Martyn Day caught up with Andrew Anagnost to hear the new Autodesk CEO’s vision for the company, including subscription, enterprise licensing, 3D printing and the future of Revit
In February, after being at Autodesk on and off for over 24 years, company CEO, Carl Bass, stepped down. Having run Autodesk since 2006, Bass changed the company culture to focus on product innovation, developing new code streams, addressing new design areas, with a focus on manufacturing. The company’s business model also changed towards delivering services on the cloud with a move from perpetual licensing to subscription.
While Bass was planning to leave his role after 11 years, he also fell foul to active investors, Sachem Head Capital and Eminence Capital, which bought enough stock to join the board of directors and demanded changes to the company’s business to make it more profitable, quicker to reward shareholders – something which Autodesk used to be focussed on under previous CEO, Carol Bartz. Bass offered a refreshing change by investing more in product diversity and attempting to drive value in its tool suites. The active investors wanted more profit now and went on record saying they wanted to replace Bass as CEO.
With the transition to subscription creating a ‘trough’ as income changed from big perpetual acquisitions to long term payments, as investors love more regular subscription more than ‘joining fees’, eventually Autodesk share price rose by 70-80% on the prospect of higher income in the future with new subscription model. A deal was reached with Bass stepping down if the investors also left the board in February. This left Autodesk with two acting co-CEOs, long-time Autodeskers Andrew Anagnost who pretty much ran the move to the company’s business model and Amar Hanspal, who was in charge of all product development. Meanwhile the board pondered internal and external candidates for the role.
In June, Autodesk announced that Anagnost had won the job and on that news Hanspal decided to immediately leave the company. In just a few weeks the company had lost two of its most experienced product development champions but was now free of the direct interference of the active investors. Anagnost is certainly a safe pair of hands, he has been responsible driving the new business model, and over the decades has held various roles within Autodesk, product managing in the manufacturing division, and he had been Chief Marketing Officer and SVP of Business Development. Anagnost was one of the original driving forces behind the development of Inventor in the company, Autodesk’s first serious new code stream after AutoCAD, and prior to joining Autodesk, he worked at Lockheed Aeronautical Systems and NASA Ames Research Center.
Anagnost inherits a company with a buoyant share price and gets to continue with his model of moving the $2.14 billion company to Subscription and the cloud, but he can now obviously control all aspects of the company, including product development direction. At Autodesk University in London, AEC Magazine had a Skype call with Anagnost to find out a little more of his vision for the company and to hear his views on some key areas.
AEC Magazine: Historically you have come from the manufacturing side of the business, so which of Autodesk’s divisions is your natural passion?
Anagnost: I have a passion for solving really big problems. There’s no doubt about my background being in manufacturing but there are two areas I’m really excited about. One is that I am super excited about construction — and I guess I am cheating a little bit here, as it’s industrialising and we have the opportunity to bring the BIM model into construction. Here I think it’s exciting for our customers and for Autodesk, I think we have a really big value which we can add, as we have a lot of knowledge as how models progressing in manufacturing as models become more important in driving that process.
And the other area that I am excited about is getting us to push button manufacture. I know it sounds whacky at the moment but five years from now we are going to be really close to automate the process of having a really complicated 3D model, pushing a button and getting a part come out the other side from a multi-purpose factory. I am super energised about that.
So I am super excited about the industrialisation of construction, that presents a lot of problems which need to be solved and we have these push button manufacturing issues that we are monitoring. So that’s what I’m looking at in the long-term.
In the short-term, I have more customer based objectives. I’m excited about subscriptions and collections; we aren’t there yet, and I’m going to make sure that they get there.
AEC Magazine: Autodesk has divested itself of its 3D printer (Ember) and seems to be getting out of hardware, although you still have Pier 9 manufacturing facility, and replicating that in Portland and Boston offices. What’s the view on hardware now?
Anagnost: You remember the rise of desktop publishing? The world changed when Adobe came out with PostScript because what you saw is what you got coming out of the printer. Our goal is to make sure what you see is what you make and it’s much more important and valuable that we played the PostScript role in manufacturing, than play a hardware vendor role. So if we’ve got a dollar to spend we’re going to spend a dollar on the development of PostScript and the new types of automation from manufacturing rather than building hardware. Ember was a test bed of the technology so we can see how it worked and get experience with that. It was never going to be our mainline business.
AEC Magazine: On Autodesk subscriptions, there is an issue. Products like Revit have not met the expectation of companies that have invested in them. Yes, Revit’s a mature product so there’s a velocity issue but customers are concerned as to the value they are getting. Having gone from yearly release to bi-annual the ‘value’ is also spread out and possibly less recognisable. But at the moment you are asking customers to move from perpetual licences to subscription to pay more for something they were already unhappy with the value of.
Anagnost: There are a couple of things we can do. First off, there’s still a long way to go for Revit in two constituencies. If you talk to architects there’s still a long list of features that they would like to see and we have made progress with them but there’s a long way to go. And secondly, in the pre-construction side, construction planning, 4D and 5D, there’s still a lot of value to mature in Revit that we haven’t given to the customers yet and we know what it is because they complain about it.
We also have to effectively blend new types of capabilities into the product and a lot of those are going to be cloud-based. Looking at Collaboration for Revit and Quantum which is on the same continuum, when we get some of that stuff working in a mainstream way, without it costing a small fortune — all of those things will be super valuable. I think when all that is stitched in customers will start to feel differently.
Wall Street kind of co-opted our subscription transition, but that’s not how we started this. Our goal is to become a cloud company, which means our goal is to change the complete value chain with a different set of price points. I think in all the rough-and-tumble of people talking about the “bad” thing we were doing, people had forgotten the good thing we were doing. When Wall Street gets involved and people start paying attention, the maintenance base feels like we’re raising prices but as a whole bunch of customers who [due to their purchasing experience of Autodesk products] think we’ve lowered prices. It’s the whole Yin Yang of all of this. The original goal was to become a cloud company, with cloud price points all the way through our value chain.
AEC Magazine: We have yet to meet anyone who signed an ELA Agreement [Enterprise Licence Agreement – lasts for 3 years for biggest Autodesk customers] in the AEC space who is happy and we have talked to a lot. The price hikes have been so big that they can’t quite believe it. Subscription is asking firms how much they want to pay for their tools. It’s not business as usual.
Anagnost: I agree with you. I don’t think it’s business as usual. I think some customers are struggling with the pricing, but here’s the dichotomy I have put in front of me. Yes, the maintenance base is struggling with this, asking “what’s going on?” and “where is the value?” I talk to them and I even call the one-man shops, as well as the big guys, and I say this consistently: I understand and I want you to give us a year to prove to you that we are delivering value, don’t leave us. I have this conversation over and over again but I have to juxtapose this with the hundreds of thousands of new seats that are coming in from people who have never bought from us before.
So our existing customers are deeply suspicious about what’s going on, but these new guys are emailing us saying you just put food on my family’s table. You probably don’t see both sides of this. I see the difficult side and recognise all the work Autodesk needs to do to solve this and build trust. And then there’s the other side where we created a pool of trust… and if I can bring those two together then it’s a home run for everybody.
AEC Magazine: Will you be a hands-on CEO like Carl Bass was?
Anagnost: I’m pretty deep into everything that this company does, which is a curse and a blessing for people that work here. Carl went deep a lot in product, I’m probably going to go deep in multiple things. Things I am passionate about – construction and push-button manufacturing but also with the sales force and customers. So yes, I’m going to be pretty hands-on.
AEC Magazine: What’s your vision for route to market and resellers, changes to margins are reducing the number of VARs?
Anagnost: There’s no doubt, it’s already happening. We will have a larger, smaller partner channel, there’s no doubt about that. The number of channel partners we have has dramatically decreased over the last three years. When you look at our business three years out and then five years out, we are going to be doing at least 50% of our business through channel partners. So we are still a channel company five years out – and by the way that half our business is bigger than the size of business we have today. So that means there is a huge role for VARs in our business. We do not sell word processing software. We sell complicated stuff.
The future of our partners falls into three segments. They’re going to be a collections channel, they’re going to be a consumption channel (which is going to be an increasing part of our portfolio, pushing buttons for one time value add is going to be huge), and third they’re going to become third-party developers all over again. They’re going to get back to where they were 30 years ago, customising what we do, but that will be on the Forge platform, not on the desktop. There’s really no future any more for a partner that just sells AutoCAD or LT. It’s not where the business is going.
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