Why is PTC’s CEO Jim Heppelmann buying ServiceMax, a cloud-based SaaS Field Service Management (FSM) solution, from the investment firm Silver Lake for $1.46 billion? What is the benefit of PTC having its own FSM solution?

The big picture is that this deal is fundamentally about acquiring a component that broadens PTC's opportunities to be involved in the entire product value chain, long after it has left the product realization phases. With ServiceMax integrated into PTC's PLM suite, Windchill, this is exactly what Heppelmann is paving the way for. This purchase shows, in short, that PTC has its sights set on being able to offer a seamless PLM platform that closes the product life cycle loop.

"There are several good reasons," claimed a visibly enthusiastic Heppelmann, during a presentation last week at the company's Investor Day. He pointed to the closed PLM loop, as well as how the purchase underscores PTC's SaaS investment strategy.

"The addition of ServiceMax will realize a key part of PTC's closed-loop PLM strategy," he said in a press release. "The PLM capabilities PTC has long offered to engineering and manufacturing departments provide the system of record for the digital definition of any product configuration. ServiceMax will complement this by providing the system of record for monitoring and servicing product instances after they leave the factory and move into customer use. Upon completion of this acquisition, PTC will have the unique ability to complement the full digital product definition from our CAD and PLM solutions with detailed usage information from our IoT solutions and the complete service history from ServiceMax. PTC is poised to be the only company that will be able to offer manufacturers this comprehensive view of their products at each stage of the lifecycle.”

This is a reasonable investment step for a company to take when it has ambitions to fight for total leadership in the PLM sphere, which has so far been dominated by Dassault Systèmes and Siemens Digital Industries.

A Slightly Wobbly “Shape Curve”

But there are also questions. ServiceMax has had a slightly wobbly evaluation curve in recent years. The question now is whether ServiceMax in the PTC environment will reverse the reversal described in Gartner's global FSM evaluations.

Heppelmann was aware of this during his Investor Day speech. All in all, it is not unreasonable to conclude that ServiceMax has not "thrived" in the environment offered by its previous owners GE Digital, and most recently Silver Lake. If you look at Gartner's three most recent evaluations, the "shape curve" has generally not pointed in the most favorable direction.

• In the 2020 Magic Quadrant, where Gartner positions the global FSM solutions, ServiceMax placed itself in the so-called leader quadrant, where the strongest software on the market resides. ServiceMax was considered to have come a long way in terms of the completeness of the vision and also ranked quite highly in terms of capacity to do the job ("execute"). Swedish ERP developer IFS was—and still is today—a clear leader with both of these aspects taken together.
• In 2021's Magic Quadrant, ServiceMax had been moved backwards in terms of vision, but slightly upwards in terms of the execution parameter.
• In the 2022 Magic Quadrant, the company actually slipped out of the leader quadrant and was instead positioned as a challenger. In this year's quadrant, it seems to be the “vision” parameter that has not developed in pace with the competition.

My view is that ServiceMax will benefit from being in the PTC environment, with a strong visionary leader such as Jim Heppelmann, who is also known for strong operational efficiency.

What further substantiates the proposition that ServiceMax's new environment can provide a positive result for the company's solutions is the fact that PTC and ServiceMax have already been partners since 2015.

In the press materials they claim to "support manufacturers of complex, highly configured products for the medical device, industrial products, aerospace, and related verticals. These manufacturers view field service as a strategic part of their businesses to maintain product performance, extend their products' lifecycles, increase customer satisfaction, drive revenue growth and expand profitability.”

“ServiceMax and PTC have a longstanding relationship rooted in the common profile of our customers, the natural synergies of our products and a shared understanding of the importance of product data at different stages of the lifecycle,” said Neil Barua, CEO, ServiceMax in a press release. "PTC has a strong and consistent track record of success, and now following the growth and innovation we've achieved during our partnership with Silver Lake, we're excited for the ServiceMax team to strengthen the service offerings of PTC's digital thread and closed-loop PLM portfolio.”

Comprehensive Cloud-Based FSM Capabilities Built on Salesforce

So, what are the details of ServiceMax's capabilities?

Overall, according to the press material around this deal, the strength lies in a comprehensive set of cloud-based FSM capabilities built on the Salesforce platform:

“These functions include managing all relevant information about serviced products – product description, serial number, service history and more – creating and managing work orders and scheduling and dispatching technicians. ServiceMax FSM capabilities are also closely integrated with Salesforce's customer relationship management (CRM) system, bridging a deep understanding of the product with an equally deep understanding of the customer.”

On their website, ServiceMax concludes that, “manufacturers of industrial equipment and assets are increasingly choosing to expand their offerings and package broader hardware, software and services solutions in an as-a-subscription model. The rise of Internet of Things (IoT) solutions and improved access to asset data is now facilitating the creation of Equipment-as-a-Service (EaaS) models for asset-intensive manufacturers. This practice is referred to as product servitization.”

Yet, Barua underscores that manufacturers often struggle with making headway in these offerings by underestimating the commercial business maturity and the customer understanding that is really needed.

And Gartner agrees, according to a recently published report titled “Now Is The Time To Deliver IoT-Enabled Product Servitization To Manufacturers.” Gartner writes: “Asset-intensive manufacturers often fail to meet the needs of their customers when enabling product servitization due to a lack of due diligence in classifying asset and product form-fit-function characteristics and operating conditions.”

Sharpens PTC’s Digital Thread Capabilities

This is a very interesting purchase being made by PTC, in the sense that what they buy can connect and strengthen their offerings around the closed product lifecycle management (PLM) loop. In particular, this will be achieved by ServiceMax expanding the capabilities of the digital thread of product information downstream towards Enterprise Asset Management (EAM) or maintenance management, and/or with the product in the end-customers hands in terms of field services.

In general, a reasonable conclusion from last week’s announcement of this deal is that ServiceMax FSM capabilities complement PTC's entire digital thread portfolio. Once in place in an optimized integration, it can leverage product definition data from PTC's Creo and Windchill solutions, technical publishing capabilities from PTC's Arbortext software, service parts management capabilities from PTC's Servigistics software, IoT and digital twin capabilities from PTC's ThingWorx solutions and AR capabilities from PTC's Vuforia software.

For example, by remotely monitoring connected products with ThingWorx, customers could proactively detect service needs and automatically generate service orders in ServiceMax. Meanwhile, service technicians can leverage 2D work instructions from Arbortext or 3D AR work instructions created in Vuforia derived from the product's digital product definition information created in Creo and managed in Windchill.

Technicians can also leverage a more detailed understanding of service activities to better optimize parts inventory with Servigistics.

Pushes PTC’s Software Revenue Past a $1.0 Billion Milestone

Relevant in this context is that PTC's purchase is a logical development in terms of the company's previous investments in Service Lifecycle Management (SLM), and connected pieces such as spare parts management. But IoT/Industrial IoT connections also exist as underlying potential enhancers where PTC's ThingWorx solution, and Vuforia on the augmented reality side, will have an even broader context than before. Just think of the opportunities that will be available to service assets or products over the internet using AR with remote guidance via wearables or iPads which show how, for example, a spare part should be replaced.

"We have been looking at ServiceMax for a long time and were interested in buying the solution. Now this opportunity came within reach and will realize an important part of PTC's PLM strategy to close the product lifecycle loop,” Heppelmann summed up during the Investor Day speech.

He also pointed to the financial value this purchase adds to PTC in the form of ongoing annual software revenue of $148 million, which also means that the company should pass the ARR $1.0 billion milestone in the next fiscal year related to “PDM and process orchestration software,” as Jim Heppelmann said during PTC’s Investor Day.

As the global market increasingly shifts to establishing business models based on the "Product-as-a-Service" concept, PTC will now be able to sharpen its position with a more complete offering, particularly in terms of more complete digital thread capabilities. Analyst firm Tech Clarity notes that over 75 percent of companies report the digital thread is either important or critical to achieving their business strategy. 

It all looks promising and adds PLM potential to PTC.