Autodesk 2007 Annual Report Download - page 83

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2007 Annual Report
As a result, we are introducing new business models, requiring a considerable investment of technical
and financial resources. Such investments may not result in sufficient revenue generation to justify their
costs, or competitors may introduce new products and services that achieve acceptance among our
current customers, adversely affecting our competitive position. In particular, a critical component of
our growth strategy is to convert our 2D customer base, including customers of AutoCAD, AutoCAD LT,
and related vertical industry products, to our 3D products such as Autodesk Inventor Family of Products
or Autodesk Revit Family of Products. Should sales of AutoCAD, AutoCAD upgrades and AutoCAD LT
products decrease without a corresponding conversion of customer seats to 3D products, our results of
operations will be adversely affected.
Product development may also be outsourced to third parties or developed externally and transferred
to us through business or technology acquisitions. Such externally developed technologies have certain
additional risks, including potential difficulties with effective integration into existing products, adequate
transfer of technology know-how and ownership and protection of transferred intellectual property.
For example, in April 2006, we acquired a 28% ownership in Hanna Strategies, a privately-held software
development firm that has been one of our software developers since 2003. 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.
Additionally, the software products we offer are complex, and despite extensive testing and quality
control, may contain errors or defects. These defects or errors could result in the need for 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 rely on third party technologies and if we are unable to use or integrate these technologies, our product
and service development may be delayed.
We rely on certain software that we license from third parties, including software that is integrated
with internally developed software and used in our products to perform key functions. These third-party
software licenses may not continue to be available on commercially reasonable terms, and the software
may not be appropriately supported, maintained or enhanced by the licensors. The loss of licenses to, or
inability to support, maintain and enhance any such software could result in increased costs, or in delays
or reductions in product shipments until equivalent software could be developed, identified, licensed and
integrated, which would likely harm our business.
We are investing resources in updating and improving our internal information technology systems. Should
our investments not succeed, or if delays or other issues with a new internal technology system disrupt our
operations, our business would be harmed.
We rely on our network infrastructure, internal technology systems and our websites for our
development, marketing, operational, support and sales activities. We are continually investing resources
to update and improve these systems in order to meet the growing requirements of our business and
customers. Unsuccessful implementation of hardware or software updates and improvements could
result in disruption in our business operations, loss of revenues or damage to our reputation.
Disruptions with licensing relationships and third party developers could adversely impact our business.
We license certain key technologies from third parties. Licenses may be restricted in the term or the
use of such technology in ways that negatively affect our business. Similarly, we may not be able to obtain
or renew license agreements for key technology on favorable terms, if at all, and any failure to do so could
harm our business.