PTC Double Down On SaaS PLM Buying Arena Solutions for $715M in Cash

PLM industry woke up today to a big M&A news. PTC announced their plan to acquire Arena Solution for $715M in cash. The homepage with news is here. It will give you some ideas about why PTC decided to do so.

These are four reasons to justify the acquisition of Arena Solutions: (1) Deliver PTC SaaS strategy; (2) Expand PTC market; (3) Drive ARR growth and (4) Complement existing portfolio. The market expansion is a clear goal for every company, so the real reason was to complement Onshape’s acquisition with Arena products. Here is the passage:

Together, Arena and Onshape will deliver a complete SaaS CAD + PLM solution that perfectly complements our existing Creo and Windchill businesses.

Arena Solutions has a long history. It was founded about 20 years ago by Michael Topolovak and Eric Larkin. The first name of the company back in 2000, was bom.com. The company pioneered the idea of hosting a data management system to manage bills of materials, which expanded in various directions such as BOM, change management, QMS, and some others.

PTC CEO Jim Hepplmann explained the strategy in the press release.

“A year ago, PTC entered the SaaS world for product development software with our acquisition of Onshape,” said Jim Heppelmann, president and CEO, PTC. “That move reflected our strong conviction that our market is nearing a tipping point in its willingness to adopt SaaS technology, following the trend seen in many other software markets. The effects of COVID-19 have dramatically accelerated this inevitable shift, with PTC customer surveys indicating a 25% increase in readiness for SaaS PLM since the pandemic started. We expect the acquisition of Arena will significantly extend our leadership position as we continue to redefine the future of our industry.”

There is not much business information about Arena Solution online. There is even less information about technology and architecture of Arena On-Demand (SaaS) solutions.

Here are a few data points I collected from multiple places online including the PTC press release.

1- Arena has ~1200 customers and with ARR of about $50M.
2- PTC paid $715M in cash, which makes each customer cost ~$500K.
3- Arena is running its own data center facility. According to the Arena website, “All Arena production equipment is owned and operated by Arena Solutions and is co-located at a secure world-class facility. Only a restricted set of Arena operations employees have operational access.”
4- Arena acquired Omnify PLM a few years ago. It is not clear what will happen with that technology.
5- According to the Arena website, it provides multi-tenant data solutions, but no details about what infrastructure and software architecture is used by Arena.

PTC Arena acquisition opens a list of interesting questions about the future trajectory of PTC solutions. And the main one is about the formula of how Arena will integrate with Onshape. Here are a few questions I have:

• Will Arena merge their technology with Onshape/Atlas?
• How Creo/Windchill and Onshape/Arena will co-exist?
• What will happen with plans to port Windchill and Creo to Atlas platform?
• How Arena and Onshape will co-merge into Atlas?

My very special interest is of course about the Onshape data management platform. There are several interesting questions here. The first is related to Onshape data management and PDM functions.

The uniqueness of the Onshape platform is well known. Onshape data management platform is built on top of NoSQL document database (most probably MongoDB) and has very unique collaboration and PDM functions. You can find the explanation about it in the Onshape blog. Based on the history of Arena Solutions (~20 years), the architecture of Arena is most probably based on SQL databases such as Oracle or similar. Does it mean the Atlas platform will be extended using a relational database? Will Arena be re-written using Atlas/Onshape data management capabilities? There are no answers (yet) to all these questions above. What is clear is that PTC now has a pair of on-premise/desktop CAD+PLM and also a pair of SaaS CAD+PLM solutions.

What is my conclusion?

SaaS acquisitions are expensive. SaaS PLM is not an exception from these rules. PTC paid almost twice for Arena Solutions compared to Onshape. With very few companies PLM SaaS and relatively small market share, it looks like PTC was paying a premium price to acquire companies using SaaS PLM products. PTC paid ~$500K for each Arena customer. The deal will be finally approved in February/March 2021. I will be learning more in the coming days and share info. The interest for multi-tenant SaaS PLM is growing, which indicates a very interesting momentum in the migration of the PLM industry to the cloud/SaaS. 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 networks. My opinion can be unintentionally biased.