Autodesk Faces China Threat, Pt 1

Autodesk, the heavyweight champion of the world, is about to take on a contender. This one’s from China. Gstarsoft invited me to their 3rd annual conference in Beijing where, with great fanfare, introduced their contender GstarCAD 8.

Being virtually unknown outside of China (80% of its sales) did not deter GstarCAD from laying out its plans for world domination, a confidence inspired by the success of Chinese manufacturers and a hope that this will somehow translate to the software. GstarCAD resellers were on hand to point to the inevitability of the business software market caving in to the just-as-good-for-a-lot-less philosophy China is adept at capitalizing on. Why would anyone in their right mind spend $4,000 for AutoCAD, when they can do everything with GstarCAD --for only hundreds of dollars?

It is a familiar refrain for CAD insiders. We’ve heard contenders, foreign and domestic, proclaiming that they will be the ones to knock out Autodesk out of the ring. Remember DataCAD, TurboCAD, VersaCAD, Ashlar Vellum...? IntelliCAD and all the AutoCAD clones it spawned? Even Draftsight, which is propped up by CAD heavyweight Dassault, is unlikely to do much damage. But none seemed to even have slowed Autodesk. Autodesk gets bigger and stronger every year. With annual revenue of billions, profits of hundreds of millions and a seeming endless number of 2D users only too willing to convert to its vertical applications, Autodesk is indeed in an enviable position. Bentley, a long way back in the #2 spot with MicroStation, has about a quarter of Autodesk’s revenue.

One might dismiss previous contenders as lightweights, but can you ignore China? China’s will and weight of numbers is sufficient to frighten established market leaders – in any market. The list of big American manufacturing industries that have suffered from Chinese competition is long. Can China’s success in manufacturing be duplicated with software? To aspiring Chinese contenders, Autodesk’s success represent a huge target, no different than a Chinese factory undercutting a domestic manufacturer of doorknobs, underwear, cameras, dog food, computers...and almost anything else you can think of. China has proven it can rule in making all sorts of physical and consumer goods. Almost the same, for a lot less. It works. We’ve all bought into it.

But here is CAD software selling for thousands of dollars. It makes no sense to the Chinese. It’s vexing that it has continued so long. Artificially priced, as opposed to value priced, like diamonds. Ready to cave in, they’re sure, like all the other industries.

It’s only going to take perseverance, some sustained pressure and patience.

Comments

[Nestor S. Reyes]

I agree with Biil Buxton. Still, GstarCAD works. Draftsight works too.Free and workable will always be good.

[Rakesh Rao]

The CAD war waged by the new entrants (both in .dwg CAD as well as MCAD) seems to make some impact only on the desktop for now.

The old market leaders are already moving away from desktop and are busy building footprints on the cloud or foraying into new areas.

Autodesk is outwardly making noises that AutoCAD is just just one of their products and not necessarily the flagship revenue earner. Sure, they still make significant money by selling AutoCAD renewals, but new revenue may come from other products?, SaaS?,Cloud? or something else unknown to us.

There may be a war brewing but in the long run, the effects will not be dramatic. The markets, economy, spending pattern, demand pattern change over time.

Autodesk will survive and grow, so will others. Some CAD companies may boast of huge license numbers because they have no qualms about copying AutoCAD pixel-by-pixel. Others do it more by the rule book.

I do not foresee the same thing happening in CAD like in manufactured goods where the 'Made in China' products sits on every store. It will be a middle path here.

[ralphg]

Well, we don't buy everything from China. There are certain items on the DNB (do not buy) list that involve the body and safety, such as food, cosmetics, bolts,and gyproc (wallboard).

With the USA and China lobbing software-based cyber attacks at each other, software could well end up on each other's NDB lists.

[Bill Buxton]

Look at the Chinese car market and you will find your answer - premium western companies are much more successful than local value companies. As soon as Chinese people and companies can afford better products they go for them - the same will happen for CAD and Autodesk has in fact much better products than local Chinese manufacturers.
If the Chinese want to compete with the West in premium products they will have to take quite a few pages from the Japanese playbook - the Japanese (and now the Koreans too) started from cheap products but as soon as they could they entered the premium market segments (Nikon, Lexus, Sony, etc.) - there no indication that the Chinese are doing that in general and in CAD in particular.