Moving from dark green to light green
Saket Kalia (financial analyst): I'd love to zoom in on slide 20 a bit [see figure below], very useful slide. Understanding that diagram is a vision and not guidance per se, I'd love to hear how you envision PTC's move to SaaS [software as a service].
Chart showing some aspects of some programs starting to run on Atlas; the lighter the shade of green, the more of the software is on the cloud
It looks like you'll have all your products available in a SaaS form -- well, the major products available in a SaaS form factor by fiscal '22.
And so the question is, is this something you perhaps drive your customer base to or encourage them to adopt? Or is this something that you're going to let happen naturally?
James Heppelmann (ceo PTC): There's a lot you can read into this slide. But if you notice that the logos, other than Onshape [Web-based CAD] and Atlas [Web-based platform], start a darker greener color and as they move to the right become more or less the same color as Atlas. That's because we call this strategy "an insidious SaaSification strategy," which means it happens step-by-step.
And it's already started. Vuforia [augmented reality software] already has the first offerings on Atlas, like expert capture. Which is one of the biggest ones. We're about to ship the second Vuforia product on Atlas, which will be called Vuforia Instruct coming out later this quarter.
We mentioned that Creo [MCAD] is shipping a capability on Atlas now for generative design called Creo GDX [based on Frustum]. And you'll start to see [capabilities] coming from Windchill [PLM] and coming from Thingworx [Internet of things].
So what we're going to do is begin to offer incremental or, in some cases, replacement modules on SaaS. And then over time, the whole suite of each product line will become available on SaaS. A customer could begin adopting a part of it, get comfortable with the idea, start to generate some incremental revenue for us. And then in year 2 or 3 or 4, [the customer could] even flip the switch and go 100% to SaaS.
So that's what that diagram intends to show you: that these products are all climbing on board, but it's not an all-or-nothing. It's step-by-step moving toward that all-state where they're fully based on Atlas, and we have really a dream, a unified SaaS portfolio.
I'm so excited about that, because a lot of these products have divergent heritages and they're on different architectures today, integrated together but still on different architectures. And we have like a spring cleaning opportunity here, thanks to the power of Atlas to unify on a single platform.
Everybody at PTC is aligned behind this. So we're making great progress. And if you think in a year or two, Windchill and Creo will have $1 billion of ARR [annual recurring revenue], if we can get some even modest degree of penetration on a 2-for-1 ARR uplift [making twice as much from subscriptions], it's a lot of growth in those businesses.
Our original thinking on SaaSification was more all-or-nothing, and then we decided that this so-called "insidious strategy" is much more interesting for everybody -- customers and PTC. The real big impact is farther to the right even in years yet to come on this chart.