The smart factory-focused partnership between software company PTC and industrial automation giant Rockwell Automation is off to a good start, but there is still lots of work to do - mostly on getting deals out of the door.
A year to the day since the tie-up was first announced, PTC CEO Jim Heppelmann was joined on stage by Rockwell CEO Blake Moret at PTC’s LiveWorx 2019 event in its hometown of Boston. Moret told attendees that progress so far represents:
A phenomenal start to what we’re doing together. We’ve already engaged in thousands of customer conversations. We’ve got a very full pipeline. That’s resulted in dozens of early wins, where customers have bet that we can add productivity to their operations, and we’re seeing it in places like Ford Motor Company, where we’re providing solutions with the combination of our technologies to help them save money and bring products to market faster.
To recap, in June 2018, Rockwell Automation invested $1 billion in PTC, in a joint push on the smart factory space that brings together PTC’s pedigree in information technology (IT) and Rockwell’s expertise in operational technology (OT).
Much has happened over the intervening 12 months, but much of it has focused on laying the groundwork. As PTC’s Heppelmann told diginomica, there’s been a concerted effort on training the Rockwell salesforce to sell PTC products. To date, 1,500 sales executives have been through this training. Then, there was the work required to integrate the two company’s products in what today is known by the rather unwieldy name of ‘FactoryTalk Innovation Suite, Powered by PTC.’
Launched in November 2018, this product aims to improve connectivity to OT machinery on the factory floor, and apply IT applications to it in order to improve visibility of the operation and productivity of industrial equipment, lines and facilities from anywhere in the enterprise. More specifically, it brings together Rockwell’s FactoryTalk Analytics and Manufacturing Operations Management (MOM) technologies with PTC’s ThingWorx industrial Internet of Things (IIoT) platform, its Kepware product for integrate industrial machinery with software applications and its Vuforia Augmented Reality (AR) product.
So which customers are biting - and in what sort of numbers? Heppelmann estimates those early wins at around three dozen in total. But it’s early days, he stressed. Even with that training and integration work out of the way, the sales cycle for FactoryTalk Innovation Suite can be as long as three full business quarters, sometimes more. And early deals are limited in scale:
In this business, it’s what we call a ‘plan and expand’ model - meaning if you’ve got 70 factories, we’re not expecting you to give us an order for 70 factories. We want to know that you plan to do 70 factories, but we’ll take an order for one [factory] to prove it to you, because frankly, we know people like to see proof-points. And then, if that one [factory] is successful, they’ll give us five more and then maybe 10 after that. Over time, we’ll get to all 70 - but there’s a timeframe to that, a timeframe that is probably a couple of years long.
That said, the two executives were happy to provide some details of what those three dozen early wins look like. According to Moret, around half of them involve the software sitting on top of non-Rockwell automation equipment - a welcome development, he said, since it provides a way for the company to be of value to companies that aren’t reliant on its hardware.
And while the initial focus of the partnership is clearly IoT-enablement and analytics, some 40% of deals so far have also included PTC’s Vuforia AR technology, which it acquired in 2015. Says Moret:
That’s been a great, fortunate surprise to us. And it really fits the theme of combining technical innovation with the expertise of people, using features like Vuforia Expert Capture to help increase the capabilities of humans. It really does expand human possibilities and shows that the most competitive factories are those that harness the decision-making and ingenuity of its workers with technological innovation.”
For context, Vuforia Expert Capture is AR technology that guides plant-floor workers wearing head-mounted devices through a wide range of operational procedures, such as setting up and repairing equipment, assembling products and performing quality control checks.
Finally, of the three dozen deals that have crossed the finish line, several have already expanded, according to Heppelmann - the first one being Ford Motor Company, which began its implementation of FactoryTalk Innovation Suite in one factory, but after just two quarters, announced its intention to use the technology in four additional plants.
In short, deals are now rolling off the combined PTC/Rockwell production line and should continue to do so. In an April call with financial analysts for PTC’s second quarter results, Heppelmann stated that the number of Rockwell Automation deals closed doubled quarter-over-quarter (albeit from a low starting point) and that nearly 300 new deals were added to the pipeline.
Many of these, he adds, come from sectors that lie beyond PTC’s traditional end markets, such as food and beverage, mining, pharmaceuticals and consumer packaged goods, and in regions of the world where PTC has limited resourcing for its smart connected operations (SCO) proposition and/or limited market presence, including China, Korea and the Middle East.
The Rockwell Automation partnership is incredibly important to PTC. The company is best known for its CAD/CAM software, and to a lesser extent, product lifecycle management (PLM), but the past six years or so have seen it make a concerted push for the IoT market.
This has involved it spending some $300 million on acquisitions, including the 2013 purchase of ThingWorx and the 2015 acquisitions of Kepware and Vuforia, as well as Coldlight for predictive analytics.
But its foray into potentially fertile new territory hasn’t come without its challenges - in particular, selling its IIoT-focused portfolio to a customer base far broader than it has tackled in the past. Rockwell Automation, with its huge resources, is a significant opportunity for PTC to do just that. So far, then, the signs are good. As Heppelmann put it in the firm's second quarter earnings call:
Our confidence around the success of this strategic alliance grows stronger every quarter and we’re pleased with the commitment and focus from the Rockwell Automation executive team plus their employees who are supporting our alliance across the globe.
The challenge now will be to keep early momentum - and confidence in the partnership - going.