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Jeff Rowe
Jeff Rowe
Jeffrey Rowe has more than 40 years of experience in all aspects of industrial design, mechanical engineering, and manufacturing. On the publishing side, he has written well over 1,000 articles for CAD, CAM, CAE, and other technical publications, as well as consulting in many capacities in the … More »

MCADCafe Weekly (8/26/12): PTC Acquiring Servigistics For Increased Presence In Service Lifecycle Management

August 23rd, 2012 by Jeff Rowe

PTC announced it has signed a definitive agreement to acquire Servigistics, Inc., developer of an innovative suite of service lifecycle management (SLM) software solutions, for approximately $220 million in cash. Pending regulatory approval and satisfaction of other customary conditions, the transaction is expected to be completed in September 2012.

The acquisition will greatly enhance PTC’s existing portfolio of SLM solutions which, today, includes robust capabilities in the areas of warranty and contract management, service parts definition, and technical information – including mobile delivery. Servigistics is recognized as a technology leader in complementary areas such as service parts planning, management and pricing, field service management, returns and repair management, and service knowledge management. In combination, the solutions will dramatically accelerate PTC’s ability to help discrete manufacturers transform their service strategies and operations into a true source of sustainable competitive edge – what PTC describes as “service advantage.”

“Over the past few years, Servigistics has earned a reputation for innovation in helping companies maximize their global service businesses through increased profitability, cash flow, and customer loyalty,” said PTC president and CEO Jim Heppelmann. “Their customers are at the leading edge of a global trend to take service from a cost center to a profit center, and SLM technology has been a critical driver. This acquisition should make clear just how serious PTC is about helping its customers achieve lasting service advantage.”

For leading manufacturers, getting their service strategy right presents a multi-billion dollar, high-margin revenue opportunity to differentiate themselves in the market from their traditional product-oriented competitors. As an enabling technology, SLM helps manufacturers and their service network partners optimize the customer experience by ensuring service is systemically planned, delivered, and analyzed to continually improve performance and maximize customer value. Yet, few manufacturers have either a coordinated strategy or the integrated technology suite needed to capture this new market opportunity – with many manufacturers realizing as little as 25% of the total service value in their products’ service lifecycle.

PTC has long been known for its world-class technology solutions that optimize the way companies create products. With this acquisition PTC will significantly expand how it helps companies service those same products. In fact, starting with the acquisition of Arbortext in 2005, PTC has been developing solutions that enable manufacturers to plan and analyze service based on how their products are designed and built. This service-focused strategy has driven PTC to deliver specialized solutions that are the result of innovative technology development combined with capabilities gained through the acquisition of companies such as ITEDO, LBS and 4CS. By adding Servigistics to this portfolio, PTC will be able to deliver a complete system for service – providing market-leading capabilities across all key components of the service lifecycle.

With Servigistics, PTC’s SLM solutions will provide global manufacturers with a real-time, single view into the extended service environment to identify and respond to areas for improvement, opportunities for new business, and risks to avoid. Only with a connected service network – supporting the owner/operator, distributor, dealer, service partner, field service force, repair depots, and warranty desk – can the OEM plan, deliver and analyze all necessary resources to ensure that service performance and overall value is meeting or exceeding their customers’ expectations. In addition, this acquisition further enhances PTC’s ability to help customers gain competitive advantage throughout the entire product lifecycle – from conception and design to sourcing and service.

“At Servigistics, we share PTC’s vision for helping to transform the way companies execute their service strategies,” said Eric Hinkle, Servigistics president and CEO. “We anticipate that our clients will reap great benefits from the synergies of this shared vision and are pleased to help PTC secure a strong technology and thought leadership position in SLM.”

Over the past 12 months, privately-held Servigistics generated approximately $80 million in revenue. In connection with this acquisition, PTC is increasing its previous preliminary FY’13 non-GAAP EPS target of $1.70 to $1.80 by a range of $0.02 to $0.05. PTC expects to draw on its credit facility to finance this transaction.

RBC Capital Markets Corporation is acting as financial advisor to PTC. Blackstone Advisory Partners L.P. is acting as financial advisor to Servigistics and its owner Marlin Equity Partners.

Commentary By Jeffrey Rowe, Editor

Not all that long ago, who could have predicted that like PLM, service lifecycle management (SLM) could contribute to a company’s top and bottom lines? To its credit, PTC saw this opportunity and jumped on it. This acquisition of Servigistics reinforces PTC’s commitment to SLM as an important aspect of its overall business, as well as a differentiator in a crowded marketplace

AMR Research defines and describes SLM as a holistic approach which helps service organizations better understand the revenue potential by looking at service opportunities proactively as a lifecycle rather than a single event or series of discrete events, combining all service-based operations into a single, albeit complex, set of workflows and connected business processes. SLM consists of the following key components:

  • Workforce management
  • Parts forecasting and planning
  • Knowledge management
  • Enterprise asset management
  • Contract management
  • Returns and repair management
  • Reverse logistics

Service lifecycle management differs from PLM, as it handles the “storage, manipulation, and rendering of electronic data” that manages business service instead of business product. Previously, software solutions for PLM and consultants viewed service as a product; however, SLM’s distinction came into play once new browser technologies became heavily integrated with customer relations and service based tasks.

Gartner defines SLM as “the processes and technologies that cover the discovery and fulfillment of service requests, including, but not limited to, contact center, remote monitoring, field service, spare parts planning, repair depot, warranty management and service knowledge management.” SLM tends to be a fractured process, since it incorporates roles and responsibilities from various groups that often have different goals and measures. Typically, these groups have acted semi-autonomously, with no management incentive, to synchronize their activities in the overall context of the business strategy. This limits the potential (read: profitability) of the overall service business. Metrics have been defined and reported independently, which often leads to conflicting outcomes. Leading service companies, however, bring these various roles together under one group or executive and use common technology platforms.

According to Gartner, most product-centric companies are recognizing the need to move to solutions and create and/or improve their service businesses to improve overall corporate revenue, margins and profits. As profit margins decrease on manufactured goods due to increased global competition, price deflation and rising commodity costs, many companies are looking for alternative sources of profit and revenue growth. One potential area of opportunity is service, with many companies examining ways to increase service revenue or offer additional add-on services.

Many product-centric companies are becoming more focused on more comprehensive solutions that contain both product and service offerings. However, just because a company says it’s focused on or cares about the customer doesn’t automatically mean they’re in more advanced stages of transformation. An underlying organization, culture, and technology must be in place to truly enable SLM’s potential.

Gartner offers the following benefits attributable to incorporating an SLM strategy:

  • Aftermarket services offer excellent margins — Manufacturers participating in a Gartner research survey noted that, while aftermarket services represent approximately 24% of revenue, it often contributes 40% to 80% of profit.
  • Direct interaction with customers — Call center employees and field technicians are in constant contact with people who have purchased products. They are in the best positions to exceed expectations and understand customer needs — or, conversely, ruin the customer experience. Cable, telephone and delivery companies that enter a consumer’s home, for example, are looking at ways to incorporate this direct contact into improved service offerings and cross-selling opportunities. We spoke with one home delivery company that’s looking at new handheld devices and software applications to collect information directly from the field. The challenge is that the company often uses third parties and thus cannot mandate technology adoption.
  • Happy customers will keep buying — If expectations are met or exceeded, customer-facing employees can easily turn into a low-cost sales force, since satisfied end consumers are likely to upgrade and continue to invest in a product line.
  • Service is flexible and has variable costs — Service is often countercyclical, increasing in volume when product sales slow as customers hold on to older equipment, or if durable goods have a product life cycle. If product sales decrease, companies can leverage their installed base for sales and maintain profitability because of variable cost structures of service.

Often, service teams are managed functionally to improve individual service processes such as customer support, spare parts, and warranty. This disparate approach fails to realize the benefits of a cross-functional, “full service lifecycle” approach – especially as it relates to customer expectations for your products throughout the service lifecycle. PTC’s product-centric approach to SLM optimizes product and service performance, from a single unit to the entire installed base. This is accomplished by organizing service strategy and delivery around maximizing product performance to yield the greatest customer value and service performance.

Service Lifecycle Management enables a full lifecycle approach to customer service and product performance to optimize the total value of the customer experience. PTC’s unique approach to service lifecycle management is product-centric, providing the OEM, dealer, and customer a single view of service for continuous product and service improvement with key technology differentiators:

  • Single source of product-centric service knowledge
  • Connected processes across the service network
  • Closed feedback loop to enterprise systems

 According to PTC, its suite of SLM tools can be deployed independently or in any combination to deliver higher value opportunities and unmatched product knowledge, including:

  • Technical Information
  • Service Parts
  • Warranty & Contract Management

 With the acquisition of Servigistics, PTC continues its foray into SLM, a largely untapped resource and potential source of significant revenue to customers that embrace and implement it.

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Jeffrey Rowe is the editor of MCADCafé and MCAD Weekly Review. He can be reached at or 719.221.1867.

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