Business model of PTC

Customer Segments

PTC provides products and services to a range of customers, including small and large businesses across multiple sectors. The Company primarily services customers engaged in the following activities:

• computer-aided design and product design;
• product development and lifecycle management;
• application lifecycle management;
• management of global software development;
• service lifecycle management; and
• planning and delivery of service, and analysis of product intelligence

This includes customers operating across the automotive, aviation, industrial and manufacturing, engineering, transport and logistics, and aerospace and defence, sectors. Among PTC’s customers are high-profile names such as 3M, BAE, Aegis, Adidas Group, Airbus, Porsche, Alstom Transport, Callaway Cars, and Deckers Outdoor.

The Americas are PTC’s largest market, accounting for 42% of the Company’s total revenue in 2015, followed by Europe, which accounted for 37%. The Company also recognizes revenue across Japan and the Pacific Rim.

Value Propositions

PTC provides value to its customers in the following ways:

• The quality and reliability of its products, including its software, hardware and support services;
• Its marketing and sales reach, providing services and solutions directly across the Americas, Europe, Japan and the Pacific Rim;
• Its industry expertise, with the Company employing highly-qualified technical and corporate staff across its two business segments;
• Its commitment to innovation, devoting a significant portion of its revenue to research and development activities each year.

Channels

PTC operates a website at www.ptc.com, through customers are able to view the Company’s products and services. The Company operates the PTC e-store, which allows customers to purchase certain PTC products and services.

The majority of PTC’s revenue is generated through sales of products and services through the Company’s in-house direct sales team. PTC operates sales and support offices across the Americas, Europe, Japan, and the Pacific Rim.

These direct sales are supplemented by a network of authorised resellers, distributors and independent sales agents, which account for between 20% and 25% of PTC total sales. PTC also provides services via a number of strategic services partners, which assist PTC customers in implementing the Company’s products and solutions.

PTC expects to increase its dependence on channel partners as it continues to grow.

Customer Relationships

PTC makes a number of its products and services available to customers on a self-service basis through its online store. This enables customers to make purchases and manage customer accounts without dealing directly with members of the PTC sales team. Customers can also arrange free software trials on a self-service basis through the PTC homepage.

Despite this, the majority of PTC’s sales come via its direct sales teams, which provide a more tailored service to customers, ensuring that all requirements and client briefs are fulfilled. Many of the Company’s licensing and subscription contracts include technical support services, which enable customers to receive ongoing personalised care. PTC also provides a broad range of support resources to customers through its e-support portal, including downloads, guides, documentation and tips.

PTC also operates a PTC Community portal, through which customers can interact with one another, and several blogs, through which it provides information on company and industry developments. PTC is also able to interact directly with its customers through its Facebook, Twitter, LinkedIn, YouTube, Google+, and SlideShare accounts.

Key Activities

PTC develops and sells a range of technology solutions, including software, support solutions and professional services.

The Company operates through two business segments: Software Products and Services, comprising the development, licensing and sale of various software products, as well as the provision of technical support services; and Services, which comprises the Company’s provision of ancillary services such as consulting, implementation, training, and cloud services, and the sale of computer-based training products.

The Company’s products and services cover computer-aided design, product lifecycle management, application lifecycle management, service lifecycle management and Internet of things.

Key Partners

PTC has established a range of partnerships to help jointly market, sell, and develop integrated products and services. Its partners can largely be categorised as:

• Software Resellers, comprising a global network of resellers, distributors and independent sales agents, which extend PTC’s sales and marketing reach;
• Software Partners, comprising software and application developers, and technology companies, to which the Company provides tools and support in integrating third-party functionality into PTC solutions;
• Hardware Partners, including manufacturers and product design companies that assist PTC in providing effective, performance-oriented hardware solutions; and
• Service Partners, comprising consulting firms and high-profile technology companies, with which PTC collaborates on joint-venture projects and complementary consulting and training program.

PTC’s partners include high-profile companies such as AMD, Hewlett Packard, IBM, Adobe, Ansys, Dell, and Nvidia, as well as less well-known companies, including GPO Solutions, Inneo Solutions, Neilsoft, Jerand Technical Services and Punditas.

Key Resources

PTC’s key resources are its technology and intellectual properties, its IT infrastructure, its sales and distribution channels, its partnerships and its personnel – in particular its research and development staff. The Company has a number patents and trademarks in place.

Searches of records published by the US Patent and Trademark Office identified a number of patent applications, including applications entitled ‘Method for analyzing time series activity streams and devices thereof’ and ‘System and method of message routing using name-based identifier in a distributed computing environment’.

Cost Structure

PTC incurs costs in relation to the development of its products and services, the maintenance of its IT infrastructure, the operation of its sales and marketing networks, the management of its partnerships, and the retention of its personnel.

PTC commits a substantial amount of its funds to its research and development activities, recording research and development costs of $227.5 million in 2015. The Company employs a workforce of just under 6,000 employees worldwide, which represent costs in the form of salaries and benefits, and operates a network of almost 100 offices worldwide, accruing costs in the form of rent and utilities.

Revenue Streams

PTC generates revenue primarily through the the sale of software licenses, subscriptions, support, and professional services. The Company’s revenue-generating activities can be categorised as follows:

• Licensing and Subscriptions, including revenue from sales of perpetual licenses, provision of subscription-based licenses, and the sale of cloud services;
• Support, including revenue generated support contracts that include upgrades, telephone and internet-based support, updates and bug fixes; and
• Professional Services, including revenue generated through implementation, consulting and training services sold under consulting engagement contracts or as part of software license arrangements.

In 2015 PTC generated $1.26 billion in revenue, down from the $1.36 billion recorded by the Company in 2014. The majority of this revenue, around $1.03 billion, was generated by the Company’s Software Products segment, with licensing and subscriptions accounting for $348 million and support services accounting for $681.5 million.