PTC Live Global 2013: All About Design for “Servitization” —Part Two

Last week on the TEC blog I talked about market shifts and technological changes that are reshaping the competitive landscape for manufacturing firms, based on PTC CEO Jim Heppelmann’s seven trends, which formed the backbone of his keynote presentation at the PTC Live Global 2013 event held in California in June. PTC Live Global also had a companion Service Exchange (formerly Servigistics Exchange) conference this year, and here I’ll give some information and my thoughts on PTC’s integration of the Servigistics products into its existing product line.

Service Exchange was on a separate track than PTC Live, with about 250 attendees (PTC Live had about 1,900 attendees from over 460 companies). PTC ran the Service Exchange event separate from PTC Live Global as a thought leadership event, targeting a different level and roles than the PTC Live Global event. Given the short time since the Servigistics acquisition, there was not much actual integration between Servigistics and PTC to report, and not many joint customers either. But PTC acquired Servigistics with a long-term bigger picture in mind. In any case, PTC now incorporates the following businesses and brands:
  • CAD (Creo and MathCAD), contributing about 40 percent of PTC revenues;
  • PLM (Windchill), ALM (MKS Integrity), and supply chain management (SCM, Windchill FlexPLM), contributing about 45 percent of revenues; and
  • SLM (Servigistics, 4CS, Arbortext, and the most recently acquired Enigma, see my blog post about the acquisition), generating the remaining 15 percent of revenues.
There is lots of work in progress integrating Windchill and Servigistics, but no official new solutions yet. In addition to the no-brainer synergy between the Arbortext service info publishing and the Servigistics SLM suite, the idea is to get Servigistics Knowledge Management within Windchill product data management (PDM), as well as to get Servigistics Spare Parts Planning (SPP) visibility into Windchill engineering change management. In the long run, the idea is to get service engineers to be PLM users too, and to pass the feedback from the field to the design engineers.

PTC’s focus on SLM is actually much older than the Servigistics acquisition one year ago. Its SLM story is closer to eight or nine years old, and can be traced back to Arbortext. Through the acquisitions of Arbortext, 4CS, Servigistics, and Enigma, as well as through organic development, PTC actually has nine SLM solutions that interoperate with one another and can be sold separately, and can also interface to ERP, CRM, PTC's PLM solutions, and other PLM solutions.

I think that in the long term PTC has a good story and opportunity with SLM and PLM. The Servigistics Exchange keynote presentations reinforced the case studies of "servitization" and offering "products as a service", e.g., paying for the NSK Global bearings in wind turbines per use (based on the number of revolutions), paying for compressors per cubic feet of gas, the Boston Bikes city-wide initiative to encourage citizens and visitors to use bicycles for fun, exercise, and transportation, and many other examples. For those manufacturers, given that they are responsible for any service level agreement (SLA) downtime penalties, repair costs, etc., they must design products in a way that they get profitable service contracts.

I think that PTC is on to something here. Oxford Economics’ research indicates that by 2015, performance-based service contracts will be used by 65 percent of manufacturing. Additionally, in the next two years, 56 percent of firms will embrace remote diagnostics. The Servigistics Exchange sessions also talked about "connected products" that gather big data and intelligence, share data in the cloud, send data about problems, and get continual enhancements, and the Servigistics portfolio is expected to provide those solutions within PTC’s solutions. However, it appears that the remote diagnostics and reliability-centered maintenance (RCM) capabilities are still missing in the offering, and my prediction is that PTC might be looking for some acquisitions there.

Other Newsworthy Items
After CEO Jim Heppelmann’s keynote presentation, other top PTC executives touched upon some other product highlights, such as PTC Creo’s desktop CAD virtualization and the new Retail PLM solution. There were several brief sneak previews of some new enhancements in the upcoming PTC Windchill 10.2 release, starting with visual traceability and a relationships navigator in the realm of system requirements and validation management. Another capability that will come from integrating MKS Integrity with Windchill will be an improvement in the ability to manage, reuse, and visualize artifacts in Windchill 10.2.

The 10.2 release will also feature improved user experience in manufacturing process management (MPM) and global product development, with visual decision-making, intuitive document, and CAD data management for business users, everything being accessible in Internet Explorer. The medical device industry should benefit from the upcoming FDA Unique Device Identification (UDI) compliance, while hi-tech companies should be interested in the product analytics capabilities, including conflict minerals reporting capabilities for the looming 2014 regulatory requirements. Automatic project execution capabilities as well as global quality and enterprise component and supplier management are some other upcoming enhancements slated for Windchill 10.2 later this year.

PTC Creo Traction
The current PTC Creo 2.0 release has ten Creo CAD apps, the most recent one being PTC Creo Layout. The solution offers 2D CAD capabilities in an integrated way, with 3D design capabilities available on the same data model. It is possible to create 2D concept designs with unconstrained drafting capabilities that leverage 2D data in the design process. 2D drafting is especially useful in case of designing symmetrical rotating parts and cross-sections (e.g., axles, gears, etc.), after which the 2D designs can be moved into a 3D design space.

Compared to a year ago, when PTC was able to report a slow PTC Creo 1.0 adoption (a few percentiles at best in its install base), PTC Creo 2.0 has been implemented by one in four legacy PTC Pro/Engineer (Pro/E) customers, and that figure is expected to be at 50 percent by the end of 2013. I asked the Creo executives about this, and they were very candid about their success and issues with Creo. For one, no one wants to buy 1.0 immature product releases. But, the bigger reason why the company got much more success with Creo 2.0 was productivity—not only in terms of fewer clicks, but the visualization capabilities also work much faster (regenerating drawings, etc.). Now, if you are on a Pro/E maintenance contract, you are entitled to an equivalent Creo functionality for free, so why not migrate to a newer technology? Having said that, PTC has made inroads in the Pro/E install base, which offers functionality equivalent to Creo Parametrics, and in the ProductView install base, which is now equivalent to Creo View. The real issue is that there is no migration path for the CoCreate direct modeling CAD product yet. Namely, Creo Direct, a direct modeling CAD solution but in new Creo architecture (not in CoCreate architecture), currently only has a minor part of CoCreate functionality. On the other hand, Creo Elements/Direct is just a new name of CoCreate, but is not really a new Creo app. Confused yet?

What really caught my eyes and ears during the PTC Live Global event was the announcement on what PTC plans to do in Creo 3.0—it will be able to natively handle (open, not only merely import) SolidWorks, CATIA V4 & V5, and NX CAD drawings. One can then decide to either make changes around these native files (via wrappers) in Creo or change them directly, but then you must save them as Creo objects. If PTC can pull this off, it would be a major breakthrough, since now companies could use Creo instead of having four different CAD systems and designers (i.e., to handle the Creo, SolidWorks, NX, and older CATIA files). Other CAD formats, say, Autodesk Inventor and CATIA V6, will still have to be dealt with in a pedestrian way (via importing files), but PTC claims that those three formats that it picked to handle natively have had the most customer requests.

3D Printing – A Sneak Peek, for Now
One of the more interesting presentations at PTC Live Global was about 3D printing, an additive process in which successive layers of material are laid down by a computer according to a stored CAD model. Additive technologies stand in contrast to traditional machining technologies, which typically rely on cutting or drilling to remove materials to achieve the desired design. Oxford Economics predicts that the use of 3D printing and similar additive technologies will grow 123 percent (to 27 percent of all manufacturers that will use 3D printing in their operations to some degree) over the next three years. The automotive sector will be especially aggressive with respect to 3D printing technologies over the next three years.

It appears that 3D printing can come in handy in design (to validate geometry), in manufacturing (e.g., for printing molds rather than to make them and then break them as in some foundry applications today), and in field service (imagine a service person being able to diagnose a problem on the spot and wirelessly order a spare part to be printed and ready for use tomorrow). 3D printing still takes too long, and is currently mainly good for prototyping or for making one-off products; for example, in healthcare, where dentists are already printing out crowns for patients and cardiologists are making stents, and in the arts, with jewelers making unique jewelry designs using 3-D printing.

As for commercial 3D printing products, PTC is not there yet (same with Siemens, Dassault Systemes, and Autodesk, who are still only tinkering with the promising yet immature technology), but it was a great general discussion with interesting info about future directions in this realm for PTC. Apparently, PTC expects Creo 3.0 to have some apps for 3D printing. The vendor announced a new joint 3D printing support strategy with Stratasys. The two companies are developing software that is intended to mitigate some of the problems users encounter with current 3D printing functions. The software will allow CAD models to be printed, have tools to validate the data for various printers, expand the data used beyond the limitations inherent in the STL (STereoLithography) format, and allow the creation of print packages (similar to a PDF file) that can be sent to a 3D print service.  PTC is not into being in the printer driver business per se, but would prefer to provide application programming interfaces (APIs) to Stratasys and other major 3D printer providers.

Blurring the Line Between Software and Services
Based upon its research, Oxford Economics concludes that well-executed transformation efforts can produce significant business results. To quantify those results for manufacturers, the report includes a business-impact model that estimates how changing transformation priorities—rethinking strategy and planning, greater emphasis on service, and innovating everywhere, including in the area of manufacturing operations—might affect revenue and costs. According to the study, manufacturers will choose a variety of approaches to transform their businesses, and may adopt multiple strategies in response to market shifts.

This research is consistent with PTC’s mission of helping manufacturing companies prioritize their strategy, planning, and service activities. By delivering technology solutions that transform the way that products are created and serviced, PTC wants to enable customers to transform their businesses to achieve ongoing product and service advantage. At the moment, the company’s business is performing decently—while its major markets in Japan and EU have been declining, they have been balanced by a modest growth in the U.S. and strong growth in China. A similar balancing act is happening with the aerospace & defense (A&D) industry—the U.S. Defense sector has been bad of late (can anyone say “budget sequestration”) but the commercial airlines sector has done much better. Modest growth is expected in PTC’s future, and it's about the same situation at most of PTC's direct competitors.

Down the track, it is possible that PLM or a combination of PLM and customer relationship management (CRM) systems could become the front end of enterprise resource planning (ERP) systems (see my recent blog post on the subject). As products migrate from a mere physical/mechanical state to include ever more software and services, ERP systems will lack capabilities to support new product structures (and old product configurators will not fill the gap).

Recommended Reading:
PTC Live Global 2013 – All About Design for “Servitization” – Part One (August 2013)
7 Major Trends in Product Design (June 2013)
PTC Windchill and Creo: 2012 State of Play (August 2012)

The aforementioned Oxford Economics research findings across industries, geographies, company size, and business functions are detailed in the report entitled “Manufacturing Transformation,” available for download here
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