Thursday, March 28, 2024 | Ramadan 17, 1445 H
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EDITOR IN CHIEF- ABDULLAH BIN SALIM AL SHUEILI

What the future holds for software firm Autodesk?

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By Stefano Virgilli — Autodesk, one of the world’s largest multinational software corporations is shifting their user base from the perpetual licence of the software to cloud subscriptions. Even though Autodesk’s shares stay high, with a loss of $0.18 per share in the third-quarter fiscal year, it is unknown what the future holds for the software company. For now, the cloud subscriptions increased from 168,000 in the second quarter, to 861,000. Total subscriptions rose to 2.58 million at the end of the fourth quarter.


There are other software companies that have decided to transition to another business model from various reasons, but in Autodesk’s situation, the prime reason is protection from piracy. On average, software products have a piracy rate of 43 per cent, but according to Autodesk, their piracy rate is as high as 70 per cent.


The company believes that almost 12 million people worldwide might be using their AutoCAD and AutoCAD Lite for free.


However, for now, the revenue is not that high. There is a fourth-quarter loss per share — between $0.39 and $0.32 and $460 million-$480 million revenue loss. Autodesk hopes to grow its revenue in the upcoming years, at an annual rate of 24 per cent to 2020. To achieve that, the company expects growth in subscriptions, cloud, and product by 20 per cent in the upcoming period.


Even though the company’s management has a plan that will bring them more revenue, about $1.4 billion in free cash flow by 2019, Autodesk’s customers will feel the increased prices over the next few years.


The first sign is the subscription discounts. Compared to last year’s multiple 50-70 per cent discounts, this year their number is lower, as well as the percentage.


While everyone expects the price to rise each year, the company’s future depends on new users and whether or not it will reach their target audience. Statistics show that from 2012 to 2014, the company’s revenue grew just 2.6 per cent, and the high percentage of piracy adds to the software’s company cloudy future. The software is expensive, so people use every method to use it for free.


On February 7, Autodesk announced that Carl Bass, company’s CEO has decided to step down as president and chief executive officer, but will remain an adviser to the company.


According to the company’s announcement, Bass said, “It’s been my honour to lead Autodesk through this exciting period of growth and change. I’m very proud of everything we accomplished — from both a business and technology perspective. Our cloud and subscription business is well under way. The company’s strategy is working, the management team is strong and it’s the right time for me to step aside.”


The company’s chairman Crawford Beveridge thanked the former CEO for “opening up tremendous opportunity” for the company. They are grateful to have Bass’s assistance “as a special adviser to support the CEO transition and cloud and subscription business model transition.”


The response of the Street was positive, with R W Baird’s Jason Velkavrh saying that “The terms of the BOD exit indicate that they will have a voice in the choice of new CEO, which bodes well for continued focus on the model transition.


The company has indicated it will raise maintenance prices in tranches over the next few years in an effort to entice customers to move to subscription (1.25-1.50x increase in LTV). At the analyst day in December, management put a finer point on this, announcing virtually all maintenance customers are expected to be converted to subscription by FY20. Any acceleration of that timeframe would be a positive for shares.”


Back in 2011, Autodesk took the risk and jumped into the biggest DIY community online, fully aware of the risk and the reward. At the first six months, many people were sceptical, claiming that the site would fail during this early period. However, that did not happen, as Instructables got even bigger than it initially was. The importance of the purchase was mostly valued in the eyes of the makers. It was their future, their chance to be a part of a large community, which also benefitted Autodesk, because, at the beginning, the revenue of the site was not important for the software company.


At the time of the Instructables’ purchase, Bass, the now former CEO told Wired.com that “One of the things that we’re seeing is that technology is increasingly starting with consumers, and then moving up into business”, adding that there is “an unbelievable community of people who want to be making things.”


The company saw the future in millions of passionate people taking part of a passionate community that helps them be creative and share their creation using Autodesk’s free tools.


Today, with the transition to a cloud business model, Autodesk has a vision that will most likely turn into another successful project. Because from what we have seen so far, the corporation has a great sense of timing when it comes to transitioning.


— vs.voxlab.net@gmail.com


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