Main content

Putting "more wood beyond the most important arrows" - Neil Barua's priorities as he steps up as PTC CEO this month

Stuart Lauchlan Profile picture for user slauchlan February 1, 2024
As the CEO succession reaches its end game, there's a long game plan in place to help industrial manufacturing customers transform in an increasingly complex market.

An image of Neil Barua
Neil Barua

This month sees the conclusion of the leadership transition at PTC as CEO Jim Heppelmann fully hands over the reins to Neil Barua, former CEO of ServiceMax, which was acquired in late 2022. Barua formally picks up the CEO role in two weeks time, but took the lead on PTC’s quarterly earnings call yesterday. 

He inherits a company reporting solid numbers in a tough market. Revenue for Q1 rose 18.1% year-on-yer  to $550.21 million from $465.91 million, while profit was down  from $75.04 million to $66.39 million. Commenting on the current sales environment, Barua said: 

It's been a sluggish sales environment for a number of years now, particularly around the approval cycles of our customers. It's just taking a lot, and it has been for multiple years. Nothing has changed worse or better since I've been here during the transition time.

On the analyst call, Barua reflected on what he’s learned during that months-long transition period as CEO Elect:

The biggest learning I've had relates to what I am seeing in our customer base and how much we could do for them. Digital transformation has clearly taken hold with our customers, around the world, and finally is here to stay. Industrial companies can't have manual, antiquated or disconnected workflows if they want to be competitive in today's complex world.

Our customers need to modernize the portion of their operations that spans from design to manufacturing to service. Importantly, our core products are the essential foundation for that. Industrial companies are still at early stages of leveraging product data effectively across their organizations, but they have started to move on in a meaningful way. We see the opportunity the same way our customers do. Digital transformation is a journey. Our broad portfolio provides a lot of opportunity to help our customers be competitive, irrespective of soft PMIs and economic cycles


In terms of priorities, Barua picked out a focus on evolving customer needs and the highest return-on-investment opportunities: 

We will be disciplined and unemotional when it comes to prioritizing our time and resources on the products and product integrations that will create the most value for our customers. To use an analogy, we plan to put more wood beyond the most important arrows to ensure we drive the best outcomes for our customers and PTC.

PLM (Product Lifecycle Management) systems have evolved to meet the challenges of more complex needs of industrial manufacturing companies, he argued:

Industrial companies are facing competitive pressures and are looking for new ways to drive productivity and efficiency as they digitally transform. They also re-architect their workflows to streamline inefficiencies and drive collaboration with their manufacturing, quality and service operations. Again, it is the PLM system that takes center-stage as this happens, because the PLM system is becoming the system of record for product data, and that makes the PLM system the epicenter for digital transformation of product companies. Increasingly, PLM systems are being leveraged as the backbone for sharing product data across departments, as well as with design and supply chain partners. 

He cited Volvo Group as an exemplar: 

[It] uses Windchill to manage their platform product strategy, which leverages modular components. The sophisticated configuration management capabilities of Windchill have enabled the Volvo Group to produce more product variants while at the same time lowering their unique part count, which is good for the Volvo Group's top line as well as their bottom line. Industrial companies have come to understand that their ERP systems are inadequate to handle these types of complexities. They now view their PLM systems as strategic and spending on PLM is in focus. 

ServiceMax cross-sell

As to his alma mater, Barua pitched ServiceMax as a driver of cross-sell opportunities for PTC over time: 

As a system of record for high-value, long lifecycle assets in the field, ServiceMax significantly enhances our SLM or Service Lifecycle Management portfolio, enabling PTC to now offer the industry's first truly comprehensive solution for Service Process Optimization.The opportunity set here is large, and this segment is under-penetrated today, with most of our wins replacing homegrown or stretchy-based systems.

ServiceMax has approximately 300 customers and PTC has approximately 3,000, with the exact same profile. Industrial companies that produce complex, high value assets. This provides us with clear cross-sell opportunities and we have now aligned the PTC sales teams with the ServiceMax sales specialists to go to market together. 

There are examples of this cross-sell in action, he added:

This past quarter, we won a very large industrial manufacturing win at ServiceMax, an over seven-digit-plus deal that, quite frankly, I was trying to win for five straight years at ServiceMax on our own, unsuccessfully. And we were able to take this deal down because the customer has Creo and Windchill. And they, over time as they implemented ServiceMax, want the asset field record, the system of record of the asset, to actually flow back to their PLM system.So the combined solution and the correlation point of a customer with Windchill with long life cycle assets that they produce is a really nice make-up. 

So, momentum is being built, but will take time, he argued: 

Keep in mind that this will take some time to develop because sales cycles for this type of product are long, given they’re new implementations for the most part.

Playing a long game can also be seen with PTC’s strategy of encouraging customers to move to a SaaS model. Barua explained: 

For customers, moving to SaaS enables a different collaboration paradigm that brings significant productivity benefits, making real-time, multi-user collaboration possible. Beyond the productivity benefits, customers also want the lower total cost of ownership and improved security posture that SaaS offers. As we have stated previously, we see this as another 10-plus-year journey for our customers.

We have visibility to solid growth in our core on-premise business; and therefore, don't need to rush things and force customers to move before they are ready. The opportunity will be with us for a long time. Therefore, our focus is making sure our SaaS transition is done with an optimized customer experience.

My take

It is a great time to be at PTC because we have a clear path to unlocking a lot of value.

As PTC enters its next phase, Barua has both challenges and opportunities ahead of him. We look forward to tracking progress over the coming years. There are undoubted prizes to be taken out there in an evolving industrial manufacturing sector ripe for digital transformation. 

A grey colored placeholder image