In an earlier post titled “The $99 Effect” I threw up a few questions that crossed my mind regarding the implications and ramifications of Alibre’s $99 offer. Paul Grayson, the CEO of Alibre, offered to reply to those questions. So me being me (give an inch take a yard) I took the opportunity and threw some more rather pointed questions at him and I was pleasantly surprised to receive some rather pointed answers. Paul let me know (completely on the record) exactly what he thought about the traditional CAD media and didn’t mince his words while doing so. I have had many off the record conversations with CAD vendors on this topic, but I must admit this is the first time that I have seen the CEO of a CAD software company be so candid on the issue. That’s in Part 2 of the interview. Part 1 contains the questions I raised in my “The $99 Effect” post and are equally interesting.
Deelip: Will the industry see Alibre’s $99 offer as them giving up on the mid-range MCAD race? More importantly, will users feel that way? Are users bothered in the first place?
Paul: If the industry or users see this offer as Alibre giving up on mid-range MCAD then they would be mistaken. Frankly, the label of “mid range MCAD” may no longer accurately fit SolidWorks, Inventor, SolidEdge or Pro/E as they have moved into the stratosphere of higher-end CAD. Recall it was 1995, 14 years ago when SolidWorks established the mid range label. Over the last 10 years all of the so-called mid range competitors have moved much higher in price and complexity, effectively abandoning the mid range to Alibre. In the process, these products have become overly complex, difficult to learn, and impossible to use without constant retraining. The user interfaces have become so overweight with little used features and multiple ways to perform the same function that they are very intimidating to the average engineer.
Deelip: Will Alibre Design be perceived to be comparable to a mid-range MCAD product fit to be deployed enterprise wide? Will Alibre’s marketing be able to ride against the popular notion that quality comes at a price?
Paul: Enterprise wide deployment is a characteristic of high-end CAD systems, reinforcing the points above. CATIA and NX are the most broadly deployed enterprise wide CAD systems and neither SolidWorks nor Solid Edge are marketed for enterprise wide deployment, deferring instead to the even higher-end and more expensive solutions sold by their parent companies.
We believe that the notion of quality at a price is best represented by the constant price performance improvement of technologies outside of the CAD industry. Customers have great choices of advanced technology products at incredible prices in laptops, cell phones, flat screen TV’s, and business, utility, and game software. CAD purchasers have been denied the benefit of “Moore’s Law”, the roughly halving of cost or doubling of performance driven by computing technology. We now have the ridiculous notion of paying $5000 a seat for CAD software that requires only a $500 laptop for great performance. Pricing in the CAD industry is seriously out of whack with the rest of the economy and customers are increasingly away of this.
Deelip: Is Alibre not bothered about the perceived loss of credibility in the mid-range MCAD space? After all, the label of “$99 CAD” is not something that is going to go away anytime soon. Even if it was only a temporary promotion. On the contrary, will Alibre be able to capitalize on the “$99 CAD” tag in some way?
Paul: We are proud of our ability to offer professional 3D CAD software at prices affordable to anyone that wants or needs it, an ability that our competitors can’t touch. Our credibility stems from customers that use our software in production every day and then refer us to their associates. This promotion is increasing the number of people that use our software and increasing the number of “word of mouth” referrals that we get. All we care about is does our product delight our customers and do they recommend us to others?
In addition, this promotion is similar to our long-running Alibre Design Xpress free software offer. Over the last few years we honed our business model to be profitable giving away software. We were able to capitalize on this approach while maintaining our credibility in the CAD industry. We asked ourselves, would selling software for $99 be less credible than giving it away?
We can’t project how we will capitalize on the $99 label in the future. Having an element of risk and uncertainty is one of the things that make life and business exciting. We are learning a lot by doing this promotion that we would not otherwise have known.
Deelip: Is this $99 offer the beginning of a marked shift in the Alibre’s target audience? Say 2D users as opposed to current mid-range MCAD users.
Paul: This offer is targeted directly at expanding Alibre’s current niche, which consists primarily of small to medium size businesses and individuals. We love this niche and are very proud of the customers we serve. In our opinion, these customers represent the future of the economy and the future of the CAD industry. Our customers come from every walk of life. We frequently see entrepreneurial companies starting up, companies that are implementing 3D for the first time, and divisions or departments of larger companies that are can make independent 3D CAD purchase decisions. We are also very popular with individual designers including “Enterprise Engineers” that want an affordable but professional 3D CAD system to use at home for personal projects, work at home requirements, and consulting or side businesses.
Deelip: This offer comes at a time when V12 is due to be released, a version which is touted to have better support for large assemblies, optimized graphics, etc. Basically more like the current mid-range MCAD products. Could this be just bad timing on the part of Alibre? Or maybe Alibre timed it for V12 for some reason, which eludes me.
Paul: The timing of the offer and the imminent release of V12 are deliberate. You can think of this offer as an “end of model year” sale. We are selling lots of copies of Alibre Design V11.2 with the confidence that it is a proven product already in use worldwide by 10’s of thousands of companies with the added knowledge that we will soon have an improved V12 available. People who take advantage of the $99 offer are encouraged to buy annual maintenance for $299 to get automatic access to V12 and other V12.x releases over the next year.
Deelip: Alibre has constantly tried to narrow the gap between itself and the other mid-range MCAD vendors. Is this offer going to widen the gap instead in the minds of users? If yes, will this widening be good for Alibre or otherwise?
Paul: We haven’t seen it widen the gap in the minds of users. People aren’t going onto forums and saying, “Alibre Design suddenly lost $900 worth of functionality”. They are saying, “There is an amazing deal, check it out if you need CAD”. We think people are smarter than to think that because of a single promotion the product all of the sudden is not competitive.
This offer increases the number of people that use Alibre Design and the number of word of mouth referrals that we get. This means that many more people are becoming educated regarding the benefits and capabilities of Alibre Design. This is unequivocally good for Alibre, because we know that people that use Alibre Design love it and make positive recommendations to their associates.
We want customers to compare us. If they do and find extra features in competitors’ products that are required to get their jobs done, then they will spend the extra $3 or $4K with the knowledge that they are spending their money wisely. Otherwise, they risk wasting thousands of dollars.
Deelip: Alibre hopes that mid-range MCAD users ask themselves the question, “Why are we paying so much?” (Matt Lombard has already asked that question). After finding the answer will these users end up doing something about it?
Paul: We have great respect for Matt Lombard and other passionate CAD bloggers that cover the industry. Getting customers to ask and answer that question is one of the best reasons to make this offer.
Deelip: There is no such thing as bad press. Or is there?
Paul: There is definitely such a thing as bad press. Nothing will kill a bad product quicker than a lot of publicity. We would not make this offer if we were not completely confident in our product’s ability to meet and exceed customers’ expectations.
Check out Part 2.