PTC Bought Onshape, for $470 Million

Issue #1,030 

 

Assessment by Ralph Grabowski   That Onshape would one day be sold was certainty. The only questions were When and By Whom. The 'When' was last week, and the 'Whom' was PTC. [This article is based on speculation. Do not make any financial and other decisions based on the content.] Last July, I penned an opinion piece on WorldCAD Access suggesting PTC as the most likely buyer. My reasoning: there are only two CAD vendors with the cash and the need. But Siemens is the most subscription- and cloudCAD-averse big MCAD vendor, leaving PTC as the sole suitor. PTC needed an Onshape, and Onshape needed a buyer. In the seven years since the company came into being, Onshape earned much mind share but few paying customers. It burned through over $100 million to develop the software and land just over 5,000 customers. Even the industry's earlier golden boy of mind share, SpaceClaim, had 5x as many customers, before selling itself to Ansys. Onshape CEO Jon Hirschtick earlier this year reporting thousands of users (image source isicad) Five thousand customers is not a lot. In the case of Onshape, it represents about $10 million in gross annual revenues. This simply is not enough to pay down the $169 million debt (not $150 million, as reported elsewhere) that Onshape's founders borrowed from investors. Now repayment will happen through PTC's $470 million (net of cash) purchase of Onshape, the largest in the 31-year-old company's history. ("Net of cash" means that the net cost to PTC is $470 million. PTC probably paid more, but it gets to have any cash that Onshape might have -- $69 million? -- to bring the net price tag down to $470M. The sale will conclude in the coming weeks, following regulatory approval.) As a point of comparison, four years after Solidworks launched with $1 million in self-funding, it was acquired by Dassault Systemes for $320 million in 1997 dollars. Some of the founders of Solidworks are founders of Onshape.   PTC's Love of CAD (and lack thereof) PTC is the hero of our industry for popularizing the power of history-based, parametric MCAD back in the late 1980s. They're also known for harsh sales tactics. I recall a ceo boasting to financial analysts that he wasn't giving breaks to hurting customers during the 2008 recession.  PTC's love for CAD ebbs and flows. When PLM [product lifecycle management] became the in-thing, PTC became the Windchill company, leaving CAD as the afterthought. We saw the love flow to ALM and SLM (acronyms I have no interest in) and then more recently AR [augmented reality]. Then last week, it was back to CAD: "Our CAD business is doing well. It grew 9% last year in a 4% market," CEO James Heppelmann enthused. CAD is the division that makes the most money for the company, 50% more than number-two PLM. The Onshape purchase signaled the new crush: SaaS CAD, software as a service. "Our studies showed that Onshape pretty much goes toe-to-toe with features and functions against Solidworks, but beats them for anybody who wants SaaS, because Solidworks doesn’t have SaaS. [And] against Fusion it’s a better SaaS model and blows them away on functionality." Onshape doesn't actually beat them in functions, but this is the style of rhetoric PTC watchers have come to expect -- and enjoy hearing the spectacle of bravado. On the other hand, PTC's Creo MCAD system is a small player in the industry. Mr Heppelmann reported that of 174,000 new MCAD seats last year, Solidworks took 80,000 and Inventor 40,000, leaving 54,000 to be split amongst Creo, Catia, and NX. And so he needs Onshape to open new paths of growth for PTC. This is the plan he has in mind (all quotations are from real-time transcriptions and may not be wholly accurate): PTC will target customers in the new category of small business:  'Most of our customers are large- and medium-size businesses, but most new seats are coming from small businesses. We don't have a product for them, because Creo is too expensive and Windchill is too complicated.' 'Nobody will adopt this [cloud] tech faster than SMB [small- and medium-sized businesses]. We intend to disrupt the industry from below, because small customers have more flexibility to change' to SaaS.   PTC will convert its desktop software to SaaS:  'I am looking at how to get PTC's entire footprint onto the cloud. You'll see real-time collaboration and data management [in Creo etc that Onshape has].' 'We needed to grab a clean sheet of paper and start over, [because] there are zero SaaS leaders who refactored on-premise software.'   PTC will add its software to Onshape: Frustum generative design and Vuforia 3D authoring and AR publishing were two that were mentioned specifically.   PTC will drive the rest of the CAD market towards the SaaS tipping point:  'We don't understand why over the long run SaaS for CAD won't happen.' With an assumed CAD SaaS CAGR [compounded annual growth rate] of 35%, PTC expects 'slightly under 20% market penetration by true SaaS in the next five years.'   PTC will keep its customers, and steal customers from competitors: 'When a [PTC] customer wants to move to the cloud, we can say, 'Fine, stay in the family' [with Onshape].' 'When the day comes that any Dassault, Siemens, Autodesk, or PTC customer wants to move to SaaS, we will be there ready to guide them.' See Heppelmann and Hirschtick on PTC's Acquisition of Onshape on WorldCAD Access for more comments made by the two CEOs to financial analysts.   What Ralph Grabowski Thinks PTC has server-based PLM in place, but I suspect the company was finding it difficult to convert Creo to pure-cloud. Messrs Heppelmann and Hirschtick use salesforce.com as their signature example of a successful, clean-sheet, cloud-based system. The analogy, however, is wrong in audience and execution. Office tasks like CRM [customer relationship software] and PLM are well suited to running on terminals, and hosting CRM/PLM on remote servers is technically trivial compared to the challenge of vector-based CAD. That's why everybody has cloudPLM but very few have cloudCAD.  PTC saw Dassault and Autodesk having a hard time cloud-izing Solidworks and Inventor-Fusion. 'Our estimate is it would take us at least five years and several $100 million to build what [Onshape] has,' said Mr Heppelmann. Moreover, PTC has a painful history of having fallen behind once before. 'We were on the wrong side when we were on Unix while the world was going to Windows NT,' explained Mr Heppelmann. 'We were running a Unix program on Windows NT, and we needed a native Windows program [code-named Wildfire]. So we learned our lesson for the next transition,' being from Windows to the cloud. PTC has a wistful history of hoping acquisitions will renew the company, such as when CoCreate (bought from HP) was fused with Pro/Engineer to create Creo. PTC needed direct editing to catch up with its competition, but it wasn't the "get out of jail" card PTC made it out to be. And so PTC was happy to pay $90,000 per Onshape customer, who generates $1,500-$2,100 in gross revenues annually -- roughly a 50-year return. PTC anticipates big sales for Onshape, but its sales force won't be keen on a product that sells at just $125 a month. Onshape raised the rental price once already, and PTC will have to do the same. In the near term, PTC will link its software to Onshape through Connected Desktop Apps, where Onshape exchanges data with programs running on the desktop. Later, some PTC programs will graduate to Connected Cloud App status, where they run on the cloud -- and finally a few, such as Frustum (which already has a version that runs int he cloud), will become Integrated Cloud Apps, where they run as tabs inside Onshape. All this will take longer than the five years PTC anticipates. A former Autodesk ceo famously said all his company's software would be available only on the cloud in three years; that was seven years ago. Dassault still has no cloud version of Solidworks, after a decade of trying. Graebert wrote the drafting component for Onshape, known as Kudo, yet this company recognizes that CAD operates primarily on the desktop, and that cloudCAD is primarily for viewing, sharing, marking up, and doing some editing.  On the other side of the ledger, we have an Onshape with new people in charge, who will require a change to its hardcore stance against on-premise cloud. Until now, Onshape's sales pitch was, 'If you want on-premise cloud, don't buy from us' -- which limited its growth. The PTC kind of customer expects security by not storing data on the outside. It is good to see Onshape with a rescuer, because its technology is important to a specific set of users. What we have learned from the decade-long experiment by Dassault, Autodesk, and Onshape, however, is that there is little appetite in our industry for multi-server-based CAD running in Web browsers. PTC won't  change the fact that CAD ain't no salesforce.com. Letters to the Editor Here's another reason to avoid software that is rented: "Adobe backtracks, will refund customers after canceling their accounts: Adobe still deactivating Venezuelan accounts but will give money back to users." arstechnica.com/tech-policy/2019/10/adobe-backtracks-will-refund-customers-after-canceling-their-accounts/ It's not just renters who are at risk. Users of some perpetual-license programs can be victimized by hostile corporate or government policies. At least one CAD company automatically disables their software if the user hasn't checked in with the corporate "mothership" in the last 30 days.     - Don Beaton The editor replies: I've raised the issue of Autodesk apparently deactivating permanent licenses, because some readers reported to me that this happened to them. Autodesk has now said they are working on a statement about it.   Re: On Who Would Buy OnShape OnShape is the biggest secret to CAD users. Yeah, I tried it, didn't like it.  The tabs at the bottom of the screen don't work for me. The confusing merge feature makes things more complicated for me. The most surprising thing for me is the attitude of the upper management.  I had a crazy run in with an OnShape employee, and their response to the situation was just crazy. A 180-degree turn about from the good old Solidworks days when all was good.  Oh well. Back to work using Fusion 360.      - Devon Sowell   Re: The Black Swan Story Behind BricsCAD - Part II A very interesting read. I remember packing up and moving from Toronto to Edmonton, Canada to have access to one of the first M&S systems. We had workstations in Edmonton and Regina connected by a dedicated 1200-baud line, if you can imagine that.  Five years later, we were one of the first AutoCAD resellers in Canada and one of the first third-party developers using DXF to communicate between the desktop software and AutoCAD. Those were the good old days when John Walker would turn around a development request (for DXF) in a couple of days.  And now it is BricsCAD and Civil Site Design. Very nice to be working with developers who care again. It has been a long journey.      - Lance Maidlow, president      Chasm Tech Civil Survey Solutions - - - What about photogrammetry input into BIM-aware entities by the Bricsys BIM Alliance? Last October, a Bricsys representative showed me pre-alpha prototype with BIM model being built right inside a combined point cloud and photogrammetry model. Alliance member Leica only does point clouds; they can’t ignore that all the other players in Reality Capture, Digital Twin, etc treat photogrammetry as integral. Indeed point cloud looks like yesterday’s cutting edge, requiring expensive equipment, trained staff -- while ‘anyone’ can do photogrammetry, which has infinite development potential, and much closer to drone and VR tech than point clouds are. Bricsys policy has seemed strangely blinkered about this.     - Tom Foster     Tom Foster Architecture      www.TomFosterArchitecture.co.uk The editor replies: It appears to me that the Bricsys BIM Alliance is still in its very early days. (To date, it consists of Bricsys and Leica from Hexagon, and the design firm HOK.) Here is the official press release: https://www.bricsys.com/common/news.jsp?item=2092 - - - Nice piece on history of Bricsys/ODA.     Martyn Day - - - I've been using BricsCAD for years, maybe decades, and find it excellent. I'm running V13 and haven't upgraded. I'm not a professional draftsman and my eyesight is slowly failing, so for those reasons I haven't upgraded. The program has more features than I use. I've opened 60MBg AutoCAD 3D drawings, edited them in BricsCAD, saved them, and have been able to re-open them in AutoCAD. BricsCAD has locked up my system maybe a dozen times in all the years I've been using it. My AutoCAD LT would lock up that often in a month.  Only a couple of times have I lost work with BricsCAD. I don't know if your readers are aware of it, but BricsCAD creates backups at: C:\Users\'User'\AppData\Local\Temp  in the form of *.bak and *.SY$ files. The files are current within a few keystrokes of the last edit. It's a matter of changing the file extension of either of these files to *.dwg, and then opens it like a regular drawing.  These backups have saved me numerous times.     - Dik Coates, P.Eng.  - - - You wrote, "Bricsys… sold its Tri-forma architectural software to Bentley Systems." What Brics (was it actually called Bricsys back then) sold to Bentley was BricsWork 2.0 (see figure) which Bentley rebranded as Triforma 1. Here is my sorry BIM story which, thanks largely to you, eventually resolved happily into 2D BricsCAD (the earner) and BricsBIM (revived hope/potential): In a longtime 3D awareness of Reflex etc, I bought Basic BricsWork (without quants) and Bentley Powerdraft in 1995, cheap because the agent Brics UK was left with stock when the sale to Bentley was announced. It was unusable because of glaring bugs -- important commands didn’t work at all. I was promised Triforma as soon as it was released, but then it would only run on full Microstation. I was eventually given an academic Microstation, but Triforma 1 was unaltered from BricsWork, complete with all the bugs. I got no support from anyone, shelved it, continued on the manual drawing board, eventually to  AutoCAD v13, and then settling with AutocAD 2009 as the 2D optimum. IMHO. In 2012 I bought Bentley AECOsim, after demos seemed to show that it was massively updated from Triforma, only to find that the geometry-creation bit of it had changed hardly at all, tho now bug-free. It never earned for me, would not do my kind of off-angle architecture, and so in 2015 shelved it (effectively BricsWork) for a second time, while continuing in 2D with AutocAD 2009. On a whim I bought ‘affordable’ BricsCAD V14 but found that the BIM module had stopped at V13. I soon discovered why: Bricsys was clearing the way for -- at last! -- for the needed BIM revolution that had slowly become clear to me with the all-new BricsCAD BIM V15. Based largely on your account of the Oct 2014 Conference, I wrote forum.bricsys.com/discussion/26662/bricsbim-v15-revolutionary#latest and other posts, which got Erik thinking I was a BIM expert (if only!) and got me an invite to address the 2015 Munich Conference -- which was not the down-to-earth product plug he was expecting, but a freewheeling history through architectural and art, and a plea for Bricsys to evolve to grab the vacant market for radically-easy off-angle (non rectilinear) modeling. This went down a storm, but we’re still waiting forum.bricsys.com/discussion/comment/42062/#Comment_42062. So thanks to you, Ralph, for first alerting me to the Bricsys revolution, which, though massive, is so subtle as to be still unrealized by the world. Related: I think there’s room for a story about the evolution of the geometry-creation concepts of BIM. After the Unix pioneers like Reflex (which was the first mature, PC-based BIM), was it ArchiCAD or in fact BricsWork? I am not sure about the pioneers, but seems to me that all(?) the other BIMs have adopted the ‘draw a solid along a base line’ concept – which of course Brics has too – but all the others then fuss greatly about which of that solid’s faces are ends vs sides vs top vs bottom, and so are very limited by assumptions about which of these can be connected to which on another solid – which BricsCAD doesn’t care (or only minimally) about. It strikes me that Bricsys must be unique in having had not one, not two, but three goes at completely re-thinking and marketing a BIM system: First BricsWork (which all the others copied?) Then Brics Architecturals, which became BricsCAD BIM module (up to V13) that no one knew about Finally today’s BricsCAD BIM  That unique ability to scrap two marketing experiments and start again might explain BricsCAD BIM’s present revolutionary uniqueness.     - Tom Foster     Tom Foster Architecture      www.TomFosterArchitecture.co.uk - - -   Thanks for the history. Brings back “old times”. I was Chief of Engineering Systems at Fluor when we bought eight workstations from M&S around 1970. I believe we got serial number 3 of IGDS.  I think we paid over $1million. In the paragraph on Jupiter, did you mean to say “Matlock” or did you mean Meadlock?     -Tom Lazear     Achway Systems The editor replies: Thanks for correcting the name! - - -   In your opening you state "Black swans are... named after the rare occasion when a black cygnet hatches from white parents." I had not previously heard that explanation of the origin of the term. I was taught that early Europeans knew that swans were always white, because they never saw any that weren't. Then they discovered black ones in Western Australia, challenging their beliefs.  The following article is give a brief history of that side of events. australiangeographic.com.au/blogs/wild-journey/2016/07/black-swan-the-impossible-bird/ Thanks for a good history lesson of BricsCAD. Although I've never used BricsCAD, the history was still interesting.     - Dale Rebgetz     Down Under - - -   I trust that when giving the paper in Australia you were appraised of the fact that black swans are the norm in Australia. White swans are the rarity.  Somewhere along the way I think I tried IntelliCAD or maybe it was part of the CAD engine behind IrriCAD. Not 100% sure. My earliest dabble with CAD was CadApple. Still have the Apple IIGS I ran it on.     - Hugh Campbell The editor replies: I am disappointed to say no one pipped up after I gave my paper at the conference. That you still have a Apple IIGS is very cool. I also  have my first computer, a Victor 9000 nearly-PC-compatible stored in its original box under the stairs. It was $12,000 in today dollars. - - -   I really enjoyed your Bricsys histories (I & II). The only thing I felt you missed was that the original M&S Consulting/Intergraph equipment ran on Tektronix 4010 (and later 4014) storage tube displays, that caused a “green flash” and a redraw for anything other than text or cursor updates.  Hardly interactive, but they still sold!     - Mickey Mantle     wanderfulstorybooks.com The editor replies: I remember seeing vector displays from Tektronix in engineering school, but we never did anything with them, sadly. - - -   Isn’t there a way for you to get a referral fee when readers click through on your blog to software vendors?   I really enjoyed that article about alternatives to AutoCAD and am in the process of selecting one.     - Mark Harris The editor replies: When I enrolled in referral payment systems in the past, such as with Amazon, they changed the rules often enough -- and made the payments low enough -- that I can no longer be bothered. For instance, Google raised the minimum amount (before they send a cheque) from $50 to $100 and I have been sitting at $95 for a couple of years now. The best way to support me is through a PayPal donation; see below.   Thank You, Readers Thank you to readers who donate towards the operation of upFront.eZine: Ragnar Thor Mikkelsen  Malcolm Davies To support upFront.eZine through PayPal, then the suggested amounts are these: $25 for individuals > paypal.me/upfrontezine/25 $150 for small companies > paypal.me/upfrontezine/150 $750 for for large companies > paypal.me/upfrontezine/750 Should Paypal.me not operate in your country, then please use www.paypal.com and the account of [email protected]. Or mail a cheque (US$ or CDN$ only, please) to upFront.eZine Publishing, Ltd., 34486 Donlyn Avenue, Abbotsford BC, V2S 4W7, Canada. 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