Q. You’ve been at PTC for over 20 years now, and been CEO for seven of those. What have you done since you became CEO in terms of guiding PTC’s direction?
A. If you go back a few years to 2000, we had two big products, Pro/Engineer [a 3D CAD/CAM product] and Windchill for collaboration etcetera. We needed to sort of fix them. They had got a bit old and needed a refresh, and we needed to add some much-needed functionality. For instance Windchill was certainly new and powerful but it was perhaps a bit green.
So we had two to three tough years. We had to rewrite Pro/Engineer and put that together with Windchill in a tightly integrated fashion. We accelerated the revisions, with the goal also being how can we complement them? We bought companies like MathCad, Itedo, giving us a broader footprint.
Q. What guides your acquisitions strategy?
A. If we make an acquisition I always want to know how good are their products? How easy are they to use? I think most decisions are predicated first and foremost on how good their products are. I don’ think you can win with inferior or even mediocre products.
We have 1,400 people across the globe in R&D, but as well as numerous projects we needed to complement that with acquisitions. Most decisions on acquisitions actually came from customers. For example Lockheed had spotted the potential with Itedo and Caterpillar gave us the idea to look at Arbortext.
Q. What kind of acquisitions do you look for?
A. Our biggest acquisition was Arbortext and they had around $40m revenue. Most have been in the $10m to $15m revenue range, and we will continue to do that kind of acquisition. If there was a really compelling larger acquisition then we would not rule it out, but we are seeing all our products growing so we are more interested in tuck-in technical acquisitions.
Q. Would you say all your acquisitions have been successful?
A. Itedo and Mathcad are both exceeding our expectations. I think we have done a pretty good job of that side of things. I think we only lost one engineer from three companies: Itedo, Mathcad, and Arbortext. It’s easier to keep engineers than salespeople, and some of this comes down to how good a job you did of your due diligence. We had one acquisition where we underestimated the amount of work that needed doing, and found that not all of their claimed products were 100% done.
Q. And what about organic growth – is that a challenge?
A. Not at all. We grew 19% last year and 14% of that was organic growth. I still want the majority of our growth to be organic; 14% may be one of the fastest organic growth rates in the world. Certainly, we are outgrowing major enterprise applications companies like Oracle and SAP on organic growth.
Q. Explain the Arbortext acquisition: the firm is more of a content management or e-publishing company?
A. Manufacturing companies have two deliverables. For example, there is the airplane and then there is the documentation for that plane. The documentation weighs more than the plane itself, and the physical product can usually not work without its documentation.
So, for example, Dell has just standardized on Pro/Engineer for CAD, Windchill for collaboration, and Arbortext for publishing. So now they can configure the user manual for the exact specification of PC that you bought; they don’t want to give documentation that covers every eventuality for every possible PC configuration. Now they can associatively link the documentation to the actual product.
Q. People would probably consider Autodesk a fierce rival of yours, yet not so long ago you signed an agreement to support each other’s application programming interfaces. So are they a competitor, or a partner?
A. We don’t generally think of Autodesk as a competitor. We think Dassault, UGS, and SAP are our three big competitors. Autodesk is stronger at individual productivity tools. We think we are more of a PLM company, though yes, Pro/Engineer is a desktop CAD product that competes with Autodesk.
But most of our customers come with the challenge of how do I do PLM better? That means they start at a higher level, so we generally find ourselves leading with Windchill, though clearly the fact that it is integrated with Pro/Engineer is very important. But Pro/Engineer is only about 20% of our total business, and in that space much of the business comes via our reselllers.
Q. I understand not all the vendors in the space are happy to open up each other’s APIs.
A. That’s true. A few years ago we initiated what you might call a co-opetition agreement, with UGS, PTC and SAP involved. We signed a five-year contract to share software APIs to facilitate integrations between rival vendors. We invited Autodesk and they have now joined too. But we have repeatedly invited Dassault and they have so far refused. They won’t join in and share their APIs, which is a shame because clearly it would benefit customers.
Q. Do you think it’s dead in the water then – an API deal with Dassault?
A. It’s something big customers have asked for, so we continue to invite them.
Q. What about Software as a Service? Is that an area where PLM can play?
A. We do on-demand with IBM, which means customers can do a hosted version of Windchill, storing their data remotely with IBM. It’s new for us, having only started in January, but we already have about 100 customers. For smaller companies, this is a great way to start to take control of their PLM with low-risk, low up-front investment.
Many have an extended value-chain, too. So for example Rolls Royce has over 100 key suppliers, and they use our software to connect them into their process. But it all starts with good products. If you don’t have good products, that companies can use to give them a competitive edge, fast, then you are nowhere.
Q. You are already around the $1bn per annum run-rate, which I know was one of your goals for the firm.
A. We have a new plan which is to get to $1.5bn by 2010. I said a billion by 2008 and with acquisitions we could go above that, which is why we have a modified plan.
Q. You have been at PTC for over 20 years. Is this where you always imagined you would be, ultimately running a software firm?
A. My whole family was in high tech. I have uncles who worked at Burrroughs, Wang, DEC, everybody was in sales and marketing at hi tech so it was almost a foregone conclusion that I would work my way up the ladder as they had.
Q. Do you consider yourself a geek?
A. I never really had a passion for technology. I came from the sales side where I enjoyed the competition, in a professional and fun way perhaps, but competition nonetheless. I do appreciate the technology though and the impact that it can have on people’s lives and their businesses.
Q. I’ve seen statistics showing that the typical technology CEO has an average tenure of three years or so, but you’ve already lasted longer than that. What do you put that down to?
A. Right now my job is relatively safe. I do think on that level I’m a bit of a history nut. You can learn from what companies did well and what they did less well, and I will keep learning those lessons.
Harrison has been at PTC for over 20 years, originally joining as vice president of sales distribution. Before that he was at mini-computer firm Prime Computer, and before that, Burroughs. Harrison supports the Inner City 100 Awards Dinner, which benefits the Initiative for a Competitive Inner City. He has a BA in English literature from the University of Pennsylvania.
