Autodesk 2014 Annual Report Download - page 90

2013 Annual Report
2014 Form 10-K 16
We believe that our future results largely depend upon our ability to offer products that compete favorably with respect to
reliability, performance, ease of use, range of useful features, continuing product enhancements, reputation and price.
If we fail to successfully manage our business model transition to cloud-based products and more flexible product licenses, our
results of operations could be negatively impacted.
To address the industry transition from personal computer to cloud, social, and mobile computing, we have accelerated
our move to the cloud and are offering more flexible product licenses. While we expect to increase our subscription base, value
per subscription, billings, bookings, ratable and recurring revenue over time as a result of this business model transition, our
ability to achieve these financial objectives is subject to risks and uncertainties. The new offerings require a considerable
investment of technical, financial, legal and sales resources, and a scalable organization. Market acceptance of such offerings is
affected by a variety of factors, including but not limited to: security, reliability, performance, current license terms, customer
preference, social/community engagement, customer concerns with entrusting a third party to store and manage their data,
public concerns regarding privacy and the enactment of restrictive laws or regulations. Whether our business model transition
will prove successful and will accomplish our business and financial objectives is subject to numerous uncertainties, including
but not limited to: customer demand, attach and renewal rates, channel acceptance, our ability to further develop and scale
infrastructure, our ability to include functionality and usability in such offerings that address customer requirements, tax and
accounting implications, pricing and our costs. In addition, the metrics we use to gauge the status of our business model
transition may evolve over the course of the transition as significant trends emerge. If we are unable to successfully establish
these new offerings and navigate our business model transition in light of the foregoing risks and uncertainties, our results of
operations could be negatively impacted.
Our strategy to develop and introduce new products and services exposes us to risks such as limited customer acceptance, costs
related to product defects and large expenditures that may not result in additional net revenue or could result in decreased net
revenue.
Rapid technological changes, as well as changes in customer requirements and preferences, characterize the software
industry. Just as the transition from mainframes to personal computers transformed the industry 30 years ago, we believe our
industry is undergoing a similar transition from the personal computer to cloud, mobile and social computing. Customers are
also reconsidering the manner in which they license software products, which requires us to constantly evaluate our business
model and strategy. In response, we are focused on providing solutions to enable our customers to be more agile and
collaborative on their projects. We are also developing consumer products for digital art, personal design and creativity, and
home design. We devote significant resources to the development of new technologies. In addition, we frequently introduce
new business models or methods that require a considerable investment of technical and financial resources such as an increase
in our portfolio of, and focus on, suites and, most recently, our introduction of flexible license and service offerings. We are
making such investments through further development and enhancement of our existing products and services, as well as
through acquisitions of new product lines. Such investments may not result in sufficient revenue generation to justify their costs
and could result in decreased net revenue. If we are not able to meet customer requirements, either with respect to our software
products or the manner in which we provide such products, or if we are not able to adapt our business model to meet our
customers' requirements, our business, financial condition or results of operations may be adversely impacted.
In particular, a critical component of our growth strategy is to have customers of our AutoCAD and AutoCAD LT
products expand their portfolios to include our suites and cloud-based services. Over time, we aim to migrate customers using
standalone Autodesk products to expand their portfolio with our suites and cloud-based offerings. At times, sales of licenses of
our AutoCAD and AutoCAD LT or standalone Autodesk flagship products have decreased without a corresponding increase in
suites product or cloud-based services revenue or without purchases of customer seats to our suites. Should this continue, our
results of operations will be adversely affected. Also, adoption of our cloud and mobile computing offerings and changes in the
delivery of our software and services to our customers, such as desktop subscription (formally referred to as rental) offerings,
will change the way in which we recognize revenue relating to our software and services, with a potential negative impact on
our financial performance. The accounting impact of these offerings and other business decisions are expected to result in an
increase in the percentage of our ratable revenue, as well as recurring revenue, making for a more predictable business over
time, while correspondingly reducing our upfront perpetual revenue stream. Additionally, the software products we offer are
complex, and despite extensive testing and quality control, may contain errors or defects. These errors or defects could result in
the need for corrective releases to our software products, damage to our reputation, loss of revenue, an increase in product
returns or lack of market acceptance of our products, any of which would likely harm our business.