A few implications of PTC+Rockwell

Yesterday, all I had time to do was tell you about Rockwell Automation’s $1 billion stock buy of newly issued shares of PTC, but not to muse on the implications. To be clear, PTC says it will use the proceeds to buy back shares so that the overall effect of this stock purchase is not dilutive to other shareholders; by inference, then, the $1 billion will not be used for new products development, channel buildout or anything like that. But this is still really significant, and here’s why:

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? PTC had partnered with GE on product development and sales, embedding ThingWorx in a number of Predix-branded offerings. (As far as I know, no equity changed hands in that relationship.) Predix struggled in the market and PTC likely saw benefits to a relationship with Rockwell — but even if the GE relationship is going great, it’s smart of PTC to partner with as many industrial automation suppliers as it can.  After all, it positions ThingWorx and its sister products as open and agnostic.

Why the equity thing? I don’t know (but expect to hear more at next week’s LiveWorx) but it seems as though PTC wanted its new partner to have a bit more skin in the game. Now, Rockwell’s investment grows in value alongside PTC.

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.

What does this mean if you’re a Rockwell customer and thinking IoT? Wait a little while for the dust to settle, then call the companies to have them show you what they can currently do and how they plan to build out their roadmap. If you’re not a Rockwell customer, just wait. I bet more of these deals are coming. Or, if you’re eager to get going on an IoT project, just start. The whole point of ThingWorx is its extensibility and adaptability; whatever you build now should be reusable if/when your automation vendor gets onboard. And if you’re not interested in ThingWorx, there are other platforms on the market –say AspenTech’s in partnership with Emerson– that could meet your needs.

As I said, PTC’s LiveWorx event is next week in Boston, when we should learn a lot more. I’ll be looking for answers to the following: How many ThingWorx installations work with Rockwell’s automation and monitoring systems? If none or few, this is a great way to grow ThingWorx in new directions. If a lot, is the point of the relationship to leapfrog ahead of competitors by leveraging this close relationship to make stronger and tighter offerings? What does “joint go-to-market” mean here: will Rockwell give PTC its customer list and say “go” or will this be a true joint effort, where automation+IoT will be offered together? Finally, I’ve assumed above that PTC can partner with others; is that true? And can Rockwell do the same?

What questions do you have? Leave a comment and I’ll try to get answers!