PTC Acquiring Onshape: Outlook Clearly Cloudy (In a Good Way)

Let’s be honest, it’s been a pretty ho-hum year so far in the CAD software business. Sure, there have been new releases, but with mostly small incremental enhancements and improvements. There has also been some relatively minor industry consolidation, but nothing like in previous recent years. Those events pale, however, in comparison to the intended acquisition announced last week of relative innovative newcomer, cloud-based Onshape by industry stalwart PTC. This acquisition is something I strongly consider to be a major positive industry disruptor.

Pending regulatory approval and satisfaction of other conditions, the transaction is expected to be completed in November 2019.

A Meeting of the Minds: Jon Hirschtick, Onshape’s CEO (left) in deep discussion with PTC’s CEO, Jim Heppelmann (right). (Image courtesy of PTC)

Onshape will be integrated with PTC and will operate as a PTC business, with current management reporting to PTC CEO, Jim Heppelmann, including Onshape’s co-founder and CEO, Jon Hirschtick.

PTC’s Heppelmann joined Onshape’s Hirschtick in a press briefing call to announce what he called “the biggest acquisition PTC has ever done thus far.”

The price for Onshape was $470 million—$400 million more than the $70 million price PTC paid for its acquisition last year of Frustum, a generative design developer.

“We see small and medium-sized CAD customers in the high-growth part of the CAD market shifting their interest toward [Software as a Service] SaaS delivery models, and we expect interest from larger customers to grow over time,” said Heppelmann. “The acquisition of Onshape complements our on-premises business with the industry’s only proven, scalable pure SaaS platform, which we expect will open new CAD and PLM growth opportunities while positioning PTC to be the leader as the market transitions toward the SaaS model.”

For customers, the SaaS model enables faster work, improved collaboration and innovation, with lower up-front costs and with no IT infrastructure to administer and maintain. For software providers, the SaaS model is proving to generate a more stable and predictable revenue stream, increase customer loyalty as customers benefit from earlier adoption of technology innovations, and enable expansions into new market segments and world geographies.

“At Onshape, we share PTC’s vision for helping organizations transform the way they develop products,” said Jon Hirschtick, CEO and co-founder, Onshape. “We and PTC believe that the product development industry is nearing the ‘tipping point’ for SaaS adoption of CAD and data management tools. We look forward to empowering the customers we serve with the latest innovations to improve their competitive positions.”

Located in Cambridge, MA, Onshape was founded in 2012 by CAD pioneers and tech legends, including Jon Hirschtick, John McEleney, and Dave Corcoran, inventors and former executives of SolidWorks. Since its inception, Onshape has secured almost $170 million in funding from several leading venture capital firms. The company’s software offering is delivered in a SaaS model, making it accessible from any connected location or device, eliminating the need for costly hardware and administrative staff to maintain, while simultaneously staying current with the latest software that is automatically updated. Onshape has approximately 100 employees and 5,000 customers. PTC strongly believes that Jon, John, and Dave and their team will play critical roles with PTC’s SaaS initiative going forward.

PTC expects the acquisition to accelerate its ability to attract new CAD and PLM customers with a SaaS-based product offering and position PTC to capitalize on the industry’s anticipated transition to SaaS.

The Acquisition Boogie

PTC has acquired several companies over the past few years, primarily relating to its pushes and presence in IoT, AR, and generative design so the Onshape acquisition is a bit different, but one that should provide revenue and ROI relatively quickly, or at least that’s the plan.

For example, in 2013, PTC bought the ThingWorx, an IoT developer that began its journey into the connected device space and early digital twin solutions. In 2015, PTC bought Vuforia, adding the key piece it needed to begin offering augmented reality (AR) solutions. Last year, PTC bought Frustum, one of the companies at the forefront of generative design. Onshape provides a big step forward for PTC to add a vital piece to its comprehensive product development puzzle.

Onshape’s open architecture allows partners to build add-ons, such as CAM, CAE, and rendering extensions. Heppelmann speculated that Onshape’s cloud-hosted CAD might realize generative design from Frustrum added to its capabilities.

SaaS CAD is particularly attractive to small and midsize firms, and it’s a market where Onshape is better suited to serve than PTC’s current Creo and Windchill products and traditional large enterprise customers.

It’s somewhat ironic that PTC is acquiring cloud-based Onshape because it wasn’t all that long ago (I recall it was around the time of Creo’s introduction) that Jim Heppelmann pooh-poohed the idea of SaaS. At the time he said that the cloud was nothing more than vapor, really not much to it. It’s amazing how time changes perceptions, attitudes, motives, and actions.

The acquisition is also ironic because PTC’s own CAD (Creo) and PLM (Windchill) brands are “vintage” desktop workstation products. Transforming them from the desktop to the cloud will take considerable effort, but since Onshape built a cloud-hosted modeling architecture from the ground up, the know how is there, it’s just a matter of how long it will take and how much it will cost.

However, before PTC totally commits to a SaaS model, I’d expect to see a gradual transition through a hybrid approach – desktop augmented with on-demand cloud capabilities. PTC wouldn’t be the first company to try and offer the best of both worlds, but it would help hedge its bets.

The 4^th Generation of CAD Evolution

Onshape could be considered a 4^th generation 3D CAD system with a market that has evolved with the other following generations:

• 1^st Generation – 3D wireframe
• 2^nd Generation – Parametric solids on Unix workstations (Pro/Engineer)
• 3^rd Generation – Parametric CAD native on Windows PCs (Solidworks)
• 4^th Generation – SaaS

To a large degree, many of Onshape’s principals and developers created the 3^rd Generation and are poised to be at the forefront of the 4^th Generation.

The acquisition may signal the tipping point for Software as a Service (SaaS) and put PTC in a good position to capitalize on the industry’s acceptance and transition to SaaS as a viable business model.

No Major Changes Planned

As far as pricing goes, there are no planned changes to Onshape’s current pricing plans, the frequency of automatic updates to Onshape (every few weeks), or customer support. Onshape’s relatively new user community promises to remain intact and grow – an important aspect for more widespread adoption. Disclosure: I recently became the Onshape user group leader in Denver, CO.

Both companies are being realistic about the adoption of cloud-based Onshape. Using Salesforce.com as an example, the companies jointly expect that SaaS will happen first with smaller companies, but over time will move into large enterprises, as well. This could prove mutually beneficial as larger companies consider Onshape and smaller companies consider PTC.

So, what does acquisition mean for Creo and Windchill? PTC claims, not much, because it plans to maintain its investment in future Creo and Windchill development. With Creo, PTC says it plans to continue its pursuits around real-time simulation, generative design, additive manufacturing, and IoT, and AR integration. At the same time, PTC expects to inject these same capabilities into Onshape over time so that it can offer products in either deployment model. In other words, if Creo and Windchill customers want to move to SaaS to pursue its advantages, PTC plans to be able to guide them to its new SaaS offering.

When discussing the Onshape acquisition, Heppelmann stressed two important messages about the future:

1. “Creo and Windchill will continue to represent PTC’s core business. Both products are performing well, with growing market share. PTC will continue to invest in these critical products indefinitely, and you will continue to see a steady stream of new performance and functionality enhancements for many years to come.
2. If, and when, you’re ready to adopt a SaaS platform, PTC will be there with a feature-rich, market-proven Onshape solution for your product development needs”.

SaaS Benefits

According to both companies, some of the benefits of the Onshape SaaS platform include:

• Customer Productivity – With no need to install software or copy files, teams can get work done quicker using SaaS tools.
• Innovation Velocity – Due to its SaaS nature, Onshape can release updates and new features (based on customer request and feedback) to its customers faster. As well, customers benefit from being always on the latest release, without disruptive upgrades. (For example, Onshape has delivered more than 100 upgrades since its founding).
• Flexibility – Onshape’s software offering is delivered in a SaaS model, making it accessible from any connected location or device at any time.
• TCO – Total cost of ownership is lower because it eliminates the need for costly server and desktop hardware and administrative staff to maintain.
• Collaboration – Distributed and mobile teams of designers, engineers, and others can benefit from the product’s multi-user cloud nature, which enables users to improve collaboration and reduce the time needed to bring new products to market.
• The platform model lends itself to extensibility into niche areas via partnerships.
• Security – Patches are implemented in the cloud, ensuring that all customers are using the latest, most secure release of the software.

Boldly Moving Into the Future

Heppelmann summed things up by saying, “PTC is acquiring Onshape because we have a deep commitment to providing innovative technology that drives business value and enhances your competitive position. With this strategic acquisition, PTC is doubling down on CAD and PLM. We will give customers the ability to choose between leading SaaS (Onshape) and on-premises (Creo and Windchill) deployment options per their preference.”

How this acquisition will ultimately play out is anybody’s guess, but I think the probability for a positive outcome is high for both parties and customers in one of the most significant events to happen in the CAD industry for some time.

It’s obvious that both PTC and Onshape have thought this acquisition through and the potential benefits and positive impact with cloud-based solutions are huge.

Tags: Creo, Onshape, PTC, Windchill

This entry was posted on Wednesday, October 30th, 2019 at 10:41. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.