Autodesk 2006 Annual Report Download - page 54

consultants and independent contractors to supplement our development efforts. Additionally, we acquire
products or technology developed by others by purchasing some or all of the assets or stock of the entity that
held ownership rights to the technology. During fiscal 2006, approximately 9% of our total research and
development expenditures were attributable to development work contracted from Hanna Strategies, LLC.
(“Hanna Strategies”), a software development firm with operations located in the U.S. and China. Hanna
Strategies performs services on behalf of our Design Solutions Segment.
The majority of our basic research and product development is performed in the U.S. and Canada, and to
a growing extent in China, while translation and localization of foreign-market versions, as well as some product
development, is performed by development teams or contractors in our local markets. We generally translate
and localize our products into French, Italian, German, Spanish, Japanese and various Chinese dialects. Portions
of product development, including some software development, localization, quality assurance and technical
publications, are performed in Europe and Asia, including China, India, Singapore and the United Kingdom. We
plan to increase our product development operations in the Asia/Pacific region over the next several years,
particularly in China.
The technology industry is characterized by rapid technological change in computer hardware, operating
systems and software, as well as changes in customer requirements and preferences. To keep pace with these
changes, we maintain an aggressive program ofnew product development to address demands in the marketplace
for our products. We dedicate considerable technical and financial resources to research and development to
further enhance our existing products and to create new products and technologies. However, these investments
may not result in sufficient revenue generation to justify their costs or our competitors may introduce new
products and services that achieve acceptance among our current customers, either of which would likely
adversely affect our competitive position.
Our software products are complex and, despite extensive testing and quality control, may contain errors
or defects. These defects or errors could result in corrective releases to our software products, damage to our
reputation, loss of revenues, an increase in product returns or lack of market acceptance of our products, any
of which would likely harm our business.
We actively recruit and hire experienced software developers and license and acquire complementary
software technologies and businesses. In addition, we actively collaborate with and support third-party software
developers who offer products that enhance and complement our products.
Independent firms and contractors perform some of our product development activities. Because talented
development personnel are in high demand, these independent firms and contractors may not be able to provide
development support to us in the future. In addition, we license some technology from third parties. Use of this
licensed technology may be restricted in ways that negatively affect our business. We may not be able to obtain
and renew existing license agreements on favorable terms, if at all, and any failure to do so would likely harm
our business.
In addition, our business strategy has historically depended in part on our relationships with a network of
third-party developers, who develop their own products that expand the functionality of our software. Some
third-party developers may elect to support other products or may experience disruption in product development
and delivery cycles or financial pressure during periods of economic downturn. These disruptions could
negatively impact these third-party developers and, in turn, end users, which could harm our business.
MARKETING AND SALES
We sell our products and services both through authorized distributors and resellers and directly to
customers, primarily large corporations. Our customer-related operations are divided into three geographic
regions, the Americas, Europe/Middle East/Africa and Asia/Pacific, and are supported by global marketing and
sales organizations. These organizations develop and manage overall marketing and sales programs and work
closely with a network of domestic and foreign offices.
We also work directly with reseller and distributor sales organizations, computer manufacturers, other
software developers and peripheral manufacturers in cooperative advertising, promotions and trade-show
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