CAD vendors are in a four-way bind:
a. They don't want to overcharge in comparison with competitors, thereby possibly losing customers.
b. They don't want to undercharge, thereby losing the respect of financial analysts.
c. They have to keep their promise to customers that cloud computing will save money.
d. Yet they are counting on cloud computing to increase revenues.
It's a dual on a dusty Main Street, where no combatant dares fire his gun first.
Yet, they are spending tons of money developing cloud apps. SolidWorks claims to have been working on it for three years; Autodesk spent a boatload of money on VisualTao; Dassault talks about betting the farm on V6. Siemens is... well, nobody knows where Siemens is. And PTC figures it'll just rejigger WindChill, like they set a wild fire to Pro/E.
To approve the expenditure of tons of money, a responsible corporation does a cost-benefit analysis and determines an expected ROI [return on investment]. (At least, that's what they tell dubious potential customers.) They know what this programming work is costing them, they must have an idea of what they want to charge you.
In the absence of hard numbers prefixed by $, here's an idea of what to expect from Matt Lombard of dezignstuff.com, who dug out the fee structure of one CAD vendor had a version of cloud-based CAD back in 2000:
It was made available on a subscription basis at $100 per month per user...
That's $1,200 a year. Maybe CAD vendors will just charge some multiple of their current subscription fees, leaving out the upfront purchase price.
(As for the cloud-based CAD vendor from the Year 2000, well, he to give up on the concept, and has since been selling it as tradCAD for a coupla' hundred bucks apiece.)
Perhaps there is no future in cloud-based CAD.
Ralph,
Pricing is an difficult problem fraught with nonlinearities and subjectivity. To the bind you mention, I like to focus on customer value. I think of what the product's ROI will be for the customer -- what their process is like without and with our product and how long it will take for them to break even.
At SpaceClaim, our ROI is so short for most use cases that the numbers aren't credible. For example, simulation users typically are able to run twice as many concurrent simulations at the same time because we remove their CAD geometry bottleneck. That's like xeroxing a analyst who's fully loaded cost is maybe fifty times the cost of SpaceClaim.
Once you understand the value you deliver, then you can look at comparables, market pressures, etc. It seems reasonable to present a three-to-nine month ROI, but we wanted SpaceClaim to be an even more obvious choice. We wanted to show that SpaceClaim can pay for itself in a single eval period.
So, here's a challenge: try to figure out what the value of cloud computing is. What does it cost to deploy CAD today, and what savings can be realized on the cloud? I don't know the answer, but it's out there. Want to throw a Google spreadsheet and ask the world to contribute data of what their actual costs are?
-Blake
Posted by: Bcourter | May 19, 2010 at 08:06 AM
How about accounting for cloud costs?
It's easy to generate pie-in-sky estimated of how much cloud stuff can save ("we'll get rid of all our IT dudes"); I'm skeptical. It's more important how the tool works and fits in the workflow.
Posted by: Tony | May 19, 2010 at 11:24 AM
In my humble opinion, point b & c will never happen. Ever.
The only reason about these delay tactics in terms of pricing is because our industry cannot put a price on innovation. When every (so called) version of a product is innovative and customer focused, its hard to come up with a model when the whole delivery platform is changed, and so drastically.
Another point I would like to mention is that pricing is hardly done with cost + markup model in software products business. Yes, this is still the model of choice in the services business, but in products, its better to price at customer's perception of perceived benefits than of actual value or cost. Google Adwords is a perfect example. The price you pay in an ad auction is not dependent on the cost to Google, but to what others are ready to pay.
Cant say I can argue with your last sentence. Not yet. Exactly like our desktop software is not going to be replaced by a webos soon, same can be said of our industry. Hugely popular products like Office and productivity tools are only now offering a similar setup on the web.
Needless to say, this is a long game, with too many game changers waiting to happen.
Posted by: Sid | May 20, 2010 at 04:24 AM