Autodesk’s Licensing Transition. Who Knew It Would Be So Hard?

The good news is Autodesk has the largest number of professional, full-time CAD users in the world. But when it comes to making big changes, such as shifting the business model from perpetual to term licensing, the shift has not been without drama.

From 2015, when it was decided that the company was going to change its traditional buy-once/own-forever policy for all its software to now, there has been an outcry from some users and years of red ink on the quarterly reports—and a change of CEO.

In all fairness, the perpetual license has had its day. Modern software is not bought, it is rented. The CAD industry, however, has lagged behind the rest of the software industry. Autodesk took the lead to migrate its users towards term licensing.

The new CEO and president is Andrew Anagnost, and he was 100 percent committed to the new model. Yes, there were going to be casualties. You have to cross the rapids before you get to calm waters. But it was going to be worth it, said Anagnost, the fearless captain at the helm.

Anagnost’s rise to the top was due in large part to being the architect and champion of Autodesk’s shift to term licensing, also known as subscription.

We caught up with both Anagnost and Teresa Anania, senior director of subscriber success, to get some clarity on his vision and to get some numbers. Anania joined Autodesk in 2009, from an acquisition of Algor, where she ran customer sales and service.

Two Types of Users, Two Types of Promotions

“We have rolled out programs that are available to customers so that they can enjoy some of the benefits that are available in subscription, beyond what they may have experienced with perpetual licenses,” said Anania.

In fact, there are really only two options, depending on what type of Autodesk user you are. If you’ve purchased a license of the software, but didn’t opt in for the annual maintenance, you’re part of what Autodesk calls its legacy base (and what Anagnost has referred to as “not a customer”). If on the other hand, you’ve got a license with maintenance, you’re in the active customer club.

Let’s start with the legacy base. It’s enormous. Millions of users have paid for Autodesk software. Autodesk has been offering special promotions over the past couple of years to sway legacy users towards a subscription. There is a fairly substantial discount of 25 percent on any collection or individual product, which can amount to almost $900/year in savings. Even though some users might see this as a jump from paying nothing for the software to paying, well, something, Anania claims the promotion is yielding good results.

“I see a large group of customers taking advantage of this offer,” she said. “Over the past two years, we converted over 120,000 subscriptions through legacy promotions. And customers are not just trading in their old version of AutoCAD for a new version, they’re actually moving up the stack [getting more software than they had before - Ed]. And they’re not balking at a subscription-only offer, they’re just joining in and taking advantage of a great price.”

On average, Anania said, around 30,000 legacy seats are migrating with each promotion offered. However, that still leaves about 2 million users who have yet to make the switch.

Maintenance to Subscription

As for the license plus maintenance base—the active customers—Autodesk has a special program they call Move to Subscription. These users are paying annual maintenance fees to Autodesk already, so switching to subscription is an easier pill to swallow. There is one snag, however: These customers have sunk thousands of dollars into their perpetual license, and it can be hard to give up. Users will have to relinquish the rights to their perpetual software in order to make the switch.

“Some have expressed concern about giving up that asset,” Anania said. “But by trading in that asset, they are enjoying not just a discounted subscription for the same product or the collection, but also a discounted price in perpetuity, as long as they continue to renew. So, it’s like a loyalty price point for the customers that had that perpetual asset and maintenance.”

The main advantage of this program seems to be as a hedge against maintenance cost increases, which Anania says will continue to rise. The earlier users switch, the more they stand to save. While the program allows customers to move to subscription for roughly the same or less than what they would be paying for maintenance, here’s the rub: Their rate is only locked in for three years. This raises an obvious question: What happens after that? According to Anania, “Customers who switch will continue to renew with special discounted pricing that will be lower than maintenance plan renewal pricing and far below the cost of purchasing a new subscription.”

“We can’t look in that crystal ball forever, but we can say that the price will always be far less than a new subscription for a new customer, and far less than their maintenance price, because that price will continue to increase,” Anania said.

The program is only offered at the end of a maintenance period, and users are free to continue with maintenance. The next time renewal comes up, users will be offered the options to make the switch a second time, but the costs will increase by 5 percent for every year you wait. The third time is the last time, and if you decline it, you’re stuck in maintenance unless you want to pay full price for a subscription.

“We probably will have a long tail of some of our customers that just don’t want to make the move, and that’s fine,” said Anania. “That’s their choice.”

So far, the number of takers on the Move to Subscription program has exceeded even Autodesk’s expectations, said Anania, with roughly 30 percent of active customers making the switch.

Is Term Licensing Really Better for Users?

Since Autodesk announced the transition to a subscription-only model in 2015, the loudest reaction from the CAD community was not applause. Long-time Autodesk critics up and left in protest, some of them grumbling about the numbers not adding up to an advantage. The move has also endured withering criticism from longtime user Steve Johnson on his cad nauseam blog

But are users really benefitting from a switch to subscription? If we start from scratch, it might be that a subscription model actually makes more sense for users. First, it’s less of an upfront expense. It’s also clear that having an updated application is better than using some ancient version that is showing its age, unable to perform with operating system updates, clashing with new hardware or even susceptible to hacks or other security threats. Modern software, like that on your smartphone, just updates itself. The larger trend of software in general suggests that a subscription model really is the best option for everyone.

But that’s probably cold comfort to some Autodesk users, now feeling as if they’ve been left out in the cold.

Even though Anania claims “we don’t want to leave any customers behind,” it’s hard not to feel sorry for longtime users now being called “not a customer.”

“Customers expect to see more value delivered through subscription over time, not only from how they buy and use our products, but also how they manage their relationship with Autodesk,” said Anagnost. “It’s our commitment to our customers that over a multi-year period, they are going to see those increases in value. Subscribers aren’t just a transaction for us, they’re a long-term relationship.”