Autodesk 2007 Annual Report Download - page 70

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Autodesk Smoke and Autodesk Fire
Autodesk Smoke and Autodesk Fire systems are our scalable line of interactive real-time non-linear
editing and finishing systems that enable editors to edit, conform and finish television commercials,
broadcast programming, film trailers and feature films as well as other high value media content.
Autodesk Subscription Program and Autodesk Upgrade Program
In addition to sales of new software licenses, we offer our customers two ways to migrate to the most
recent version of our products: the Autodesk Subscription Program and the Autodesk Upgrade Program.
These programs are available for a majority of our products.
Autodesk Subscription Program (Maintenance Services)
Under the Autodesk Subscription Program, customers who own a perpetual use license for the most
recent version of the underlying product are able to purchase a subscription that provides them with
unspecified upgrades when-and-if-available, download e-Learning courses and obtain optional on-line
support over a one year or multi-year subscription period. Revenues from our Subscription Program
are reported separately on our Consolidated Statements of Income and are referred to throughout this
document as maintenance revenue.
Autodesk Upgrade Program
The Autodesk Upgrade Program allows customers to purchase upgrades, but only to the extent that
they are still on a supported version of the product. Typically, the cost to upgrade is based on a multiple
of the number of versions the customer is upgrading. An existing customer also has the option to upgrade
to a different, more recent discipline-specific or 3D product, which generally has a higher price, for a
premium fee; we refer to this as a crossgrade. The cost of a crossgrade is substantially less than the cost of
purchasing a new seat and is available to subscription customers as well. Revenues from our upgrade and
crossgrade programs are reported on our Consolidated Statements of Income in License and other.
PRODUCT DEVELOPMENT AND INTRODUCTION
We continue to enhance our product offerings and develop new products to meet changing customer
demands. Research and development expenditures were $406.3 million or 22% of fiscal 2007 net revenues,
$303.2 million or 20% of fiscal 2006 net revenues and $241.5 million or 19% of fiscal 2005 net revenues. Our
software is primarily developed internally; however, we do contract services from software development
firms, 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 owns rights to the technology.
For example, in April 2006, we acquired a 28% ownership in Hanna Strategies Holdings, Inc. (“Hanna
Strategies”), a privately-held software development firm with operations in the U.S. and China. Hanna
Strategies has been one of our software developers since fiscal 2003. Our relationship with Hanna
Strategies is intended to provide more efficient resources for the development of new products and the
maintenance and enhancement of existing product offerings, among other things. As of January 31, 2007,
Hanna Strategies employed approximately 1,100 software developers primarily in China. Expenditures
attributable to development work contracted from Hanna Strategies represented 8%, 9% and 6% of our
total research and development expenses for fiscal years 2007, 2006 and 2005, respectively.
The majority of our basic research and product development is performed in the U.S. and Canada,
and to a growing extent in China. Our China Application Development Center develops products for
the worldwide market as well as products to specifically address the Chinese market. Translation
and localization of foreign-market versions, as well as some product development, is performed by