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PTC’s innovative outlook, robust solution toolbox, and legacy in CAD and PLM make it a valuable IoT partner

Strategic findings

Shift in focus to AR/VR

In our 2018 LiveWorx EP we suggested a shift from an emphasis on PTC’s ThingWorx IoT platform to PTC being more vocal about Vuforia, its AR/VR solution, and its wider product portfolio. TBR believes that shift has continued with much of the messaging centered on the business implications of augmented reality as well as how its entire product base works in symphony, and less focus on ThingWorx as its tip of the spear into digital transformation.

This shift makes sense. The IoT platform space is saturated with established vendors, along with several smaller entrants, offering some shape of IoT platform. PTC has the key components for an IoT platform, but so do others, including the giants Amazon Web Services (AWS), Microsoft, IBM, Oracle and Google, and OT stalwarts such as Bosch and Siemens. It is hard for PTC to stand out by messaging its IoT platform alone, despite a robust offering, as the IoT platform market is busy. TBR believes the shift could also indicate IoT is not growing quite as fast as PTC hoped.

Instead, PTC has increased its messaging around AR/VR. TBR believes PTC is positioning AR as a new differentiated niche to bring customers into its wider ecosystem, positioning it as a “wow” factor and distinct from peers’ offerings, as well as enhancing the value of other products such as Creo, Windchill, and ThingWorx. Based on the compelling presentations, messaging, and customer lineup using Vuforia, TBR believes PTC has a competitive AR/VR product.

PTC’s pitch is that AR helps customers add the human element to an IoT solution — instead of getting insight from dashboards in the board room, insight is delivered in real time on the factory floor. Conversely, in PTC’s view, AR/VR helps feed data into the IoT solution. Information around what workers see, such as a fire, a faulty part, parts that need to be replaced as well as unsafe conditions, can be fed into a centralized IoT platform, much like a sensor inside a machine. Ultimately, PTC seeks to “decorate” the industrial world with real-time information, and extend the value of IoT data through AR. It remains to be seen how well AR contributes to feeding data into an IoT solution. TBR believes AR is not there yet, but believes PTC did a good job of showing how AR can provide an actionable UI and lead an IoT solution to be more operationally effective.

Key outcomes PTC messages around AR/VR include reducing complexity by allowing workers to always have information on parts and machines; ensuring quality control and compliance using step-by-step checklists; and improving efficiency through gamification. It also offers a drastic reduction in training time as the Vuforia Expert Capture (formerly Vuforia Waypoint) solution allows expert employees to transition knowledge to novice workers or a machine or solution vendor to train a new customers’ IT or OT team.

PTC has a lineup of customers leveraging its Vuforia technology as proof points. Customers seem to adopt in two ways: by leveraging PTC’s polished tools Vuforia Expert Capture and Vuforia Studio, such as Howden and Aggreko, or by building upon PTC’s foundation, such as Fujitsu and Caterpillar, which are leveraging Vuforia Engine to build a proprietary solution.

How well Vuforia is performing monetarily is still questionable to TBR. TBR expects many Vuforia customers are in the pilot and proof-of-concept stages, which could indicate Vuforia is not yet being fully monetized while in multiple trials. However, in speaking about PTC’s strategic partnership with Rockwell Automation, PTC CEO Jim Heppelmann noted 40% of Rockwell Automation’s IoT wins have included AR with joint customers particularly interested in Vuforia Expert Capture. According to Heppelmann, Vuforia contributes 7% of PTC’s current software revenue, a respectable amount compared to its larger legacy PLM and CAD businesses, with growth of 80% year-to-year (TBR expects from a very small base). He also noted the AR-IoT combo is a core growth business for the company and expects the combination to contribute one-third of its sales moving forward, with continued growth of nearly 40% year-to-year.    

An interesting thread we have not seen PTC talk about, publicly or privately, is offshoots of Vuforia to the consumer market and leveraging Vuforia Expert Capture for consumer self-help applications, e.g., instead of a YouTube video on how to tie a complicated knot, a VR experience guiding people on how to tie a knot could be more impactful. This could be expanded to cooking guides, exercise guides, or sewing guides as examples within a huge pool of opportunity. Microsoft and the HoloLens team could be a good partner for these applications, such as leveraging the Xbox install base to reach consumers (if Microsoft is not already moving in this direction alone), and could help foster a content creator network. It could also be leveraged by consumer-focused businesses to educate its end customers, such as sporting goods company Coleman delivering a VR walkthrough of setting up a tent.   

Bosch is a things company at heart but will leverage new capabilities to capitalize on emerging data opportunities

Bosch takes off its tie

To achieve its current position, Bosch self-admittedly had to transform from a traditional components manufacturer to an evolutionary technology and services company. Bosch CEO Volkmar Denner characterized this transformation as the “taking off of the tie” as the company evolves from a stiffer, traditional mindset to one more like that of Silicon Valley, which focuses on agility, innovation and attracting young talent through corporate flexibility. Denner suggested that while this was indeed a technological development, the path to transformation necessitated a culture change. To help, in 2018 Bosch brought Dr. Michael Bolle on board as chief digital officer, tasked with organizing companywide digital transformation efforts, corralling shadow IoT efforts, and breaking down business silos to share resources, knowledge and capabilities.

Denner indicated Bosch has been implementing proto IoT, often termed telematics, for decades, but its evolutionary journey started in earnest in 2014 as the company began realizing the disruption IoT, AI and other emerging technologies would cause within its business and wider market. To outmaneuver peers and expand the reach of its business, Bosch began taking steps toward transformation:

  • Bosch’s journey began in 2008 when it acquired Innovations Software Technology. It was the foundation of the newly founded Bosch Software Innovations and was positioned as corporate Bosch´s IoT software and system unit and was leveraged to begin building a horizontal software foundation to link together Bosch’s vertical businesses’ efforts in connected equipment.
  • From 2014 to 2016, Bosch began focusing on enabling IoT inside its larger business. This included making strategic acquisitions to build a stronger horizontal software footing, building the Bosch IoT Suite, establishing the Bosch Center for Artificial Intelligence, and setting the goal for all of the company’s electronic products to be connectivity-enabled by 2020. By the end of 2018, 52 million IP-enabled products were sold by Bosch.
  • Starting in 2016 Bosch began to emphasize the digitization of existing ecosystems and the scaling of IoT within those ecosystems. Bosch also started leveraging its Bosch IoT Suite to corral data from a client’s entire operations and using AI to generate elevated insight.

To help speed its transformation, Bosch acquired inubit AG and ProSyst early in its journey to enhance its IT foundation in the application and platform space. But Bosch has also been investing organically in technical talent. Bosch leadership indicates the company had 69,500 associates in R&D as of 2019, a significant jump from when the company began its journey (though an exact compare was not provided); 27,000 software developers, which is a sizeable pool for a manufacturing company; and more than 5,000 dedicated IoT developers. Denner indicated AI is a cornerstone of Bosch’s IoT strategy and that the company has over 200 dedicated researchers in the field. Bosch is leveraging all of this talent to not only improve its verticalized products and services but also to grow its capabilities horizontally, akin to an IT company. The Bosch IoT Suite, which is examined in depth in this report, aims to serve as a foundational layer to support customer deployments across multiple verticals, in addition to enhancing the company’s own capabilities.

Bosch ConnectedWorld is an IoT and digital transformation conference hosted annually in Berlin. It stands out in the sea of IoT conferences due to its emphasis on operational technology (OT), with sessions often headed by industrial partners talking about industrial challenges, and its use as a platform for EMEA-based technology and industrial companies to highlight their products and strategies in a technology area that is sometimes dominated by U.S.-based messaging. Bosch ConnectedWorld has grown from 500 attendees in 2014 to nearly 5,000 in 2019, indicating customers’ increasing interest in digital transformation, as well as the power of Bosch’s messaging around connected products.