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Adobe led the way moving its Creative Suite into the cloud and others in the industry have watched with interest as the impact on the bottom line was fairly short lived and now the software vendor is in a strong position.
As a result the move by Adobe is inspiring others to follow suit with CAD specialist Autodesk indicating that from July next year the delivery of its professional software will be available through a cloud-based subscription model.
The firm offers a fair few packages at the moment, largely based on industry vertical, and it has promised to make the choices for customers buying through the cloud simpler when it pushes more of its business through that model next summer.
Why it all matters to the channel is because if two is company then we are not that far off from getting more to follow to make a crowd. It underlines just how much change is happening in the industry and why those dragging their heels in the move towards the cloud are running out of time.
Autodesk is going through the same decision process as many other software vendors as it faces a world ehere customers want to pay for and consume technology differently and it cannot be unique in that respect.
“The way we design and make things is changing: every industry is being disrupted by changes in production, demand and products,” said Andrew Anagnost, Autodesk senior vice president of Industry Strategy & Marketing. “Autodesk is embracing this new norm and evolving our business so that customers can thrive in theirs. Giving customers the flexibility to subscribe to software solutions that precisely match their needs best positions them to compete in this new era.”
The journey that Autodesk has taken started earlier this year when it stated that it would stop selling perpetual licenses of most of its individual products after 31 January next year as it introduced fresh licensing options. It has now followed that up by revealing that it wants to take its Design and Creation Suites to an entirely subscription based offering.
Changes like that cannot happen overnight and the vendor has reached out to existing customers to ensure that over next nine of so months they have a chance to get to grips with a simplified licensing structure and it will support perpetual licenses that are sold in the run up to 31 July 2016.
The impact on the business model that comes from going to the cloud is also something that has to be handled senstively and anyone from a vendor through to a reseller making that move needs to be prepared for at least a few quarters of transition.
As it also announced second quarter results the firm was able to show that subscriptions are on the rise with 61,000 being added from Q1 and the total user base hitting 2.39m by the end of Q2.
Revenues of $610m were down year-on-year by 4%, but it is those sort of things that the staff and investors should have been prepared for at the outset as the business model started to change.
That point was stressed again in the statement accompanying the Q2 results: "During the transition, billings, revenue, gross margin, operating margin, EPS, deferred revenue, and cash flow from operations will be impacted as more revenue is recognized ratably rather than up front and as new offerings bring a wider variety of price points."
But enough has already happened with billings increasing by 7% to $1.2bn and defrred revenue climbing by 25% to $1.2bn in the second quarter to give the CEO something to chirp about to investors.
"We are pleased with the progress of our business model transition," said Carl Bass, Autodesk president and CEO. "Strong billings and deferred revenue growth led the quarter and we continue to see customers adopt our new model subscription offerings, which are showing strong year-over-year and sequential growth. For the past two years we've been preparing for this transition and we're now ready to accelerate the process."
Now the transition has started the expectation is that it will continue through the second half at a slightly quicker pace as more customers get the message about the subscription changes and move away from perpetual licenses.