Autodesk 2016 Annual Report Download - page 110

2016 Form 10-K 38
perpetual licenses of most individual software products effective February 1, 2016, and plan to discontinue selling new
perpetual licenses of suites effective August 1, 2016.
With the discontinuation of the sale of most perpetual licenses, we are accelerating our transition away from selling a
hybrid of perpetual licenses and term-based offerings toward a single subscription model. During the transition, billings,
revenue, gross margin, operating margin, earnings (loss) per share, deferred revenue, and cash flow from operations will be
impacted as more revenue is recognized ratably rather than up front and as new offerings bring a wider variety of price points.
As we progress through the business model transition, billings and reported revenue will become less relevant to measure
the success of the business as perpetual license sales are discontinued in favor of subscription offerings, which have
considerably lower up-front prices. Annualized recurring revenue ("ARR") and subscription additions will better reflect
business momentum and provide additional transparency into the transition. To further analyze progress, we will also
disaggregate our growth in these metrics between the original maintenance subscription model ("maintenance") and the new
desktop, cloud and mobile, and enterprise flexible license agreements ("new model"). We expect maintenance subscriptions to
peak as perpetual license sales end this year, and we expect them to decline slowly over time.
Another key element of our strategy is increasing our global penetration. Emerging economies, such as Brazil, Russia,
India, and China, represent a construction and manufacturing opportunity. Emerging economies face many of the challenges
that our design technology can help address, including infrastructure build-out and innovative design and manufacturing.
However, conducting business in these countries presents significant challenges, including economic volatility, geopolitical
risk, local competition, limited intellectual property protection, poorly developed business infrastructure, scarcity of talent,
software piracy, and different purchase patterns as compared to the developed world. We believe that our move to the new
model increases the number of potential markets for Autodesk. By connecting all of the participants in the process of designing
and making things, we can sell new offerings into the construction and manufacturing spaces. In fiscal 2016, revenue from
emerging economies decreased 4% as compared to fiscal 2015 and represented 15% of our total net revenue for both fiscal
2016 and fiscal 2015, respectively.
Today, complex challenges such as globalization, urbanization, and sustainable design are driving our customers to new
levels of performance and competitiveness, and we are committed to helping them address those challenges and take advantage
of new opportunities. To achieve these goals, we are capitalizing on two of our strongest competitive advantages: our ability to
bring advanced technology to mainstream markets, and the breadth and depth of our product portfolio.
We bring powerful new design capabilities to volume markets. Our products are designed to be easy-to-learn and use, and
to provide customers with a low cost of deployment, a low total cost of access to our software offerings, and a rapid return on
investment. In addition, our software architecture allows for extensibility and integration with other products. The breadth of
our technology and product line gives us a unique competitive advantage because it allows our customers to address a wide
variety of problems in ways that transcend industry and disciplinary boundaries. This is particularly important in helping our
customers address the complex challenges mentioned above. We also believe that our technological leadership and global brand
recognition have positioned us well for long-term growth and industry leadership.
In addition to the competitive advantages afforded by our technology, our large global network of distributors, resellers,
third-party developers, customers, educational institutions, educators, and students is a key competitive advantage. This
network of partners and relationships provides us with a broad and deep reach into volume markets around the world. Our
distributor and reseller network is extensive and provides our customers with the resources to purchase, deploy, learn, and
support our products quickly and easily. We have a significant number of registered third-party developers who create products
that work well with our products and extend them for a variety of specialized applications.
Autodesk is committed to helping fuel a lifelong passion for design in students of all ages. We offer free educational
licenses of Autodesk software worldwide to students, educators, and educational institutions. In fiscal 2016, we initiated Project
Ignite, a free and open learning platform delivering a unique package of technology, learning content, and services created
specifically for the classroom. The Project Ignite learning platform additionally offers classroom bundles, which include
hardware such as 3D printers and electronics kits along with professional development and training services to help educators.
Through Autodesk Design Academy, we provide secondary and postsecondary school markets hundreds of standards-aligned
class projects to support design-based disciplines in Science, Technology, Engineering, Digital Arts, and Math (STEAM) while
using Autodesk's professional-grade 3D design, engineering and entertainment software used in industry. Beginning in the
second quarter of fiscal 2016, we have also made Autodesk Design Academy curricula available on iTunes U. Our intention is
to make Autodesk software ubiquitous and the design software of choice for those poised to become the next generation of
professional users.
2016 Annual Report