 From Boston, Massachusetts, it's theCUBE. Covering LiveWorks 18, brought to you by PTC. Welcome to Boston, everybody. You're watching theCUBE, the leader in live tech coverage, and we're here with a special presentation and coverage of the live work show sponsored by PTC of Needham, soon to be of Boston. My name is Dave Vellante. I'm here with my co-host, Stu Miniman and Stu. This is quite a show. There's 6,000 people here. I'm Stu Miniman, I'm Jim Heppleman this morning, was up giving the keynote. PTC is a company that kind of hit the doldrums in the early 2000s, a company that, as manufacturing moved offshore, its core business was CAD software for manufacturers, and it went through a pretty dramatic transformation that we're going to be talking about today. Well, fast forward 10 years, 12 years, 15 years on. This company is smoking. The stock's up 50% this year. They got a billion dollars plus in revenue. They're growing at 10 to 15% a year. They've shifted their software business from a perpetual software license to a recurring revenue model, and they're booming. And we're here at the original site of theCUBE, as you remember well, in 2010, the Boston Convention Center down at the seaport. And Stu, what are your initial impressions of live works? Yeah, it's great to be here, Dave. Good to be here with you. And they dubbed this the largest digital transformation conference in the world. So, I mean, Dave, you and I have been to much bigger conferences, and we've been to a lot of conferences that are talking about digital transformation, but IOT, AI, augmented reality, blockchain, robotics, all of these things really are about, it's about software, it's about digital transformation, and a really interesting space. As you mentioned kind of the legacy of PTC, I've been around long enough, I remember we used to call them parametric technologies. They kind of rebranded themselves as PTC, Windchill, wow, bringing back some memories to me. When I worked for a high tech manufacturing company, it was, that's the life cycle management tool that we used back in the early 2000s, so I had a little bit of background to them, and as you said, they were based in Needham, and they're moving to the seaport hot area, especially, we've said, Dave, Boston has the opportunity to be the hub of IOT, and it's companies like PTC that are going to help bring that, those partnerships and lots and lots of companies to an event like this. Well PTC has always been an inquisitive company, as you were pointing out to me off camera, you know, they bought Prime Computer, Computer Vision, a number of acquisitions that they made back in the late 90s, you know, which essentially didn't pan out the way they had hoped, but now again, fast forward to the modern era, Jim Heppleman came in, I think around 2010, Exida, ThingWorks, a company called Coldlight, Kepware is another company that they purchased, and took these really sort of independent software components and put them together and created a platform. Everybody talks about platform, we'll be talking about that a lot today, we're the number of the customers and partners of PTC, and we even have some folks from PTC on, but basically, talking about digital transformation earlier Stu, IOT is a huge tailwind for a company like PTC, but they had to really deliberately pivot to take advantage of this market, and if you think about it, you know, yes, it's about connecting and instrumenting devices and machines, it's about, you know, reaching them, creating whatever wireless connections, but it's also about the data, we talk about that all the time, and constructing data that goes from edge to core, and even into the cloud, whether that cloud's on-prem or in the data center. So you're seeing the transformation of this company, obviously I talked about some of the financials, we'll go into some of that, but an evolving ecosystem, we heard Accenture's here, Infosys is here, Deloitte is here, as I like to say, the SIs like to eat at the trough, if the SIs are here, that means there's money here. Yeah, Dave, and actually a number that jumped out on me when Microsoft was up on stage, and it wasn't that Microsoft is investing five billion dollars into IOT, the number that caught my ear was the 20 to 25 partners that it takes to deploy a single IOT solution, so anybody that's been in tech for a long time, when you see these complicated stack solutions, the SIs need to be here, it takes a long time to work through them, and integration is a big challenge, how do I get all of these pieces together? It's not something that I just tip by off the shelf, it's not shrink-wrapped software, this is complicated solution, it is very fragmented, and how we make them up, very specific to the industry that we're building, so really fascinating stuff that's going on, but we are still very early in the life cycle of IOT, huge, huge, huge opportunities, but big players like Microsoft, like Google, like Amazon are going to be here making sure that they are going to simplify that environment over time, huge, Dave, the original forecast I think we did at Wikibon was a $1.2 trillion opportunity, which most of that, that was actually for the industrial internet, which is not the commercial things that we think about all the time when we talk about the home sensors and some of the things, we'll be talking some of the consumer stuff, but also the industrial here. Well, I think a couple of key points that you're making here, first of all, the market is absolutely enormous. It's almost impossible to size, I mean you're talking about a trillion dollars and sort of spending on hardware, software, services, virtually everything, but to your point, Stu, it's highly, highly fragmented, virtually every industry, in a lot of different segmented technologies, but it's also important to point out, this is the mashing together of operations technology, OT with information technology, IT, and those forward-leading companies, IT is actually leaning in and embracing this notion of edge computing and IoT. Now, I wouldn't even say that IT and OT are Hatfield and McCoy's, they're not, they're parts of the organization, they don't talk to each other, so there are cultural differences, they use different languages, they think differently, one is largely engineers who make machines work, the other IT guys, which we obviously know what they do, they keep information technology systems running, they deploy a lot of new IT projects, so really different worlds that have to start coming together. Jim Heppelman today I thought did a really good job in his keynote, he talked about innovation, usually start with okay, we're here at point A, we want to go here, we want to get to point B, and we're going to take a straight line and have a bunch of linear steps and milestones to get there. He pointed out that innovation today is really sort of a non-linear process, and he talked about the combinatorial effects of really three things, machines or the physical, computers and humans. Machines are strong, they can do heavy lifting, computers are fast, and they can do repetitive tasks very accurately, and humans are creative. And he talked about innovation in this new world, coming together by combining those three aspects, finding new ways to attack problems, to solve nature's challenges, and bringing nature into that problem solving. He gave a lot of examples of how mother nature, mimicking mother nature is now possible with AI and other technologies, pretty cool. Yeah, absolutely Dave, I'm sure we'll be talking a lot today about the fourth industrial revolution, a lot of discussion as to what jobs that robots are going to take. I look around the show floor here, there's a lot of cool robotics going on, but as Eric Buñolstein and Andy McAfee, the folks from MIT that we've interviewed a couple of times, talked about the second machine age, the really the marrying of people and machines that are going to be powerful, and absolutely, Jim Heppelman talked about that a lot. It's humans, it's physical, and it's digital, putting those together, and then the other thing that he talked about is we're talking a lot about voice lately with all of these assistants, but you're really limited as to how much input and how fast you can take information in from an auditory standpoint. I mean, I know I listen to podcasts at 1.5 to 2X to try to get more information in faster, but it is site that we're going to get 80% of the information in, and therefore it's the VR and AR that are huge opportunities. I know when I've been talking to some of the large manufacturers, what they used to have in written documentations and then they went digital with, they're now getting you inside to be able to configure the systems with the HoloLens or some of the AR headsets, the VR headsets to be able to play with that. So we're really early, but excited to see where this technology has come so far. Yeah, we're seeing a lot of practical applications of VR and AR. We get a lot of these shows and they'll have the demos, and you go, okay, well, what do I do with this? Well, you're really seeing here at LiveWorks some of the things that you actually can do. One good example I thought they did was BEA Systems up in Nashor, actually showing the folks that are doing the manufacturing, you know, a little tutorial on how to do that. We're going to see some surgical examples today, remote surgery. There are thousands, literally thousands of examples. In the time we have remaining, I want to just do the rundown on PTC because it really is quite an amazing transformation story. You're talking about a company with $1 billion in revenue. Their aspiration is by 2021 to be a $2 billion company. They're growing at 10% a year. Their software business is growing at 12% to 15% a year. 15% is that annual recurring revenue. So this is an example of a company that has successfully shifted from that perpetual model to that recurring model. They got $200 million this year in free cash flow. Their stock, as I said, is up 50% this year. They got $350 million in cash, but they just got a billion dollar investment from Rockwell Automation that took about 8.4% of the company, given an implied valuation of almost $11 billion, which has got a little uplift from the stock market there. They're selling a lot of seven-figure deals. Really, their core is manufacturing, product life cycle management, CAD. That's the stuff that we know PTC well from. And I talked about some of those acquisitions that they made. They sell products like Creo, which is their 3D CAD software. I think they're on, I don't know, five or six by now. So they've taken their legacy software and updated that for the digital world. And it is version five that they were just announced today talking about really the 3D effort that they're doing there, some partnerships around it. And like every other software, Dave, that we've been hearing about, AI is getting infused in here because with so many devices and so much data, we really need the machines to help us process that and do things that humans can't keep up with. And the ecosystem is growing. This is a complicated marketplace. If you look at the Gartner Magic Quadrant, there is no leader, even though PTC is the leader, but there is no leader. They're all in the sort of lower right, PTC is up highest. GE, interestingly, is not in there because it doesn't have an on-prem solution. I don't know why GE doesn't have an on-prem solution and I don't know why they're not in there. It's, you know, is there another version of the Magic Quadrant that includes the Amazons and GEs of the world? I don't know. But so that's kind of interesting. We'll try to unpack that as we go on here. PTC announced today a relationship with a company called Ancest, which does simulation software. Normally simulation comes sort of after the design. They're bringing those two worlds together, the CAD design piece and the simulation piece sort of in closer to real time. So there's a lot of stuff going on here, as you said. It's data analytics, edge computing, it's cloud, it's on-prem, it's blockchain for security. We haven't talked about security. A lot bigger threat matrix. So blockchain comes into the play. If I saw a great joke, do you realize that the SNIOT stands for security? Did you know that? Oh wait, there's no SNIOT. Well, that's the point. All right, good. So Stu and I'll be here all day today. This is actually a three-day conference. The Cube will only be here for day one. Keep it right there, everybody, and we'll be right back. You're watching theCUBE live from LiveWorks in Boston.