Own the Entire Workflow, Not Just One Step

Today I'm digging into PTC Inc. It's a 40-year-old CAD company that has figured out how to make customers stick around.

This was a fun one for me as I've really gotten into 3D printing this year. I have started designing some of my own 3D models and one of the CAD tools I tried out was Onshape. I like Onshape as it's cloud-based and just works!

It turns out Onshape is owned by PTC.

Here's what else I found interesting about them:

• Successfully pivoted from traditional software licensing to 93% recurring SaaS revenue

• Built switching costs so high that customers have invested "hard-to-part-with" levels of investments in their workflows, not jus their CAD tools

• Acquired their way into every step of manufacturing (ThingWorx, ServiceMax, Onshape) rather than building organically

• Serves 95% of Fortune 500 manufacturers with $2.35B annual revenue and 80%+ gross margins

The core lesson: Own the entire workflow, not just one step. PTC didn't just sell CAD software - they bought their way into design, IoT, augmented reality, and field service to become indispensable rather than just useful.

The AI wild card: PTC is betting big on AI integration across their platform - Windchill AI, ServiceMax AI, generative design capabilities. This could go two ways. AI might become a massive cost-cutting and efficiency tailwind, helping customers optimize everything from predictive maintenance to design automation. Or it could democratize manufacturing software capabilities, letting nimble competitors offer "good enough" solutions that chip away at PTC's expensive, complex workflows. The switching costs that protect them today might not matter if AI makes switching dramatically cheaper and faster.

Worth watching how this plays out. Companies with high switching costs usually win, but AI has a high likelihood of flattening competitive advantages.

With that, I'll talk to you tomorrow.

-Nick

TL;DR

• What they do: PTC transforms manufacturing through integrated CAD, PLM, IoT, and AR software serving 95% of Fortune 500 discrete manufacturers

• Scale: $2.35B annual revenue, 30,000+ customers, 7,000 employees across 30+ countries

• Business model win: Successfully pivoted from software licensing to 93% recurring SaaS revenue

• Competitive moat: Created switching costs so high customers can't afford to leave - years of data, trained employees, integrated workflows

• Key lesson: Own the entire workflow, not just one step - PTC acquired their way into every stage of product lifecycle from design to field service

The 30,000-Foot View

PTC makes software that helps manufacturers create everything from jet engines to medical devices. Their business model: charge monthly subscriptions for tools so deeply embedded in workflows that switching costs millions.

• Revenue Sources: Support/Cloud Services (59%, $1.36B), Software Licenses, Professional Services

• Market Cap: $20.56B

• TTM Revenue: $2.35B

• Gross Margin: ~80%+

• Net Income: $440.38M

• Employees: ~7,000

• Industry: Industrial Software/PLM

• Geography: Americas (45%), Europe (40%), Asia Pacific (15%)

Company History

1985: Russian immigrant Samuel Geisberg founds Parametric Technology Corporation with $4M VC funding, revolutionizing CAD with parametric design.

1988-1989: Launches Pro/ENGINEER (first parametric CAD software), IPO on NASDAQ. Profitable from year one.

1992-1995: Captures 20% of global CAD market, becomes second-largest CAD seller behind IBM.

1998-2007: Launches Windchill PLM platform, acquires Computervision. Grows to 25,000+ customers.

2010: James Heppelmann becomes CEO, rebrands Pro/ENGINEER to "Creo."

2013-2019: Strategic pivot to digital transformation. Acquires ThingWorx (IoT), Vuforia (AR), Onshape (cloud CAD).

2022-2023: Launches Windchill+ SaaS platform. Completes largest acquisition: ServiceMax for $1.46B.

2024: Neil Barua becomes fourth CEO, focuses on AI integration. Successfully defends against Autodesk acquisition approach.

Show Me the Money

Standout Features:

• Consistent 7-10% revenue growth

• Expanding operating margins (42% in Q4 2024)

• Sizable free cash flow generation ($736M in FY24)

• Successful debt reduction of $569M in FY24 alone.

Memorable Marketing

PTC evolved from product-centric to customer-obsessed marketing, using their "Revenue Orchestration and Intelligence Engine" that combines AI and automation for real-time buyer engagement.

Revenue Orchestration Engine (2023-2024): Replaced lead forms with AI-powered conversational marketing using Drift, 6sense, and People.ai across 17 countries. Results: 4x faster MQL conversion, 1,200 net-new accounts, 21,000 hours saved through automation.

LiveWorx Digital Events (Annual): Premier industry conference with 6,500+ attendees featuring non-tech keynote speakers alongside customer implementations. Why it worked: Education over selling creates genuine value.

Social Selling Program (2023-2024): LinkedIn Sales Navigator training across 45 reps in 17 countries. Results: 25% increase in social engagement, improved conversions through industry insights rather than generic pitches.

Tactical Takeaways:

• Replace lead forms with real-time chat that engages prospects when they're interested

• Use automation to eliminate manual tasks and focus on high-value activities

• Create educational experiences rather than direct sales pitches

• Focus on account-based targeting using predictive analytics vs. wide-net approaches

Financial Data

The N.O.O.B. Nine — Competitive Powers

Average Score: 3.6/5 - Strong competitive position with exceptional switching costs and scale economies.

AI Uses & Opportunities

Current AI Uses: Windchill AI offers document analysis and intelligent search. ServiceMax AI provides field technicians with predictive maintenance insights. Creo features generative design for automatic part optimization. ThingWorx uses machine learning for predictive maintenance, reducing unplanned downtime 10-20%.

Future Opportunities: AI automation could reduce operational costs 20-30% while increasing output 10-15%. Predictive maintenance optimization could cut maintenance costs 25% and decrease downtime 30%. Generative design could accelerate time-to-market by automatically creating optimized product variations. AI copilots could help engineers access decades of product knowledge instantly.

Bumps in the Road

Go-to-Market Disruption: PTC is restructuring sales around vertical industries, incurring $20M in costs. New CEO Neil Barua eliminated COO and CRO positions, consolidating control but risking execution during challenging market conditions.

Competitive Pressure: Faces intense competition from Siemens, Dassault, and Autodesk. Autodesk walked away from rumored $20B acquisition in July 2025, suggesting strategic concerns.

Economic Sensitivity: Manufacturing exposure creates cyclical risk. Company acknowledges "sluggish selling environment" with declining close rates for 2+ years.

Debt Load: Carries $1.75B gross debt requiring $90M annual interest payments, though maintains strong cash flow and targets debt-to-EBITDA below 3x.

Your Swipe File

• Own the entire workflow: PTC grew from CAD software to complete product lifecycle platform, making themselves indispensable rather than just useful

• Switching costs are your best friend: When customers have millions invested in your ecosystem, they become partners in your success rather than flight risks

• Pivot early to recurring revenue: PTC's transformation to 93% subscription revenue provides predictable cash flow and higher valuations than traditional licensing

• Strategic acquisitions can beat organic growth: PTC spent over $2B acquiring capabilities rather than building from scratch, accelerating market entry by years

• Data creates competitive moats: IoT platform generates usage insights that improve product value, creating flywheel effects competitors can't replicate