There has been a significant development this week in the Internet of Things (IoT) enabled factory automation technology sector that has longer term implications in this technology applications area.

This supply chain industry analyst and blogger has been attending the PTC LiveWorx 2018 Technology Conference in Boston this week, an event we have covered on this blog for the past several years.  While we will provide noteworthy highlights of the conference in a subsequent blog, we wanted to alert our Supply Chain Matters reading audience to a rather significant announcement made in conjunction to this week’s event. PTC LiveWorx 2018

The Announcement

A joint announcement indicates that Rockwell Automation and PTC have entered into a definitive agreement relative to a strategic partnership that is expected to accelerate growth for both companies. This announcement was disclosed at the tail-end of the opening morning keynote anchored by PTC President and CEO Jim Heppelmann.

The announced partnership calls for Rockwell Automation to make a $1 billion equity investment in PTC, representing an approximate 8.4 percent ownership interest in PTC based on PTC’s current outstanding shares.  PTC, in-turn, intends to use the proceeds from the equity investment to repurchase stock to offset stockholder dilution. The per-share price that Rockwell will pay represents an 8.6 percent premium on PTC’s closing stock price on June 8th, the last trading day prior to this announcement. The investment transaction is subject to customary closing conditions and regulatory approvals and is expected to close within 60 days.

Rockwell Automation’s Chairman and CEO, Blake Moret, will join PTC’s board of directors effective with the closing of the equity transaction.

Announcement Details

In essence, this proposed partnership leverages both companies’ resources, technologies, industry expertise, and market presence, to include technical collaboration across the organizations as well as joint global go-to-market initiatives. In particular, PTC and Rockwell Automation have agreed to align their respective smart factory technologies and combine PTC’s ThingWorx® IoT, Kepware® industrial connectivity, and Vuforia® augmented reality (AR) platforms with Rockwell Automation’s best-in-class FactoryTalk® MES, FactoryTalk Analytics, and Industrial Automation platforms.

At the PTC executive news conference held with press and industry analysts on Monday, Heppelmann described this transaction as a Rockwell decision to partner with PTC rather than to compete directly. More succinctly, Rockwell possesses a huge direct sales presence in factory automation and MES systems, which PTC can now leverage. Once more, according to Heppelmann, PTC is committed to not sign future competitive agreements with other MES and shop floor automation systems integrators, allowing Rockwell exclusive rights to significant customers and distribution channels.

Heppelmann was specifically questioned about the existing partnership and implication related to the General Electric partnership in the factory automation and Industrial Internet market segment.  His response was that the GE partnership is not as active at this point and that Rockwell provided far more strategic benefits for PTC in market penetration. “We are not a small company, but not a massive company. We needed scale in a partner.

Questions also were focused on why the morning keynote elected to share the announcement at the very tail-end of the keynote, when the session had already overrun its time allotment. Heppelmann’s response was that the session had a prescribed flow in marketing messaging and that it made more sense to share the announcement at the end. That explanation, from this author’s lens, did not hold water. Rather, the implications of this announcement were likely significant to some of the conference’s paid sponsors.

Technology Market Implications- Initial Take

This author walked away from this year’s LiveWorx with a belief that PTC is undergoing a complete strategy change in its market support capabilities. Rather than a noted emphasis in product lifecycle management (PLM) and IoT platform capabilities, the technology provider has found market resonance and stated needs in more manufacturing shop floor and extended supply chain management information integration opportunities. PTC is also committed toward leveraging a sustaining Cloud-based subscription revenue model.

Other announced strategic partnerships with Microsoft for leveraging that provider’s Azure Cloud for global based IoT platform adoption, and with ANSYS, to combine CAD and digital simulation in a combined capability for engineering design focused communities each address scale and reach in today’s market.

But the Rockwell Automation partnership and equity investment has far broader market implications in the competitive race as to which enterprise and specialized technology providers eventually dominate the lucrative Industry 4.0 additive manufacturing and IoT market. From our lens, it places PTC and Rockwell Automation technology in direct competition with the likes of Oracle, Open Text, SAP and other ERP and enterprise software and Cloud platform providers. Specialized systems integrators such as Accenture, Capgemini, Deloitte Digital and Infosys are likely impacted in access to future key MES and shop floor automation leveraging IoT

revenue opportunities.  It likely provides Rockwell with an inside edge to leveraging PTC technology along with other strategic options in the months to come.

This Editor will provide added insights and commentary in a subsequent LiveWorx 2018 commentary.

 

Bob Ferrari

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