September 11, 2013

Autodesk touts 3D design software subscription model

Focus on subscriptions allows customers to leverage scalability of software suites

3D modeling software maker Autodesk next week is rolling out pay-as-you-go subscriptions for most of its design, engineering and entertainment suites.

The San Rafael, Calif.-based company said starting September 16, customers, for the first time, can buy access to several of its desktop software suites on a monthly, quarterly or annual basis with access to select Autodesk 360 cloud services and basic support. Autodesk said it will still sell its traditional, conventional licenses.

The subscription economy

Software as a service (SaaS), also referred to as “on-demand software,” is becoming a standard business model for many software developers looking to keep and lure more customers, who may be more willing to pay smaller incremental subscription, or rental, charges then thousands of dollars for an upfront license.

Autodesk sells SaaS to share and collaborate on architectural and engineering projects, among others, involving CAD modeling with 3D laser scan data and digital imagery, 2D CAD drawings, and both 3D and 2D meshes, as well as video, animations and other information. About 70 percent of Autodesk customers are already on a subscription plan.

Late last month, Autodesk reported second quarter sales of its flagship AutoCAD software used by designers, engineers and architects, suffered an 11 percent drop to $289 million, pushing overall quarterly revenue down 1.2 percent to $561.7 million.

But, sales from the company’s AEC business segment increased 9 percent to $177 million, building on a 4 percent increase in first quarter revenue for AEC and an 18 percent increase for the segment in FY2013. Revenue from its Suites segment, which provide software platforms combining desktop and cloud-based services, increased 18 percent to $193 million.

VIDEO: Autodesk launches pay as you go software: The Blind Date

Q2 license revenue down, subscription sales up

Autodesk reported license and other revenue fell 6.2 percent to $313.2 million in the second quarter, while subscription revenue was up 5.9 percent to $248.5 million.

“People are increasingly seeking out experiences with less financial or time investment, and consuming products and services through renting, sharing and purchasing subscriptions,” the company said in a statement.

For example, Autodesk’s Product Design Suite Premium 3D modeling software would cost $3,750 a year under the new subscription plan. That’s less than half the one-time price of $8,620 to permanently own the product, the company said.

“We expect rental plans to be attractive across all the industries we serve, especially for freelancers, startups or businesses that are project-based in nature,” said Andrew Anagnost, Autodesk senior vice president of industry strategy and marketing. The company said the new subscription plans can be started and stopped, and can be resumed without penalty.

Access over ownership

“We’re in a moment in which access to goods, services, and talent is going to triumph over the ownership of them,” said Lisa Gansky, author of “The Mesh: Why the Future of Business Is Sharing.”

The company forecast adjusted earnings of $0.36 to $0.40 per share for the third quarter on revenue of $540 million to $555 million, that’s less than analysts’ estimates of $0.50 and $581 million.

For the year, Autodesk projects revenue to reach nearly $2.4 billion, up about 3 percent, but analysts are reportedly predicting a small decline in revenue for the current fiscal year to $2.3 billion.

“The challenging dynamics within some of the end-markets that we serve has led us to adjust our growth assumptions,” said Autodesk CFO Mark Hawkins.

Shares of Autodesk closed Tuesday at $38.08. The stock is up just over 5 percent for the year with a 52-week price range of $30.20-$41.72. Autodesk’s market cap is $8.5 billion and P/E ratio is 39.46.

Rethinking the business model

“It’s no secret; it has been a challenging time to be in the visual effects business,” said Will Cohen, CEO of U.K.-based VFX start-up Milk. “Everyone needs to rethink the business model, and Autodesk launching rental plans will really help change the industry. Having scalability – the flexibility to easily ramp up or back depending on the project – means we can better compete in the modern visual effects industry.”

New rental plans apply to products including Autodesk: