Andrew Anagnost, co-CEO of Autodesk. (Courtesy of Autodesk.)
Carl Bass left Autodesk with big shoes to fill. Autodesk has decided to fill each shoe with one person. Until the company names a new CEO, Andrew Anagnost will share CEO duties with Amar Hanspal, who is responsible for all product development. We had not heard of an engineering and design software company splitting and sharing CEO duties, so we rang up Autodesk to see how this would work. Answering his phone was Andrew in his San Francisco Market Street office.
It had only been last November at Autodesk University that we congratulated Andrew for his promotion to head of Autodesk marketing. While it was a big step up on the career ladder, Andrew, with his education and background (a PhD in aeronautical engineering and computer science from Stanford, for example), is not the same as other marketers. But Andrew, new in his role as co-CEO, claims he is not far from his roots.
I am a product person. You can look at my marketing title, but if you look at the organization I run, it’s actually a business transformation organization. Marketing was a key component of it. Many important things are changing. I’ve structured my organization as a business system. It’s not along the lines of a marketing organization. There’s a whole new back office and front office with the customer. We had to change because when you go to market with a subscription model, you need to layer in more and more cloud solutions, and the time between what can be delivered and the impact it has on the customer is much shorter.
The Business Model Transition: Your Idea, Andrew?
The talk over the last couple of years has been the change in the business model, from a perpetual license to term licensing, a pivotal move in the company’s 35-year history and a move that Andrew had acknowledged to be a “bumpy road.” It was left to Andrew to first explain it to the media a little over two years ago. Andrew, as any good leader would, hesitates to take full credit for a monumental idea—although he admits to being the main change agent at Autodesk.
Certainly, everything in the company is a team effort. My team and I have been the primary folks responsible for bringing subscription to our customers, our channel and our operation. As you know, I’ve been evolving the Autodesk offering for some time in various roles in the company.
Our whole machinery—communicating with customers, responding to input from customers, communicating with our channel, responding with input from our channel–this all had to change. So, that’s why I ended up in the role I’m in, because there was a whole series of things in the company that really had to be transformed.
Did you have to talk Carl into it?
There were the couple of vectors here. Carl had an amazing passion for what the cloud could do as well as the changes that our customers were seeing and how the cloud could address those changes. It came with a realization. “Wow, we’re going to build our products for the cloud.”
Once Carl was all-in on the cloud, we realized that if you can't deliver cloud services to the customer, all that value is trapped. So, he became passionate about this concept of moving to subscription, as soon as he realized that we had to flip the whole company over if you really want to bring the value to the customer. So, the two became so intimately connected for him—he was definitely engaged through the entire transition.
After the Cloud, the Second Vector Was Term Licensing
To be clear, the two vectors Andrew is discussing are 1) the cloud (which Carl was behind from the start) and 2) the switch to term licensing. But then it was you, Andrew, who said to Carl, “We can’t have the cloud and still have perpetual licenses. We have to go all the way to term licenses.”
That is correct.
Are the Resellers Hating Life Right Now?
The transition to term licensing changes more than the revenue model—it stands to change how Autodesk sells its software. Autodesk has traditionally sold to a layer of resellers, who then turn around and sell it to end users. Term licensing changes everything. When your software updates itself, resellers who once delivered stacks of CDs to your door and took the upgrade opportunity to sell their “value-added” services (like training on the new batch of features) may be out of the picture. With features being upgraded continuously, there’s never really a good time for a reseller to show up. Services provided (training, consulting)—rather than commissions on software—were the mainstay of many a reseller’s business.
Change is hard. Andrew recognizes the value-added reseller world will change but he is unrelentingly as the company moves towards the new way of doing business.
We still do more than 80 percent of our business via partners. You might recall we gave a notice to our customers and our partner base that we were going to do this many years ahead of time. There are several reasons we did this. One, our customers need time to absorb change like this. We know in this industry that key customers have longer cycle times—they need to know what's coming, and they need to have advance notice of some of the changes we make.
Our partners also need advance notice. They need to understand what they have to do to prepare their business for this change. So, over a two-year period, we sat down with our partners. We spent time with them, and we explained what was going to happen with their cashflow, what they needed to do in the first year to make sure they have enough of a buffer in their business so they can get through the cash flow squeeze and what was going to happen on the other side.
We’ve been working with our partners continuously through this process. As we have moved to the other side, the partners are now experiencing what we told them was going to happen. They’re starting to see the recovery in their cash flow that they need to keep their businesses going. So, we’ve actually worked really hard to keep the partner network going, and that doesn't mean in the future we won't be selling more software directly. If you’re buying AutoCAD LT or another lower-end product, you probably will buy more directly from Autodesk. We’ve been very transparent with our partners about this. We’ve talked to them about it and how the customer’s buying preferences will probably change over time.
I’m not saying every partner is going to love this change or even survive this change. If you’re a partner that doesn’t add value, you’re probably going to struggle, because you’re just providing a transaction. Regardless of the partner, it hasn’t been our goal to disintermediate them. To the contrary, we compromised our speed in this change to ensure the partner’s health continues through it.
We still have a large base of maintenance customers, but I think more are starting to see there’s a bunch of things that are better in the subscription world. It’s not ideal to be juggling perpetual and subscription licenses. And I also see Autodesk continuing to provide more and more value with subscription.
New Customers versus Old
Newer customers are immediately delighted with the subscription model. Maintenance customers are trying to understand the changes. “What’s in it for me,” they ask. Well, it’s easy to answer. For one thing, subscription delivers much broader access. You can access Autodesk tools with any device, anywhere, anytime. We are committed to delivering that access capability. It is the ability of the license to follow you, not be bound by the device you installed it on. So, you can install it on different computers, but as long as it’s you, you can use it. That adds huge value to how our users deploy assets. It helps people work at home, work on the road, work anywhere.
Another advantage for subscription, and this is especially true for our larger customers, is that they don’t have to maintain a perpetual asset. Now they don’t have to manage it or control who gets access and uses it.
You know that in the old world, software access could be a massive headache—controlling which employee and which managers get to use which assets and knowing who owns what and who’s using what. In the new world of subscription, it’s under control. The change will be dramatic. It’s already started to change, but over the next year, you’ll see even more.
Companies are going to see an unprecedented flexibility in the ability to control who is using the software, what they buy, when they buy it and how they get the software to employees. Eventually, all of this will just happen.
Another advantage of subscription is the insight we'll be able to give our users. We’re going to be able to report on which project used which software and which team has heavy usage of what so that they can adjust the budget for the future. This is insight we can only provide with subscription.
Convergence, Part One: AEC and Product Design
There are a couple of things that we’re very passionate about. I want to make sure people understand we are totally focused on where we’re taking the company in the future. This is Carl’s legacy. The cloud is a platform—it’s a delivery mechanism. But it’s what you can do with the cloud that’s amazing. And there are two things that Autodesk is uniquely positioned to deliver on.
One is what I like to call a convergence in industry. What we’re seeing is a convergence of the AEC and manufacturing industries around production. AEC companies want to build the way manufacturers make products. Manufacturers want to get into that game because they see that they can participate in the construction industry. In other words, construction is industrializing. Our unique knowledge of manufacturing customers and AEC customers has created an advantage for us and for our customers. We can help bridge the gap between these two industries. So, that’s one thing that we’re maniacally passionate about. We’re not going away. We’re not going to stop. The focus is clear.
Convergence Part Two: Design and Make
The other area is a convergence between design and make. New types of technology are blurring the lines between how you design things to be made. You hear a lot about 3D printing and all things associated with 3D printing, and 3D printing is a proxy for the new way that things get built. With the new way, a lot of processes you had to insert between designing something and making something just go away.
There is a blending between the process of designing something and making it that allows you to automate things at a level that you were never able to do before. That intersection is just another place we’re driving a truck through because we believe that’s the future. You can see it everywhere. And like I said about the convergence of industries, it’s not just people building products. People are designing buildings to be constructed in new ways. And then how it’s constructed is impacting the design. It’s limitless. These new means of making don’t constrain people’s ideas. They actually open them up quite a bit. You can do things in this new world of production that you simply couldn’t do before.
We are so passionate about both those convergences. We want to bring them to life. We feel like we’ve created a better and healthier company, and that is going to allow us to make this happen.
So, there is the idea that an engineer can design a part, push a button and be delivered the part. Why not. I’ve fully defined it. Now just make the damn thing. No, I don’t want to find the machine shop, talk to the machinist and know how to program a CNC. I’m not sure I want to mess with a 3D printer ... Is push-button manufacturing not the dream of every engineer?
That’s exactly what we’re trying to do
Autodesk is in a unique position because we are in all these industries, and this is happening in all these industries simultaneously. Autodesk is uniquely positioned to take advantage of this idea of design it and have it be created anywhere. What you see is what you get from a production method. That production method is significantly less complicated than anything you’ve used before. This will change the cost structure and the design process. It will also change the way we assist people in designing things because we’re going to be able to provide them with input that allows them to come up with lighter, cheaper, better designs. Because production no longer will require an interpretation after design, a manufacturer has to interpret the design intent. If you reduce or eliminate that interpretation, you open up limitless possibilities.
Autodesk traditionally has been a design software company, but in recent years, it has added CAM technology through acquisition. Now you are saying you will work on putting CAM under the hood as part of “push-button manufacturing?”
Exactly! If you look at what we’re doing with Fusion 360 and where we’re highly integrating the design with manufacturing, I think you’re getting a pretty good look at where we’re heading.
We conclude by wishing Andrew the best. It’s too bad corporations are not democracies, where leaders are elected by votes from their users. Were that to be the case, Andrew could run on a “push-button manufacturing” platform with the votes of the engineering community, we’re sure.