PTC customers - still spending, but ramping up over multiple years

Recent months have seen a number of enterprise tech firms flag up a new hesitancy when it comes to purchasing decisions being signed off.

Additional layers of approval have become the new normal as the macro-economic crisis creates an atmosphere of ultra-caution and ensuring that every ‘I’ is dotted and every ’T’ is crossed. 

PTC Inc, the new parent company of ServiceMax, is the latest to provide some insight into new buying patterns as the firm announced its Q2 numbers that saw revenue rise year-on-year by seven percent to $542 million. That’s healthy enough, but CEO Jim Heppelmann pointed to a shift in client behavior: 

In our core business, we saw a higher mix of ramp deals from companies choosing to proceed with large strategic programs, but wanting to ramp their deployments over multiple years.

This isn’t necessarily a bad thing, as it does indicate ongoing commitment, he added:

We landed a large and interesting PLM [Product Lifecycle Management] and ALM [Application Lifecycle Management] order from a European automotive OEM that included extension options for Windchill and Codebeamer to contemplate our relationship spanning 20 years. The fact that an automotive OEM wants to understand commercial terms over the next two decades, speaks to how sticky our software is. Clearly, they expect to have it for a while.

As for PTC as a whole, with ServiceMax now part of the portfolio, the product stack holds up well, he said: 

PTC has expanded our clear category leadership role in PLM, which has become a must-have technology backbone for digital transformation at industrial companies. The addition of ServiceMax further extends what was already a unique portfolio of interconnected digital thread capabilities across the full product life cycle.

With the firm’s LiveWorx conference coming up next month, expect much focus what Heppelmann calls PTC’s “model-based, closed-loop digital thread”, which he argues is both “very powerful” and “pretty unique”, allowing the firm to cross-sell in a lot of directions:

We like this idea of a lot of products that are very compelling, that could be sold stand-alone as the tip of the spear, but then integrated into this digital thread so that they could be better. Better together, but you don't have to buy it all. If you want to use ServiceMax with some other PLM system, fine, we know how to make that work. 

This is about meeting customer needs and expectations, he said: 

You have to be that way, because it's practical. Customers don't throw out all their technology and switch lock, stock and barrel. They look at what they have and [what] they want to systematically, over time, upgrade. So, we get in there, we might win with Windchill, and then we might win with Codebeamer, and then we might introduce ServiceMax. That’s kind of how we've built our whole growth story over the last decade, by really perfecting these cross-sell motions.

Customer wins

Heppelmann cited a couple of use case examplars to back up his thesis, beginning with  Fresenius Medical Care, a provider of products and services for individuals that need dialysis treatment: 

Fresenius produces dialysis machines in over 40 manufacturing facilities around the globe and also runs a network of over 4,000 dialysis clinics. There's a lot of inherent complexity in their product life cycle. Fresenius saw the opportunity to bring down treatment costs and improve their products by building a digital thread workflow across their engineering, manufacturing and service domains. Windchill was selected as the backbone to bring product data together and enable better collaboration across internal groups and with external partners.

Fresenius subsequently standardized on Creo and has since adopted ThingWorx for smart connected products and for smart connected factories. Currently, they're exploring how they might leverage ServiceMax in that digital threat. Fresenius is a great case study that shows the breadth of what PTC technology can enable.

Another case in point is Komatsu, a a Japanese multi-national corporation that manufactures construction, mining, forestry and military equipment, as well as diesel engines and industrial equipment, such as press machines, lasers and thermoelectric generators. Heppelmann pointed to the firm’s wheel loader: 

It’s big and yellow and weighs 30 tons. Using Creo and Windchill Komatsu engineers and manufacturers' equipment that customers use for decades in the field. Because Komatsu's after-market service business contributes significantly to their overall financial results, they've been investing in software to make the services business more efficient and productive. Komatsu has been using PTC service life cycle management software, including Servigistics, since 2006 to optimize spare parts inventory, and Arbotex since 2015 to streamline the availability of service instructions.

Last year, Komatsu expanded their investment in service technology by selecting ServiceMax. Komatsu purchased software independently from PTC and ServiceMax when we were still separate companies, but represents a good example of the type of customer where we think we can be successful cross-selling, because they really appreciate that 3D model-based digital thread. Komatsu is also a poster child for my point that for every customer that ServiceMax currently has, PTC has ten more that look like them. Companies that use Creo and Windchill to produce products that have long service lives.

My take

Much more to come from LiveWorx next month when diginomica will be on the ground at the conference in Boston.