So there has been a lot of talk around the Autodesk Software Licence changes lately and as the end of financial year is here, it is getting to the pointy end of the decision time for a lot of license holders out there.
Recently I have been getting asked by a lot of my clients and colleagues what they should do about their existing license and what I think the future holds. So I thought I would take some time to share my thoughts on where I see things going in the future and what you should probably consider doing about it.
Before we look forward though I think we need to take a look at the recent past and a look at the wider software market. In approximately 2013 Adobe made the bold and market leading decision to move their business model to subscription based licensing. I can remember this pretty clearly because at the time I was saving my pennies to buy what is arguably their most well-known product, Photoshop. I recall the change at the time not only pushed the price of the very expensive product higher but also well out of my reach. As an avid weekend photographer, it was impossible for me to justify the price they were asking. Especially when considering that there were cheaper and even free alternatives out there.
I also recall reading at the time of the Adobe changes that all software companies will be waiting and watching like wildebeests at the edge of the crocodile infested rivers to see how they went with their crossing. At the time this was a game changing move for their revenue stream and if it worked then everyone would be moving to this system because of the revenue advantages. I remember thinking at the time that surely companies like Autodesk couldn’t make this change as it would price them out of the market and surely their customers wouldn’t be happy about it. Clearly I was wrong about that! (To a degree.)
It appears on the surface that Adobe have succeeded to some extent and if you look at their overall revenue it appears to be on the up and up. While I have done no more looking into this than happening across as couple of articles in my browsing of the internet, some commentators are saying that their success it actually coming from other business ventures that fall under the Adobe banner and not the subscription model. However on the surface, you would have to wonder how true that is given that so many major software companies are now moving to subscription. The likes of Microsoft have moved their office suite to subscriptions. Some game companies are now offering subscription benefit programs. (I mean, so I hear….uhumm) A lot of other smaller software companies are now subscription only or offer a subscription option. And of course Autodesk are also not the only drafting and modelling software company offering subscription licensing with most now having some form of subscription options available. There are some major differences in the way a lot of other companies are doing things though, but we will look at that in an up coming article.
So looking at the wider software landscape, it is safe to say the other wildebeests have taken the leap into the murky waters. The take away is that given Adobe’s seemingly successful transition, it looks like the reality for the future of software is going to be subscription based software licensing for the time being at least. So now the decision is going to have to be how do you as an individual or company handle that transition?
What is the real cost of the changes?
One of the first things I did when I got the infamous email from Autodesk was break out my trusty spreadsheet and do some maths. Below I will go through the findings I made that helped me make my decision.
(NOTE: all these calculations are done based on my single seat license of Product Design Suite Ultimate in Australian Dollars. Please check with your reseller for exact numbers on your exact circumstances.)
The first thing I needed to do was work out the prices the new collections would cost verses the maintenance costs based on the discounts claimed in the email sent out. So the exact wording from the email was as follows:
“To continue supporting maintenance, beginning May 7, 2017, renewal prices will increase by 5% in 2017, 10% in 2018, and 20% in 2019.”
What does that look like?
So over the next 3 years the costs was going to go up about $100, $200 and then $300/year. Realistically that isn’t that big of an increase in the grand scheme of things. The real question is though, what would happen after that 3 year period? But we will get to that in a minute.
The next thing to consider is, what will it cost to go to the subscription license option and a collection?
Based on the numbers it is a fair bit cheaper to go to the subscription over the next 3 years no matter when i make the switch. As we all know, there is more to this decision than just the cheapest way to get the software. Most businesses have a 5 – 10 year plan at least, and those that don’t and based their decision purely on the cost of the software, I wish them the best of luck!
The reality of this particular decision is that these discounts were based on handing over your existing perpetual license and subjecting yourself to the subscription license model of “pay or else”. If you are smart about your decision making you would take into account where you want to be in a few years and how this decision will affect that. In order to do that you need to consider things like;
- What will the price change to once the discount rate is over?
- What about growth? What will more licenses cost?
- How long will that cost need to be carried?
- What will that mean to your bottom line?
- Can you pass any extra cost onto your clients?
- How will your clients feel about that?
What will the price change to once the discount rate is over?
Well, this one is “easy” to answer. According to the Q4 earnings call over at Seeking Alpha we can expect to see
“When that three year lock in expires, that customer immediately goes up to the terminal loyalty price of a little over 15%, roughly 16% more than their maintenance price. Then they’re kind of subject to ongoing price increases that would you affect what our long-term pricing strategy is.” – Andrew Anagnost
Now this is a little open to interpretation and that interpretation can make some pretty big differences in the outcome of the numbers. I was always taught to prepare for the worst and hope for the best, so that means an ongoing price will look roughly like this depending when (if) I decide to change over.
It’s worth noting here that the first line is very highly unlikely to happen as that would be a price drop, not raise. The other thing to consider here is that it is highly unlikely that Autodesk will let all their customers keep any kind of heavy discount in the long term and even if they do it will be one price for all, meaning it will likely cost everyone that moves to subscriptions in the next 3 years $2007/yr after their discount period is up. Plus whatever annual increases Autodesk see fit to charge.
This is what it looks like if you let those different pricing structures play out. Over the next few years.
As you can see here there is about a $1400 difference over the next 7 years no matter which way you go. Problem is, we have all learned over the years that Autodesk can’t be trusted to stick to their word. If they had just introduced a reasonably young CEO that had a projected long future ahead of him and this was his brain child, you could be a little more confident that they will stick to their guns. Problem is that the exact opposite had just happened. This (according to Autodesk) is the brain child of the EX-CEO Carl Bass and they have just introduced a new younger CEO. So the chances of there being a backflip on all of this in the next few years are pretty good if this all starts to go sideways.
Which leads to the next question…
What about growth? What will more licenses cost?
As a business owner that is looking to grow and grow reasonably fast, this is a huge burning question for me. However anyone who has any kind of growth in mind they should be considering this question now. Here’s why; the longer you run your current software and workflows, the more difficult it is to make a change later down the track. I personally am in a fortunate position as a consultant that I don’t have to rely entirely on one software. But I do need to some extent, to work with a “preferred” software when doing work for clients that don’t have a drafting package of their own or a preference as to how I do my work.
With the 3D scanner as an engrained part of our workflows though, it does limit the choices somewhat. At this point in time, Autodesk do offer the best/cleanest/fastest workflows. So to some extent it appears for the short term I am “stuck” using Autodesk products. This is a feeling I am sure a lot of people have. This is something I will look more closely at in the next article, but for the purposes of this article we will assume we are stuck on Autodesk products. So what will more licenses cost us moving forward?
$3460/yr per license, plus whatever price increases Autodesk decide to make each year. That, and we have no option of a perpetual seat. It is subscription or nothing. Pay or else.
How long will that cost need to be carried?
The reality is at this point in time it will be for as long as you want to use the software. So if that is for the next 30 years (roughly how many years I have left to work) that is a whopping $103,800. Verses the $13,000 initial investment in the previous perpetual license and the roughly $53,250 worth of maintenance renewals based on last year’s price of $1775. And while both of those figures are less any kind of inflation or Autodesk mandated price hikes, it is easy to see why Autodesk want to make the change to their business model. That is roughly 40% more from every license in the next 30 years. Hell I would do that with my prices too if I could figure out a way to do it!
But when put like this it is easy to see why so many are upset by the changes.
What will that mean to your bottom line?
Ultimately this depends on how you factor the initial and ongoing costs of the software to your business. In the instance of a consultant, we have to factor it into our hourly rate as that is typically all we can bill for. In the instance of a fabrication shop, they may be able to lessen the blow with incremental increases across the board, but ultimately it means an increase to the customer. Unless you absorb the cost with your profits. On an individual license that isn’t that bad, but if you have a few licenses or are planning to grow, that may not be feasible in the long term given how tight margins are anyway.
The official Autodesk line to this is that the markets are changing and that we will be able to add the cost of the software directly to each job as we need it. I am sure I don’t need to list all the issues with this, not least of which we are all fighting hard to win work now anyway and adding a few hundred dollars to a job for the rental of the software for the month would potentially kill the job. But Autodesk’s response is, it will change wait and see. What do we do in the meantime while we are waiting for that change?
How will your clients feel about that?
This is the ultimate question you have to ask yourself when considering this change. How will your clients think of you if they contact you to ask a simple (non-paid for) question about a job you did for them on a month where you haven’t got an active license and you can’t answer their question? Is there a reasonable workaround for the above scenario?
Can you afford to bill the client directly for the subscription of your software? Will that kill some or all of your jobs? How much work will you lose if you increase your hourly rate even just a few dollars an hour to cover these costs?
What am I going to do about all this?
Ultimately I get asked a lot what I plan to do about this. The answer for me was pretty simple and I came to the decision pretty quickly after doing my spreadsheets above.
The fact of the matter is that I am not happy about this and ultimately Autodesk don’t care about me because I only currently have a single license. They are expecting that they will lose customers (or there will be “churn” as they put it to the investors) over these changes. But they are insanely optimistic about this move and chose to blindly ignore the masses of unhappy people voicing their opinions on the internet, including on their own forums.
So how do you or I as a business that have a single or small number of licenses get the attention of a juggernaut like Autodesk? Simple, we talk their language. If you listen to the last couple of earnings calls on Seeking Alpha, they are expecting everyone to come running to their new over priced subscriptions. However they are not actually taking away the option to renew your maintenance plan. At least not yet anyway. So the way I see it, the only way they will “hear us” is if we do one of two things. You either drop your maintenance plan all together, or you renew your maintenance for the next few years and see if they take the hint that you don’t want this change. Either way will be effective.
My plan is at this stage, for the sake of $1400 over the next 7 years, is to just renew for the next couple of years and see what happens. I am pretty sure that by the end of the 3 years Autodesk will have done so much to make the maintenance plans as unattractive as possible that it will be almost impossible to stay on them anyway. So I will at least put up the protest for as long as I can and see if it makes a difference. In that time I will also be looking closer than ever at what other options are available to me. That is something I will get into in an up coming article though, so stay tuned.
I would love to hear what your plan is, so feel free to leave a comment below.