Will PTC+Arena = SaaS dominance in PLM? Maybe
A lot of you have been in touch to talk about PTC’s announced acquisition of Arena Solutions. Why do this deal? What’s in it for PTC, Arena, and for their customers? What happens to Arena’s PLM where it overlaps with PTC’s Windchill, and vice versa? When will there be a tighter connection between Creo/Windchill/Onshape/Arena or any of those possible combinations?
These are great questions, and we don’t yet have a lot of answers because the deal isn’t done yet — we’ll know more about integration plans once the companies are actually one entity and can coordinate their R&D and go-to-market teams. Remember that announcing a deal is perhaps the second or third step along a path that still includes regulatory approvals and obtaining financing. If any of those steps fail, the deal may not happen. Until the deal closes, the companies walk a balance beam of sharing enough to give everyone confidence that they know what they need to, but not so much that they’ve given away competitive secrets if the deal fails.
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.” Later, Mr. Heppelmann added that he sees small and medium companies (SMB) gravitating to a SaaS PLM before larger ones. SMB is a market, he said, where PTC sees great potential.
So for the near term, assuming the acquisition closes, PTC will offer its traditional Windchill on-prem (with its browser-based access capability) and the SaaS Arena.
In the longer term, the question of overlap is a good one. Functionally, Arena offers a lot of solutions (in PLM, Arena specifically calls out change management, document control, requirements management collaboration, and of course the bill of material management (BOM) that started it all at the former bom.com) that are also offered by Windchill. That overlap could become a problem — but I don’t think it will.
PTC has embarked on an ambitious plan to build on the SaaS technology it acquired with Onshape in what it’s calling Atlas — the Saas-ifying of Creo, Windchill, Vuforia, and ThingWorx over the next few years. I wouldn’t be at all surprised if the resulting PLM takes the best of Windchill, Arena and anything else PTC comes up with as this all evolves. It seems more likely to me that we’ll see Windchill and Arena sold as they are, then customers being transitioned to the new Atlas-based PLM when they are ready to make that jump. Supporting 3 PLM systems could be a nightmare, though, so that transition will have to happen fairly quickly, organically, or be helped along by licensing and other means.
We need to look at the prospects of PTC+Arena in two parts, present and future. Assuming the deal closes, PTC immediately gets technology it doesn’t have (a SaaS PLM) that it can offer alongside its SaaS CAD, Onshape. PTC sees this as a winning combo that lets it target SMB prospects it currently doesn’t reach. This also has big implications for its channel — VARs and Rockwell will perhaps be able to sell Arena — that will be able to call on a huge pool of SMB prospects. There’s a likelihood of immediate revenue as well as the potential to freeze out competitors.
But the question really is longer-term: what is PTC getting for that $715 million it’s paying for Arena? Oleg Shilovitsky pointed out that Oracle paid $495 million for Agile PLM in 2007 while Dassault Systèmes paid $408 million for MatrixOne in 2006, both significantly less than what PTC will pay for Arena. Perhaps Arena lets PTC move more quickly with Atlas — either because of intellectual property that it brings or because its humans have the right SaaS-ish skills. Maybe that combo platter of benefit-now+benfit-later is worth the steep price. Or maybe there’s something in Arena’s 1,250 customers that could be a fertile ground for Onshape? Only time will tell.
As of last week, the deal was still on plan to close during the March 2021 quarter.