Manufacturing technology solution provider PTC has made a significant bet on the Internet of Things with its acquisition of ThingWorx. Manufacturers should watch as ThingWorx broadens PTC’s market possibilities.
On 30 December 2013, PTC acquired ThingWorx, an application development platform provider for Internet of Things (IoT) applications, primarily for industrial applications. The transaction was for $112 million cash, plus a possible earn-out of $18 million. PTC is a product life cycle management (PLM) vendor with approximately $1.3 billion in annual revenue.
This likely represents a major expansion in corporate strategy for PTC. PTC invested in an internal IoT development team prior to the acquisition and this accelerates its entry into the market. The magnitude of the sale (and implied valuation) suggests PTC expects significant results. However, the acquisition of a small startup has risks: Cultural differences and new market understanding can stand in the way of success.
Existing ThingWorx customers should see little or no change, outside of some shifting of PTC sales and product resources. Keeping the current ThingWorx management team intact benefits both companies. Near-term growth opportunities will come primarily from joint sales efforts, with product integration benefits coming later.
Within the next five years, the acquisition should enhance PTC’s service life cycle management (SLM) business. These customers should gain the ability to more effectively monitor products and equipment in real time and predictively manage service needs. However, because PTC has no significant experience with IoT software, practices and processes, the ThingWorx leadership team must deliver.
Gartner does not expect acquisition benefits to quickly flow to PTC’s current PLM customers. The PLM potential beyond 2015 depends on how PTC evolves its PLM cloud strategy.
ThingWorx customers: Watch your investment. The ThingWorx platform is now protected by the financial strength of an established, public company. However, there is no guarantee of successful execution by PTC.
PTC SLM customers: Consider the ThingWorx platform to enhance your offerings through more effective and efficient management of data associated with the servicing of equipment.
PTC PLM customers: Monitor developments at PTC with respect to initiatives for creating more intelligent and connected products.
Others looking for asset performance management, IoT or SLM solutions: Add PTC to your list of potential solution providers; the acquisition of ThingWorx changes the competitive dynamics in each of these markets.