Should SAP Buy PTC?

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The year 2008 is approaching an end, and we still haven’t seen any major acquisitions taking place in the product lifecycle management (PLM) world. Truly, after a series of acquisitions during the years 2006 and 2007, there are not many acquisitions left to happen except the one between SAP (the one likely to be a buyer), and PTC (the one likely to sell itself). So, should SAP buy PTC?

Yes, go ahead

If we look at SAP’s efforts in PLM during the past few years, the company’s intent to grow its PLM business is obvious. Although the company’s $600 million PLM revenue (2007, data source: CIMdata) is just a fraction of the whole, the growth rate (roughly 30% in 2007) is well above the company’s overall revenue growth (9% in 2007).

According to PLM Market Growth in 2007 released by CIMdata, SAP is now the largest PLM provider without CAx (CAD/CAM/CAE) offerings, and the fourth in PLM mindshare leaders—if we take CAx into account. One major reason that companies need PLM is to let CAx systems talk to other management systems. This is why major CAx providers are reigning in PLM. If PTC could become a part of SAP, then the enterprise resource planning (ERP) giant will have a strong CAx wing—making its leading position more unchallengeable in collaborative product definition management (cPDm), which is believed to be the most critical segment of the PLM industry. In addition, on the SAP PLM customer list, there are a good portion using Pro/E, the CAx solution from PTC.

It would also make a lot of sense if Oracle bought PTC. Last year, by acquiring Agile, Oracle made itself into the PLM business but it’s still considerably weaker than SAP. By having PTC on board, Oracle would become equally strong in cPDm, plus possess the CAx power that SAP doesn’t have. However, in a blog post by Ralph Grabowski, the author says that Oracle rejected PTC. If that is true, it’s probably not because Oracle didn’t want it, but rather because it already had a big plate to swallow after nine acquisitions in a row through the past year. As such, the timing couldn’t be better for SAP.

No, wait a minute

Those who don’t think SAP should approach PTC probably will ask, “Does SAP really need PTC?” First of all, SAP is already very strong in cPDm. SAP’s approach in PLM is quite different from its major rivals that have CAx origins. In some cases, SAP seems to be more willing to talk about its new product development and introduction (NPDI) framework instead of PLM. This framework organizes different SAP components—ranging from strategy to planning and to execution—to manage the whole product life cycle.  Thus, the question is, if PTC becomes a part of SAP, how will it manage to promote two different PLM methodologies at the same time?

The second question is, does SAP need to buy a CAx company in order to have better CAD integration? The past few years has seen SAP grow quite well in CAD integration. Besides integrating with major CAD products, SAP has also built a tight partnership with Right Hemisphere. An April, 2007 press release from Right Hemisphere said the company had received an equity investment from SAP, and another press release in September, 2008 announced that Right Hemisphere’s 2D and 3D viewing and publishing capability had  been deployed for SAP PLM 7.0. According to SAP, markup will also be available in a near release SAP PLM 7.1. Will all these integration efforts be enough? Not for everyone, but probably a good portion of customers will say yes.

Another worry about the acquisition is knowledge integration. SAP has been very successful in transactional processes. It might be overwhelmed by the richness of the product knowledge domain if it acquires PTC.

So, should SAP buy? You tell me.
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