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How Will You Buy CAD Software in 2016?

10 Feb, 2015 By: Robert Green

Autodesk and other software developers are moving toward subscription-only access to software. The time to plan for the transition is now!


Last week, Autodesk shook things up by announcing that it is moving toward a subscription-only business model and will no longer sell perpetual software licenses for standalone desktop software products. While the policy shift has been rumored for awhile, it's now official, and companies that are not already on and Autodesk subscription plan or cloud service will need to evaluate how they want to manage their software moving forward. And, of course, it goes without saying that CAD managers must be involved in planning for this new software landscape.

It's important to note that this change will affect only those customers who already own perpetual licenses of standalone desktop software; it does not affect customers using Autodesk product suites or those already on a desktop subscription plan or using cloud services. For details about the announcement, see "Autodesk Announces Subscription-Only Access for Standalone Desktop Software" on the Cadalyst web site and two online FAQs from Autodesk, Perpetual Licensing Changes and Autodesk Standalone Perpetual License Discontinuation Public FAQ (PDF).

More and more software developers are moving away from perpetual license sales and toward subscription, or rental, as their only means of distributing their wares. So examining the trend is worthwhile, no matter which brands of software you use. In this edition of the CAD Manager's Newsletter, we will examine some cost and licensing scenarios that you may have to consider as you plan for next year and beyond. Here goes.

Defining License Terms and Costs

Of course, not everyone uses Autodesk software, but I'll go ahead and use the company's terminology here along with AutoCAD suggested retail pricing as I build some example scenarios. Most software companies these days have essentially the same types of licensing, so all you have to do is plug in the appropriate numbers for your software to follow along.

Perpetual License: A software license you own that runs with no time limits. A perpetual license for one seat of standalone AutoCAD 2015 is $4,195.

Maintenance Subscription: An annual maintenance contract that you can purchase with a perpetual license to keep the software up to date. Maintenance Subscription for AutoCAD is $545 per year.

Desktop Subscription: An annual or monthly rental contract that entitles you to run the latest version of the software. At the end of the rental period, if you don't renew, the software stops working. Desktop Subscription for AutoCAD is $1,680 per year or $210 per month.

Now let's compare the total cost of ownership over three years for these three plans:

Table 1

Perpetual Becomes Legacy

A quick glance at the table above shows that the best value is derived when you continue maintaining existing licenses under existing Maintenance Subscription agreements. In fact, this deal is so much better than moving to Desktop Subscription that it would be crazy to do anything else — assuming you already have perpetual licenses in place and don't foresee the need to upgrade your software. Maintaining a legacy license will cost $545 per year, about one-third the cost of Desktop Subscription. According to Autodesk, perpetual licenses can remain on Maintenance Subscription indefinitely, as long as the subscription is not allowed to expire.

An interesting twist of pricing — which I suspect is not an accident — shows that acquiring a new perpetual license makes less financial sense over a three-year timeframe than does Desktop Subscription.

Of course, if we expand the timeline to more than three years, the math starts to tilt in favor of perpetual licenses. Consider the following scenario, where you purchase a perpetual license and use the software for five years before upgrading:

Table 2

Reading between the lines, it doesn't take much to understand why Autodesk is abandoning the perpetual license. Over time, Autodesk will make more money via its Desktop Subscription (rental) plan than it would selling a perpetual license and allowing customers to keep it on a low-cost Maintenance Subscription program.

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About the Author: Robert Green

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Re: How Will You Buy CAD Software in 2016?
by: jmaeding
on:
February 11, 2015 - 4:47pm
seems like the big question is if and when they will do this for suites and other products. I do not think the market will bear too much of a price hike in general before switching to things like Bricscad for 1/5 the cost. I have a few places asking for help doing the conversion, and its actualy quite easy as long as you have the code to any add-on tools or the author of them supports bcad.
 
Re: How Will You Buy CAD Software in 2016?
by: R.Paul Waddington
on:
February 12, 2015 - 9:43pm
Robert, it might be a good idea to say/define a perpetual licence as being a licence which allows continual (no time limit) use, for no additional cost. You do not own Autodesk software you licence its use.
 
Re: How Will You Buy CAD Software in 2016?
by: cadcoke5
on:
June 3, 2015 - 3:33pm
I first learned of this policy when I spoke to a dealer today. The company I work for had been using BricsCAD, and I was looking to purchase one of AutoDesk's products. My immediate response was, "There is no way will I be purchasing an Autodesk product now!" This policy would, in essence, mean I need to "rent" access to my own drawings in the future. I have known Autodesk to try to prevent me from using my own work in anything other than Autodesk products. They work hard to keep people from reverse engineering the DWG format. Those who use the upscale products are in even worse situation. This is even for products that are in DWG format. Of course, the whole subscription monster conquered the CAD software world with great success. It meant that software vendors no longer needed to make upgrades that earned their upgrade fees. I hope this newest idea dies on the lab table of Dr. Marketing Frankenstein.
 
Re: How Will You Buy CAD Software in 2016?
by: raj
on:
February 23, 2016 - 3:34pm
The issue with subscription/rental/pay-as-you-go licencing is that there is nothing to hold the software vendor to account. When introduced the price is reasonable, but as the number who now HAVE to be on such licencing increases, the vendor now has the upper hand. There are many examples of such software where the software just climbs and climbs in price. There is also now little incentive to really improve the product. These licencing schemes are introduced to increase the revenue stream, and to guarantee it. Shareholders will NOT be satisfied if their return merely keeps pace with inflation. This is risky, and they are much better off by just putting their money in the bank. Shareholders want to see a return that is ABOVE the rate of inflation otherwise they will take their money elsewhere. The result is that prices will have to rise at a rate higher than inflation and this is what those on such licencing will be hit with. Now, if they want to access the intelligence they have in THEIR data, they will have to pay whatever is demanded by the software vendor. There is a well known accounting software that did this a while back, and they suffered. They also tried something like authorising the data file. So, anyone could download and install the program, however to do anything, you had to purchase a licence for the data file. No problem when it was a perpetual licence for the data file. It became a major issue for users when everyone went on to annual subscription. Now, you HAD to have a valid licence for your data file to be able to even access it. In the case of CAD, it is not all about lines arcs and circles. Each of those objects can have a whole lot of data attached to them that gives the drawing intelligence, and a viewer does not give you access to that intelligence. Couple that with the price premium we have to pay, and you can see why there has been a surge in purchase of perpetual licences for AutoCAD to beat the deadline. This will show a healthy revenue stream and no doubt push the share price up, but is is a short lived blip, and when markets realise this, there will have to be something else happen to keep shareholders happy. The simplest way to achieve this is to increase prices of the now pay-as-you-go system. I have been trying to find the cost of AutoCAD in the US for quite a while. I just updated from 2006 to 2016. I say updated, because there was no consideration given at all, so I have two legitimate perpetual licences. The difference here is that while you pay USD 4,195, I had to pay AUD 5,950. Even the maintenance subscription was AUD 800/year and not USD 545/year. Even with the exchange rate, we pay a significant amount more, and even when the AUD was worth more than the USD, the numerical dollar difference was the same. So, was it worth it? Well, for me, going from 2006 to 2016 it was. For many who were keeping up on more regular schedule, I would say not really. For those previously on subscription, many are now nervous because subscription rates had downward pressure on them by the ability to take up perpetual licences. Now that that is no longer the case, many are bracing for big increases in their CAD costs. I am not talking about small operations. I am talking of multi-nationals who are running financial simulations with a whole lot of "what ifs" to see how it will affect their operations. As for looking elsewhere, in the early 1990's I was asked to present a paper at an ACADS seminar on CAD Data Exchange. It was a major problem switching applications then, and is only many times worse now.
 
Re: How Will You Buy CAD Software in 2016?
by: Robin Capper
on:
February 23, 2016 - 5:49pm
Good article, The Register also found another aspect of Desktop Subscription which benefits Autodesk. Their product sales cost 50 per cent more than subscription sales, so reduction in costs comes with the increase in revenue. See the table (and comparison with Adobe) in this article http://www.theregister.co.uk/2016/02/04/autodesk_announces_redundancies_...
 
Re: How Will You Buy CAD Software in 2016?
by: cadzookz
on:
February 23, 2016 - 6:19pm
I will be dropping the use of autocad. and will use another software I can purchase to "own." . I have already done this with the MS Office software and replaced it with an alternative, as they too have gone the way of "subscription" B.S.
 
Re: How Will You Buy CAD Software in 2016?
by: DaveW
on:
February 24, 2016 - 4:13pm
Looks like this will be the year of the 2016 software that have to be used for several years because most of us will buy the perpetual license. I did. I can't afford the subscription deal anyway, maybe big businesses will along with multiple license seats. To me, it's just a deal where Autodesk won't see anymore low income months because nobody is buying. The subscription is a steady inflow of cash. I'll use my current perpetual license(s) until they come back again.
 
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