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Monica Schnitger is asking a question about SaaS dominance in PLM following the PTC acquisition of Arena Solutions. Check her article here. Read the article. I like the thought process about PTC trajectory in solution building between Windchill and Arena delivery each own channels and PTC Atlas is building a new formation of yet to be discovered PTC SaaS PLM.

The article made me think about the second portion of the question – SaaS dominance in PLM. Arena Solution is most probably representing the biggest chunk of SaaS PLM revenue (~$50M ARR according to PTC) delivered in the traditional segment such as aero, defense, auto, industrial, high-tech, electronics. But Arena’s revenue is insignificant when it comes to the overall cPDM revenue (based on CIMdata assessment, it is almost $7B for 2019).

According to Jim Hepplemann PTC will be working on new SaaS offering and meantime selling Arena SaaS solutions. Here is the passage I took from Monica’s blog:

One thing is clear from PTC investor day last week, just after the Arena acquisition was announced: PTC sees Arena as enabling it to offer a SaaS PLM product while they work on getting Windchill onto a SaaS architecture. Until then, Arena plus Onshape will offer those clients who are interested in SaaS a way of engaging with PTC. As PTC Ceo Jim Heppelmann put it (paraphrasing here): “It’s like buying a car. People who want an electric car aren’t even going to look at combustion engines. It’s the same with SaaS: people who want a SaaS PLM won’t look at Windchill but will look at Arena.”

I think, tactically, this approach is brilliant. Even functionality of both (Windchill and Arena) might have the same name (BOM, change management, etc.), Windchill and Arena have almost zero overlaps in the market. This means PTC bought the market expansion and now can lure all customers looking for SaaS solutions into Arena (Jim’s electric car allegory works great here).

But, I can see challenges too…

To reach market dominance you need to find the market capable of bringing large revenue numbers. What is the market that is capable of bringing $100M+ growth in the short-mid term to PLM business and who are the players in the market? The market capable of bringing these numbers is combined from the companies that are not buying into big PLM solutions today. These are medium-sized companies. These are companies buying multiple CAD solutions for mechanical, electronic, and software design. These are companies at the bottom of the supply chain today buying big PLM products.

Here is my take on a typical company in this segment and the tools they use. A typical company in this space will be using Solidworks CAD for mechanical design and Altium for electronic design. They might be using PDM tools and probably looking at how to expand their ERP (or alternative financial system). The companies in this segment of traditional markets are looking at how to improve the collaboration and get their data under control, which is spread between tons of Excel files.

Who is selling to these companies now? How to transfer these companies to become SaaS customers? This is a $1B question vendors need to answer to bring the next “Solidworks type of brand” to reach market dominance in the next 10 years like it was done with Solidworks in the past. Dassault Systemes 3DX is looking into this space with their new 3DXWORKS product based on the SOLIDWORKS product. Altium is looking into this market with their new Altium 365 platform (even Altium growth was slower recently).

PTC will have to sell Arena to these customers. With $50M ARR and ~1200 customers, the average Arena customer should be paying a $25-35K annual subscription. Arena doesn’t do PDM and doesn’t provide seamless CAD integrations. These types of functions may come later from PTC/Windchill/Onshape/Atlas functions. But not yet… By selling Arena to these customers PTC will not penetrate DS and other CAD vendors selling PDM collaboration to their existing customers. Will Arena sell together with Onshape? Technically possible, but this integration can be only tactical as Arena architecture is different from Onshape and the PTC is building new products on top of the Atlas platform using Windchill tech.

What product can provide penetration to this market segment and how PTC can make it happen? Onshape is clearly the best technological candidate to make it happen, but to do so, Onshape must be enhanced SaaS PLM functions as soon as possible. PTC is enabling Windchill on Atlas, but even though this option was mentioned during the PTC -Arena announcement, I have a doubt such a product will become available in the next 24-48 months.

PTC Arena integration team is the place to watch in the near term. This team can potentially bring integration of Arena into the existing PTC portfolio. But it is not clear if the integration will be directed towards existing mature products (eg. Creo), SaaS products (eg. Onshape), or the Atlas platform.

Who will be the PTC competitor to get SaaS dominance? I’d mention two possible options. The first would be clear one of the CAD vendors aggressively developing SaaS solutions. Autodesk, Altium, or Dassault can have a good chance if they will broaden their SaaS cPDM offering. Another option is any manufacturing ERP vendor moving into the PLM segment with a SaaS offering (created or acquired) to expand into the engineering segment and provide a better business integration.

What is my conclusion?

There is a need to build a $100M SaaS PLM brand to the market to get SaaS dominance. Who will do so? Will PTC make Arena do so? Will DS, Autodesk or Altium will? Alternatively, will one of the ERP vendors expand into the engineering/PLM domain to do so? These are questions to answer.

The trajectory of Arena tactical integration and Onshape/Atlas development can define the future capability of PTC to get big traction in the SaaS PLM segment focusing on traditional industries. There are many “balls in the air” for PTC at this moment, so it is hard to say something clearly. Watch tactical Arena and Atlas/Onshape announcements. At the same time, other CAD and ERP vendors might have a good chance to get traction if they will be equipped with the right set of functions/products. Just my thoughts…

Best, Oleg

Disclaimer: I’m co-founder and CEO of OpenBOM developing a digital network-based platform that manages product data and connects manufacturers and their supply chain networksMy opinion can be unintentionally biased.

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The post How To Achieve SaaS Dominance In PLM? appeared first on Beyond PLM (Product Lifecycle Management) Blog.

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