The technology used to conceive, design and fabricate the objects around us is complicated. It may be difficult to understand if you're not a practitioner, yet businesses routinely entrust their most important processes to these tools. Our Hot Topics blog tries to clear up some of the confusion.
If you have comments or ideas for Hot Topics, please contact us.
Autodesk just reported Q1 results that are pretty good, but investors are likely to focus on rising costs and a gloomier outlook for the rest of the year.
Total revenue in Q1 was $647 million, up 9% as reported and up 13% in constant currencies (cc), just a bit above the top end of earlier guidance of $625 million to $645 million. Problematic is that this revenue increase didn’t translate into increased profits, as higher costs led to a decrease in cash flow and net income.
By category, license and other revenue was up 3% as reported while subscription revenue was up 16%.
By geo, revenue in the Americas was up 19%; from EMEA, up 9% as reported and up 15% in cc percent on a constant currency basis; and from APAC, revenue was down 3% as reported and up 2% cc.
By line of business, the AEC segment reported revenue up 21% year/year; from Manufacturing, up 25%. Revenue from the Platform Solutions and Emerging Business segment was down 13%, likely as customers continue to choose suites and buy products on subscriptions. The Media and Entertainment business segment saw revenue increase of 6%.
The real problem with Autodesk’s report is that it’s pulling back on earlier optimism for 2015. Q2 revenue is now expected to be between $600 million and $620 million, and fiscal 2016 is expected to be up 2% to 4% — down from earlier expectations of 3% to 5%. A lot of this is probably currency-related, but we’ll know more after the earnings call.
I’m jumping on a plane; more soon.
For those of you who are wondering: AVEVA still hasn’t been acquired. In fact, CEO Richard Longdon told CNBC and told that reporter that “there’s nothing to say” about a possible acquisition and that AVEVA is not talking with Schneider, GE or Emerson about a potential acquisition. Mr. Longdon seemed quite amused about the whole thing but made clear that AVEVA is being run as an independent software company, for the long haul.
So what about the results reported for fiscal 2015, ended March 31? They were in line with the company’s April announcement (not really surprising), with total revenue of £209 million, down 12% year/year as reported and down 7% on an organic, constant currency (cc) basis. That’s pretty good, given much of the dire musings around the falling price of oil, cancelled or postponed projects in upstream oil (production) and the continuing doldrums in shipbuilding. Mr. Longdon said that the strengthening Sterling had a negative 6% impact on reported revenue.
Mr. Longdon told investors that AVEVA saw “substantially more challenging conditions in the Oil & Gas end market [around 40% to 50% of total revenue –Ed.]”, which affected customer buying. Business in Latin America continues to be affected by political problems in Brazil. It’s a mixed bag of OK in constant currencies, slightly down in a bunch of categories. Bright spots appear to be North America (who thought we’d say that about AVEVA?!), the power market and sales to its largest customers.
From a product perspective, Engineering & Design revenue was down 8% in cc to £183 million while Enterprise Solutions revenue was up 3% cc to £26 million (that includes £1 million from 8over8) . The company said that AVEVA E3D, released in early 2013, now has 230 customers of varying installation size and is starting to contribute meaningfully to revenue. Since release, AVEVA says it’s seen £11 million in cumulative revenue.
AVEVA doesn’t give guidance, but it appears that City analysts expect total revenue for fiscal 2016 to be around £220 million.
Oh, and yesterday’s share price gain of 9% has been pulled back; the price is down 4% as I write this. See my musings on this whole thing.
More after I’ve had a chance to digest all of the details — now, I need to head back to PLM Connection, the Siemens PLM user conference.
People, breathe. The Financial Times yesterday ran a story about AVEVA, saying that several companies were in the running to acquire it. That led to all sorts of speculation in the media, which sent AVEVA’s share price up 10% or so today on the London Stock Exchange. (The FT is behind a paywall; read about the article here.)
First of all, there are always rumors about companies being acquired. That’s not unusual or new, especially given how much deal activity there is in the software world right now.
But let’s think this through. Does it even make sense for a deal to happen right now?
AVEVA reports results tomorrow. If those results are awesome (and I know NOTHING you don’t also know), then the share price would have gone up tomorrow anyway, making it a more expensive acquisition than it was on Friday. Given that it’s always been considered expensive, sort of like ANSYS is, that’s not likely to be good timing for a buyer.
If the results are lousy (and again, I DON’T KNOW), it’s hard to predict how much investors would sell off and how low the price could get. AVEVA has already said results would be in line with expectation so it’s possible Friday’s valuation is where the market wants it to be (investors call this “baked in”).
But it really comes down to expectations for the rest of 2015 and for 2016. Will AVEVA’s revenue decline, as oil projects are postponed until prices rise again? Or are AVEVA’s sales diverse enough to weather this storm? If that forecast is good, which it might be as asset owners try to eke out efficiency gains for existing facilities while continuing with some new projects, AVEVA might be OK. If tomorrow’s news is pessimistic, the share price might fall; if optimistic, it will likely rise. Will results reported in the fall likely be good, driving the share price up?
AVEVA could be a great addition to any number of enterprises that want to do what Siemens did with the SDRC/UGS PLM acquisition — adding software-level profitability to a hardware business and fining points of intersection to bring unified products to market. It could also be a solid investment for a private equity firm that has a financial and not strategic interest.
It comes down to price, timing and value. Lowest price today or tomorrow? Will a competitor get a bid in first? How much does price even matter, for a buyer trying to fill a strategic gap?
Keeping in mind that I am speculating (which I hate doing, but you keep asking): If I wanted to acquire AVEVA, I would have done it last week. At this point, I’d probably wait to see what happens with project work in upstream and downstream oil (drilling and refining) and shipbuilding/
We’ll know tomorrow how AVEVA’s year ended (to March 31) and how management sees 2015 and 2016. If you’re an investor, good luck; keep calm. If you’re a customer or partner, I’d ignore all of this until there’s something concrete to do something about.
I probably get asked this one question more than any other: I think I want/need/could use/maybe should think about PLM but it makes my head hurt. Can you help?
Something along those lines, anyway. The problem is, PLM isn’t one thing and it isn’t the same from enterprise to company to division to small business to solo entrepreneur. The concept of product lifecycle management, that you track many aspects of your product from inception through design to making to servicing to retiring/replacing — that’s common. After that, every case is unique.
Also unique to each company contemplating PLM is its motivation. Do you have a specific quality problem? Need to better communicate with suppliers? Or are you trying to create a major corporate shift (“we want to be #1 or #2 in our industry”) and want to use PLM as a lever to re-examine old processes and shake things up? Each of these is a great reason for PLM, but everything downstream from that decision will be different.
The PLM vendors, of course, don’t help matters. They’re competing with one another for your consideration, which often leads to confusing messages. Would you buy laundry detergent simply because it’s better than another brand? No. You want to know, objectively, what makes one brand better so that you can see if it solves your specific issue. PLM vendors bury that level of detail in Experiences and Platforms and apps/APIs/widgets and so forth. It’s not buyer-friendly and, to my mind, shows a growing internal focus and not the customer orientation they all claim to value.
So, what do I generally suggest that people do? Start small. If you’re trying to shake up an enterprise that you think has gone stale, start small there, too. Pick one thing (a behavior, an information flow, a quantifiable problem like warranty returns or failures) and work backwards to root causes. Realize that IT is just a tool and that you need to work on the underlying data and personalities to fix whatever you tackle first. Then ask each PLM vendor how they can, specifically (very, very specifically) help you fix this. What do you need, from a hardware/software/training/connecting perspective? How will it change your team’s daily work? Can you tackle this on your own or do you want to engage an implementation partner?
A partner, by the way, is both good and bad. Good, in that they’ve done this before, in the best scenario for a company like yours in your industry. A partner can help you navigate the vendor landscape and handle some of the nuts and bolts of the implementation. Bad in that they may try to fit your business into one of their templates –but that could also be good because it may save time and money in the implementation– so listen carefully and be aware of any tradeoffs. Perhaps the best thing about involving outsiders is that they are dispassionate: they haven’t been with you for 25 years, won’t feel threatened if you change their workflow and can help mediate between stakeholders. PLM implementations often involve a review of sacred processes, unearthing “because we’ve always done it this way”. That’s hard for insiders, and it may be good to have an external party handle this.
Jim Brown, a fellow industry analyst –and a genuinely funny guy– and I recorded a brief webisode on just this topic late last year. Check it out here or click on the image below. You’ll love Jim’s SprayOn Software spoof:
Parting words: don’t do something because someone makes you feel bad that you haven’t. When we’re kids, that applies to smoking cigarettes and crossing big streets before we’re ready. As adults, it’s a little easier to resist “everyone’s doing it” but we still fall to peer pressure occasionally. You hear about tremendous savings, quality improvements and all sorts of other wondrous benefits of PLM at a conference. That’s great! But how did they get there? Don’t be swayed by magical thinking: PLM technology is much more usable than even five years ago and may be perfect to address your specific issue but, for many, it’s still a major enterprise IT implementation. Investigate but don’t jump ’til you’re ready.
PTC’s LiveWorx event last week showcased all things Internet of Things (IoT): technology, business processes, benefits/drawbacks, change/resistance, new opportunities and old challenges.
There’s a lot to process but these are my key takeaways from 2ish days in IoT-land:
PTC is betting big on IoT, investing hundreds of millions of dollars to acquire technology and people that can help it dive head-first into the deep end. No slow build-up here; PTC is going from 0 to 100 mph in Internet-seconds when it comes to IoT. Since 2013, it has acquired ThingWorx and Axeda for $112 million and $166 million, respectively, both small in revenue but innovative. ThingWorx is a platform on which companies build and run applications designed to leverage the IoT; Axeda developed solutions to securely connect machines and sensors to the cloud. Together, they “collect and organize the world’s machine and sensor data”, according to PTC.
At LiveWorx 2015 PTC announced that it is adding ColdLight, whose Neuron solution analyzes data to detect and predict failures and prescribe solutions. The deal was valued at $105 million for a company with revenue of perhaps $10 million (a Philadelphia paper said ColdLight was valued at $30 million after its latest round of venture capital.) Predictive analytics and corrective action is big, and likely to be where the IoT money is for the foreseeable future — if a plant can keep producing and not coping with a forced shutdown due to a failure, that’s million of dollars in protected revenue per day. It’s why Bentley bought Ivara and C3global, ESI bought Picviz, and the driver behind some of the big data initiatives in PLMland.
Each acquisition brought only a tiny bit of revenue to PTC and PTC’s total IoT-related revenue is, today, also still tiny. One concern voiced by investors at this event and by longtime PTC customers at last year’s PTC Live, which included introduced the IoT strategy to a broader audience, is that PTC is once again going after the shiny new opportunity and leaving core CAD and PLM customers to deal with a slower R&D pace. EVP of CAD products Mike Campbell tried to reassure customers that this isn’t the case, laying out a roadmap that continues to push Creo forward — and that ties IoT technology into Creo. Today your version of Creo (assuming you’re up-to-date) includes Performance Advisor, technology that automates issue reporting, lets admins track uptime and other usage stats — and lets PTC determine which issues cause the most user pain. (That’s IoT in action, people.) Version 1 is out now; V2 comes next month.
What you see in the photo above is CEO Jim Heppelmann talking about the way PTC hopes plans to shake up the CAD/PLM world with IoT: digital twins. At LiveWorx, Mr. Campbell showed off an instrumented mountain bike that closed the loop between design, operations and services. Mr. Campbell sees data coming back from a smart, connected product (like this bike) to show designers how it’s being used in the real world — a link to the product after manufacturing that’s often missing. He sees this combo of IoT, CAD, big data and augmented reality enabling engineering to optimize the next version of the product based on real usage information, and predict when and how it needs to be serviced. This is a technology proof point today that will be made real over the next few years. It’s cool — imagine being able to run your simulation virtually and then recreate it digitally, all from the comfort of your office. You may want to take that mountain bike out for a spin, but I bet you’d rather run that drilling machinery virtually.
Back to IoT. Speaker after speaker tried to both excite about the possibilities and reassure attendees that the concept of connectedness, grabbing lots of data about lots of things isn’t really new in an industrial setting. What’s exciting the imagination (and shareholders, to a large extent) is the potential to tap into millions and billions of consumer devices. Nest thermostats, Wink lights, sensors to tell an app on your phone whether you left the garage door open, all could create great business opportunities if only one could figure them out. LiveWorx had a lot of business/tech consulting types in attendance, many of whom were looking for these kinds of businesses to start.
Grounding all of this were terrific presentations from industrial companies, many of whom have been using ThingWorx or Axeda technology for years. The common themes were
- a specific business problem to solve (poor service performance, dissatisfied customers, expensive roll-the-truck-before-knowing-what-the-problem-is)
- the conviction that there was no other way to solve this problem — and that connecting devices to gather sensor data for analysis was also a way to create new services offerings
- these data-based new offerings cemented the customer relationship, differentiating this supplier from peers by being proactive, cost-effective and more performant
- that implementing IoT is hard, threatening long-time behaviors with real data that replaces “I think” seniority
- this can start anywhere, and doesn’t have to have a magic launch. One speaker had a huge installed base of legacy systems, some connected, some not, some via phone modems, cell signal, WiFi. Thinking through the offering, benefit to customer, and tech hurdles enabled him to blend real-time with on-demand and 0n-record models. All are useful, and each deals with unique customer sensitivities about sharing data and access
- any IoT effort needs to create many levels of benefits — end users (customers) need to understand why their data is being captured, how it’s going to be used and what is safeguarding it; internal users need to be able to create real-time predictions, run simulations, optimize and so on, with tools that can handle the flood of data and yet be easy to use
- everything IoT-related needs to be as straightforward as possible in order to succeed. Dashboards, easy-to-build apps that synthesize data, connectors to the many standards out there — these companies aren’t experts in sensors or protocols and need a platform like LiveWorx to smoothe these connections.
Many of the customers I saw at LiveWorx started down this path a decade ago. They started when there were no ThingWorx platforms and easy-to-implement apps; their job was nuts and bolts IT, connecting sensors and data loggers and algorithms. All are a bit jealous of people just getting to this now — but, make no mistake, they are convinced that they have a competitive advantage over companies starting in 2015.
Also at LiveWorx, PTC announced a new partnership with ServiceMax to give customers access to solutions built atop ServiceMax’s cloud-based field service management, execution, and mobile delivery capabilities; the release of ThingWorx 6.0 and the development of ThingWorx Converge, which uses an IoT hub and more out-of-the-box tools to simplify collecting and adding real-time data into enterprise systems and business processes.
So what’s the magic? The data is already there, in many cases. It’s trapped in a data logger or perhaps transmitted but ignored because it’s all coming faster than we can deal with it. If the clutch in your car starts slipping, you won’t know about it until the orange idiot light comes on, but that’s not specific enough to let you know if you have to pull over stat or can limp into a service bay somewhere. If your car were smart and connected, it might have a digital representation –yes, your specific one with all of the options you selected, knowing which factory produced each component– somewhere for diagnostic purposes. Your data is aggregated with everyone else’s and the manufacturer can say with some certainty that you have 50 miles to get to a service bay. Or, even better, tell you months in advance that you’re likely to see a problem in a certain number of miles, so you can be proactive.
That’s the magic, and the potential power of the IoT. Combining sensors designed into products (something also on PTC’s radar) with the means to grab, aggregate, analyze and present that data is incredibly powerful. It feels like we’re at the very beginning of a wave that’s building. Some of the companies that spoke at LiveWorx are already on their surfboards, some are trying to find them and most are somewhere in between. PTC plans to be right in the middle of it all.
A word: IoT is an overhyped buzzword, since most people think first of consumer gadgets. I like IIoT, the Industrial Internet of Things, much better since it’s more focused. Egg cartons that tell you how many eggs you have in the fridge are a frivolous proof of concept for the cool kids; real IIoT or Machine 2 Machine (M2M) applications have been around for decades and make a real difference in the way manufacturing is done. We’ll keep using IoT when writing about PTC because that’s what they prefer, but …
ANSYS reported Q1 results today that were in line with expectations, but at the very low end. Total revenue was up 1% as reported and up 8% in constant currencies — again reflecting the tough climate created by shifting exchange rates. I’m off to PTC’s Liveworx so will only post the highlights right now:
- GAAP revenue was $218 million, up 1% as reported but up 8% or so in constant currencies (cc). That’s in the range of $217 million to $225 million, but just barely. Expect investors to be underwhelmed
- By revenue type, license revenue was $125 million, down 1% while maintenance and services revenue was $93 million, up 4%
- Lease, paid-up, maint v services all to come when I’ve had time to parse the non-GAAP data provided by the company
- For Q2, ANSYS expects revenue between $230 million and $238 million, an increase of -1% to 2% or s0
- For the year, ANSYS lowered and tightened its range, from the $945 million to $975 million it had set in March to $942 million to $967 million today. The reason: strengthening US Dollar.
In prepared remarks, the company said “The first quarter financial results performed in line with our Q1 guidance ranges. Q1 was a solid quarter on many fronts, highlighted by strong cash flows, a record deferred revenue and backlog balance of $477.5 million and an industry-leading non-GAAP operating margin of 47%. We reported consolidated non-GAAP revenue of $218.4 million, an increase of 8% in constant currency (1% in reported currency) and within the range of our expectations … Our first quarter results were driven by 11% growth in North America, 9% in Asia-Pacific and 5% in Europe, all in constant currency.
More to come, after I’ve listened to the earnings call. See you at Liveworx?
A very quick update on Hexagon before I rush back to all things Internet of Things at PTC’s Liveworx event:
- Total revenue was up 19% as reported to €705 million in Q1. In constant currencies (cc), and removing acquired revenue but adding back in sold revenue, total revenue was up 5%.
- That’s quite a slowdown, even for a traditionally weak Q1: revenue was up 9% y/y on a like basis in Q4 and up 8% in Q3 and up 5% in Q1 2014 — but the further back we go, the less relevant even the “like group structure” is, since the company has been buying and divesting like crazy over the last couple of years. In any event,
- Results for Q1 2015 were below expectations, which had been for total revenue of around €720 million
- By business line, Geospatial Enterprise Solutions (GES) revenue was €355 million, up 2% on a cc/like basis.
- Industrial Enterprise Solutions (IES), which includes the metrology, CAD and CAM businesses in Hexagon Metrology and Intergraph PP&M, reported total revenue €351 million. That’s up 28% as reported but up 8% cc/like because of all of the acquisitions for this part of the business
- Intergraph PP&M reported organic growth of 7% y/y as a “result of several smaller to mid-sized deals (no large project orders). The organic growth also benefited from the continued shift among PP&M’s users from legacy software to 3D-based engineering software applications”. That sounds like CADWorx had a good quarter, but we’ll see if the company gives more detail on the call
- By region, cc/like growth was 6% in EMEA, 5% in the Americas and 3% in
- Asia. Highlights (lowlights?): Hexagon saw significant weakness in Russia, flat sales in South America; while growth rates in Asia “weakened significantly on a sequential basis due to weakness in the infrastructure and mining-related businesses”
Hexagon’s earnings call is later today; in prepared remarks, CEO Ola Rollén said, “Growth was primarily driven by the Industrial Enterprise Solutions segment which recorded organic growth of 8 per cent, driven by solid performance in Metrology and PP&M. Our Geospatial Enterprise Solutions segment is being impacted by a slowdown in Asia and Russia, and recorded 2 per cent organic growth … We are pleased to see the continous strong cash flow and remain confident in our ability to generate profitable growth and reach our financial targets.”
More to come.
If you’re interested, follow #Liveworx on Twitter to keep up with happenings there.
Have you ever had so much stuff that you’re not sure what to do with it all? Maybe your closet is overflowing, or your spice rack or bookshelf … It’s all great, but there’s no cohesiveness to it, no plan, no way that the bits sum up to something more than the individual pieces.
Siemens has that problem but at over 100,000 stock keeping units (SKUs), it has a much bigger organizational challenge that you or I will ever face. The mammoth Siemens AG was founded over 150 years ago, has around 343,000 employees in over 200 countries and generated revenue of €72 billion last year. That’s a lot of people, offices, divisions, manufacturing plants, partners and customers. It all started with electrical telegraphs and has grown to encompass the whole “electrification value chain” –power generation, transmission, distribution— and, from there, grown into all sorts of industrial applications.
It’s hard for a software person (at least this software person) to wrap her brain around. Coming at this industrial powerhouse from the relatively narrow perspective of design, manufacturing and product support. What else is there in the parent AG? Lots, as it turns out. A LOT.
Two weeks ago, Siemens AG hosted an Oil and Gas Innovations Summit in Houston to showcase the breadth of its entire offering for this one vertical. We had software, lots of hardware, services, consulting and mixes of all of these, and a couple of hundred end-users all eager to see how the latest offering could help them be more efficient and cut costs in a tough end-industry environment. Company, partner and user presentations were bookended by displays of industrial controllers, analytical products and inline components for the oil and gas upstream (getting it out of the ground), midstream (moving it) and downstream (turning it into gasoline and other high-value products). It was really cool to see it all come together but so much remains to be done.
Did you know that Siemens makes sophisticated instruments that analyze production? Everything from the gas chromatographs and continuous gas analyzers that identify composition of the flow in a particular line, to level, temperature and pressure measurement devices. The data can be read on-site from gauges, transmitted to operations centers for action and to data loggers for record-keeping and historical analysis. But the instruments are often in hazardous locations —on a drilling platform, in a refinery, very hot, Arctic cold and so on— and need to be protected and made safe for operator access. Enter Siemens Analytical Products and Solutions’ systems integration facility, where they build shelters to buyer’s specifications that combine instruments, add air conditioning and other features. Think a small house, or 10 foot x 10 foot (or 20 foot or bigger) trailer, $500,000 and you’re in the ballpark. We can’t look too closely because each shelter is custom, but this is the general idea:
The instruments are mounted on the inside or outside of the shelter, as you can see mid-photo. What’s cool about this is that this part of Siemens has just started using Tecnomatix to help plan production and optimize workflows of material, people and the shelters themselves on the production floor, moving to cell manufacturing from a more craft-based approach. Baby steps. (BTW: see the red things under the shelters? Those are air skates, which let employees just push the many-ton shelters from cell to cell. Sadly, they didn’t let us try it.)
Back at Minute Maid Park, home of the Houston Astros, the conference brought together Siemens assets to improve efficiency, visibility and reliability in the oil and gas world. As speaker after speaker pointed out, this industry is old and still uses a lot of manual methods, which don’t scale and are often localized which means they’re not connected to anything that could improve efficiency or provide advanced warning. Too often, this lack of integrated monitoring and real-time operating data means that processes are inefficient, and that safety is an after-thought. Add in cyber-security, a very real talent shortage in the industry, regulatory pressure and the stresses placed on the industry by political and macro-economic effects, and it’s no wonder that those in attendance are looking at Siemens to tell them what’s next.
But they also see Siemens as either too big and disjointed to even begin to know where to start, or as a niche provider who doesn’t offer much beyond the measuring instrument or process controller they’re currently using. Several of the attendees I spoke with had no idea that Siemens made/sold a product outside what they’ve already bought; several partners expressed frustration at not being able to sell a more diverse set of Siemens’ products. It’s hard to know what Siemens AG does, when you’re used to dealing with one time piece of it.
On the second day of the conference Siemens’ Andreas Geiss explained Siemens’ offering for the industry this way: Siemens covers the digital enterprise from product design (in this context, the grade of heating oil, for example), through process and plant design to engineering, operation and service. Maybe this graphic will help, from a presentation made to industry analysts and the media:
Everything highlighted here is equipment Siemens manufactures or packages — nearly every aspect of the rig is touched somehow by Siemens. Another interesting example: If you have the chance, look for videos made by Siemens and National Oilwell Varco, a drilling company. Erlend Engum of NOV showed how Siemens control technology lets them insert sections of pipe (many meters long) with far fewer humans and improved safety.
But it’s not all control systems and measuring devices. Design software also plays a major role in these projects, as you may imagine, and Siemens has plenty to say there, too. We all know about Siemens PLM, which is aggressively targeting this market with Teamcenter-based solutions for equipment data management, master document list (MDL) transmittals, bid management, project and issue management and modular construction — 7 solutions, so far. The point: if it’s digital, a PLM system can manage it and perhaps replace a lot of homegrown solutions. Creating a single source with real-time collaboration and specific workflows can remove a lot of the adhoc or manual methods and help leapfrog a project into the 21st century. Siemens is working with Accenture on a number of these solutions, applying its cross-industry and deep oil & gas expertise to these implementations.
A couple of other software notes: Comos was front-and-center here, after years of playing in the background. You may recall that Comos is a data platform that supplies designers, engineers, operating personnel and others with a continuous flow of data tailored to each role’s specific need and the phase of the project. All component data is stored in a central database, and all roles access the same data for a given object, creating data sheets, drawings or other output as needed — which means that changes are always available to any user. As Comos becomes more a part of the Siemens family, this takes on interesting ramifications. Imagine being able to walk through the virtual plant with Walkinside, and navigate to the data stored in Comos, perhaps to find out operating parameters for a piece of equipment. Now tie that to actual operating plant data, coming in from Siemens Simatic PCS 7, and you can begin to answer questions like, How can we produce at higher quality and lower cost? Combining engineering and automation enables operator training (not sure if it’s man-in-the-loop yet, but it’s clearly on the horizon), trade-off studies, fact-based planning, easier programming SIMATIC PCS 7 hardware, and updates to the Comos database when field components are changed. I am trying to connect with a user and hope to write more about this soon.
Have you heard of XHQ? No? Me neither, and I pay attention to these things.XHQ used to be INDx, which was acquired by Siemens about ten years ago.XHQ is software that allows users to aggregate, relate, and present operational and business data in real time. It’s really cool — it’s an IoT-like dashboard that can include instrument data, the spot price of input commodities, stock prices or anything else one is interested in. XHQ can extract data from ERP systems, production databases, document management systems, process historians, and manufacturing automation systems (whether Siemens’ or not). All kinds of great applications already in place, and hardly anyone knows about it.
And one final, not-so-calming software note: One of the event keynotes was Alice Barnett, Manager of Information Technology Audit for ConocoPhillips. Ms. Barnett very calmly laid out just how vulnerable every electronic system is to bad actors, whether internal or external. She pointed out that while automation brings reliability, safety and operating efficiency, it also lays open far too many systems to cybersecurity threats. Industrial cyberthreats could have potentially deadly consequences: from service interruptions to off-spec products to unplanned environmental releases of hazardous equipment to serious injuries or deaths resulting from hackers who derail production equipment. Ms. Barnett told us that these treats are more frequent than the public knows, and are increasing as industry moves to standard hardware and software. Her suggestions: protect what you can with physical and digital tools, monitor everything that makes sense to detect intrusions as early as possible, respond to attacks with multiple layers and learn from every incident. Hackers are always evolving, so cybersecurity must also. My personal takeaways: never, ever turn off the firewall; don’t plug in random USB drives (and even from known sources, think about the giver’s cybersecurity efforts), and keep on top of security updates from trusted sources. It’s a scary, scary world.
So, what about Siemens’ offering for the oil and gas world? There’s something for everyone, for asset owners and their contractors, for design/engineering and operations/maintenance. But it isn’t completely tied together at this point. For example: are there digital representations for all of the Siemens hardware products, so that they can be quickly represented in a digital model? Not yet, but working on it, I am told. In a perfect world, a process engineer would spell out Siemens SKU 12345 in his design which would spawn all sorts of downstream activities for procurement, detail design, installation instructions, maintenance schedules and so on. For now, it’s OK that this isn’t connected –most oil & gas projects can’t do this yet, anyway; but it will become increasingly important, especially in a world of $70/barrel oil.
Siemens AG’s CEO Joe Kaeser laid out the company’s vision for 2020 as “gathering data, generating data, analyzing content and then drawing the right conclusions”. Many of the pieces are there. Connecting products, sales channels, partners, and customers so that everyone can see the breadth of it all is a daunting challenge.
Note: Siemens graciously covered some of the expenses associated with my participation at the event but did not in any way influence the content of this post. I’d like to offer a special shout-out to the guys in the mobile exhibits for answering endless questions. Thanks!
Photos taken by me; slide image is courtesy of Siemens. That top photo is of the Siemens and conference logos on the jumbotron at the baseball stadium. Don’t think I’ve ever seen a logo that big.
Remember how PTC shocked everyone at the beginning of the month when they announced that the first calendar quarter/second fiscal quarter of 2015 was OK, but they were rejigging the business to better meet new goals? Yes? Well, last night PTC gave much more detail about the past and future. And both are pretty good — though, like everyone else on this side of the pond, foreign currency weighed things down.
The big picture is that total revenue for the quarter was $314 million, more or less in line with Wall Street’s consensus of $315 million and towards the high end of PTC’s own guidance of $305 million to $320 million. It gets a bit dicey forecasting, though, as PTC thinks June quarter revenue will be between $307 million and $312 million, versus a consensus of $327 million. PTC also lowered its guidance for the year from $1.32 billion to $1.35 million to around $1.29 billion; Wall Street had expected around $1.33 billion. In each case, PTC lowered its forecast because it sees further depreciation in foreign currencies, a slightly higher mix of subscription bookings (which will lower immediate revenue), the continued planned decrease in services revenue and a more cautious outlook here in the US. Did investor care? Not so much, as the share price is up 4% or so as I write this.
PTC CEO Jim Heppelmann told investors that “[F]Q2 results demonstrated solid execution across the business despite the very tough currency environment and somewhat uncertain macro economic conditions”. He went on to say that he thinks this is the “new normal” and that PTC’s recent corporate realignment is, in part, a way of mitigating these outside stressors while enabling PTC to take advantage of new opportunities. He said that PTC is accelerating IoT-related R&D for core CAD and extended PLM (ePLM) solutions because that will differentiate PTC’s offerings — more details to come at the LiveWorx event next week and at PTC Live Global in June.
The headline for those not bothered by Wall Street are that PTC’s business is increasingly complex, mixing license models, delivery mechanisms and product sets/types, all overlaid on a bunch of different end-industries and geos. What we wind up with is that the strengthening US dollar caused a negative impact on reported revenue, as did the continued push to move services revenue to partners. More customers opted for subscriptions, which pushes revenue out into future periods; that’s good long-term but also lowers immediate revenue. All added together, that means revenue was down 4% to $314 million.
- By revenue category, License and Subscription revenue was $86 million, down 3% year/year as reported but up 6% in constant currencies (cc). What’s interesting here is that PTC says that subscription bookings were 14% of total license and subscription solutions bookings in the quarter, up from 4% a year ago. Some of this is due to IoT growth (where everything is subscription) but still: it means that core product customers are increasingly going for subs. Given that subs require different customer buying and approval processes, that’s a pretty quick ramp-up. If these had been more traditional perpetual buys, PTC figures that FQ2 software revenue would have been up 10%. That, in turn, would have led total revenue to be up 5% (both cc measures).
- Maintenance revenue (now known as Support) was $169 million, up 1% and up 9% in cc
- Adding those together, total software revenue was $255 million, flat as reported and up 8% in cc
- Revenue from Services was $59 million in FQ2, down 20% (down 12% in cc) as the transition to partners continues. Mr. Heppelmann said that service partner bookings were stronger than anticipated in the first half of the year, so everyone is pleased with the progress.
- By business line, revenue from CAD-ish products and services was $131 million, down 5% as reported but up 4% in cc. CAD software revenue was $126 million, down 4% (up 5% cc). CAD support revenue was up 6% cc; CAD L&SS revenue was up 2% cc, “driven by a midsingle digit cc growth in new seats, modules, and upgrades of Creo, offset by a decline in legacy CAD products”.
- ePLM revenue was $132 million, down 10% as reported (down 2% in cc) as a couple of large deals slipped out of the quarter. ePLM software revenue was $92 million, down 4% (up 4% cc); ePLM support revenue was up 14% cc even as ePLM L&SS revenue was down 11% cc, as “double digit YoY CC growth in cloud services [was] offset by a decline in PLM license revenue against a tough comparison relative to large deals.”
- Revenue from IoT was $9.4 million, up from $0.5 million a year ago. (The percentage growth is a staggering but meaningless 1886%; some of this is organic, but the Axeda acquisition in August is also in here.) PTC says it added 62 new IoT customers during the quarter — I’m looking forward to hearing what they and PTC have to say at next week’s LiveWorx conference.
- SLM revenue was $42 million, down 4% as reported and flat in cc. SLM software revenue was $28 million, up 4%.
- By geo, revenue from the Americas was $132 million, down 2% as reported and down 1% cc. Revenue from Europe was $110 million, down 14% as reported and flat in cc. Revenue from Japan was $39 million, up 32% as reported and up 52% in cc, driven by a CAD and PLM megadeal. Finally, revenue from the rest of the Pacific Rim was $33 million, down 10% as reported and down 8% in cc.
- The company recorded 13 deals with over $1 million in license and subscription solutions revenue, down from 17 a year ago. This included one mega deal (over $5 million), down from 3 a year ago. That one deal was in Japan, which boosted year/year growth; the other two were in Europe and the Americas, and the lack of replacement deals there in FQ2 made for tough comparables in those geos.
- One other thing: PTC has apparently run afoul of regulations around how it does business in China and is working through the investigation and likely fines or penalties with the US Securities and Exchange Commission and Department of Justice. PTC says that any settlement “could be material to our results of operations for the fiscal period in which the liability is recorded. Further, any settlement or other resolution of this matter could have collateral effects on our business in China, the United States and elsewhere”.
OK. That’s a boatload of data. What does it all mean??
I’ve got 4 main takeaways: Cross-selling IoT, SLM or some other buzzword to CAD or PLM customers isn’t easy. Different departments, new purchasing gatekeepers, an unknown name in a new landscape. Too, a lot of prospects are just starting out with their internal process to identify services opportunities, so they’re not sure what problems they’re solving or what technologies they might find useful. I think PTC bet big on SLM and it hasn’t panned out as well as expected. Yet. They’re starting to make progress with accounts like Lockheed Martin, a Windchill customer that “made a sizable SLM purchase” in FQ2. The integration they’ve hinted at between sensor data and CAD, for example, to analyze actual use patterns, or between CAD, PLM and SLM to deliver as-built configuration images to the field, can only accelerate this trend.
PTC’s CAD people may not be subscribers. But it’s hard to say — the company has only offered CAD subscriptions for 2 quarters, so we still have a lot of users whose maintenance contracts haven’t come up for renewal. CAD software revenue grew 5% in cc in the quarter and (from inferences, not direct statements on the earnings call), most of that was from traditional buyers. How can PTC sweeten the offer? Autodesk uses suites and content only available to subscribers to get people to move; it’ll be interesting to see what levers PTC can pull.
The lack of growth in PLM is really troubling. In FQ2, ePLM license revenue was $33 million, down 19%. Total ePLM software revenue (including maintenance) was $92 million, the lowest since March 2013. Worse, over the past 8 quarters, license and subscription solutions revenue has averaged out to no growth, with all of the reported ePLM business line’s growth coming from maintenance (aka Support). Looking forward, PTC said that ePLM L&SS bookings decreased 16% in cc, meaning that future-period revenue doesn’t get a big jumpstart from subscriptions. Perhaps some of this is the big-dollar-upfront to smaller-dollar-subscription transition, but we don’t really know.
But all of this could become insignificant if PTC does the technology integration it’s talking about. If real usage data can be incorporated in design, products will become much better, reflecting as-used as opposed to as-designed. But as with SLM, it comes down to how ready enterprises are to embrace new ways of doing things. With SLM, there’s the obvious economic incentive of a manufacturer growing its services revenue; it’s unclear how PTC can make that a similar case for an IoT/CAD/PLM marriage. We’ll learn more over the next couple of months.
A couple of things caught my eye recently, but I’ve been too wrapped up in other projects to write about them in any detail. So rather than continuing to wait until I have time, in no particular order …
Reality computing seems to be taking a beating right now — well, at least a couple of the bigger, publicly-traded suppliers are. FARO said that Q1 revenue would fall short of expectations because of foreign exchange and weakness in Japan and Brazil then, last week, 3D Systems said that it saw a sharp drop-off in activity by aerospace, automotive and healthcare customers as they slowed spending because of exchange rates and the fallout from the low price of oil. 3D Systems also had internal issues, as “certain metal and nylon applications and performance issues delayed the company’s ability to sell additional printers during the quarter”. Coming on the heels of Stratasys‘ announcement of problems with the Makerbot business, 3D printing shares are taking a beating on Wall Street. Does this mean reality computing is a non-starter? Of course not. We’ll all keep capturing more and more of the world around us; one hiccup won’t affect that in the long run. We will also increasingly rely on additive manufacturing technology, so postponing purchases from one quarter to another is also not a category-killer. But these reports do show that perhaps printer companies may be trying to push too hard with technology that’s not quite ready for customers whose internal processes may not be quite ready, either, to let go of decades of additive manufacturing practices.
Speaking of reality computing, the popularity of handheld scanners seems to be skyrocketing. Since they’re so much cheaper, at under $10,000 per unit as compared to $50,000 and up for a traditional model, easy to use and can reach places traditional scanners often can’t, they’re a great way to collect “as is” data. Trimble and DotProduct recently announced that DotProduct’s DPI-8 would be distributed by Trimble and its distribution partners. That’s big — a little startup getting such a global partner on board. It’s a clear sign that the cost of reality capture can only come down even as ease of use goes up.
Nemetschek gave more details results a few weeks ago for Q4 and full year 2014. You can read them here but, in summary, revenue was up 18% to €219 million in 2014, above the company’s last forecast with a big year-end, as Q4 revenue was €65 million, up 26%. What led to such good growth? License revenue was up 21% overall, with the Design segment again leading the way, led by Vectorworks and Graphicsoft. Design is still the largest segment, with total revenue of €175 million, up 17%; on an organic basis, revenue was up 11%. The Build segment reported revenue of €20 million, up 30.4%, including a €5 million contribution from Bluebeam, consolidated since October 31, 2014. Revenue from the Manage segment was up 5% to €5 million and the Media & Entertainment segment reported revenue up 12% to €18 million. For 2015, Nemetschek expects group revenue to grow organically by 6% to 9% but that acquisitions will boost total revenue to around€265 million. What does it all mean? That BIM is catching on for more and more project types and sizes — and that for those too small to support a BIM environment, the use of design and collaboration technologies is still growing in importance.
Finally, a bit of VAR catch-up. VARs, value added resellers, make the PLMish world go round. They represent the software vendor for both sales and support and are often the “face” of a product to local users. They are also, often, small businesses that struggle to keep the cash flow in balance and struggle to grow when they’re dependent on their OEM partners for new products. A couple of large, publicly-traded PLM VARs give us periodic glimpses into the health of that part of our universe:
- CENIT, reselling Dassault Systemes, IBM, SAP and other partner products as well as add-on services, reported that revenue for 2014 was €123 million, up 4%. Within that total, revenue from third party software was up 12% to €56 million; proprietary software was unchanged at €13 million, and revenue from consulting and services was €54 million, down 3%. Revenue from the PLM segment was up 7.5% to €98 million.
- Mensch und Maschine, MuM, is an Autodesk reseller that is growing its own portfolio in CAM and AEC. MuM reported that Q1 was a “sparking start” to 2015, as revenue grew 14% to €43. The company’s own software revenue grew 14% to €10 million while the VAR business contributed €33 million, up 16%. MuM said that “nearly one third of the VAR Business growth was due to the Swiss Franc increase against the Euro, the remainder – still double digit – was purely organic.” CEO Adi Drotleff is optimistic about 2015 as a whole: ‘The higher than expected business development in Q1 makes us confident that the targets for fiscal year 2015 are achievable: Sales should clearly exceed €150 million.”
In both cases, the PLM VAR revenue was up over 10% –a little more in the Autodesk space, a little less in the DS– which bodes well for the greater VAR universe and for the OEM suppliers as well. We’ve heard from DS, with total revenue up 30%, constant currency growth of 17%, organic software revenue up 9% in constant currencies. Next up are PTC and Trimble and then we take off with ANSYS, Hexagon and a host of others. It’s going to be a bumpy, currency vs expectation-laden ride.