the old habits and precedents harbored by long-time services managers sometimes stand in the way of their knowledge – and understanding – of the newer ways for acquiring SLM software (and other) solutions.

For example, when asked on a non-prompted basis, how they would prefer paying for their new and/or upgraded SLM solution, 33 percent of survey respondents cited perpetual license over subscription basis (which received only 12 percent), representing a ratio of nearly three-to-one for the traditional, tried and true payment model. While 30 percent were uncertain as to their preference, one-quarter (i.e., 25 percent) stated they still would prefer to own or lease the software.

However, when the same question was asked on a prompted basis in a follow-up survey interview – essentially with the same base of respondents – the results come out virtually 180 degrees diametrically opposed.

This is important because the only difference between the two modes of asking this one particular question is very straightforward: on the non-prompted basis, respondents were simply given a list of multiple choice answers from which they were asked to check the one response reflecting their preference. The choices were perpetual license, monthly subscription, own or lease, or don’t know/unsure.

For the same question, but asked on a prompted basis, each of the two main choices were described in the following manner:

• “I would prefer to pay on a perpetual license basis (i.e., paying a large capital expense upfront, with ongoing monthly, quarterly or annual maintenance charges that could be expensed)”, or

• “I would prefer to pay on a subscription basis (i.e., where there is no large upfront capital expense required, and I can expense the ongoing maintenance payments via credit card or other payment mode)”.

In the latter case, simply by defining how each of these two very different payment models work, we were able to, first, educate the potential SLM user that they have choices; and, second, that one of the choices may represent a new alternative (i.e., to them) that they may not have thought of before. As a result, the responses to this otherwise unchanged question totally flip-flopped to 44 percent preferring a subscription basis, compared with only 28 percent preferring a perpetual license. An additional 6 percent cited no preference, and only 22 percent responded don’t know/unsure.

What this shows is that while the market may be fairly sophisticated with respect to what features and levels of functionality they require from their SLM solution, many remain fairly uneducated about the payment options available to them and, as a result, tend to rely on their historical experience in paying for any service management solution on a perpetual license basis.

Regardless, the differences between the two alternative modes of payment could not be more pronounced. Say the desired SLM solution was available for roughly $1 million. Most, if not all, of this amount would be invoiced and payable within a timeframe virtually equal to the implementation and burn-in period – with a steep initial payment required up front. For such a large capital expense, the VP of Services Operations would need to present his or her case for acquisition to senior management, including the CIO, CFO and Procurement.

The acquisition cycle would likely be lengthy, complicated and hard fought from a value vs. cost basis, with each camp arguing from its own perspective. Further, even after the implementation, there would still be monthly, quarterly or annual maintenance fees required to ensure the efficient use of the solution over time. This approach is often a hard sell for the services manager, who just simply wants to implement a state-of-the-art solution that powers the company’s services operations.

The subscription model, however, offers an entirely new way of pricing and structuring the acquisition of the solution. Made possible through the proliferation of Cloud-based technology (and promoted in a big way by Salesforce.com for most of its offerings), going with a subscription model does not necessarily do away with any of the potential inter-departmental infighting between Services, Procurement and the CIO or CFO, etc.; however, what it does do is take away much of the financial burden associated with having to pay a steep upfront cost that, for some companies, could present a major cash flow or other bottom-line-related problem.

In fact, more than one respondent to the survey reveled in the possibility of having the option to pay for a much needed state-of-the-art SLM solution on a monthly basis – on his corporate credit card – rather than having to go head-to-head with management and Procurement over an extended period of time – with no assurance of winning their case.

Of course, subscription pricing is neither a miracle cure nor a panacea for the overall costs associated with acquiring and running an SLM solution; but it affords a “new” option that takes a more readily available Cloud-based solution, and makes it more easily affordable to the marketplace.

This example clearly shows that when the market is well-educated as to its options, it can more easily make a choice regarding these important types of decisions. However, it also shows that when it comes to pricing “new” technologies, or those being offered via “new” modes of delivery, they will require a bit more education from the vendors as to what options are truly available to them, and with what specific value propositions.

Acquisition Works: The Acquisition of ThingWorx Establishes a Pattern of Connectivity in PTC’s Global Growth Strategy

On December 30, 2013, when PTC announced that it had acquired ThingWorx, the Exton, Pennsylvania-based creators of an award-winning platform for building and running applications for the Internet of Things (IoT), it should not have been a surprise. However, for those of us who have been covering the global services community for the past several years, what was most surprising was the timing of the acquisition – that is, it was at least a year or so sooner than what we might otherwise have expected!

No two ways about it, though – the acquisition of ThingWorx makes absolute sense for PTC. And, as it turns out, the timing could not have been more appropriate. As stated by PTC president and CEO Jim Heppelmann in the Company’s official press release announcement, “All aspects of our strategy to date have centered on helping manufacturing companies transform how they create and service smart, connected products.” Thus, the three primary keywords from Heppelmann’s introductory quote are: “manufacturing”, “service” and “connected”. And we could not agree more!

Heppelmann went on to elaborate, “With this acquisition, PTC now possesses an innovation platform that will allow us to accelerate how we help our customers capitalize on the market opportunity that the IoT presents.” We agree that this latest move now firmly positions PTC as a major player in the emerging Internet of Things era and, by doing so, allows the Company to continue to expand the overall breadth and depth of its historical Product Lifecycle Management (PLM), Service Lifecycle Management (SLM) and Application Lifecycle Management (ALM) solution portfolios.

PTC’s plan is to use the ThingWorx platform “to speed the creation of high-value IoT applications that support manufacturers’ service strategies, such as predictive maintenance and system monitoring”. This, in turn, would serve as a complement to its existing SLM and extended PLM solution portfolios. As such, the Company would now be able to offer its customers a means to establish “a secure, reliable connection to their products as well as a platform to rapidly develop applications for maintaining and operating them – and ultimately for finding ways to create new value.

In an ideal business world, Product Lifecycle Management (PLM), Service Lifecycle Management (SLM) and Application Lifecycle Management (ALM) would all work in concert with one another, connected in real time, and providing enterprise-wide benefits in a truly synergistic manner. Please forgive my Math background, but the equation that would best represent this ideal scenario would look something like this:

     Lifecycle Management (Product + Service + Application) x Connectivity = Business Lifecycle Management 

– or more simply stated –

LM (P+S+A) x C = BLM

More simply stated, what this basically means is that, long before the acquisition,PTC had already taken a number of proactive steps toward putting most of the individual Lifecycle Management components of the equation in place; however,since the acquisition of ThingWorx, it is now able to integrate the one last remaining piece of the puzzle to deliver a total Business Lifecycle Management (BLM) solution to its customers. This is where IoT meets Lifecycle Management!

The Internet of Things – especially as developed and applied in the way that the ThingWorx solution has evolved – represents the “cement” that can now bond the Company’s highly regarded PLM, SLM and ALM offerings together, especially for those more progressive enterprises that have already recognized the synergies and economies of scales associated with the cross-pollination of these three historically separate disciplines. The IoT also serves as a catalyst for PTC to improve each of its individual major product lines (plus any of its other related enterprise solution offerings), in and of themselves, just by the nature of its newly-acquired ability to leverage state-of-the-art connectivity into all aspects of its global enterprise solutions.

This latest acquisition also puts all of us covering the global services community on notice as to how aggressive PTC is likely to continue to be moving forward with respect to both growing its core (i.e., traditional) businesses, as well as expanding its overarching technology base and global market presence. The Company is widely recognized as being among the market leaders in each of its core businesses; however, its investment in IoT should also serve to expedite and facilitate its ability to deliver.

Throughout his presentation as part of the Company’s January 15, 2014 industry analyst Webcast, Heppelmann used highly descriptive terms and phrases to underscore the rationale behind the benefits of the acquisition including “globalization”, “collaboration”, “take the world to digital products”, “design anywhere; build anywhere”, “personality of products” and “diversity with scale”. These are all areas that PTC had been trying to build upon over the past several years that can now be fully supported and facilitated as a result of the acquisition of ThingWorx.

In his address, Heppelmann further supported the rationale for acquiring ThingWorx by identifying the major forces that PTC believes are driving transformation in the manufacturing sector today; i.e., the forces that have led PTC to make an accelerated move into the IoT era:

• External forces are reshaping the manufacturing landscape
• Products are evolving to be smart, connected and global
• Value is fundamentally shifting from product to service
• When combined, these forces will transform the industry

Taken together, these forces describe a global manufacturing sector that will begin to look very much different in the next couple or few years than it looks today – that is, a sector predicated on an emerging foundation of the three descriptors Heppelmann had cited earlier in his presentation: i.e., “manufacturing”, “service” and “connected”.

There have been many of us who follow the global services community that have been watching – and, quite frankly, wondering – how PTC would ultimately incorporate its October 2012 acquisition of Servigistics into its overall operations and solution offerings. In fact, over the past 16 months or so, many of us have felt that our (and the market’s) questions have been left largely unanswered. The Company’s July 2013 acquisition of Enigma, a niche developer of software that aggregates and delivers technical content in aftermarket service environments, also contributed to this growing list of unanswered questions. However, the acquisition of ThingWorx has changed everything – apparently, there always was a “method behind the madness” at PTC that was not really mad at all!

It would be incorrect to interpret PTC’s most recent spate of acquisitions as being little more than a series of one-off purchases made by an already established, major PLM industry player that simply wants to add to its global empire. Conversely, these acquisitions have apparently been both long – and well – thought out as part of an overarching strategy that would not only propel PTC to be the single largest provider of global PLM and SLM products and services, but, rather, totally reposition the Company as an Internet of Things leader that has leveraged the latest in state-of-the-art technology into a comprehensive – and completely re-tooled – portfolio of enterprise solutions.

For those of us who have spent most of our careers serving in either the PLM or SLM (or ALM) marketplace, the time for choosing sides (i.e., “we’re either in product management or services management”) is over! Our research has consistently shown that the gap between manufacturing and service management is diminishing, and that the ability to deliver what our customers want, when they want it, and in a consistent and more collaborative fashion will be an even more critical driver for success in the Internet of Things era (i.e., today, and in the foreseeable future).

While many of today’s manufacturing and services managers may still find it too difficult to operate outside of their respective management silos, PTC clearly understands the need for providing a technology platform to support the “new normal” for enterprise-wide collaboration. They have seen the future – and it is a future that will essentially be built around global solutions, powered by the Internet of Things, and supported by a solutions provider that understands how each major component of the enterprise needs to work in concert with the others.