Business & Tech

Scott Kirsner | Innovation Economy

How Boston software maker PTC came back from the brink

PTC chief executive Jim Heppelmann speaks during PTC's LiveWorx technology conference in Boston last year.

Two companies decided to move from the bucolic ’burbs into Boston’s Seaport neighborhood, one in 2016 and the other in 2017. The chief executives of both companies liked to discuss the potential of the “industrial Internet” — the ability to link all kinds of physical machinery to the network and have it start reporting information about its current health and status.

One company, General Electric, has seen its stock lose roughly 50 percent of its value over the last two years. Shares of the other company, the software maker PTC, have risen about 150 percent over that same period.

At a moment when GE is reevaluating all of the businesses it operates and seeking to sell some off, PTC announced this month a $1 billion investment from a new partner, Rockwell Automation of Milwaukee. And next week, PTC will hold a conference in Boston focused on the industrial Internet and other emerging technologies that is expected to attract about 6,000 attendees.


What did PTC get right? This, after all, is a company that looked to be on the verge of extinction — or at least irrelevance — in 2003. Back then, the company was losing money, laying off hundreds of employees, and being sued by both shareholders and its biggest distributor. The company was nearly de-listed from the Nasdaq exchange for filing an annual report late.

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PTC’s original business was making the modeling software that engineers use when they are designing new products, from cars to coffeemakers. Jim Heppelmann, who took over as chief executive in 2010, had a sense that as a new product went out into the world, it would be important to be able to “keep getting data back from it, so you can improve or optimize it, and so the next generation of the product is even better.” That meant integrating wireless connectivity to the products — something that would be done by those same engineers who already used PTC’s software.

But the company also needed the software that would let customers create applications to monitor those connected products once they were being used — to decipher all the data they were spitting out, and to understand when they needed to be repaired or how efficiently they were operating. So starting in 2013, Heppelmann spent more than $400 million to acquire three companies that were producing that kind of software: ThingWorx, Axeda, and Kepware. It was a big bet, he acknowledges, since the three companies combined were only generating about $40 million in revenues.

To most consumers, Internet-linked products mean things like the Nest thermostat, or a door lock that can be opened with an app. Heppelmann notes that some of that stuff is mainly interesting for convenience or the gee-whiz factor, like the swimming pool heater at his home that lets him switch it on or off even when he’s not there. But when you’ve got a multi-million-dollar piece of factory equipment, he says, “preventing it from going down and out of commission, or optimizing its use, can create a lot of value. In the industrial world, we’re talking about equipment that typically is an extremely expensive asset.” Being able to constantly monitor that type of equipment, he says, “is more useful than cool.”

In this part of the economy — the factory floor rather than your family room — there is lots of competition from players like Siemens, ABB, Qualcomm, and yes, GE. And Silicon Valley giants like Amazon and Google also want to provide cloud-based infrastructure to support all of these connected devices.


While stock analyst Steve Koenig considers PTC a “niche vendor” in the industrial Internet arena compared with some of those larger players, he also expects the stock to keep going up. A report he issued this month says that the future is so bright for PTC that investors “gotta wear shades to LiveWorx,” its annual conference. Koenig, a managing director at Wedbush Securities in San Francisco, says that the $1 billion investment from Rockwell Automation is “a very big deal for both companies.” Rockwell, a major equipment supplier to factories, will help sell PTC’s software into its customer base.

The biggest question for PTC going forward is how quickly those industrial customers feel they need to step into a more connected, data-oriented future. A report issued by the Chicago consulting firm Sikich this week said that fewer than 10 percent of the 200 companies Sikich surveyed currently use “Internet of things” technology in their facilities, and 30 percent admitted they don’t have a solid understanding of how the technology works.

“Manufacturing is a notoriously slow-moving industry,” says Graham Immerman, director of marketing at Northampton-based MachineMetrics, a manufacturing analytics startup. “But it’s the largest industry in the US. It produces the most data, but you see the least amount of digitization. You’ll still see some of the largest companies using whiteboards or paper for tracking data.” That’s either a problem for tech promoters — or a massive opportunity.

Like GE, PTC is relocating its headquarters from Needham to Boston “primarily for talent reasons,” Heppelmann says. When the company tries to hire techies fresh out of school, the company’s current location just inside I-95 can be a deal-breaker. “They don’t want to move to the suburbs,” he says. Many candidates don’t own a car and don’t want to.

When I ask him about the transformation that GE has been struggling through, Heppelmann isn’t unsympathetic. “GE desperately wants, or wanted to be, a software company,” he says. Former CEO Jeff Immelt “used to say, ‘You go to bed as an industrial company, and wake up as a software company.’ Well, the reality is, software is pretty hard, and very competitive,” says Heppelmann.


PTC survived a near-death experience in the early 2000s. “We had an unbelievable lead, we squandered it, and we crashed hard,” Heppelmann says. “But we went back to the drawing board, and rebuilt the company.”

At the LiveWorx conference next week, he’ll get to take a victory lap. And come January, they’ll move into a glass high-rise just a few blocks away from GE’s headquarters.

Scott Kirsner can be reached at Follow him on Twitter @ScottKirsner and on