PTC’s IoT Strategy: Realizing the Connected World

PTC LiveWorx 2015

PTC’s IoT Journey

Since James Heppelmann took the helm at PTC in October of 2010, he has been hard at work, challenging the status quo among top-tier PLM vendors and seeking to redefine PLM and expand its influence beyond its traditional engineering boundaries. The comprehensive strategy has had multiple threads and terms, starting with service lifecycle management (SLM) and the notion of product “servitization”, and evolving recently to the Internet of Things (IoT). Mr. Heppelmann wants to keep the “things” PTC’s customers design, operate, and service at the center of everything PTC is doing.

This well laid out strategy was supplemented with a rapid succession of technology acquisitions. A quick chronology of the last five years or so might be instructive.

PTC kicked off a buying spree to expand its portfolio in the area of SLM in 2011 by acquiring warranty management software company 4CS, and, a year later, Servigistics, which itself was a potpourri of companies, including Xelus, MCA Solutions and Kaidara. The SLM consolidation continued in 2013 with the addition of Enigma, and culminated with a partnership PTC has forged with ServiceMax.

The second wave of acquisitions, augmented by considerable marketing efforts, expanded PTC’s portfolio into the area of the IoT. It began with IoT platform company ThingWorx in 2013, followed by the addition six months later of complementary assets from Axeda in 2014 and, most recently, machine learning and analytics company ColdLight.

Along the way there were additional acquisitions of technologies that support the development of IoT “things”: application lifecycle management company MKS in 2011 and Atego, a software engineering tool suite, in 2014.

You could say that the SLM journey had actually begun much earlier, in 2005, when PTC acquired technical publishing software Arbortext. Unfortunately, this acquisition went underutilized and didn’t get the opportunity to demonstrate its value until Mr. Heppelmann took over.

Throughout this journey, PTC remained consistent and steadfast. Some of these acquisitions might have raised a few eyebrows among Wall Street and industry analysts (including yours truly), but now they represent a rich portfolio of tools, capabilities and customers that form a cohesive vision.

Over the years I have had many conversations with PTC’s leadership about the company’s strategy and roadmap to achieve market leadership in SLM and industrial IoT. The goal of this article is to offer my perspective about the company’s IoT strategy the way I understand it.

What’s Driving PTC’s Quest for IoT Leadership?

The Outcome Based Economy. Product companies are shifting from competing through selling products and support services, to delivering services that are aligned with customer business models and produce measurable results that are important to the customer. Product-centric companies are transitioning and adopting business models that couple both product functionality and service offerings.

The Networked Economy. The outcome-based economy is enabled and enhanced by connectivity. Connected assets afford brand owners and service organizations proximity to the customer and point of service, better understanding of both products and customers, and more efficient ways to reach and service them.

In the connected economy, everything, and, in fact, everyone is connected. Products and humans are roaming IP nodes in an ever-present Internet cloud.

In the outcome-based connected economy, products are no longer defined solely by their physical or even operational manifestations. Physical products are just nodes in a network of operations, processes and outputs.

This is the direction in which PTC’s customers, most of whom are manufacturers of complex, highly engineered products, are heading. PTC wants to give these companies the design, operations management, and service tools to capitalize on these changes and achieve ”product and service advantage in a smart, connected world.”

Strong Momentum

PTC is executing a deliberate strategy to position IoT as the infrastructure and the digital backbone that bridges products and services. PTC supports this strategy through multiple technology building blocks and domain expertise: the ThingWorx IoT platform, service management capabilities (Servigistics and ServiceMax) and connected service (Axeda).

PTC is leveraging its brand and a loyal customer base that is ready to exploit the promise of the Industrial IoT. For now, most IoT initiatives are driven from technical organizations: engineering or service, in which PTC has a strong presence. In the long run, the center of gravity of IoT may be changing, but for the time being PTC has the unique advantage.

While PTC’s vision has special focus on SLM, the overall IoT strategy remains horizontal, open and extensible, and strives to support expansion into adjacencies such as manufacturing operations and energy management. PTC recognizes that expanding beyond its core PLM and CAD base requires deep understanding of business requirements and culture, technical expertise and, above all, brand recognition and trust. So it is taking a pragmatic approach by relying on partners, integrators and other value-added entities for long-term growth.

ThingWorx vs. ERP

Although connectivity is often at the heart of IoT conversations, and many choose to illustrate the potential value of the IoT by counting connected devices, the business value is not in connecting and managing devices; these are merely the platform. The value is in shortening the latency of context-rich information thereby helping companies to make better decisions faster.

Indeed, unlike many IoT vendors and pundits, PTC emphasizes the value of device-generated information: “ThingWorx Converge will provide companies with an IoT hub to offer a more efficient and secure way to access, collect, organize and expose the data, events and services of those things. This ability to make the value of smart, connected products broadly available throughout the enterprise allows companies to more extensively realize the benefit of their investment in IoT initiatives.”

Sounds a bit like ERP, doesn’t it?

Of course, PTC’s isn’t going to replace ERP. It wants to give manufacturing companies a platform to IoT-enable existing enterprise systems and business processes, combining device-generated data with other information to deliver new value.

But getting the message across and walking this path will not be without its challenges.

As connected devices become the norm (and connectivity in itself – a commodity), the center of the product lifecycle universe will no longer be the PLM software as we define it today. Data will be scattered throughout the enterprise, and, in fact, portions of the critical lifecycle data will not even generated by IoT devices. PLM—as a process—will become a federated system of networked tools and data repositories, primarily: PLM, CRM and ERP.

With this transition and continuing maturation of IoT, there will also be a gradual shift in the way corporate management utilizes device-generated information to improve decision-making, leading to greater involvement of parts of the organization PTC does not have the relationship it has with engineering and the service departments. This will be a challenge for PTC, especially when facing the well-entrenched ERP companies. PTC’s close collaboration with Michael Porter will certainly be an important asset here.

Service Lifecycle Management

Equipment service is often considered the “killer app” for the Industrial IoT and its strongest and best articulated use case.

Expect to see more integration between ThingWorx and PTC’s “legacy” products. I do not expect to see much in the way of the integration of the different SLM assets and incorporating them under Windchill, but the recently minted partnership between PTC and ServiceMax has very good opportunity to succeed where Servigistics might have disappointed.

Predictive Diagnostics

There is rarely a discussion in which the promise of predicting and preventing equipment failures before they occur isn’t touted as the pinnacle of service lifecycle management.

The ability of the recently acquired ColdLight to deliver the holy grail of predictive diagnostics is promising, but yet to be proven. The company’s Neuron data analytics technology has reportedly been applied in various retail, media and financial services applications, but the capacity to provide actionable failure analytic for complex equipment in real-world industrial environment is yet to be demonstrated. At present, it appears that the software requires a significant level of professional services to create and maintain predictive models cost effectively.

But the topic of analytics is much broader than ColdLight’s predictive technology that is likely to improve over time. High fidelity enterprise-level decision making process must incorporate a broader range of multidisciplinary data, much of which is stored in the enterprise ERP system, out of the reach of the IoT platform, which brings us back to the earlier discussion on ERP and enterprise data ownership.

What’s Next?

The center stage placement of ThingWorx (where one might expect to see Windchill) can be confusing to business owners who might infer that PTC’s strategy will cannibalize resources from the rest of the product portfolio. I don’t believe this will be the case. I’ve been exposed to what the company is cooking up for its next generation technology and, while time will tell how well it executes against it, the vision is consistent and compelling. As well, PTC relies on revenue from existing products, especially as the SLM and IoT businesses represent only a fraction of the company’s overall product revenue. Moreover, PTC IoT growth strategy is based on the company’s strong base of manufacturing customers.

Now, that the main strategy has been laid out and with key technologies and partnerships in place, PTC should be ready to leverage the underutilizes arrows in its quiver, among them Windchill Quality Solutions (formerly Relex), Arbortext and, depending on your point of view, Integrity (formerly MKS). PTC should leverage these software assets, talent and experience to make the IoT-centered SLM vision clearer and easier to realize.

Final Word for PTC Customers

If you are a PTC customer, consider the following:

  1. If you have not started to evaluate service lifecycle management as a pivotal element of your product strategy and the role of IoT technology in enabling advanced SLM, now is the time to do so.
  2. IoT in itself is not a business strategy. It’s a technology architecture to improve and accelerate product visibility, create information rich context for making informed decisions, and improve operational efficiency. IoT is the foundation for new business models.
  3. Seek a solution partner with a clear and comprehensive vision of industrial IoT as a foundation for product lifecycle strategy and enterprise decision-making. Moreover, it should have deep domain expertise and understanding of its business processes.
  4. IoT platforms such as ThingWorx are designed to allow quick prototyping and experimentation to test and demonstrate business models and options, assess their ROI, and then scale rapidly.

Design For IoT or Design By IoT?

Connected devices offer a way to complete the product lifecycle loop and get detailed—and real time if needed—feedback from the assets in field to enrich the understanding of customers, products and their complex interactions. I sometimes refer to IoT as the means to enhance both customer and product intimacy.

Companies must incorporate IoT thinking in product design. First, design the prerequisite instrumentation, connectivity and security features into your products so they can create reliable, secure and cost effective IoT “things”. Then, use the detailed understanding of products and customer interactions to improve product design.

Is it design for IoT or design by IoT? PTC wants to help you achieve both.

Image: PTC LiveWorx 2015