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(part 2 was 100 bytes over the 15k limit, will split into a total of 3 parts)
Second Strike
Blows Against The Hardware Lock
by John Walker
Episode II: January 29, 1990
I disagree with the statement that the hardware lock is a ``deep
emotional issue.'' I consider the issue of whether to lock or
unlock a product to be a straightforward business decision which
should be made, like any other decision, based on the company's
overall goals and strategy, and from the best information at hand
about all factors involved.
I would, therefore, like to ask the following largely non-technical
issues related to the decision to lock the product.
1. How does adoption of the hardware lock benefit our
customers?
Autodesk has grown and prospered by always, as much
as possible, placing the customer's needs foremost. By
customer, I mean the user of AutoCAD, not the reseller,
even though we do not sell directly. If we do not satisfy
the customer, new customers will not come to Autodesk
resellers, but will purchase other products instead. The
hardware lock does not benefit the customer in any way
of which I am aware.
2. What effect will the hardware lock have on Autodesk's sales
and earnings, and on the sales and earnings of our resellers?
It is rare in business to be able to definitively answer a
hypothetical question about financial results. One of the
few benefits of our Dark Night Of The Soul in 1986 was
that we learned the answer: None. Sales did not go up or
down when we introduced the lock, and sales did not go
up or down when we discontinued it. I know of nobody
who predicted this result; certainly I did not. I do not
believe that any material changes have occurred in the
market since the last time around; in fact, the events
since have moved further away from protection devices
and schemes.
If the lock is reintroduced with the goal of increasing our
sales and earnings and those of our dealers, and
consequently improving the business viability of the
AutoCAD resellers, I believe that decision to be based on
demonstratedly incorrect premises. And if not with those
goals in mind, then why?
3. What effect will introducing the lock domestically have on the
shipment date of AutoCAD Release 11?
We are presently in the middle of one of the most furious
pushes to shipment in the history of the company. Only
with Stakhanovite exertion and more than a little luck do
we stand a chance of meeting the current release date
goal. Already, only for the second time in the company's
history, we have disabled features already developed and
integrated because we lack the time and manpower to
debug and test them as part of the product by the release
deadline. Now it is proposed that we throw another major
twist into the product cycle. The statement that the lock
is already part of the product is abject nonsense; anybody
who lived through 1986 will recall that the logistics of
acquiring, inventorying, and quality testing locks in
quantities adequate for our domestic business involve
problems that are not small ones. The vendors involved
may be more mature than those we used in 1986, but the
volume of locks we will require is also much larger. All
the issues of documentation, installation problems,
compatibility with hardware, and the like are identical.
We introduced the lock in the development cycle of
AutoCAD 2.1, which was, before Release 11, our most
critical date-driven release (being scheduled near the
time of the initial public offering). I think it is more than
coincidental that AutoCAD 2.1 was the worst release of
AutoCAD we have ever shipped, with diversion of
company resources into lock-related issues a major
contributor, if not the proximate cause.
4. Who are the additional customers who will buy a locked
product?
Introducing the lock increases our cost of goods (perhaps
doubling it, if some of the numbers I've heard bandied
around are to be believed). Therefore, if margins are not
to fall, additional sales must be generated (indeed, as
noted in item 2 above, unless the lock is a public relations
exercise or a moral crusade, this is the only reason for
considering it). Therefore, what is the profile of the
customer who will buy a new AutoCAD from an
AutoCAD dealer if the product is locked, but would steal
the product were it not? People tell me I have a fairly
vivid imagination, but I cannot come up with a sketch of
a sufficiently large population of customers representing
that foregone revenue.
Remember that shortly after the lock is reintroduced,
products will appear that circumvent it. (The suggested
lock, and its implementation within AutoCAD, will be
much easier to defeat than the lock of 1986). If our 1986
experience is a guide, the market price of the
lock-defeating programs will be less than $100. In that
environment, the question becomes this: ``Who is there
who today would steal our product, but who will pay
$2000+ for a legal copy of AutoCAD rather than purchase
a $100 program that lets him continue to steal it?'' Legal
remedies against lock-defeating programs are probably
impossible and ineffective in any case.
I would suggest that those advocating the lock without
pondering the full implications of this issue (which I did
not appreciate until tutored by brutal experience) are
victims of the same kind of naive reasoning that suggests
that if one doubles taxes, tax receipts will also double.
The real world is a complex web of nonlinear relations
and interconnected feedback loops with delay. When you
change a parameter, you're shifting incentives, not
results, and you have to think out all the consequences,
not just the obvious first-order ones.
5. What does the hardware lock decision say about the direction
of the company?
This is not just an issue important to those who presently
work for Autodesk; it is central to the overall mission and
strategy of the company, its relationships with its resellers
and their customers, with the marketplace and our
competitors, and with the perception of Autodesk among
all these constituencies.
Autodesk has always adopted a strategy of broad market
share, low price, rapid enhancement, and responsiveness
to the user. Almost since inception, AutoCAD has been
the ``safe buy'' because so many other people use it, even
if some have not yet paid. This strategy has served us
well, and I am absolutely convinced that, at least in the
domestic market, rampant piracy has substantially
contributed to our current dominance of the market. I
wish there were a way to measure the number of current
legal copies of AutoCAD that replaced pirated copies. It
would not startle me to discover that number to be very
large.
Reintroducing the lock sends a message that Autodesk
has changed its strategy. I'm concerned here with the
message, not the strategy itself, and I consider irrelevant
on this point comments not grounded in the 1986
experience. Regardless of the moral and intellectual
merits of the arguments employed, the simple fact was
that the lock was perceived as Autodesk abandoning ``the
little guy'' responsible for its initial success (and I got at
least as much of this from dealers, who we were trying to
benefit, as from users).
This comes at a time when Autodesk is sending many
other signals that seemingly herald such a change in
course. We have opened regional offices. We have
announced an aggressive discount program for the
Fortune 500 and the government (and if you want to get
onto morals, I think the concept of selling to General
Motors for less than the price paid by a one-man
consulting firm is as least as reprehensible as profiting by
software piracy, especially when practiced by a
supposedly entrepreneurial upstart company). We have
concentrated development on network licenses, again
aimed at the larger customers.
It is worth reflecting on the fact that despite all the
hoo-rah about Fortune 500 and government sales,
they're still about 15% of our business (and presumably a
much smaller component of our typical reseller's
business). Sending the wrong message to the people that
are responsible for 85% of our revenue can be disastrous.
I saw the unanticipated misperception of our intent in
1986, and I believe nothing has changed. If anything, the
scars of that experience have hypersensitised our users to
the issue of locks.
6. What will be the effect of the lock on the perception and initial
acceptance of Release 11?
Version 2.1 was one of the most significant product
introductions in the company's history. With the addition
of AutoLisp, AutoCAD set itself on the course that has
brought us all here today. (Full AutoLisp was deferred
until 2.18, an update release, because of time-driven
pressure to ship...sound familiar?) Yet the major
enhancements in the product were simply lost in the furor
surrounding the lock. In fact, virtually nobody paid
attention to the capabilities of the product at all; it was
just locks, locks, and more locks.
Now if we're pushing Release 11 because we believe both
that the features it contains will increase sales and that
the mere fact of a new release contributes to revenue,
then can we afford to have the normal publicity attendant
to that release consumed by a second hardware lock
firestorm?
I urge you to think carefully about this issue. If Release
11 is so critical as to justify the efforts and compromises
attendant to its push to shipment, the risk of a public
relations disaster coincident with shipment is grave
indeed. Having presided over the last one, I consider
anybody who minimises the risk of repetition as
uninformed, misguided, or naive. It may not happen, but
what are the probabilities? How did you arrive at your
estimates? What happens if you're wrong?
In addition, the 1986 experience demonstrated that
Autodesk will cave in on locks when an uproar arises.
(The argument that only a small percentage of our
current users were users in 1986 is fallacious; information
about the 1986 episode will be spread through all
available channels once the lock surfaces. It's in The
Autodesk File, after all). Consequently, there are strong
incentives to:
a) Make a big stink about the lock, because that made
us remove it the last time, and,
b) Defer buying Release 11 both to
``send-em-a-message'' and because one feels the
probability is high that one will be able to buy (or
steal) an unlocked version within a few months
anyway, once Autodesk concedes defeat this time
around.
Are these the incentives we want, or need, associated
with Release 11's introduction?
Now these are just the obvious issues related to the domestic
reintroduction of the hardware lock--a compilation off the top of
my head based on the 1986 experience. I have not thought
through the numerous, more subtle, consequences that appeared
in 1986 in terms of the current proposal. I presume that in the
process of arriving at the decision to reintroduce the lock,
management considered all these points and more (and if not,
then the decision was arrived at through a dangerously flawed
process). I am therefore interested in the conclusions that were
reached in regard to each of the issues I raise herein, and the
background information and reasoning used to arrive at them.
If any emotion is involved in the issue of the lock, it is emotion
that springs from seeing our company about to repeat the single
worst experience in its entire history, with a probability of disaster
I would estimate on the order of 85%. It is emotion born of seeing
a company forget its past, its goals, its customers, and the
principles and processes that made it so successful in the first
place.
--
| Gary Funck, Intrepid Technology, gary@xxxxxxxxxxxx, (650) 964-8135
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