Manufacturing is transforming. New business models, new products, new technologies. Manufacturing is becoming decentralized and connected. PLM companies are swimming in these transformation trying to find a path in the future. Some of these trajectories are really interesting. Remember this one from the last year – IoT is PLM. Here are few other indicators of potential trends – PLM beyond Amazon and 3DEXPERIENCE – beyond digitalization.
But company transformation also means potential acquisitions and it raises questions about potential trajectories for current CAD / PLM companies. Will they sustain as current businesses or will get swallowed and integrated into conglomerates of other industrial companies.
Recent partnership between PTC and Rockwell Automation made me think about this potential. Navigate to Monica Schnitger blog – A few implications of PTC+Rockwell. Here is an interesting passage:
When I speak with investors, one of the most frequent questions is about an end-game for traditional CAD/CAE/PLM/etc. providers. Can they continue to go it alone or will they, like Unigraphics and SDRC, be acquired by an industrial automation supplier like Siemens?
Does this mean that PTC will be acquired by Rockwell in the future? Perhaps. As far as I can tell, the deal holds no options that enable Rockwell to grow its stake. But I wonder if the 8%ish ownership might be enough to block a takeover by another party.
So, can companies like PTC go it alone? There’s a very strong argument that they should: if acquired by a Rockwell, a Bosch or an Emerson, they will no longer be seen as agnostic. Even if ThingWorx changes not at all, the first hurdle to overcome in any sales situation will be “does it work with my existing installation” and “how do I know data from my installation won’t be used competitively against my installed vendors?” Whether they can remain independent or not, of course, depends on their ability to execute and weather transitions like perpetual to subs; and on the offers they may receive. A big enough offer …
Consolidation will continue. But I think it’s more likely that we’ll see IoT platforms acquire sensors, analytics and other components to their platforms via acquisition and partner with factory automation suppliers to reach new markets, industries and applications. While ThingWorx may have a lead in the market right now, it’s still absolutely possible for another supplier to scoop that lead.
Monica raised a very good question about consolidation related to PLM and IoT industry. Comparing to other players in IoT business, PTC is not the biggest one. What will be a trajectory of PLM (which is IoT based on Jim Hepplemann’s description) in the future?
Build, Buy or Partner?
These 3 options are always on the plate, when you start thinking about growing your business or entering new market. With enough financial resources and shortage of time, companies are balancing between new development, acquisition of technologies, channels and teams as well as strategic partnerships.
It is very interesting time in IoT, because so many players are around investing money and looking how to build a sustainable business.
For many vendors, IoT means adding a technology layer to products that never had any before. Even for tech savvy vendors, IoT presents a whole new set of technologies that they are less familiar with. Equally important, IoT is not just technology, but includes data, security, user experience, and business/business model elements. Figure One shows an IoT product management framework developed by Daniel Elizalde of TechProductManagement. A company going “smart” has a lot of decisions to make, of which technology is just one component.
The framework shows that the “build, buy, partner” decision is multi-dimensional. There are six decision areas, spread across components from the edge to the user applications. Each represents a different “build, buy, partner” decision point, and each takes the company down a different path. In today’s fragmented and dynamic IoT ecosystem, many companies will need to “build, buy, partner” simultaneously. For example, cybersecurity is a specialized field that many vendors cannot address on their own, and must buy or license for their solution. The actual proportion of “build, buy, partner” each vendor does varies based on their specific situations.
So, who will own PLM companies in 10 years?
A decade ago Siemens AG acquired UGS. The trajectory of Siemens PLM can give lot of interesting ideas to large industrial companies such as Rockwell Automation about possible acquisition of PTC or other PLM vendors. Overall PLM business is very sticky and sustainable. Not many changes happened between large PLM vendors in the last 15-20 years. IoT development can be a good catalyst for future transformation.
There are few other trajectories in engineering software. One of the most interesting I will talk in the future is related to combination of PLM and BIM. Check my article about BLM few days ago – it will give you more ideas. Bentley Systems, Autodesk and Dassault Systemes are all showing more signals and interest in construction and industrial companies. Implementation examples I captured at Hexagon Live conference few weeks ago are matching most of large PLM implementations made by Dassault Systemes and other large vendors.
What is my conclusion? PLM companies can found themselves in the intersection of significant transformation trajectories of software business, marketplaces, industrial software and IoT transformations. It will bring lot of questions from investors including equity firms and industrial companies. It is possible that some PLM portfolios will be for sales or acquisitions. Everything is possible. Just my thoughts…
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Disclaimer: I’m co-founder and CEO of OpenBOM developing cloud based bill of materials and inventory management tool for manufacturing companies, hardware startups and supply chain. My opinion can be unintentionally biased.