Arena: Market Conditions Before Autodesk
Draftsmen in small engineering and architecture firms and in corporate drafting groups · 1982 · United States
Overserved customersEnabling technology shift
Computer-aided design meant a turnkey system: a vendor's own computer and software sold together for design, analysis and manufacturing, at about $100,000 a seat AU13 ADK-1. Large companies bought them through selection committees that scored systems against long feature lists AU13. Most parts, though, were made by small shops that needed only a clean engineering drawing, and inside large companies many drafting groups found that a turnkey system never paid back on drafting alone; some had gone back to pen and paper AU13. Personal computers were getting cheaper and more capable, but CAD had not yet been sold for them at a price such a shop or department could justify AU13.
How each step happened
Step 1 of 5 · 1982–87
Mainframe-class drafting sold as software for other makers' PCs
Autodesk's innovation was to sell CAD as software alone, for personal computers that other companies made. AutoCAD launched at COMDEX in 1982 at a $1,000 list price AU1. By its size and ambition, John Walker said in 1986, "AutoCAD is mainframe software"; Autodesk simply chose to sell it on PCs AU12. Intergraph sold the opposite model: its own computers with its software bundled, earning its revenue mainly from the hardware ADK-1. Autodesk left hardware to the PC makers, so every drop in PC prices widened its market AU1 AU13.
The price opened demand that turnkey vendors did not serve. Autodesk's Ron McElhaney set out the trade in 1990: $100,000 a seat bought design, analysis and manufacturing; about $10,000 a seat bought complicated engineering drawings and nothing more AU13. For small shops and for the drafting groups that had gone back to pen and paper, the drawing was the whole job, and "thousands and thousands of users" found desktop CAD "exactly the right solution for their needs" AU13. Autodesk sold over 1,000 copies in 1983 and nearly 150,000 by the end of 1987 ADK-9 AU19.
Intergraph could copy the software but not the model. A $1,000 program on another maker's PC would have competed with the workstations that earned its revenue, so in 1986–87 it moved to its own Clipper-based UNIX workstations ADK-1. Its chief executive, Intergraph co-founder Meadlock, later conceded that he may have missed the PC boom ADK-3. The software-only sale left one problem open: someone still had to set up the PC and plotter and teach the buyer to draft on a screen.
Rivals Intergraph priced its software per CPU to sell VAX systems and then its own Clipper workstations ADK-1; Computervision and Calma sold the same kind of turnkey system AU13.
Component SpecializationBlue Ocean StrategyCounter-positioning
Step 2 of 5 · 1983–90
Dealers sell, install and support it locally
Autodesk decided from the start not to sell directly AU12. Computer makers' OEM deals lent an unknown product their endorsement, but Autodesk's Swedish distributor found that selling CAD on a PC needed a local dealer, and makers that discounted AutoCAD to move hardware upset the dealers AU12 AU20. By 1986 dealers, who configured the computer and plotter and supported the user, accounted for more than 85% of sales AU12.
Autodesk then made its dealers competent: by 1986 each of more than 1,300 dealers had to employ a full-time person with a drafting or engineering background, train at Autodesk's headquarters every year and support every package it sold AU12. In less than four years, Walker said, dealers had "sold twice as many CAD systems as any of the CAD companies have in two decades" AU12. By 1990 there were 4,000 ADK-9. The channel gave a $1,000 product local sales and support without Autodesk paying for either, and it gave outside developers a place to sell their applications.
Rivals Intergraph sold directly, typically by bringing prospects to its Huntsville headquarters to meet Meadlock ADK-1, and large buyers chose among turnkey systems through corporate CAD/CAM selection committees AU13.
Channel PartnersOEM Licensing
Step 3 of 5 · 1985–94
Open architecture: outside developers build the specialist applications
AutoCAD was drafting for every trade, so Autodesk let others build the specialist parts. In February 1985 Walker explained why AutoCAD would embed the Lisp language: users could write small programs for their own jobs, and later interfaces would let software vendors attach their own programs ADK-6 AU12. Release 2.5 in 1986 opened the drawing database to developers ADK-9.
By early 1986 more than 150 outside packages ran on AutoCAD, from pipe stress to surveying and theatrical lighting design AU12. There were more than 700 by 1988 ADK-9, and over 2,000 independent developers in 1994 ADK-7. Dealers that specialised in one market, such as architects, could sell AutoCAD with the applications that market needed AU12. Each application fitted AutoCAD to another trade without Autodesk writing it, and put AutoCAD drawings into another field.
Rivals Intergraph wrote its own applications, and independent CAD software vendors were its direct competitors, which made them hard to recruit ADK-1. By 1990 McElhaney saw Intergraph and other turnkey vendors adopting dealers, open architecture and third-party developers, Autodesk's own practices AU13.
Platform Strategy
Step 4 of 5 · 1985–2014
Schools and training centres make AutoCAD the skill employers hire
Training started alongside the dealers in 1985 and continued for three decades, so this step overlaps the next. By 1986 Autodesk had 43 authorised training centres, many of them regular educational institutions, and more than 600 schools taught drafting with AutoCAD AU12. "The overwhelming percentage of students who are learning CAD are learning on PC CAD," Walker said AU12. By 1994 there were about 750 training centres ADK-7, and in 2014 Autodesk made its professional software free to students, teachers and schools worldwide AU18.
Schools turned AutoCAD from a purchase into a skill. Students learned it because employers used it, and each trained drafter made AutoCAD easier for the next employer to adopt; generations of architects and engineers entered the workforce expecting to use it AU12 AU8.
Carrying the workforce into building models
The same workforce carried Autodesk into building information modeling (BIM), where a building is designed as one coordinated model instead of separate drawings. Carol Bartz, chief executive from 1992, set out to reduce the company's dependence on AutoCAD AU22 ADK-7, and Autodesk bought Revit in 2002 AU21 AU2. The 2003 AutoCAD Revit Series let firms keep trained AutoCAD staff and existing drawings productive while moving suitable projects into Revit; the architects Einhorn Yaffee Prescott described making the change gradually AU17. Revit reached those firms through the resellers already serving them AU17 AU8.
Rivals MicroStation, Intergraph's PC product co-owned with Bentley Systems from 1987, had sold about 20,000 copies by mid-1989 at a price near AutoCAD's ADK-8; AutoCAD had passed nearly 150,000 copies by the end of 1987 ADK-9.
Educational SeedingExpertise network effectsM&A StrategyMulti-Product
Step 5 of 5 · 1989–2001
DWG becomes the exchange format of design
The copies, applications and drafters of steps 1 to 4 all produced drawings in AutoCAD's DWG format, and DWG became the format in which design work was exchanged. Autodesk held 60% of the PC CAD software market in 1989 ADK-7. By 1993 Walker counted more than a million users and billions of drawings AU19. In 1997 the Federal Trade Commission put AutoCAD at nearly 70% of the installed base of Windows CAD engines, about 1.4 million users AU15.
Drawings pass between architects, engineers, contractors and agencies, so one party's format sets the requirement for the others. The FTC's complaint said AutoCAD users shared their drawings with people who must read and edit them, so a new CAD engine needed AutoCAD file compatibility to compete AU15 AU16. The federal government often required drawings in DWG ADK-4. For a customer, leaving AutoCAD meant converting and checking past drawings and risking exchange with collaborators AU16. When Autodesk bought Softdesk in 1997, the FTC made it sell Softdesk's IntelliCADD, an engine built to read AutoCAD files, to an independent owner AU15.
In February 1998 fourteen rivals, Intergraph among them, formed the OpenDWG Alliance to share the work of reading and writing DWG ADK-5; a trade newsletter noted that companies competing with AutoCAD were at a disadvantage without it ADK-4. Compatibility lowered the file barrier: MicroStation read and wrote DWG natively from V8 in 2001 ADK-8. From then on Autodesk's hold rested more on the trained workforce and the Revit models of step 4. All of it traced back to the software-only sale of step 1, which put AutoCAD on far more desks than any turnkey vendor reached.
Rivals Intergraph left proprietary hardware in 1992, lost $164.6 million in 1993 and lost money through 1997 ADK-3; it helped found OpenDWG ADK-5 and was sold to Hexagon in 2010 for $2.1 billion ADK-2. Bentley, which took over MicroStation in 1994, stayed out of OpenDWG ADK-4 ADK-8.
Protocol network effectsSwitching costs