 From around the globe, it's theCUBE presenting the innovation for good, brought to you by Onshape. Okay, welcome back to innovation for good. With me is John McElaney, who is one of the co-founders of Onshape and is now the VP of strategy at PTC. John, it's good to see you. Thanks for making the time to come in the program. Thanks, Dave. So we heard earlier some of the accomplishments that you've made since the acquisition. How has the acquisition affected your strategy? Maybe you could talk about what resources PTC brought to the table that allowed you to sort of rethink or evolve your strategy. What can you share with us? Sure, you know, a year ago when John and myself met with Jim Heppelman early on as we were pondering sort of joining PTC, one of the things that became very clear is that we had a very clear shared vision about how we could take the Onshape platform and really extend it for all of the PTC products, particularly sort of their augmented reality as well as their thing works or the IoT business and their product. And so from the very beginning, there was a clear strategy about taking Onshape, extending the platform and really investing pretty significantly on the product development as well as go to market side of things to bring Onshape out to not only the PTC base, but sort of the broader community at large. So PTC has been a terrific, terrific sort of partner as we've gone after this market together. So we've added a lot of resource in the product development side of things, a lot of resource in the go to market and customer success and support. So really on many fronts, it's both resources as well as sort of support at the corporate level from a strategic standpoint. And then in the field, we've had wonderful interactions with many large enterprise customers as well as the PTC channel. So it's been really a great year. Well, and you think about the challenges of in your business going to SaaS, which you guys took on that journey seven, eight years ago, it's not trivial for a lot of companies to make that transition, especially a company that's been around as long as PTC. So I'm wondering how much, I was just asking you how much PTC brought to the table. I got to believe you're bringing a lot of the table too in terms of the mindset. Even things as mundane is not the right word, but things like how you compensate salespeople, how you interact with customers, the notion of a service versus a product. I wonder if you could address that. Yeah, it's a really great point. In fact, after we had met Jim last year, John and I, one of the things we walked out in the Seaport area in Boston, one of the things we sort of said is, Jim really gets what we're trying to do here. And part of, let me bring you into the thinking early on, part of what Jim talked about is there's lots of, install base sort of software that's inside of the PTC base that's helped literally thousands of customers around the world. But the idea of moving to SaaS and all that it entails, both from a technology standpoint, but also a cultural standpoint, like how do you not just compensate the salespeople as an example, but how do you think about customer success? In the past, it might have been that you had professional services that you bring out to a customer and help them deploy your solutions. Well, when you're thinking about a SaaS-based offering, it's really critical that you get customers successful with it, otherwise you may have churn and it'll be very expensive in terms of your business long-term. So you've got to get customers successful with the software in the very beginning. So Jim really looked at Onshape and he said that John and I, from a cultural standpoint, a lot of times companies get acquired and they've acquired technology in the past that they integrate directly into PTC and then sort of roll it out through their products or their distribution channel. He said, in some respects, John and John, think about it as we're going to take PTC and we want to integrate it into Onshape because we want you to share with us both on the sales side and customer success and marketing, on operations, all the things because long-term we believe the world is a SaaS world that the whole industry is going to move to. So really it was sort of an inverse in terms of the thought process related to normal transactions. I mean, that makes a lot of sense to me. You mentioned Sharon, Sharon's the silent killer of a SaaS company. And there's a lot of discussion in the entrepreneurial community because you live this, what's the best path? I mean, today you see, you've watched Silicon Valley, double, double, triple, triple, but there's a lot of people who believe and I wonder if you comment this, the best path to, in the XY axis, if it's growth on one and retention on the other axis, what's the best way to get to the upper right? And really the best path is probably to make sure you've nailed, obviously the product market fit, but make sure that you can retain customers and then throw gas in the fire. You see a lot of companies, they burn out trying to grow too fast, but they haven't figured out, but there's too much churn. They haven't figured out those metrics. I mean, obviously Onshape, you were sort of a pioneer in here. I got to believe you've figured out that customer retention, before you really put the battle to the metal. Yeah, and growth can mask a lot of things, but getting customers, especially in the engineering space, nobody goes and sits there and says, tomorrow we're going to go and put 100 users on this and immediately swap out all of our existing tools. These tools are very rich and deep in terms of capability and they become part of the operational process of how a company designs and builds products. So anytime anybody's actually going through a purchasing process, typically they will run a trial or they'll run a project where they look at kind of what, what is this new solution going to help them do? How are we going to orient ourselves for success in the longer term? So for us, getting new customers and customer acquisition is really critical, but getting those customers to actually deploy the solution and be successful with it, we like to sort of say the marketing or the lead generation and even some of the initial sales, that's sort of like the kindling, but the fire really starts when customers deploy it and get successful with the solution because they bring other customers into the fold. And then of course, if they're successful with it, then in fact you'll have negative churn, which ironically means growth in terms of your inside of your install bits. Right, and you've seen that with some of the emerging SaaS companies where you're actually, when you calculate whatever it's net retention or renewals, it's actually from a dollar standpoint, it's up in the high nineties or even over a hundred percent. So, and that's a trend we're going to continue to see. I wonder if we could sort of go back and when you guys were starting on shape, some of the things that you saw that you were trying to strategically leverage and what's changed today? And we were talking, I was talking to John earlier about in a way you kind of got a blank slate against like doing another startup, obviously you got install base and customers to service, but it's a new beginning for you guys. So what are the things that you saw then, cloud and SaaS and okay, but that's, we've been there done that. What are you seeing today? Well, so this is a journey of course that on shape on its own has gone through and had, I'll sort of say, several iterations both in terms of how do you get customers? How do you get them successful? How do you grow those customers? And now that we've been part of PTC, the question becomes, okay, one, there's certainly a higher level of credibility that helps us in terms of our megaphone is much bigger than it was when we were a standalone company. But on top of that now, figuring out how to work with their channel, with their direct sales force, they have, for example, very large enterprise, well, many of those customers are not gonna go and forklift out their existing solution and replace it with on shape. However, many of them do have challenges in their supply chain and communications with contractors and vendors across the globe. And so finding our fit inside of those large enterprises as they extend out with their customers is a very interesting area that we've really been sort of incremental to PTC. And then they have access to lots of other technology like the IoT business and now, of course, the augmented reality business that we can bring things to bear. For example, in the augmented reality world, they've got something called expert capture. And this is essentially imagine an AR headset that allows you to be able to speak to it but also capture images, still images in video. And you can take somebody who's doing their task and capture literally the steps that they're taking, its geolocation and from there build steps for new employees to be able to learn and understand how to use that technology to help them do their job better. Well, when they do that, if there's replacement products or a variation of some of the tools that they built the original design instruction set for, they now have another version. Well, they have to manage multiple versions. Well, that's what on shape is really great at doing. And so taking our technology and helping their solutions as well. So it's not only expanding our customer footprint, it's expanding the application footprint in terms of how we can help them and help customers. So that leads me to the TAM discussion. And again, this is part of your strategist role. How do you think about that? I was just talking to some of your customers earlier about the democratization of CAD and engineering. I kind of joked sort of like citizen engineering. But so that, the demographics are changing. The number of users potentially that can access the products because it's so much more of a facile experience. How are you thinking about the total available market? It really is a great question. It used to be when you sold boxes of software, it was how many engineers were out there and that's the size of the market. The fact that mattered is now when you think about access to that information and that data is simply a pane of glass, whether it's a computer, whether it's a cell phone or whether it's a tablet, the ability to use different vehicles to access information and data expands the capabilities and power of a system to allow feedback and iteration. I mean, one of the very interesting things in technology is when you can take something and really unleash it to a larger audience and build purpose built applications, you can start to iterate and get better feedback. There's the classic case in the clothing industry where Zara is a fast sort of turnaround agile manufacturer. And there was a Great New York Times article written a couple of years ago, my wife's a fan of Zara and I think she justifies any purchases by saying, Zara, you gotta purchase it now, otherwise it may not be there the next time you go back to the store. They had some people in the store in New York that had this women's throw kind of covering shawl and they said, well, it'd be great if we could have this little clip here so we can hook it through or something. And they sent the note back to the factory in Spain and literally two weeks later they had 4,000 of these things in store and they sold out because they had a closed loop and iterative process. And so if we can take information and allow people to access it multiple ways through different devices and different screens that could be very specific information that we remove a lot of the engineering data book bring the end user product conceptually to somebody that would have had to wait months to get the actual physical prototype and we can get feedback. Well, we can have a better chance at making sure whatever product we're building is the right product when it ultimately gets delivered to a customer. So it's really, it's a much larger market that has to be thought of rather than just the kind of selling a box of software to an engineer. Now that's a great story. And again, it's got to be exciting for you guys to see that and with the added resources that you have a PTC. So let's start, I promise people we want to talk about Atlas. Let's talk about the platform a little bit that Atlas was announced last year. Atlas for those who don't know it's a SaaS based platform. It purports to go beyond product lifecycle management and you're talking cloud like agility and scale to CAD and product design. But John, you could do a better job than I. What do we need to know about Atlas? Well, I think Atlas is a great description because it really is metaphorically sort of holding up all of the PTC applications themselves. But from the very beginning when John and I met with Jim part of what we were intrigued about that he shared a vision that Onshape was more than just going to be a CAD authoring tool that in fact, in the past, these engineering tools were very powerful but they were very narrow in their purpose and focus. And we had specialty applications to manage diversions, et cetera. What we did in Onshape is we kind of inverted that thinking. We built this collaboration and sharing engine at the core and then kind of wrap the CAD system around it. But that collaboration sharing and versioning engine is really powerful. And it was that vision that Jim had that he shared that we had from the beginning which was how do we take this thing and make a platform that can be used for many other applications inside of any company? And so not only do we have a partner application area that is much like the App Store or the Google Play Store that was sort of our first instantiation of this platform, but now we're extending out to broader applications and much media applications and internally that's the thing works in the augmented reality, but there'll be other applications that ultimately find its way on top of this platform. And so they'll get all the benefits of the collaboration, the sharing, the versioning, the multi-platform, you know, multi-device and that's an extremely, extremely strategic leverage point for the company. You know, it's interesting, John, you mentioned the Seaport before. So PTC for those who don't know built a beautiful facility down at the Seaport in Boston. And of course, when PTC started, you know, back in the mid 1980s, there was nothing at the Seaport. So it's kind of ironic, you know, we've seen the transformation of the Seaport, we're seeing the transformation of industry and of course PTC and I'm sure someday you'll get back into that beautiful office, you know. I can't wait. But yeah, I'll bet. And but I want to, I bring this up because I want you to talk about the future, how you see that with our industry and you've observed this as move from very product-centric to platform-centric with SaaS and cloud and now we're seeing ecosystems form around those products and platforms and data flowing through the ecosystem, powering new innovation. I wonder if you could paint a picture for us of what the future looks like to you from your vantage point. Yeah, I think one of the key words you said there is data because up until now data for companies really was sort of trapped in different applications and it wasn't because people were nefarious and they wanted to keep it limited, it was just the way in which things were built. And you know, when people use an application like Onshape, what ends up happening is their day-to-day interaction and everything that they do is actually captured by the platform. And you know, we don't have access to that data, of course it's the customer's data, but as an artifact of them using the system and doing their day-to-day job, what's happening is they're creating huge amounts of information that can then be accessed and analyzed to help them both improve their design process, improve their efficiencies, improve their actual schedules in terms of making sure they can hit delivery times and be able to understand where there might be roadblocks in the future. So the way I see it is companies now are deploying SaaS-based tools like Onshape. And an artifact of them using that platform is that they have now analytics and tools to better understand and instrument and manage their business. And then from there, I think you're gonna see because these systems are all extremely well architected and allow through very structured API calls to connect other SaaS-based applications, you're gonna start seeing closed loop sort of system. So for example, people design using Onshape, they end up going and deploying their system or installing it or people use the end using products. People then may call back into the customer's support line and report issues, problems, challenges. They'll be able to do traceability back to the underlying design. They'll be able to do trend analysis and defect analysis from the support lines and tie it back and close loop the product design, manufacturer deployment in the field sort of cycles. In addition, you can imagine there's many things that are sort of as designed, but then when people go on site and they have to install it, there's some alterations, modifications. Think about like a large air conditioning units for buildings. You go and you go to train and you get a large air conditioning unit that's put up on top of the building with a crane. They have to build all kinds of adapters to make sure that that will fit inside of the particulars of that building. With Onshape and tools like this, you'll be able to not only take the design of what the air conditioning system might be, but also all the adapter plates, but also how they installed it. So it's sort of as designed, as manufactured and as stalled. And all these things can be traced just like if you think about the transformation of customer service or customer contacts. In the early days, you used to have tools that were PC-based tools called contact management solutions, kind of act or gold mine. And these were basically glorified electronic Rolodexes. They had a customer names and they had phone numbers and whatever else. And Salesforce and Siebel, these types of systems really broadened out the perspective of what a customer relationship was. So it wasn't just the contact information, it was how did they come to find out about you as a company? So all the pre sort of marketing and then kind of what happens after they become a customer. And it really was a 360 view. I think that 360 view gets extended to not just to the customers, but also tools and the products they use. And then of course the performance information that can come back to the manufacturer. So, as an engineer, one of the things you learn about with systems is the following. And if you remember when the CD first came out, the CDs they used to talk about four times oversampling or eight times oversampling, and it was really kind of the fidelity to system. And we know from systems theory that the best way to improve a performance of a system is to actually have more feedback. The more feedback you have, the better a system can be. And so that's why you get 16, 64 X sampling, et cetera. Same thing here. The more feedback we have of different parts of a company, the better perform at the company will be better customer relationships, that are overall financial performance as well. So that's the view I have of how these systems all tie together. It's a great vision. And your point about the data is, I think right on it used to be so fragmented in silos. And in order to take a system view, you've got to have a system view of the data. And for years we've optimized maybe on one little component of the system. And that sometimes we lose sight of the overall outcome. And so what you just described, I think is, I think sets up very well as we exit, hopefully soon we exit this COVID era. And John, I hope that you and I can sit down face to face at a BTC on shape event in the near term. In the seaport. In the seaport would be, I tell you, that'd be a great facility to have an event for sure. It's wonderful there. So John McElady, thanks so much for participating in the program. It was really great to have you on. Great, thanks Dave. Okay. And I want to thank everyone for participating today. We had some great guest speakers. And remember, this was a live program. So give us a little bit of time. We're going to flip this site over to on demand mode so you can share it with your colleagues and you can come back and watch the sessions that you heard today. This is Dave Vellante for theCUBE and on shape PTC. Thank you so much for watching innovation for good. Be well, have a great holiday and we'll see you next time.