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PTC Embarks on Internet of Things Journey via ThingWorx Acquisition

Written By: Predrag Jakovljevic
Published On: January 3 2014

PTC ended 2013 by announcing it had acquired ThingWorx, creators of a platform for building and running applications for the Internet of Things (IoT), for approximately $112 million (USD), plus a possible earn-out of up to $18 million (USD). The acquisition of ThingWorx positions PTC as a major player in the emerging IoT era. The IoT, a.k.a. the “Industrial Internet”, is defined by McKinsey as “networks of low-cost sensors and actuators for data collection, monitoring, decision making, and process optimization.” The acquisition is expected to add more than $10 million (USD) of revenue over the next 12 months for PTC, with $5–7 million (USD) of revenue in fiscal 2014.
 
The IoT Allure
This IoT concept of "smart and connected products" has been a pervasive theme of late, discussed at many enterprise software conferences in 2013, including Dreamforce 2013, where it was renamed the “Internet of Customers.” Salesforce.com CEO Marc Benioff even joked during his keynote presentation about his toothbrush that spies on him and reports back to the dentist if he doesn't brush enough. And at the IFS World Conference 2013, an expert panel discussed the possible scenarios if every item produced had a nano chip with an Internet Protocol (IP)-stack to send and receive small pieces of information.
 
With the IoT in place, one could imagine the food packages in your fridge reporting to you when they are about to be out of date, while your car keys can sound an alarm when you walk out the door without them. At the business end, one can picture machines starting to “reason” with each other and being able to—by themselves—figure out which machine will be the bottleneck and change production plans accordingly. And how about produced items being able to determine if they’ve been stolen or misplaced and act on it? As helpful as these scenarios sound, I don't think many people want to be “spied” on and I don't think these “big brother” or “conspiring machines” scenarios will truly emerge.
 
More realistically, according to a recent report from the McKinsey Global Institute, the IoT has the potential to unleash as much as $6.2 trillion (USD) in new economic value by the year 2025. In the IoT era, increasingly smart and connected products can generate value in many key ways, as streams of real-time operational data are captured, analyzed, and shared to deepen a company’s understanding of its products’ performance, use, and reliability. With increasingly sophisticated IoT technologies becoming available, companies can not only track the flow of products and keep track of physical assets via RFID tags, but they can also manage the performance of individual machines and systems.
 
IoT is closely related to the mobile Internet trend, i.e., increasingly inexpensive and capable mobile computing devices and Internet connectivity. For many years, industrial service providers have taken advantage of machine-to-machine (M2M) technology using existing (but in some cases archaic) standards such as the open productivity and connectivity (OPC) standard within production environments, supervisory control and data acquisition (SCADA) in utilities, and simple network management protocol (SNMP) in IT.
 
Improving Service Capabilities
The IoT and mobile Internet trends open the door for integration of virtually any device, be it in the industrial or consumer realm. Service providers have long realized that the most expensive part of service delivery is the service engineer time, and through smarter automated diagnostics, better remote management, and continual monitoring, the IoT could revolutionize service delivery. This could allow service engineers to focus on calls where they are really needed and add real value to both customers and their organizations.
 
Many products will have failure sensors that will take enterprise asset management (EAM) and service lifecycle management (SLM) to the next level. For the process industries where temperature and humidity have a big impact on safety and shelf life, this could be a real game changer. While manufacturing execution systems (MES) are active during production (and plant machines have long used monitoring sensors), the staging or storage of material can be actively monitored to ensure that materials are kept under proper conditions. The ability to actively monitor statuses that are not allowed in machines could really improve safety. And the capability for reporting this data on a course of action to customers could start to reshape recall risk discussions. This could potentially be applied to the pharma grey market counterfeiting issues with the ability to track the repackaging of products.
 
The IoT may not be as significant in manufacturing because production monitoring (both the operations of machines and things being manufactured in production lines) via programmable logic control (PLC) is quite mature in MES. Still, due to environmental issues in some production environments, more sensors could be included in the equipment. Smartphones could use near field communication (NFC) working with those sensors in machines and having an immediate feedback when walking by a machine could be really powerful. In general, getting machine feedback via mobile devices will allow access almost anywhere.
 
ThingWorx at PTC
In the IoT era, PTC’s customers are bringing to market increasingly smart and connected products, which can generate value in new ways as streams of real-time operational data are captured, analyzed, and shared to deepen a company’s understanding of its products’ performance, use, and reliability. PTC will use the ThingWorx platform to speed up the creation of high value IoT applications that support manufacturers’ service strategies, such as predictive maintenance and system monitoring, in complement to PTC’s existing SLM and extended product lifecycle management (PLM) solution portfolio.
 
With ThingWorx, PTC will also now offer its customers a means to establish a secure, reliable connection to their products as well as a platform to rapidly develop applications for maintaining and operating them. The ultimate goal is to find ways to create new value from products. Think of Amazon Kindle's "Mayday" button, where the consumer can instantly get a live service person to talk him/her through their device troubles. Manufacturers will have to take these IoT embedded sensors and software considerations into account when designing future products.
 
As part of PTC, ThingWorx will continue to help customers in a wide range of industries seeking to leverage the IoT, including telecommunications, utilities, medical devices, agriculture, and transportation, as well as an emerging partner network of IoT-enabled service providers. ThingWorx intends to continue serving this diverse market with senior management continuing to focus on its current path (see video for more info on the company and its products).
 
Conclusion
This move confirms PTC’s dedication to the SLM realm and adds to its earlier acquisitions of Arbortext, 4CS, Servigistics, and Enigma. PTC is definitely a trailblazer in the SLM and IoT spaces given that its direct competitors, Siemens PLM Software and Dassault Systemes, do not offer much here at this stage. Given that the Siemens PLM’s parent company manufactures equipment and sensors, it is very likely that Siemens will jump on that bandwagon soon, especially in light of the significant involvements in IoT by GE, Cisco, Ericsson, IBM, SAP, etc. IoT and mobile Internet come hand in hand with big data, and it will be interesting to watch what PTC does with regard to big data analytics capabilities.
 
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