Which CAD solution was the fastest-growing on the market last year? Take a wild guess—but you’re probably wrong. I was. It’s PTC’s cloud-based Onshape solution.

I have discussed this and other related matters with PTC's CEO Jim Heppelmann and Jay Vleeschhouwer, a research analyst at Griffin Securities, a firm that keeps close track of CAD revenues, new license volumes, comparative active bases and market shares for the big CAD players, including Autodesk Inventor, Dassault Systemes’ SOLIDWORKS and CATIA, and PTC’s Creo and Onshape.

But PTC's positive CAD software trend in 2020 doesn’t stop with Onshape's good growth figures. According to Vleeschhouwer, last year the company's main solution on the CAD side, “Creo outperformed Inventor, SOLIDWORKS and CATIA."

This is an interesting indication of a market in transition, and aligns well with Jim Heppelmann’s statement on the topic.

“SaaS and cloud-based PLM and CAD are about to become the new normal,” Heppelmann said to engineering.com. “I expect that the SaaS market for CAD and PLM will experience ‘hyper-growth’—meaning more than 40 percent—for years to come. That means SaaS will grow an order of magnitude faster than the traditional market.”

This can be considered a bold statement, reflecting an obvious self-interest on the part of PTC. So the question is: How right is he?

Gartner Predicts an Explosive Growth for Saas Software

One answer recently came from the analyst Gartner, stating that companies’ global investments in cloud SaaS software will grow by 40 percent over the next two years. In 2021 alone, that means we are talking about 20 percent to a total of almost $122.6 billion, up from $102.8 billion in 2020. For 2022, Gartner calculates that this figure will rise to around $145.4, once again about 20 percent up.

Admittedly, at present we are not yet able to see the exact figures and effects of SaaS-based CAD and PLM in the cloud during 2020. However, there is a lot of evidence to suggest that a corresponding development curve may apply to these areas, and the trend appears to be very close to the growth figures Heppelmann talks about.

“SaaS up 40 percent.” The analyst Gartner predicts that companies’ global investments in cloud SaaS software will grow by 40 percent over the next two years. In the picture, Sid Nag, research director at Gartner.

An interesting point in all this is that the pandemic served as a multiplier for CIOs' interest in the cloud, according to Gartner’s report. This is not a cost-neutral phenomenon, however; on the contrary, Gartner estimates that growth in SaaS investments will drive companies' items for IT-related costs up to 20 percent per year. Budgets and expenses will therefore increase by 20 percent per year in SaaS, and the pandemic played a major role.

“Yes, the events of last year made it possible for CIOs to overcome their reluctance to move mission-critical workloads from locally installed to the cloud,” says Sid Nag, research director at Gartner. “Even in the absence of the pandemic, the situation would still be a lack of appetite to develop their own data centers.”

If you are a CIO, taking this development into account in the budget is a very relevant action.

Virtualization and Edge Computing Contribute to Driving the Cost Upwards

What else is driving the cost-curve upwards? Several things, says Nag:

“New technologies such as containerization, virtualization and edge computing are becoming more common and driving additional cloud costs. Simply put, the pandemic has served as a multiplier for the CIOs' cloud interest.”

It may seem a bit paradoxical to see such a sharp rise in costs right now, as most nations are experiencing macroeconomic headwinds. But this does not matter, claims Gartner’s analysts. Money obviously still exists and facing another pandemic situation would be a repeat of a nightmare that no responsible CIO wants to be a part of. Therefore, they re-prioritize and invest what must be invested, and the result is "an enormous growth for investments that support or deliver public cloud services."

CAD in a browser, accessible everywhere on any type of device, even a mobile phone, and no software downloads needed—these are characteristics for the cloud CAD solution Onshape that Jim Heppelmann intends to use as a cornerstone in the PTC Atlas Package.

A Mess to Get Through, Says Competitor

Some say that Jim Heppelmann’s hyper-growth prediction during engineering.com’s interview was too optimistic, but developments can still come to prove him right. The question, however, whether in the short-term PTC can capitalize on the trend with its Atlas package comprised of Onshape and Arena PLM, and apart from the CAD flagship Creo and its main PLM suite, Windchill?

It may not come as a surprise that PTC’s competitor, Siemens Digital Industries Software, doesn’t think so.

“I wonder what PTC is going to do,” says Siemens CEO Tony Hemmelgarn. “They have Windchill sitting there, they have Arena sitting there, they have Creo sitting on its own CAD offering, and Onshape using Parasolid. What are they going to do? That’s a mess to get through.”

“Is it?” I asked Heppelmann.

“No, not at all. Creo and Windchill are proven offerings that work great and will continue to do so ‘forever.’ The Onshape and Arena offerings follow an entirely different paradigm—multi-tenant SaaS with zero installed footprint of applications or data—and are targeted at different customers in a different part of the market, especially wherever there are competitive displacement opportunities because customers want SaaS. We are bringing Creo and Windchill to SaaS using Atlas, so no need for those customers to switch,” he replied.”

“As opposed to what Tony Hemmelgarn says, we feel Creo has the world’s best CAD kernel, the original one that has stood the test of time,” Heppelmann adds. “It has few if any shortcomings, and customers love it. Meanwhile, Onshape will use Parasolid to make it, among other things, easier for Siemens and SOLIDWORKS customers to switch to SaaS with PTC.“

A Powerful Opinion Leader for SaaS-Based CAD and PLM in the Cloud. PTC’s chief Jim Heppelmann is one of the players in the PLM area who is the most powerful advocate for SaaS-based CAD and PLM in the cloud. He is supported in his view of the development path by respected analysts. According to independent PLM analyst Gartner, the total SaaS software market will grow by 40 percent over the next two years.

He added that Siemens really doesn’t have an SaaS offering, “but I can tell you firsthand that their customers are all interested in one. Why? Because they are talking to us about it.”

The tone may seem harsh, but it is simply the nature of things at this and other competitive levels when business opponents collide. Who is right or wrong is always up for discussion, but in my experience what Jim Heppelmann is doing in his executive role is the result of a well-thought-out plan. Bottom line, it is up to the customers to think about it and consider the relevance. Fortunately, there are some more scientifically-developed facts which can substantiate the picture and provide aspects of the situation.

Jay Vleeschhouwer at Griffin Securities is a respected analyst who, among other things, has great insights into the CAD sector. He has also appeared on CNBC with his expert breakdowns.

How Griffin Securities Measures the Market: Creo Outperformed CATIA in 2020

“How do you measure what happens on the market,” I asked Jay Vleeschhouwer.

“Our published reports on the CAD business consider two metrics: new commercial licenses, both upfront and subscription; and active commercial bases, both under subscription and maintenance,” said Vleeschhouwer, explaining that with respect to the new business and among the “classic” products, in the 2020 calendar year Creo outperformed CATIA, Inventor and SOLIDWORKS (each of which appear to have had double-digit declines from 2019).

“When we include the newer brands, Onshape had the fastest growth, but on the smallest base. PTC reported ‘more than 150%’ bookings growth in calendar 4Q20, i.e., its 1QFY21; Fusion 360 also had strong growth year-over-year and became the highest volume product last year, surpassing SOLIDWORKS.

With respect to the active bases, Jay Vleeschhouwer, claimed that among the "classic" products, Creo had the most rapid growth (about 6%) in 2020. This meant that they surpassed the active base growth for Inventor and SOLIDWORKS, he said.

“This is one of the most interesting new dynamics in the market, as prior to 2019 the Creo base growth had lagged that of Inventor and SOLIDWORKS, but was ahead of CATIA's base growth,” Vleeschhouwer added.

The combined active commercial base for CATIA-Creo-Inventor-SOLIDWORKS was over 1.46 million as of the end of 2020, up 4 percent from 2019. It’s interesting to put these numbers in the perspective of what Dassault Systèmes SOLIDWORKS communicates in terms of their license base—plus 6 million! Behind the big difference lies the fact that a major part of Dassault Systèmes SOLIDWORKS licenses are heavily discounted educational or sponsored licenses. However, SOLIDWORKS still has the largest active professional user base, but the number may surprise you: 583,000 active commercial seats as of the end of 2020 with a seat defined as a paying subscription or maintenance. PTC Creo’s figure is 214,000, which is a smaller difference than people normally believe.

Of course, it is not difficult for Heppelmann to point to these facts as yet another indication supporting his theses that the development of the company's solutions and business models is moving in a favorable direction.

What PTC has primarily brought into the Atlas platform are Vuforia Expert Capture and Creo Generative Design Extension (GDX). With this in the existing Onshape offering for Atlas, PTC continues to accelerate the availability of SaaS products on the market.

So, What Is Going On With The PTC Atlas Package?

When Jim Heppelmann invests, he always goes all-in—and he also expects quick results from his coworkers and development organization. That was the case when the company entered into a partnership with automation company Rockwell a few years ago, and it is likely to apply to the company's latest acquisition and the creation of a cohesive SaaS and cloud-based PLM and CAD platform, in PTC Atlas.

As mentioned above, Onshape is the cloud CAD solution on the Atlas platform, including PDM functions, while in the short term the latest acquisition of the Arena PLM platform will be integrated for more complete cPDm capability (collaborative Product Definition management).

The development work has also started quickly, as expected, and a few weeks ago PTC announced that it has expanded its SaaS function with two new products delivered on the PTC Atlas platform. What is primarily included now is the Vuforia Expert Capture and Creo Generative Design Extension (GDX), which will be included in the existing Onshape offer on Atlas. This shows how PTC continues to accelerate the availability of SaaS products on the market.

“Atlas therefore supports a growing portfolio of SaaS applications and production-ready solutions,” stated Andrew Kimpton, VP of PTC's Atlas development.

Kimpton adds that the new Vuforia and Creo applications will immediately have the operational and technical scalability that PTC has built into the Atlas architecture.

“The Onshape team invested years in building the groundbreaking SaaS platform, which also prepared to host a number of product development applications,” he said.

As it became part of PTC, this development has been able to be accelerated. But this acceleration effect also works in several directions when it comes to development work.

“PTC has been able to accelerate the development of Atlas at the same time as the Atlas platform has contributed to accelerating PTC's overall SaaS strategy. We are very pleased to have new levels of performance, security and efficiency, as well as groundbreaking new SaaS collaboration opportunities for the entire PTC portfolio,” Kimpton commented.

PTC strongly believes in augmented reality (AR) solutions. The technology's visuality, interactive methods for presenting relevant digital information in connection with the physical environment and connecting employees has great potential to improve business results. It is believed that Industrial AR also offers a better way to create and deliver easy-to-use work instructions by transferring digital content to real work environments. PTC's Vuforia solution is one of the new capabilities now added to the Atlas package.

Robust Setup Functions

PTCs EVP and GM for the augmented reality (AR) pieces, Mike Campbell, is well known and experienced in PTC’s organization. He also praises the powerful new architecture now provided to the Atlas package.

“With Atlas’ power, we can offer Vuforia users a robust set of features they need to scale implementations in the company, including version control, content management and approval workflows that would have taken years to deliver without Atlas,” asserts Campbell. “Atlas helps to make these offers better and we look forward to delivering a robust roadmap for Atlas-enabled benefits in the near future.”

PTC’s and Creo’s GDX generates multiple designs simultaneously and provides a simple and intuitive way to analyze which designs are the best for the project. You can rapidly investigate multiple design scenarios and materials to find design geometry that would not have been found using traditional design methods. This approach saves time and material cost, reduces waste and leads to higher-performing designs.

Sharp Generative Capabilities

In the same way, the generative solution Creo GDX on the Atlas platform delivers perhaps the most advanced AI-based generative design functions available on the CAD market.

“The seamless integration between GDX at Atlas and the Creo CAD environment gives our customers unmatched access to the resilient computing resources needed for AI-driven generative design,” commented Brian Thompson, divisional director and head of the CAD segment at PTC.

With these new products, he says, which are now being sent out on the Atlas platform, PTC has dramatically accelerated the opportunities for ever faster time-to-market with richer products.

“In short, we significantly exceed the industry standard in time-to-market,” Thompson concludes.

Experienced PTC Employees. (Left) Jon Hirschtick, the mathematics professor who once created SOLIDWORKS and sold it to Dassault Systemes, then launched a whole new idea around a cloud CAD solution that did not require a software download but which could instead be used directly in the browser: Onshape. In October 2019, it became clear that PTC's Jim Heppelmann appreciated the plan and believed so much in the project that PTC invested $470 million in buying the company. To the right, experienced PTC employee Mike Campbell, who has held a number of important management positions in the company. Today he is active as head of the AR side.

A Brilliant Future For Atlas?

Does the Atlas package have the brilliant future that Heppelman envisions? He says the answer is a powerful "Yes," pointing to the potentially exponential development for SaaS and cloud-based PLM, CAD and other product development-related solutions and tools.

Besides that, he and PTC have invested heavily in building up competence, software capabilities and added purchasing of key technologies where needed.

IoT/ThingWorx, AR/Vuforia and the SaaS-based business model are viable examples of his decisive intention to move the company ahead in a direction that goes hand in hand with PTC’s parametric groundbreaking DNA and earlier commercial successes, mainly during the 1990s.

Furthermore, he has always managed to make things happen around his bets. For example, where Dassault’s Bernard Charles had great ideas and PLM visions in the early 2000s but an R&D development organization that had difficulties in closing the gap between what could be delivered on those visions, Heppelmann is more aggressive in carrying through his visionary ideas and translating them into practical solutions. The wheels start rolling quickly and the results are coming at an unusually fast pace for the PLM industry, presently only matched by Siemens.

These days Heppelmann as a matter of fact also can point to good financial results, which is a key that sets the limits for how much can be invested in R&D.

“PTC’s PLM business accelerated to 15 percent growth in FY20, building on the strong trend of 12 percent growth in FY18 and 13 percent growth in FY19. In the last two years, Windchill has grown 28 percent while Siemens appears to be flat or down, and Enovia grew -1 percent,” Heppelmann asserted when I asked him.

This is of utmost importance in the context of what developing Atlas to a broad and competitive level will cost. There are strong indications that Heppelmann and PTC are on their way to develop these resources. Altogether, the first ready new Atlas solutions, the economic growth for the various PLM areas such as CAD and cPDm, and last but not least, the analyst predictions which seem to verify Jim Heppelmann’s hyper-scale prediction, mean things are looking pretty good.