What’s soft about software?
The term “software” is ubiquitous to a degree that few hearken back to review the origins of the word. The “soft” nature of software implies it to be amorphous compared to its computer counterpart “hardware”, but certainly it is software that brings “muscular” value to hardware. Software’s intrinsic value originates from the effort that goes into creating it, and is completed by the benefit or value that users can get from it. This gap between investment to create software and the value it brings must of course be spanned by some means of compensation, and the “soft” nature of software has spawned many methods of creating a quid pro quo conduit. Over time, the challenge of how to price software has received a great deal of attention as demonstrated by the amount of effort Independent Software Vendors (ISV) expend at getting the right systems in place to monetize their development investments. As a generalization, it can be said that software monetization is achieved on the basis of purchasing a license for usage, with a generalized further extension that software licenses are either perpetual or subscription, which correlate to an entitlement to use a software license permanently or only for a defined and limited time.
From a financial standpoint, the main difference between perpetual licenses and subscription licensing is that for perpetual licenses, there is a large up-front investment with additional yearly maintenance and support (M&S) costs. Perpetual license M&S costs are lower than the yearly subscription costs, and as a result, long term costs for a subscription are higher than perpetual license costs, with the cross-over usually occurring in the 3rd to 4th year of usage. Viewed over a long time frame, perhaps 10 years, the difference in cost becomes substantial. As such, purchased and owned perpetual licenses are a significant asset in the long run.
The concept of subscription versus perpetual licensing has been around nearly as long as software licensing has existed, and computer networking played an early and ever increasing role in expanding software licensing options. Via computer networks, options were created which allowed a group of users to share of a pool of network based licenses, allowing efficiencies which became very popular as opposed to having single user licenses installed on individual computers. Additional transformations in licensing and payment for usage evolved such that it has become relatively common to pay just for the time a software is used based on network accounting. This pay-per-use model (PPU) is used extensively in Cloud software implementations.
Times Change and Licensing Has Also
Across the software licensing landscape, there have been a few notable shifts in recent years, but probably none is more dramatic than Autodesk’s license policy changes. In 2015 Autodesk began actively phasing out perpetual software agreements world-wide, and announced that by August 2016 they would no longer sell any of their applications or suites with perpetual licensing agreements. According to Autodesk, customers with existing perpetual agreements can continue to use their previously purchased software without interruption and the maintenance agreements associated with these legacy licenses will be renewable for the foreseeable future, allowing continued access to the associated support, improvements, and upgrades. However, if the perpetual license maintenance plan is ever allowed to lapse, support for that legacy license will immediately terminate, and at that point a subscription plan will need to be purchased to maintain access to updated Autodesk products.
Subscriptions… Whose Idea Was This Anyway?
As alluded to earlier, quantifying and charging proportionately for the value that end-users extract from largely intangible computer code is a key challenge for the ISV. The preference of some users for subscription licenses over perpetual licenses is probably at least partially attributable to human psychology of delaying immediate pain despite the prospect of greater future pain. Unwillingness of light users to invest in permanent ownership of software, along with accounting practices whereby large expenditures are capitalized and closely scrutinized while smaller periodic expenditures are attributed as operating expenses, are other aspects of some users’ and organizations’ preferences toward subscriptions. For their part, software providers have long been willing to accommodate user preferences for subscriptions options as long as they could also capture benefits in the form of long term cash flow and higher profitability. There are likely other potential benefits for software sellers in the form of reduced revenue leakage due to piracy, though this is generally acknowledged as a secondary concern. Recognizing that there are situational benefits and detriments of licensing options can be useful, so let’s move on from how we arrived where we are today to explore navigating the options that lie ahead for Autodesk licensing.
Simplifying the Autodesk Options Puzzle
Just as previous perpetual licenses, Autodesk subscriptions will come as a single application, or as a bundle of useful and related applications geared toward common needs. An organization’s understanding of which application are most in demand by users translates into which suites or combinations of suites are needed, and in what quantities. This is where detailed user information, if available, can be very helpful in making efficient selections to minimize costs, and such information is available in some commercial license metering packages.
Since Autodesk perpetual licenses can no longer be purchased, it is important for any current perpetual license holders to recognize the unique value of perpetual licenses currently held, and understand how to design the totality of their Autodesk licensing if additional Autodesk software is required. With that in mind, let’s examine the value of Autodesk perpetual licenses in light of future restrictions to only subscription licenses.
As noted previously, after the cross-over period of 2 to 3 years, each year a perpetual license agreement is maintained “current” results in accumulation of savings as compared to an identical subscription. For organizations exploiting this benefit of perpetual licenses, Autodesk’s elimination of perpetual agreements fomented anger, hostility, and even feelings of betrayal. Autodesk touts the advantages of subscription and pay-per-use agreements as providing users a wider variety of software while avoiding up-front purchase price, thus allowing better value and flexibility. Customers have expressed skepticism about the true value of these stated advantages, believing that long-term costs for use will rise substantially for Autodesk software, resulting in criticism and a pervasive lack of joy in forums discussing Autodesk’s discontinuation of perpetual agreements. There are examples wherein users “did the math” to demonstrate how much additional long-term cost would be added under the subscription pricing model. From the perspective of Autodesk, the move to subscriptions translates into greater future profitability versus perpetual agreements, assuming subscriptions continue to be faithfully renewed. So while subscription licensing is touted as more flexible and better fitted to today’s “agile” business environment, and for many organizations they offer the advantage of being treated as an operating expense which is typically subject to less scrutiny than a capital expenditure, these benefits come at a price over time. This can all be summarized as a caveat that allowing any Autodesk perpetual license maintenance agreements to lapse should be a strategic decision based on analysis of options, and not an accidental or negligent destruction of a valuable software asset.
Flexibility of Subscription Options
Aside from the usual network based or single workstation licensing options which are now available only as subscriptions, there are also an increasing number of cloud based options for Autodesk’s software products. In order to offer a strong degree of agility, cloud subscriptions come in a wide variety of lengths, which facilitates scale-up and scale-down as needed for unexpected changes to needs, such as short term projects or other such transient situations. By establishing a base capability with yearly or multi-year subscriptions, and evaluating additional needs periodically to handle special situations with quarterly or monthly subscriptions, there is the potential that proper management can yield advantages by exploiting the agility of subscriptions. For those with the choice of using a base capability of perpetual licenses, covering additional short-term usage with subscriptions can potentially be accomplished with minimal financial discomfort.
Analyzing the cost-benefit tradeoffs of any particular Autodesk portfolio, given the potential combination of licenses either owned or available for purchase, can become somewhat daunting. Implementing a systematic approach to assessment of needs is more important than ever, and should include consideration that some Autodesk 360 cloud subscriptions come with “credits” which allow the access to other powerful specialty cloud applications. Autodesk Cloud Credits can also be purchased in packages, and they allow subscribers to access massively scalable cloud computing resources for high-intensity computing tasks such as simulations and 3-D rendering of design concepts. This of course facilitates accomplishment of certain difficult computing challenges in a much shorter time than would typically be possible in-house, which can add significantly to the total value of a subscription license portfolio. In instances where cloud computing results must be integrated with in-house data, there are sometimes additional technical challenges associated with accomplishing this merge of systems, source data, and results, but these difficulties will diminish as experience grows and systems are developed to respond to these issues.
For very large organizations, additional options are available, though these can only be purchased directly from an Autodesk representative. Some of these options are known as Token-flex and Multi-flex. They are tailored for enterprise environments where a very wide variety of capabilities will be needed, and the customer is willing to pay for this flexibility. In the case of MultiFlex, nearly every software available from Autodesk is made available enterprise-wide, but this is a very expensive option. Alternatively, the TokenFlex model differs in that it is a “pay-per-use” type of agreement, where tokens are purchased for a given year, and then consumed as software is utilized over the course of the year. The real caveat here is that the tokens have a limited lifespan, typically one year. For enterprises confronted with the prospect of transitioning to a token-based pay-per-use licensing model, understanding how to purchase enough tokens for a year of usage without over-purchasing requires careful planning, especially if historical usage is poorly understood (or not known at all). Even if past usage is understood based on software usage metering, undertaking modeling to translate past usage into token costs may be extremely difficult. Getting IT and procurement management comfortable with token purchases is best undertaken with historical usage details and a tested model of token consumption.
As we can see, given the changes and spectrum of options now available, Autodesk licensing is certainly more challenging than it was a few short years ago. Sufficient understanding of the available options, as well as current usage and potential future needs are key to cost effectively empowering users with the Autodesk software they need.