Company Says New Customers Are Opting for Subscriptions; Existing Perpetual License Owners Can Stay on Maintenance

All Autodesk software, including suites as well as standalone products, will be available only on a subscription basis beginning August 1, 2016, company officials said today. The announcement follows the company's already specified January 31, 2016, deadline for ending perpetual licensing of individual software products.

In a conference call with investors last week, Autodesk CEO Carl Bass teased the announcement, saying it represented the company's move to a "more sustainable, less volatile" business model. "We've seen a huge willingness on the part of our customers to use this new model," Bass said.

Early Adopters
In a conversation with StudioDaily, Autodesk Senior VP of Industry Strategy and Marketing Andrew Anagnost said new customers, especially, have been gravitating toward the company's subscription options. "They like the lower up-front costs," he said. "And seeing new customers coming in this way, we thought we should get on with it. It's better for us and it's better for our customers."

Anagnost said the company is taking pains to be more flexible and responsive than Adobe, which had a long-runnning dust-up with customers over its own abrupt transition to a subscription model. Instead, Autodesk is trying to give users ample advance notice of the move. 

Customers with perpetual licenses will retain full usage rights, and if they have a maintenance plan to keep their versions up to date, they can continue down that path as long as they renew their maintenance. "We have no plans to take away anyone's maintenance rights," Anagnost said. 

A Controversial Trend
A vocal contingent of users has loudly rejected subscription pricing for software, saying that it forces customers to keep paying out over time instead of making a decision on a single, larger purchase. 
At current pricing levels for the Entertainment Creation Suite Ultimate, a perpetual license with maintenance would cap ongoing expenses at the $1,090 cost of annual maintenance — less than half the $2,730 cost of a desktop subscription.

But over the short term, the desktop license is attractive. A desktop subscriber wouldn't begin paying out more than a customer on a perpetual license plus maintenance until the fifth year. And many do find the model advantageous, especially larger facilities that need to scale up seats on a short-term basis, where deploying traditional software and keeping it up to date via traditional licensing models can be challenging.

Autodesk Entertainment Creation Suite Ultimate
Cost Over Time

    Perpetual License Plus Maintenance Subscription   Desktop Subscription    
Time Frame   Yearly Cost Cumulative Expense   Yearly Cost Cumulative Expense   Difference
Year 1   $7,915* $7,915   $2,730 $2,730   -$5,185
Year 2   $1,090 $9,005   $2,730


Year 3   $1,090 $10,095   $2,730 $8,190   -$1,905
Year 4   $1,090 $11,185   $2,730 $10,920   -$265
Year 5   $1,090 $12,275   $2,730 $13,650   $1,375
* $6,825 for perpetual license plus $1,090 for one year maintenance

Source: Autodesk Store

Product updates should become more frequent and easier for subscribers to acquire as time goes on, Anagnost said. Also, every user on a subscription or maintenance program is theoretically using the same, up-to-date software, eliminating version interoperability issues. And named-user licenses follow the user, not the machine, allowing a subscriber to install the software on all of their computers and use it on any of them with their login. (In response to customer requests, Autodesk plans to introduce a shared-license option next year that will allow a license to be bought for a single seat shared by multiple users, rather than for a single user.)

Subscription pricing can simplify billing, too. Customers who ramp up and down for different jobs are able to increase and decrease subscriptions by the month, billing additional costs back to clients on a job-by-job basisAnagnost said Autodesk has some customers who have remained on a monthly subscription plan for nearly two years, rather than opting for a less-expensive annual plan, simply because it's easier to account for those monthly charges, perhaps billing them back to individual customers, without making a full year's commitment to any subscription at any point.

The Bottom Line
The advantages for Autodesk are even more significant, of course. Once the company makes it through a transition during which the move has a negative short-term impact (as customers begin to make small monthly subscription payments rather than large up-front license purchases), subscription-based revenue becomes more stable and easier to predict over time.

And that's a big reason why subscription models are taking hold, to some degree, throughout the software industry. "The new normal is subscriptions," Anagnost said. "The software companies of the future are going to be subscription-based companies. It's the way we're going — there is more value, more power, and a vastly superior customer experience in the new subscription model than we currently have with the perpetual licensing model."

But he acknowledged that the burden is on Autodesk to make subscribers happy with their subscription-based, cloud-connected wares. "Moving traditional desktop software to the subscription model doesn't mean data has to move to the cloud," he said. "Customers can limit their interactions with the cloud unless they choose to use the cloud capacity they have access to. But we are moving licensing to the cloud, and we have to prove to the customer that they will like what they get this way more than they have in the past."