When it comes to CAD software, there’s likely no topic more divisive than that of maintenance fees. Ahh, fabulous subscription service–the additional yearly charge, on top of any license cost, which typically includes product upgrades and support, often through a reseller of the software.
Last week, two SolidWorks Partner websites, TPM and ModernTech, posted a new “Subscription Late Policy” change from Dassault Systemes (DS) for SolidWorks users who let their Subscription Service lapse. Previously, SolidWorks users paid a fixed fee plus renewal to get up to date. This has been the policy since 1995. However, starting January 1st, 2016, lapsed licenses of SolidWorks will have to pay for all years lapsed, up to the cost of a new license. Here’s what was posted:
What is the new Subscription late policy?
Since its inception, SOLIDWORKS has offered users the ability to renew expired licenses for an established and nominal fee. For example, $500 in NA, or a similar fee across other price lists, regardless of how long the licenses have been off subscription. Additionally, license repurchase was required for expired EPDM licenses.
Beginning January 1, 2016 the current Subscription late fee and repurchase requirement will be replaced with full Subscription backdating. As a result, users with an expired Subscription will be subject to all missed Subscription charges (up to the cost of a new license) plus the current year charge to renew the expired license and obtain the current release with full support. This policy applies to all SOLIDWORKS product offerings and includes licenses that were never on Subscription.
When will the change on into effect?
The new late policy will be effective beginning January 1, 2016 when all orders must be compliant with the new policy. The existing late policy for renewing licenses will remain intact through the end of business December 31, 2015.
Why change the Subscription late policy?
The new Subscription late policy rewards our best customers and affects only a small percentage of our user base. It is more fair and respectful to approximately 95% of the SOLIDWORKS users, those customers who renew on time and annually. These customers consistently make the investment necessary to gain access to the most current intellectual property the SOLIDWORKS product suite provides and the world class support our Channel Partners offer. While the current late policy that allows users to renew expired licenses for a nominal fee regardless of the expired duration is the most lenient in the industry, it actually encourages and supports users to reduce their overall investment while allowing the same benefits and competitive advantages as Subscription customers who remain current year-to-year.
Summary
This change is a policy shift. We will remain the most customer focused team in the industry and we will listen to our customers.
‘This change is a policy shift.’ Done. Dusted. Move along. But wait, those two sites have now removed the pages detailing the policy sent out to SolidWorks Partners who were, allegedly, instructed not to publicly broadcast this change, leaving Resellers to contact customers on an individual basis with the ultimatum or the customer to find out when pursuing upgrades after the January 1st start date. Why were they removed? Because people would misunderstand and be upset, I’m sure.
Though we confirmed the new policy from several resellers, there was nothing official from SolidWorks. However, the 2015 Q2 earnings call reveals the reasoning and the background on the policy shift, plus adds a juicy tidbit on the future of SolidWorks.
Jay Vleeschhouwer [Analyst with Griffin Securities]
Okay. Next, for Thibault, it’s our understanding that, starting next January of 2016, you are going to be changing the pricing for customers who have gone off of maintenance or subscription and wish to resume or reinstate the subscription and, in effect, making them – making it less desirable for them to go off maintenance and making it more expensive for them to come back onto maintenance after some period of time. Could you verify that that is in fact something that you mean to do? And given your normal churn rate of customers go on and off maintenance, what do you think the incremental revenue opportunity might be from putting in that kind of new subscription reinstatement for pricing?
Thibault de Tersant [Dassault Systemes, Senior EVP, Chief Financial Officer]
Thank you, Jay. Well, in fact the policy we have for reinstatement across all our process and rules portfolio has been the same for the past well, I prefer not to say but probably 20 years, which is essentially that when you stop paying for maintenance and you want to go back and pay again, and be under maintenance again you need to catch up for the period of time in which you have not renewed maintenance and the reason for that is because we have continued to do R&D and the improvement in functionalities and they are brought when you get back under maintenance, so we need to be fair with all our customers.
And there wasn’t one exception actually to this rule. And the one exception was that we had a fixed amount for SOLIDWORKS users when they were returning under maintenance. And frankly, we don’t believe I mean this rule was the one which was at the beginning of SOLIDWORKS. And we really don’t see a reason why, we would do things differently for SOLIDWORKS than for all of our brands, because we have the exact same rationale. And of course, the more we go, the more the SOLIDWORKS product portfolio will be based upon this 3DEXPERIENCE platform and we’ll share applications, so very important to be a consistent across of users. So that is the rationale.
Now, to be honest with you, I have not measured in terms of dollar revenue, incremental dollar revenue what is going to be brought by this changing of rules. I expect maybe a small improvement in renewal rates. That would be my expectation. But it is not planned exactly yet.
This is very telling. Issuing a policy change that could effect revenue without measuring? Without planning? I don’t think so. And I know you’re ready to hear more about SolidWorks on the 3DEXPERIENCE platform–a topic for another time though.
Finally, after one week and 68 comments on the SolidWorks Forum thread concerning the new policy, Rachel York, Community and Customer Advocacy Manager, broke the silence from SolidWorks:
The Reaction
As you can imagine the reaction has been less than supportive. Long time SolidWorks users and advocates are considering (and moving to) alternatives. The statements of ‘industry norms’ and keeping things ‘fair and respectful’ do nothing for customers to justify a policy change to force a 5% minority into submission.
From Anna Wood
Dassault has no interest in the small accounts, never has had interest….. I will NEVER renew my personal license for SolidWorks. The arrogance of Dassault is over the top and I will not support them.
From Jeff Mirisola
Have to say that while I can see their reasoning, to some extent, I don’t think Dassault is seeing the whole picture. How many 1-, 2-, 5-seat companies are there that have CATIA or SIMULIA or some other high-end package? While their subscription policy may work for those companies that have high-end products, and can always afford the fees, there are plenty of small SolidWorks shops who may not be able to. Any sort of minor downturn can be major for small players.
From Duncan Gillis
This is basically going to affect the 5%’ers of SolidWorks user base, but how many of these 5%’ers run or are involved with a SolidWorks User Group? The foot soldiers that put their time and effort in without reward or benefit are likely running their own small business or part of a small business.. This change is going to affect the community as well..
From William Radigan
The surprising part to me is the (apparent) lack of vision on the part of DS /SW. While the rest of the CAD community moves towards “by the moment” licensing and cloud-based software (Altair Hyperworks, OnShape, Fusion 360), SolidWorks moves towards more restrictive and less “user-friendly” licensing. Don’t they want to keep the market-share that they’ve worked so hard to build? Don’t they know that ADSK and PTC were on top, and then lost to a customer-focused product that bent over backwards to serve their users?
The fixed amount re-up fee is where SolidWorks was unique. Now they’re falling in line with the policies of software companies that SolidWorks beat out. So, why didn’t DS switch their other products to a fixed price? Well, renewals would slip, revenue would be lost. But only by 5%, surely? Unlikely. Backdating fees ensures two things, 1) That DS will keep more companies on maintenance 2) That resellers will continued to be subsidized through the 40% take on renewal fees. For Dassualt’s bottom line and the reseller business, this is the the only solution they see to maintain revenue with existing customers and grow revenue with new customers. It’s also likely to give a pretty good boost to renewal rates through 2015 Q4.
The Alternatives
The first alternative to avoiding lapsed fees is staying on maintenance, budgeting for your licenses and any increases or decreases, maybe even working with your reseller to take that into consideration for you, then being sure to push the cost and growth projection into your projects. The cost of business, so they say. Bound to make you more competitive, I’m sure. At generally $10,000 for each employee in start-up costs (software, hardware, etc.) and thousands each year after, that’s a lot of cash to push along and some big projects to book, simply to keep using the most current version of the software.
So, if returning to and staying on maintenance isn’t an option, what is a business using SolidWorks to do? The alternatives are few. Nearly all lapsed software upgrades involve backdating of maintenance fees or new license purchases. The ones that standout are Rhino, SketchUp, Autodesk Fusion 360 and Onshape. SketchUp has a fixed price upgrade fee. Rhino has no maintenance fee. Fusion 360 and Onshape continue to to work as long as you continue to pay the monthly/yearly subscription cost.
With the latter options, a monthly subscription model holds a bucket o’ promise, or at least simplifies policies like maintenance, for developers and users. Users pay monthly and stay on latest version, developers are paid monthly and keep users on the latest version. No product editions, no service levels, no lapsing, fewer tears. More than that, people know what they’re getting and what they will be paying.
With this policy shift from DS, it’s not so much that DS is moving it to be more inline with their subscription service for other software–fine, that makes sense, all the product names are capitalized and in their nice little revenue generating row–it’s that they’ve not been transparent about it and are doing their best to hide it, not letting users know what the policy is, and putting others into a position where they are left with dishing out thousands or loosing business.
In a time where economies are tanking all over the world, DS has to decided to make it more difficult for businesses. It’s difficult to watch, but the anger and disappointment many are revealing about this is understandable–It shows how much they thought of SolidWorks, how important it was to their life. “This change is a policy shift. We will remain the most customer focused team in the industry and we will listen to our customers.” Do you feel like you’re being listened to? Or is is it time to make a policy shift of your own?
