PTC Prepares for ‘Inevitable’ Future of CAD by Purchasing Onshape, Part 230 Oct, 2019 By: Cadalyst Staff
How will the acquisition affect the market — and will it spell the end of Creo or Onshape?
Editor’s note: Click here to read Part 1 of this article.
What Factors Drove the Acquisition?
Hirschtick expects the acquisition will help Onshape broaden the scope of what it delivers to customers, and enable it to reach more customers. The latter is of particular importance because Onshape has not been able to build up a large customer base on its own; the Onshape solution is currently said to have “more than 5,000 subscribers” globally.
According to Heppelmann, the most important driver behind the acquisition is that PTC sees Onshape as a growth engine well suited to the evolving market. “We believe that the CAD and PLM market will go to SaaS. We just can’t understand over the long run why that won’t happen, because there are many compelling drivers pushing in that direction. We think that by bringing PTC and Onshape together, we will accelerate that tipping point: The market will move faster now to SaaS, because there’s really a vendor out there who has a foot in both sides,” he said. “We’re pleased to get technology, we’re pleased to get operational processes and infrastructure, and we’re pleased to get leadership that we think will play a very important role in the future of PTC.”
Heppelmann pointed to lower startup costs and cost of ownership (when reduced IT infrastructure is taken into account), less maintenance, and faster delivery of new capabilities as reasons why the SaaS model, “while nascent in the CAD and PLM market, is rapidly becoming industry best practice across most other software domains.”
For software providers, the benefits of the SaaS model include a more predictable and consistent revenue stream than perpetual-license models — customers cannot continue to use SaaS software without continuing to pay for access to it. “This acquisition is the logical next step in PTC’s overall evolution to a recurring revenue business model, the first step of which was the company’s successful transition to subscription licensing, completed in January 2019,” Heppelmann explained.
What Does This Mean for the CAD Market?
PTC is convinced that SaaS is the way of the future, but acknowledges that “it will take the market some years to shift toward the SaaS direction,” Heppelmann said — and the company’s not rushing any resistant customers down that path. As Heppelmann stated, “We will give customers the ability to choose between leading SaaS (Onshape) and on-premises (Creo and Windchill) deployment options per their preference.”
But Onshape does not occupy the same market niche as Creo, so it’s not simply a matter of picking whichever one has the delivery model you prefer. Creo and Windchill are relatively more “complicated and expensive” solutions compared with Onshape, Heppelmann explained.
Currently, most of PTC’s CAD and PLM business is in the upper half of the market “pyramid,” which has a large foundation of small businesses at the base and tapers to a small number of large businesses at the top. Until now, the company lacked a product that competes in the “bottom half,” meaning the smaller-sized companies. “So one thing we think we can do with Onshape right away is participate in the growthiest part of the market … and I think we’re going to play with a very strong hand here with the Onshape technology,” said Heppelmann.
Last year, Heppelmann noted, some 70% of new MCAD seats went to Dassault Systèmes SOLIDWORKS and Autodesk Inventor, according to numbers reported by Jay Vleeschhouwer of Griffin Securities. “PTC didn’t really participate in that competition, but now we will, because we feel like nobody will adopt this type of technology faster than the small and medium-sized customers.”
The Onshape model holds value for larger customers too, Heppelmann stressed: “This is really a technology that, frankly, will create more value for large accounts, who spend a lot more cost of ownership on these systems than the small ones.” Small customers have most flexibility to switch solutions, however, so PTC plans to start at the base of the pyramid, then drive disruption upward to its peak, he explained.
Are Creo, Windchill, or Onshape Going Away?
Although Heppelmann described PTC as a “big brother who will bring lots of financial stability and distribution and marketing and many good things that will accelerate Onshape’s path,” some current Onshape customers have expressed concerns that the acquisition will lead to detrimental changes — or even elimination — of the Onshape solution.
In an open letter to the community, Hirschtick reassured customers: “I want to first emphasize that our top priority as we become part of PTC is to preserve and enhance what you and I love about Onshape. Our beloved Onshape team remains the same. Our product strategy and roadmap remains the same, with a continued sharp focus on our customer needs. You will still experience the same level of responsive customer support that you have come to expect from us.”
According to Onshape:
There are no planned changes to Onshape’s pricing plans.
There is no change to customer points-of-contact or customer support at Onshape.
- Customers can expect the same frequency of updates to Onshape.
On the PTC side, “Creo and Windchill are PTC’s core businesses and will remain that way for a long, long time,” Heppelmann said. “We’re going to keep these businesses going and really try to build a best-in-class solution on either side of the fence,” he continued.
PTC does envision moving all its own products to a SaaS model eventually. (Although the company has already transitioned from perpetual sales to a subscription model, most of its software offerings run on-premises.) “We think that surely someday that will be in the cloud, and we see Onshape as the engine that’s going to take us there,” Heppelmann predicted.