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#319
26 November 2002
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#319
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Contents Pitfalls
to the Pather of Pepectual Profitability Conference
Call: Q&A:
Five Minutes with Scott Hucke of ITC Below
the Radar, - - - - - -
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Pitfalls in the Path to Perpetual Profitability Technology sales have slowed, in part because the technology is sufficient for many customers. Are subscriptions an attempt by desperate software developers hoping to lock in customers who are paying for fewer upgrades? Some public CAD vendors are promising Wall Street to switch customers from semi-regular upgrades fees to annual subscription fees. The concept is to smooth revenue flow, making revenue projections predictable and, they hope, ever increasing. The 'ever increasing' part comes from this logic: as software companies gain new customers, the customers get onto the treadmill of paying annual fees for alltime, giving a whole new meaning to the phrase "perpetual license." As a benefit, getting customers hooked on paying annual subscriptions is a method for lock-in. Subscriptions may not, however, be the panacea. A survey of 162 mechanical CAD customer sites in England by 'CAD Spaghetti' showed that 80% hadn't considered subscriptions, and that only 10% were definitely interested, As CAD and non-CAD vendors alike attempt to switch revenue from upgrades to subscriptions, pitfalls are appearing in the path to perpetual profitability. Vendors may want to consider these negatives:
Conference Call: Autodesk 3Q03 The ADSK share price rose US$2 in anticipation, and then fell $1 in disappointment following the conference call in which Autodesk announced it has lost US$3.9 million in Q3 (down from a net profit of $21.5 million a year earlier), and that its revenues would be no better in Q4. Revenue fell to $188.7 million ($250 million had been projected at the beginning of the fiscal year), down from $216.4 million a year earlier. Ceo Carol Bartz blamed the poor numbers on the slow economy, the lack of software upgrades, and on restructuring costs. Other reasons include: customers are sitting on their 2D systems, waiting for the recession to end before spending on 3D. "We've got all the early adopters of 3D," said Ms Bartz, noting that the company has 400,000 2D Mechanical seats. AutoCAD LT was given a rare mention when Autodesk noted sales of LT fell just -2% in contrast to AutoCAD sales falling -10%. Another reason for reduced revenues is that 60% of deferred income is from subscriptions -- Autodesk has collected the money, but isn't allow to declare it as revenue yet. In previous conference calls, Autodesk said it would reveal subscriber numbers in December; in this call, however, it appeared the numbers would be delayed until next year -- this, despite Autodesk consistently claiming subscriber rates are "exceeding all expectations" (subscriptions are up 5%). Perhaps the numbers are not exceeding what Autodesk fears are analyst's expectations, especially considering that analysts were keen on a revenue jump when Autodesk "obits" (eliminates upgrade pricing) AutoCAD 2000 six months after the next AutoCAD ships. Autodesk tends to have roughly $20 million a quarter in upgrade revenues. Three of those quarters, however, stand out:
To encourage customers to switch from paying for upgrades to paying for subscriptions, Autodesk will increase the AutoCAD upgrade price from $395 to $495, while a one-year subscription stays at $395. - - - Conference calls earlier in the year emphasized the word "collaboration"; the word has gone missing, having been replaced with "PLM" [product lifecycle management]. Streamline was the only PLM product mentioned, described as "just a couple of steps along the way." After an analyst expressed his worry that Autodesk might need to spend hundreds of millions of dollars for developing PLM software, vp Carl Bass was brought into the call. "Our approach is different," he said. "We will be a fast follower, as we've always been." Autodesk, he said, is letting "competitors spend a lot of money on educating the market." He expects Autodesk to acquire some PLM technology from other companies, though not, he added in a significant aside, acquiring the companies. Ms Bartz added, "We think we will be able to scamper, or march, into this market." Another 100 Autodesk employees will be laid off this quarter, in part to afford 100 new employees, many of whom will be working on PLM. - - - Among other products:
Q&A: Five Minutes with Scott Hucke Scott Hucke is operations manager of the IntelliCAD Technical Consortium. - - - upFront.eZine: When Visio first set up the ITC, they made IntelliCAD sound like Linux -- freely given away. Has there been a change in vision? Scott Hucke: Visio had never intended IntelliCAD to be open source; they created a quasi-open source group focused on the Contributing Members. They made old source code available to Non-commercial Members in hopes they would contribute their fixes back to the ITC. That vision never materialized. What we found was that Non-commercial Members were using the code in their own pirated products. In June, 2002 the Board of Directors, at the recommendation of both our legal and accounting advisors, decided to disable access to the source code for Non-commercial Members. Thus our efforts are directed at supporting our Contributing Members. We are working on establishing an Educational Members category, allowing educational institutions to license our source code for educational purposes.
upFront.eZine: The reason I am wondering is because of the "To report piracy of IntelliCAD: piracy@intellicad.org" statement on your Web site. Scott Hucke: We list the piracy email address for end-users who may have purchased or seen a product not produced by one of our members. This helps us police the market, ensuring those who purchase IntelliCAD get the latest product. We have spent a large percentage of our development budget this year making sure IntelliCAD 2001 v3.3, and the soon-to-be-released IntelliCAD 2003, are robust productive CAD platforms. When an end-user purchases a product that claims to be IntelliCAD, yet isn't based on our latest source code, they are buying an inferior product which hurts the IntelliCAD brand.
upFront.eZine: Speaking of Visio, does Microsoft have any involvement with ITC? Scott Hucke: Fortunately or unfortunately, depending on your point of view, Microsoft doesn't have any involvement in the consortium, either financially or as a business at this time.
upFront.eZine: And what became of ArchT? As I recall, Visio bought it from Ketiv. After Visio was bought by Microsoft, Microsoft gave ArchT to ITC, but kept the symbol libraries. Scott Hucke: ArchT is a product close to my heart. When I was with Ketiv, I helped manage its development, so it is like a child, as you can imagine. ArchT was licensed to Eagle Point to develop and resell via an agreement with the ITC. That agreement ended January 1, 2002. Since that time, the ITC has been defining how the licensing program would work, and promoting the ArchT license within the consortium. To date we have four members who have licensed the technology. They either have or are working on releasing up-to-date versions of the product. The consortium has recently decided to commit development resources to ensure the ArchT source code will run with the latest IntelliCAD and AutoCAD. This provides the additional benefit of allowing us to QA [quality assurance] our development APIs [applications programming interfaces] with another large commercial application. See //www.ArchT.com for a list of members who have the right to resell ArchT. You'll need to contact the specific vendor to establish their progress in releasing a new ArchT. Below the Radar A summary of CAD industry news you may not have read elsewhere, or that I found interesting: - - - Some 44% of 374 readers responding to a 'Pro/E Digital Digest' survey said they were interested in running a Linux version of Pro/Engineer. www.d-digest.com/proedigitaldigest ATI released Linux drivers for its Radeon 8500 - 9700 graphics boards, with support for OpenGL v2 graphics. www.linuxlookup.com/modules.php NVIDIA says its new Quadro4 980 XGL graphics board is up to 40% faster in OpenGL workstation applications, as measured by SPECviewperf 7 tests. http://www.nvidia.com Avatech Solutions will unveil their first PrescientQA-based product for Inventor users at Autodesk University next week. Autodesk made version 3 of its Architectural Studio available for download from the Web by subscribers only. Mill Creek Systems released its RAS/Edit hybrid-editing software tool for MicroStation, which handles raster and vector editing at the same time. www.millcreeksystems.com/products.php3 MecSoft is letting you download VisualMill Basic 3.0 STL free from www.mecsoft.com/freevm.htm . After registration, product runs until 1 Mar 03, after which it must be re-registered. Axiom released FileFixer for MicroStation V8. The company notes that "in dramatic contrast to the 'simplicity' of a V7 design file, V8 files now have multiple layers between you and your elements [objects]. In a nutshell, the simplest V8 design file contains at least six internal sub-folders and nine sub-files. If one of these outer layers is inaccessible, the components within that V8 file won’t be accessible either." www.axiomint.com/products/filefixerv8.htm D-Cubed released the Profile Geometry Manager for the sketching environment in mechanical CAD systems. www.d-cubed.co.uk GEOMATE announced that ToleranceCalc ($795), its automated tolerance analysis wizard for Inventor, is free until 31 January for qualified users. www.inventbetter.com DRCAUTO Software has a 30-day trial of AccuRender v3.3 for AutoCAD LT 2000/i/2 from www.drcauto.com/downloads/index.html after registration.
Seminars & Conferences Fifth International Symposium on Tools and Methods of Competitive Engineering will be held April 12 - 16, 2004 in Lausanne, Switzerland. dutoce.io.tudelft.nl/~jouke/tmce2004/ Process & Power 2003 will be held April 30 - May 2, 200 3in Las Vegas NV USA. www.intergraph.com/process/community/ipp2003 daratechiDPS 2002 (Intelligent Digital Prototyping Strategies) will be held June 9-10, 2003 in Detroit MI USA. www.daratech.com/idps2003
New Newsletters/Webzines 'EMaxCAD' is Romania's first monthly CAD e-zine at www.acintl.ro/templates/newsletter.php
People/Companies on the Move MSC.Software cto Edward Stanton is retiring 27 years of service. Mr Stanton will remain with the company in a consulting role. PTC signed up Mensch und Maschine [man and machine] Software to distribute Pro/E Wildfire through one thousand dealers in in Europe. Cimatron signed Tecnum as distributor in Mexico. CADATA Consulting is recruiting value-added resellers and developers who have developed solutions using the scripting capabilities of dwgBase. var@dwgbase.com
Computer News Summaries With Microsot's repeatedly delaying shipping its .NET Server software, 'The Register' suggests renaming it .NOT Server. The new IEEE 802.11g spec allows wireless LANs to transmit at up to 54 megabits per second, and uses the same radio spectrum as the current 11mbps equipment, resulting in lower cost. (The 802.11a is 54mbps but at a different spectrum.) A recent study,however shows that wireless LANs average only about 40% of their throughput capability. - PC World In an interview with 'Computerworld', Sheikh Omar Bakri Muhammad, founder of the London-based Jama'at Al-Muhajirun and spokesman for Osama bin Laden's International Islamic Front for Jihad Against Jews and Crusaders [Christians], said all types of technology, including the Internet, are being studied for use in the global jihad against the West. - www.computerworld.com/securitytopics Amazon, Google, Yahoo, and other Web companies are giving developers direct access to their databases to create other paths to information. The concept bypasses heavily designed home pages, sending developers straight to back-end corporate operations. Google and Amazon's grassroots approach to Web services stand in marked contrast to Microsoft’s top-down .Net strategy. - CNET
Market News On November 19, PlanetCAD and Avatech Solutions "consummated" their merger via Raven Acquisition (a wholly-owned subsidiary of PlanetCAD). Avatech becomes a subsiduary of PlanetCAD; PlanetCAD has changed its name to Avatech. The company also engaged Chesapeake Capital Consultants to develop strategies for growth and increase profitability. Fakespace Systems and Mechdyne intend to merge their businesses by the end of the year. The upFront.eZine stock index is at www.cadwire.net/to?upfrontezine/stocks Dassault Systemes acquired Knowledge Technologies International (knowledge-based engineering software) for an undisclosed amount of cash.
The WorthWhile Web www.gotouring.com/razzledazzle/dazzle.html
http://www.cad.org.uk/
Notable Quotable "The scrawny, old cow is still giving milk." - Bryan Sparks, ceo of Device Logics, on his company's purchase of DR-DOS from Canopy Group. He plans to release DR-DOS v8 next spring. The venerable operating system is still used in embedded devices.
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