On November 1st, 2019, renowned CAD developer, PTC, broadcasted the following:
“PTC (NASDAQ: PTC) today announced it has completed its acquisition of Onshape, developer of the Onshape® Software as a Service (SaaS) product development platform that unites robust computer aided design (CAD) software with powerful data management and collaboration tools. The acquisition positions PTC to capitalize on the inevitable industry transition to SaaS.
“We expect our acquisition of Onshape will enhance the momentum we’re seeing with our Creo® and Windchill® products,” said Jim Heppelmann, president and CEO, PTC. “We now have the full portfolio to meet customers wherever they are, be it on-premises or with a full SaaS model in the cloud.
“Based on the successful approach we took with our ThingWorx® Internet of Things and Vuforia® Augmented Reality platforms, we expect the increased investment and market reach that PTC brings to Onshape will lead to an even stronger position in the high-growth SaaS market. We also intend to integrate breakthrough capabilities, such as our recently acquired Frustum® generative design technology, into Onshape, to further advance PTC’s position as the market transitions to the SaaS model,” added Heppelmann.
The SaaS model, while nascent in the CAD and product lifecycle management (PLM) markets, is rapidly becoming industry best practice across most other software domains. IDC’s research shows manufacturers are looking to the cloud to support specific innovation-related processes such as design review, supplier collaboration, quality management, and service execution.*
Onshape will operate as a SaaS business unit within PTC with Jon Hirschtick, president of Onshape, reporting directly to Jim Heppelmann, president and CEO of PTC.”
According to Engineering.com’s Editor-in-Chief, Verdi Ogewell, this is the second time Jon Hirschtick was able to sell a CAD system at a 9-digit figure:
Way back in 1997, Hirschtick sold his 3D CAD desktop firm, SOLIDWORKS, to Dassault Systèmes for $310 million. With PTC’s announcement last week of the acquisition of Hirschtick’s newest creation—the cloud CAD company Onshape for $470 million—this is the second time he has succeeded in selling a unique CAD company.
When SOLIDWORKS debuted on the market in 1995, it was the world’s first desktop 3D CAD solution and brought 3D design technology to the masses.
Onshape has its own unique characteristics. It’s the first native 3D CAD solution developed for the cloud under a software-as-a-service (SaaS) model and runs on the Amazon Web Services (AWS) platform. Onshape is also equipped with multi-tenant capabilities for collaboration and an aggregated database technology (instead of being file-based).
This is not the first time Jim Heppelmann surprised the market. Over the past decade, the chief of PTC has increasingly emerged as one of the industry’s leading visionaries.
At the top of his track record is the early realization that the Internet of Things (IoT) could play an important role in a product’s life and created a solution for this in PTC’s ThingWorx platform.
Heppelmann has also been the driving force behind the development of the market’s strongest augmented, virtual and mixed reality (AR/VR/MR) solutions, as well as the creation of practical functionalities for feedback of data from the product in the field or the hands of the end-user to the PLM system through PTC’s Windchill, and making it possible to use that data for innovative product enhancements.
The SaaS Concept Attracted PTC
The SaaS aspects of Onshape are what attracted the attention of Heppelmann; partly because PTC’s current CAD solution, Creo, is mainly used by larger corporate customers where the growth of new CAD seats is limited or slow.
During a briefing after the Onshape deal was done, Heppelmann said that PTC’s research on the transition to the cloud indicated that no company so far has been able to port existing systems to the cloud. Generally, all SaaS industry leaders built their solutions natively, rather than porting existing systems.
Furthermore, Heppelmann noted that 70 percent of the new market in recent years went to Autodesk Inventor and Dassault SOLIDWORKS.
“Today, we see that small and medium-sized CAD customers in this fast-growing part of the CAD market are shifting their interest towards SaaS delivery models. But we also expect the interest from larger customers to grow over time,” he said in a comment.
New CAD system sales and business opportunities are mainly coming from mid-market environments, and PTC wants to have a larger slice of the mid-market pie. Can Onshape prove to be a catalyst in this context, as well as a way to expand PTC’s SaaS business?
How Much Does Onshape Cost to Use?
Onshape offers everything from free solutions to professional layouts with extended functional capabilities. Both variants, free and paid, provide full functionality, but the free solution has limits on data storage and on the number of documents a user can access at any time.
The advantage of the free level is that it makes it easy for those who want to share work in collaborative arrangements similar to other companies’ viewer solutions, though it’s more capable than just offering those who are partners in the product development work the opportunity to look at, rotate and turn and zoom in to view 3D models and drawings.
- The STANDARD solution costs $1,500 a year.
- For those who want Onshape’s advanced solution package, PROFESSIONAL, the price rises to $2,900 a year.
- The ENTERPRISE solution starts at minimum $20,000 dollars per year for a whole team.
Nothing to Install, No License Keys, No Service Packs
But the cloud and browser solution is a big point. This makes the platform accessible everywhere and on all modern devices such as mobiles, tablets and more. Users do not need to download anything, install anything or think about license keys or service packs. In the cloud, on the web, the latest version is always available and always compatible. You do not have to spend time managing file management or PDM issues.
“Check-in, check-out and IT overhead, which come with the old-time PDM system, are history. Onshape’s sharing, collaboration, and control capabilities are, I dare say, actually revolutionary,” says Hirschtick. He explains that, “It is very easy to share documents with suppliers and partners, as well as the fact that data management is no longer a headache. You also save local storage space and the backup needs disappear. No more lost files or broken links.”
A Logical Step for PTC
Furthermore, this acquisition is a logical next step in PTC’s overall business model. The first part of this was the company’s transition to subscription licenses, which was completed in January 2019.
“The SaaS model in the CAD and PLM markets will quickly develop towards becoming the industry’s best practice in these and most other program domains,” says Heppelmann.
He further points out that the SaaS model enables customers to work faster and improve collaboration and innovation, with lower costs and without an IT infrastructure to manage and maintain. But there are also good consequences for the software developer’s business:
“Yes, the SaaS model has proven to generate a more stable and predictable revenue stream,” Heppelmann continues. “We also note that it increases customer loyalty.”
PTC added that Onshape will function as a business unit within PTC, with current management and reporting directly to Heppelmann.
“I am very pleased to have received such a talented team of technical and skilled business leaders for our company and look forward to taking our business to the next level of growth,” Heppelmann concluded.
“Onshape shares PTC’s vision to help organizations change how they develop products,” said Jon Hirschtick. “We and PTC believe that the product development industry is approaching the ‘tipping point’ of SaaS. The attractiveness of this type of offering will increasingly entail a transition in the utilization of CAD and data management tools to SaaS. This model will improve their competitiveness.”