Facing An Array Of Challenges, Autodesk Shifts To Subscription Pricing

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Autodesk has been around the block a few times, having debuted way back in 1982 in the earliest days of the desktop PC. These days, the company is in the midst of a major transition from a licensing model to a subscription model, while juggling the assortment of challenges a change like this brings to a mature company.

It would be wrong to characterize this is as a total cloud pivot, however. It’s more akin to what Adobe did in 2013 when it began shifting to a subscription model. As with Adobe, Autodesk is combining its desktop applications with services in the cloud supporting those main pieces. The desktop applications are still updated on a regular basis as in the cloud model, but the applications are stored locally.

The idea is to place that desktop app in a cloud wrapper while shifting to subscription pricing, says Scott Reese, VP of cloud products at Autodesk. “We don’t see a time where [our] desktop applications go away. Much more what we see is that they become cloud connected, cloud aware and cloud-centric,” Reese told TechCrunch.

Ch-Ch-Ch-Changes

This move has to be seen against a backdrop of wider industry change where Autodesk operates. Autodesk makes 3D computer-aided design (CAD) tools and sees a manufacturing environment that’s changing too with the advent of new technologies like 3D printers. Gone are the days where companies design in a linear fashion and make the same product thousands of times. Today’s environment could involve more customized designs and even one-offs.

What’s more, companies are making their products data-aware as we enter the age of the Internet of Things and that requires a different set of tools and different way of thinking for Autodesk as well.

We don’t see a time where [our] desktop applications go away. Much more what we see is that they become cloud connected, cloud aware and cloud-centric.
— Scott Reese, Autodesk

The company also recognizes that 3D design requires vast resources, sometimes more than a desktop PC can provide. The cloud offers a way to provide additional computing resources in a flexible way.

To that end, the company launched its cloud development platform, Forge.com, last Fall as a way to encourage customers to build applications on top of the Autodesk tool set and provide a set of tools to create these more connected products.

For a company that went public in 1990, it’s a major transition. Company CEO Carl Bass, who has been with Autodesk since 1993, has been pushing the company toward cloud for some time, Reese said.

“Carl Bass has been clear for the last several years about his belief in the cloud and the combination of cloud, mobile and social. His passion is grounded in the idea that pervasive engineering problems can be solved by mobile, cloud and social,” Reese said.

Forging Ahead

With that top-down push in mind, the company is looking ahead to the new way of doing business driven by subscription pricing. Some might say it’s late to the game, considering that Adobe started to make its pivot in 2013. The good news for Autodesk is that Adobe has made the transition successfully.  As I wrote about the Adobe shift, changing the way you do business is a significant challenge for any company:

Adobe has managed to pull off something here that most companies continue to struggle with. It completely changed its revenue model and lived to tell about it. In fact, it learned that it can make more money with a subscription model than it did selling boxes.

That could bode well for Autodesk as it makes its own shift. For them it involves getting all their customers off licenses and onto subscriptions by the end of this year. The customers get something in the deal too as they no longer have to wait years between releases, getting updates as quickly as Autodesk engineers can crank them out.

To facilitate this shift, Autodesk has moved from a waterfall development approach to an agile one where they can develop new functionality in short burst,s measured in weeks instead of months or years. In the old model, customers had to wait months or even years for updates, even for small changes. With incremental updates, any issues with the software are resolved much faster and they get access to new features more quickly.

“Some of our products, we update every two weeks. It takes the complexity [of big upgrades] away from user and they always have the latest updates,” he said.

About Those Layoffs

As though to prove, there is going to some pain with a change like this, just last week, the company laid off 10 percent of its workforce or about 925 people. Reese attributed this to tightening things up ahead of the transition to the new subscription revenue model.

The company also appears to be dealing with a couple of activist investors, who could be driving these cutbacks, a Reuter’s report suggested.

When asked directly about the reasons behind the layoffs, an Autodesk spokesperson explicitly stated it nothing to do with any external investor pressure.

“While we are always open to constructive input into the Autodesk business from any of our shareholders, the restructuring plan announced last week, which aims to accelerate the move to the cloud and our transition to a subscription-based business model, is not in response to activist investors,” the spokesperson told TechCrunch in an email.

Regardless of the reasons for the  layoffs, Autodesk is clearly a company in transition, and like many companies making a major shift in how they do business, it needs to feel its way to the new model, changing  the way it develops software and how it accounts for revenue.

As the technology world and market needs have shifted, the company deserves some credit for recognizing that it cannot sit still and survive long term. It’s doing what it has to do to move forward amid a myriad of challenges.

Featured Image: Autodesk