Autodesk 2015 Annual Report Download - page 108

2015 Form 10-K 16
most standalone software products will be available only by desktop subscription beginning February 1, 2016. As a result, we
expect to derive an increasing portion of our revenues in the future from subscriptions. This subscription model prices and
delivers our products in a way that differs from the historical perpetual pricing and delivery methods. These changes reflect a
significant shift from perpetual license sales and distribution of our software in favor of providing our customers the right to
access certain of our software in a hosted environment or use downloaded software for a specified subscription period.
Our ability to achieve our 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. For example, in fiscal 2015, we announced that we would create Spark, a 3D printing
software platform for developers to facilitate the advancement of 3D printing technology, and begin manufacturing and selling
Ember, an Autodesk-branded 3D printer. If we are not able to meet customer requirements, either with respect to our software
or hardware 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. We want customers using standalone Autodesk
products to expand their portfolio with our suites and cloud-based offerings, and we are taking steps to accelerate this
migration. 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 potentially 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.
Our executive management team must act quickly, continuously, and with vision, given the rapidly changing customer
expectations and technology advancements inherent in the software industry, the extensive and complex efforts required to
2015 Annual Report