Autodesk announced at its recent Investor Day that the company will begin discontinuing the sale of perpetual licenses of its popular design software in favour of its more profitable subscription plans. Shifting its focus to these desktop rental plans seems to be part of a larger ongoing shift in strategy from Autodesk to unify all of its products into a closed, tightly controlled ecosystem.
The changes will be implemented over a period of one to two years rather than all at once, and the perpetual licenses will simply stop being offered for select items. Autodesk SVP of Industry Strategy and Marketing, Andrew Anagnost, explained to their investors that the transition is not being treated as an event but rather slowly rolled out from region to region and product to product. The first product that will only be available by subscription is AutoCAD LT, possibly followed by Maya LT.
For those who were paying attention this move shouldn’t be a surprise. When Autodesk announced their new rental plans last year they made it very clear that they felt their desktop subscription plans were better for their customers because it was a smaller upfront investment and the product would continually be updated to the latest version. Lower upfront investments would be extremely helpful to smaller design firms and project-based freelancers who could start and stop subscriptions based on need rather than requiring a large investment upfront. Of course the fact that it is more profitable for Autodesk over the long run certainly doesn’t hurt.
But I believe that this is about more than money. Anagnost specifically mentioned the nearly 3 million customers who still purchased perpetual licenses as a reason for a greater focus on their subscription model. Perpetual license holders tend to purchase updated software infrequently, and while that is a loss of revenue for them, it is also a loss of control. Autodesk is trying very hard to create a stable software and hardware ecosystem, and that is extremely difficult to do when most of your users potentially have software that is incompatible due to being out of date.
Of course Autodesk isn’t the only software company that is shifting its focus to subscription based business models. One of the ongoing difficulties with creating new versions of software every year is the need to not only market and sell an entirely new product while hoping that you’re offering enough new features to convince people to buy it again. There is also the need to constantly maintain and offer support for outdated products. If all of your customers pay annual subscription rates on a product that automatically updates to the latest version there will eventually no longer be older versions of software to maintain.
Subscription only software is essentially a win/win for Autodesk. Not only does it eliminate the cost of developing and marketing new versions of existing software, but more importantly it allows Autodesk to focus on making their forthcoming Spark software platform optimised for the largest segment of their user base. 3D printing has become a virtually ubiquitous part of the workflow for many design and prototyping firms at this point, and with Spark, Autodesk is looking to control that workflow.
Here is a great interview with CEO Carl Bass on the subject of Spark and 3D printing:
Of course this could all backfire spectacularly for them. When Photoshop CC – the cloud-based monthly subscription version of PS – was announced most of the platform’s user base had a rather cool reaction to it that hasn’t really warmed very much since. While Anagnost said during his time in front of Autodesk investors that the subscription licenses were selling incredibly well, those were mostly from new users. Thier existing customers haven’t seemed to warm to the idea yet.
Additionally he said that over half of the new subscription sales came from Autodesk’s website directly because many of their resellers haven’t had as much luck selling them to their customers. SVP of Worldwide Sales and Services Steve Blum said that they would begin adjusting reseller margins in order to make the subscriptions more profitable to them. But higher profit margins or not, selling subscriptions when you used to sell entire licenses is going to be a hard transition for many of them to make.
Still, Autodesk is reporting record revenue increases, largely driven by a 27% jump in billings from maintenance services and new software sales and almost 74,000 new subscriptions. I doubt Autodesk has much to worry about, their products are unquestionably popular. But Spark is going to have to be everything that they are promising it is, because they certainly seem to be putting a lot of faith in their ecosystem being the next step in their company’s evolution.