THE AUTODESK SUBSCRIPTION LICENSE.

"When the history of the software industry is written, upgrades will be one of its biggest mistakes." --Autodesk CEO Carol Bartz

After two decades of dragging users along a sometimes-rocky upgrade path, Autodesk has declared war on the classic upgrade model. At the company's annual meeting with financial analysts last month, executive vice president Mike Sutton took the wraps off a new subscription pricing plan that lets customers upgrade feature by feature. Autodesk plans to put real marketing muscle behind the new model: The goal is to switch at least 40% of users to subscription pricing within the next two years.

Under the new plan, Autodesk users will pay an annual fee to get frequent "extension" modules that plug into the core program, plus online tutorial and support materials. Over time, subscribers will probably end up paying about 15% less than they would for perpetual licenses and upgrades, but the real savings--for Autodesk as well as its customers--are expected to come from reducing the administrative and training hassles that upgrades now cause.

Autodesk's own research suggests that upgrade hassles are a significant hot button among PC users. "Not too many people have good things to say about upgrades," says Bob Ng, Autodesk's director of new business models. "There has to be an easier way." In fact, he says, an Autodesk research survey found that some 60% of the company's customers prefer the idea of subscription pricing and incremental delivery of new features.

We spoke recently with Ng about the strategy behind the company's new subscription plan:

Bob, didn't Autodesk roll out an earlier "VIP" subscription plan about five years ago? What's different about your approach this time?

"One of the important things we learned is that we need to let users sign up who don't have a lot of copies. When we started the old VIP program, our administrative systems couldn't handle the huge volume of signup traffic we were getting. So we had to slap on a five-unit minimum contract--and that wasn't a popular decision. Now if a user has just one unit, it's okay."

What other issues seem to be the hot buttons for subscription pricing?

"We have so many different kinds of customers that a hundred hands will go up no matter what you mention. For big users, administrative control is a huge deal--they want to get everybody in synch without the problems of keeping track of licenses and versions. For others, having us do a global rollout was important, with the same policies and the same structure throughout the world. And for a lot of smaller architectural firms, a big issue is having a fixed cost they budget for. You wouldn't think that an unbudgeted $700 upgrade would be a big deal, but it is."

Presumably, the subscription model strengthens your direct relationship with customers.

"That's what we're hoping. We already have a few hundred thousand registered users who are signed up for our Point A Web site, and we're getting an average of 3.5 visits a week from these people. And of course we're e-mailing them all the time."

But doesn't a stronger direct relationship threaten your resellers?

"That was one of the hardest things we had to overcome with the old VIP plan: Our resellers were very suspicious that we were going to take over their customers. But they've figured out that they can continue to sell products and support just the way they used to do. They sign up customers and get a commission, regardless of whether it's a subscription or a perpetual license."

If subscriptions are more or less revenue-neutral, what's the economic advantage for Autodesk?

"Our assumption is that subscription customers will be 'stickier.' Upgrades are horrendously disrupting for our users and our dealers, and we always lose a bunch of customers who don't upgrade because of the effort it takes. If we can make the process easier, we should naturally end up with a higher penetration rate."

Robert Ng, director of new business models, Autodesk, 111 McInnis Pkwy., San Rafael, Calif. 94903; 415/507-6456. E-mail: robert.ng@autodesk.com.