PTC's John Gray On Partner Growth For IoT, AR: 'The Channel Is On Fire'

The industrial software vendor's channel chief also touches on a new regional system integrator program for IoT, a new managed services provider for PLM and how two recent acquisitions of PTC partners will benefit the channel.


The Industrial Software Vendor Is Investing More In The Channel

PTC channel chief John Gray said partner sales for the Internet of Things and augmented reality are soaring as the industrial software vendor plans new programs and hires to stimulate channel growth.

"We're excited because, honestly, the channel is on fire," said Gray, who was promoted to divisional vice president of the PTC Partner Network during the company's LiveWorx conference last month.

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In an interview with CRN, Gray said the company's IoT sales in the channel grew 46 percent year-over-year last quarter while AR channel sales grew 146 percent over the same period. He said the company's computer-aided design and product lifecycle management sales in the channel are growing faster than the overall market, at 12 to 14 percent and 17 to 20 percent, respectively.

Gray oversees PTC's partner program and marketplace for the company's value-added resellers, managed service providers and regional system integrators, which he said constitutes a roughly $170 million annual business. Gray, who was previously a consultant for CRN's parent company, The Channel Company, joined PTC last fall as senior vice president of global solution provider sales while taking over the mantle of "channel chief" from predecessor Kerry Grimes, who left earlier this year.

The channel chief of the Boston-based company said his top priority is to build further build out PTC's IoT and AR business, which will be done through new programs and hires.

"I've only been here seven months, there has to be momentum and a solid foundation for it to be as good as it is," he said at LiveWorx last month. "That being said, we haven't really got the investment in the things that were needed to have a proper IoT and AR partner business."

What follows is an edited transcript of CRN's interview with Gray, who discussed PTC's plans to start a new IoT program for regional system integrators and a new PLM program for managed service providers as well make new hires to boost channel efforts. Other topics included the impact of the PTC-Rockwell Automation partnership and PTC's acquisitions of Factora and Twnkls on the channel.

What are your responsibilities as divisional vice president of the PTC Partner Network?

It's the partner program. It's the partner marketplace. It's resellers, [managed services providers], regional [system integrators]. Think of the full cycle of enablement and recruitment and operations. The business is about $170 million [annually] in size, so it's really all of the moving parts that go with everything from recruit, enable, go-to market, sell, support, success. So think of that whole cycle and that's what I'm responsible for.

Is that $170 million representative of the whole channel?

Yes, which is about 40 percent of overall bookings now, so it's grown dramatically. Right now, we're delivering in terms of growth about a 17-percent compound annual growth rate, 40 percent of bookings. It'll be about $170 million this year, which ends at the end of September [for the 2019 fiscal year].

We're excited because, honestly, the channel is on fire. If you break our revenue down across the four product segments that we've got, our [computer-aided design] business is growing — the market for CAD says basically single-digit 6 percent growth if you're lucky — our CAD channel business is sitting in the 12 to 14 percent range. It's on fire. [Product lifecycle management], if you look at what the market analysts say, they'll tell you PLM is single-digit [growth], usually around the 8 percent range. Our business is doing about 17 to 20 percent in the channel. If you look at our [Internet of Things] business last quarter, that grew 46 percent and if you look at our [augmented reality] business, our business in the channel grew about 146 percent. It's on fire.

It doesn't matter which leg of the stool you want to pick. For a CAD business, a sleepy traditional CAD business, to be growing 12 percent, there's more going on, and the more that's going on is that if you think back to [CEO] Jim Heppelmann's digital transformation strategy, you've got that "digital thread" running through the circle, and it's feeding each of the segments on that circle AR, CAD, PLM, IoT. It's feeding the whole thing. [Some partners who recently joined PTC from another vendor told me,] "we're not only thrilled with your PLM product, but what we're really excited about is you've now given us at least one if not more products as part of that story to now sell, because you've got such a great story around digital thread that just makes so much sense."

How many partners do you have now?

It's upwards of 2,000. I would say our clip rate of net new partners has never been as high as it is right now. Things like IoT and AR are really, really driving high interest in joining the PTC Partner Network.

What are your current priorities right now? And have there been any recent changes to the partner program? Are there changes coming?

My No. 1 priority right now is really doing a build-out of our IoT and AR partner business. I would say that what I inherited from [former PTC channel chief Kerry Grimes], a phenomenal partner foundation and program and business. The numbers don't lie. I've only been here seven months, there has to be momentum and a solid foundation for it to be as good as it is. That being said, we haven't really got the investment in the things that were needed to have a proper IoT and AR partner business.

I'll give you an example. We're in the process of hiring an IoT program leader globally — think of them as owning the number that we're going to deliver for IoT through our partners globally — what I call the CEO in the channel of basically the IoT business. They own the number, but they're building the business plan, and they're saying we need to recruit this many partners here, we basically need to do this here, and they're responsible across the [geographies] of building that IoT business. Same for AR, we're recruiting someone to do that.

And then on the ground, when you're in a brand new business, you've got to really go deep on domain focus. So we have, like most organizations do, partner managers who cover partners within a region. What we are deploying on the ground are IoT and AR partner managers, so imagine it's a horizontal within a horizontal. In other words, the partner managers are still there, still focused on those partners, but now horizontally, we're putting an IoT and AR partner manager into a region, and they will be responsible for doubling down on who are the new partners we've got in the region, how do I build pipeline, let's take these programs, let's deploy these programs, do we have enablement running, let's get enablement running ,but let's close IoT deals with these partners. So it's focused on revenue and the build-out. I would say that is probably my No. 1 priority right now.

The other thing is that in order to continue to bring PLM to more of a broader marketplace, one of the big things that I feel has been missing — in fact, this goes back to my days at The Channel Company and that is stuck in my head a lot — is the massive growth of managed services. And we don't have a managed services program for our partners. [This is] one of the things that we're working on right now. We're about halfway through the project right now. In fact, we've just done a meeting today with 20 partners on this, and the goal is that by the end of the year, we'll be launching a managed services program for our partners, because, first of all, it's what the customer wants. That's the most important thing. But No. 2, something like PLM, which is a weighty product, it's actually a good way of taking PLM further down market in more bite-sized pieces. So that we are aiming at doing by the end of the year.

So IoT and AR No. 1, I'd say MSP No. 2. I would then say the other things we're focused on is that in order to be successful on IoT, for example, we're launching a brand new IoT RSI program. In other words, we have done a good job of recruiting at the global SI level, and we're putting in place those roles I just talked to you about. But again, what I learned at The Channel Company with working on the IoT Advisory Board were two things: No. 1) RSIs are critical because most companies don't have an IoT plan, and the people they are engaging first are the consultants, and those consultants are building the plan, and if you don't have that community of domain experts, then they're likely not going to recommend you. So having that community is very important.

To play that through, we've bought two companies recently. One's called Factora, and the other one we announced is called Twnkls. Well, guess what? They were both my partners. One was Factora, who was an RSI. Twnkls was actually a reseller. So I'm glad, because it's proving my point that to be successful with IoT, you need those regional system integrators dedicated to IoT and AR, especially as we're trying to grow those. So that's a third priority in terms of building that out.

When PTC's acquisition of Factora was announced, my understanding is that it wasn't going to create conflict with the channel, and it wasn't giving PTC a system integration arm that would compete for the same customers as partners.

Absolutely not. If anything, I think it's more to give us better use cases than it is to — we haven't got the bandwidth. We're not interested in building some big professional services arm, so that is absolutely not the case. It's more that we needed the use cases and best practices [to give out to partners so they can deploy them in a standard way]. If you think about IoT, I always describe it, and this probably dates me, but if you think of IoT and what we have, it's the CD player. Factora gives us the CDs to put in the CD player. It's just a platform. You need those use cases here, so Factora brings us a lot of those.

And the idea is similar for Twnkls — they won't be competing with AR partners?

Absolutely not. I'm literally in the process of hiring a lot of headcount, because we need to go recruit more Twnkls out in the market. We need them. We haven't got that capability. The business is growing so fast, if we don't get those partners recruited, we're going to have a problem, because there's more and more of that work that needs to be done.

Beyond developing use cases and standards, will Factora and Twnkls help partners?

Absolutely. [Factora CEO] Barry Lynch and I know each other very well. I'm excited that he's on board helping us, because if you think about it, part of my job is profiling. So what does the partner look like that I need to go and recruit?. So now [that] he's on the inside, I think he can actually help us get better profiling of what are the partners and what do they look like? So I think he'll actually help.

So it sounds like PTC is really trying to avoid channel conflict.

Let's put it this way. We can't scale as a business to the level we want to if we don't have the channel with us. We just can't do it. And so, [CEO Jim Heppelmann] knows that, and in fact, when Jim was presenting one of his slides, he very clearly stated just the strength of the channel business. And so he wouldn't even be talking about it if the ulterior was, "actually we don't value the channel."

Let's back up a little bit — can you explain what the digital thread is?

The best way of positioning it is, imagine you are manufacturing a car, and within a car you've got thousands of parts. And so the digital thread is that you've got to maintain a thread for each of those parts through the product line management — so for a BMW and it's a new model year, and we're changing these five components to upgrade them to new options. That's the beginning of the digital thread, because you've got all of these piece parts, and they've each got their own part number. They've all got their own pricing components, but then through that, you've got the whole IoT Edge thing, where now you want to be doing analytics on all of that. How many units are we selling? Connected car is a huge thing around the IoT platform. So the digital thread is that you've got to maintain that thread through PLM, through IoT and then on to the applications that sit on top, like connected car, refinery of the future, connected worker — that ripples all the way through that. And that thread is critical.

There's a lot of talk about the digital thread in how the entire product stack is a meaningful part of this continuum of product, processes and people — how much of an opportunity is there for all partners to fully adopt that digital thread strategy?

That's a an amazingly good question. Before I joined PTC, with The Channel Company, I came to this event last year, and PTC at the time announced their strategic partnership with Microsoft as well as Rockwell. And the Microsoft executive who was on stage at the time basically said, "look, in any IoT of opportunity, there's about 22 to 24 vendors or partners playing a role in that." So the answer — and we talked about this [at LiveWorx 2019] — is we agree with that. In fact, Kelly Ireland [of PTC partner CB Technologies] during her Refinery of the Future presentation put up a slide [showing there were about 22 partners involved in her IoT project].

So to answer your question, I'm seeing both sides of this. I see PLM partners or even CAD Partners who are engaging with us. In fact, we did a Partner Advisory Council recently and for our own executives, I thought, it'd be good based on the partners that we've got in the room to say, what are they authorized for, because it's a good cross-section, and what percent of revenue are each of them doing across the four segments? And to my shock, the bulk of them were all authorized for all of the products, and secondly, they were all actually selling all the products.

So from a strategy point of view, clearly we want to continue to grow the business on that digital thread story, where there's a solid footprint in CAD and PLM. But to your point back to the 22 vendors or partners in an opportunity, there is a lot of room for a partner who just does IoT.

And if I take the Factora example, when I first joined here, there was a guy called Tom, who I met in my very first week, and I'm at a cocktail reception. And I'm talking to him about the work I did at The Channel Company as part of IPED and that I saw this whole domain expertise thing, where there's this new breed of partners emerging from the physical [who are saying,] "I've been doing industrial HVAC for 22 years, and now I'm doing cloud and IoT, because there's more services margin." And he looked at me, and he said, "you got to be kidding me." And I'm like, "what?" And he said, "well, that's my story." He's like, "I used to do industrial HVAC, and now I'm basically reselling IoT. I set up a new company." And I'm like, "how are you coping with the services piece?" He said, "well, I'm partnered with Factora."

Partners partnering with partners. So I would say that whole Partner Finder, partnering with partners is big for us. We've just upgraded Partner Finder, because we recognized to be successful in IoT, we've got to have our SIs, we've basically got a help those partners find the other partners, because it's a multi-partner world. And that also comes back to the biggest strategy of how important our partners are within PTC, and the answer is "very" because of the whole IoT play requiring those partners.

PTC CEO Jim Heppelmann has made a big emphasis on the land-and-expand opportunities in IoT. How are you helping partners with that?

First of all, enablement is a critical component, because we've got existing partners that have got strength and muscle in a PLM relationship that need to develop the muscle for IoT or AR with CAD. The other component that I think is important is helping them understand the use cases. So I would say we're investing heavily on the upfront enablement so that we've basically got well-trained IoT partners, for example. I would say then, through the investment in the IoT and AR partner managers, they are the ones that would then be tracking the expand motion to make sure we've got the right technical resources on deck to help our partners.

How is the PTC-Rockwell partnership going on the channel partner side?

Let me answer that in two ways. No. 1, if you think about it, Rockwell in terms of the relationship, is a super reseller. In other words, they paid us a large sum of money, a billion [U.S. dollars]. And basically with that billion, they buy the rights to X number of licenses. It's a super reseller relationship. The effort and the focus has been to say what's the story together — hardware industrial manufacturing, there's this Kepware component, there's us in terms of the software side of the story and so industrial manufacturing — how does that play in terms of the two sides coming together? So there's been a massive, massive, massive effort in terms of training the Rockwell sales organization to go and sell those use cases in that story. That's one part of the answer, because the priority is obviously to help Rockwell be successful with our technology complimenting their story and driving bigger business for that.

No. 2 then is the second part, which is how are our partners able to engage? There's a couple of ways. First, existing partners of PTC can become part of the Rockwell Partner Network if they want to, so we're actively encouraging them that if they want to become a Rockwell partner, how can we help you make the right connections to do that? Having said that, there's also if Rockwell is a super reseller, how do we make sure we've got good rules of engagement, so that we're not tripping over each other.

And so we've been very, very thoughtful in terms of how can we communicate to our partner ecosystem that deal registration, for example, is all figured out, thought through and is working. So if you try and register a deal where Rockwell is already registered, those systems work on both sides, and people have got good clarity on who's on deck first. I would say that if I look at what's playing through — we also have Rockwell Partners who are coming over and saying, "hey, we want to be a PTC partner."

That's also happening, because if you look actually at the Rockwell partner business, it's mostly hardware distributors or its global SIs. Right in the middle is my business, which is resellers, MSPs, regional SIs, which they really don't have, and I think that's largely because of the business they're in. It's more hardware-oriented than software.

So it's actually quite complementary, because what we have, they don't have and what they have, we don't have hardware distributors. To some extent, does the hardware distributed want to become a software reseller? Possibly not. They might want to add software if they've got that capability, so there's some crossover, but at the end of the day, the relationship is [meant to support Rockwell as] a super reseller. Our primary job is to help them be successful.

With regards to the MSP program, how would MSPs interact with PTC's software stack?

No. 1, I'm going to throw back at you stats from The Channel Company, which is 75 percent of solution providers across the board are either going into being a managed services provider or are building out managed services within their business.

No. 2, then, what are we building out? Well, we have no managed services program at all. And what is going on in the marketplace is customers are saying basically, "I don't want to have my own data center. I'm basically going to take those workloads. I'm going to put them on AWS or Azure, and then off the back of that, customers are then saying well if I'm divesting my data center to put it on to AWS or Azure, and I'm able to release that budget with people and data centers to focus on being more competitive, I don't want to run that. I don't want to run AWS and Azure with applications on top. I want to give that to my reseller, who I've been dealing with for 20 years and have them manage it for me."

So basically, what I did when I arrived was say, I think we need a managed services piece to the channel strategy. We don't have multi-tenant products, which lends itself more easily to an MSP model, but let's go test the water. So I went out to our partners, a large number of our partners, and said if we brought out a managed services offering, what would you want and would you sell it? And we got a 95 percent hit rate of saying, "not only do we want it but if we don't get it, we'll go and do it with someone else."

So to answer your question of what it is, it's PTC Cloud, which is our platform-as-a-service, and then it would be PLM sitting on top, all of that packaged and bundled as one and then basically given to the partner to say, you can put services on top of that, you can put applications on top of that, and then you can sell it to customers, which is what they want.

We've started with PLM, because it was the PLM business that said we could really use a managed services offering that we can take more down market through our channel. But more importantly. ThingWorx, once we get PLM done, we want to look at ThingWorx as to how we can do the same there.