Heppelmann has been working in the infotech industry since 1985 and has extensive experience in developing and deploying large-scale information systems within the manufacturing marketplace. In an interview with DQ Channels in Boston, Heppelmann expressed his views on the PLM (product lifecycle management) market globally, PTC's acquisition plans and its competition

What would be the future of the PLM market, let us say, five years from now?
I think the PLM market today is like ERP market in the 80s. There were many point-solutions but a tremendous lack of integration. There were many good solutions but it was difficult to get one overall solution. In PLM today, there are 25 subsets. If you take 3D, it is a sub-sector and has number of players and competitors in it. Similarly in CAD, CAE, and others. There are 25 sub-sectors like project management, portfolio management, requirement management in each of this and there are five-six companies in these sub-sectors. So what SAP did, it brought together all the components to make this one integrated solution. In PLM world some consolidation and some big platform solution will come out. Even in PTC we have covered half of the sectors. Through development and through acquisitions, we could double the breadth of the PLM platform. But the key is to commit to one platform. Because, if you make many acquisitions and if you don't have one platform it is not going to solve the problem.

James Heppelmann Executive VP-Software Products and Chief Product Officer, PTC

Doesn't PLM make a very interesting candidate for a takeover? SAP or Oracle?
If PLM is simple, then SAP wants to takeover. More the niche and complicated PLM is, the more intimidating it is. The world of SAP, or of Oracle, is simple. In PLM, it is rich graphics, complex mathematics, 3D CAD, 2D, equations, and they (SAP or Oracle) don't have experience in that. My point is that if PLM is billing material or document management, then watch out for SAP. If PLM is integration of Maths, CAD, 2D-3D then SAP is not so eager. Certainly they have clash. It may be Microsoft, SAP or Oracle. These companies are broad and their solutions are shallow compared to ours. But they sell them across different sectors. Our solutions are offered to companies, which produce products. SAP could decide to acquire a company. But they are scared for the domain knowledge required.

What is the current PLM market size?
It depends how you look at PLM. Overall it may be around $15-20 billion market.

From a technical point of view do you consider PTC should go for further acquisitions?
Our vision for PLM is very clear. We probably need 12 more categories, so either you develop or acquire. We would like to do more around Arbortext or process market. We might do some development on requirement management, system engineering and cost management. For instance, people want to know long before any commitment to build the product, how much would it cost? They can't ask the same question to SAP because none of these products were built. So ERP system doesn't have the historical data. They need to estimate the cost. Today you don't have the cost estimation against ideas. That's an example of an area for acquisition or for organic development to happen.

Many niche companies in almost all the segments are working on many acquisition targets. For us to do any acquisition we look at the technology to integrate with us. We also have some financial criteria. We want to acquire companies that grow in the second and third quarter of the acquisition and become profitable.

Your R&D plans for India?
Overall we have 600 engineers in India. They work on almost all projects. We work on 65:35 ratios, where 65 percent of our engineers will be working on new developments and the rest on product enhancements.

How are you handling different cultures from different companies?
We haven't had any problems. May be the companies, which we picked, have people who think like us. Mostly we have acquired R&D companies. In any R&D, people work together. If you compare that to a sales job, most of them work alone. When we acquire a company we make some alignment with our vision. In fact, I came to PTC through an acquisition.

What is the kind of growth do you expect from enterprise solutions and SMEs?
We experienced 35 percent growth in enterprise segment. It is a very phenomenal growth. I think enterprise market might grow 15-20 percent and for SMBs we hope to see around 20 percent growth.

How has global sourcing and design collaboration affected the product development process and your business?
We globalized our product development in 1994. PTC also came to India in 1994. We think this strategy is working for us.

Are you looking at any other development facilities apart from India?
We have deep Russian heritage; our founder is a Russian and we also have many Russian employees. Russians are good in mathematics, so we feel that we get good talent there. Eastern Europe, Russia and China can be looked at for new centers.

Coming back to PTC's plans to earn a billion-dollar revenue by 2008, which way will PTC choose to achieve this? Will you acquire other companies?
In 2004, we published a plan to achieve billion-dollar revenue in 2008. We have come close to that in '07 already. At this time, we didn't need to acquire in order to achieve that number. Having said that, we don't want that plan to show us down. We are continuing to make acquisitions.

Are you looking at PLM in non-manufacturing area?
I see PTC expanding to other verticals. For example, Arbortext can be used in many verticals, not only in manufacturing. But we are looking at addressing the second biggest segment, after agriculture, for our products. We don't want to sell our products everywhere. Instead, we want to offer integrated solutions to manufacturing.

Srinivas R
(The writer was hosted in Boston by PTC)

Page(s)   1