Autodesk 2016 Annual Report Download - page 81

2016 Form 10-K 9
investing in an Internet of Things ("IoT") platform integrated with our cloud infrastructure. IoT will allow our customers to
develop applications for predictive maintenance, improved design quality, and smarter connected design systems. We believe
that IoT will play an increasingly important role for our customers as the buildings and products they design contain embedded
sensors and computation. IoT provides a unique opportunity for our customers to connect designing, making, and using. We
anticipate ongoing investment in IoT to both serve existing customers and expand market opportunity.
Research and development expenditures were $790.0 million or 32% of fiscal 2016 net revenue, $725.2 million or 29%
of fiscal 2015 net revenue and $611.1 million or 27% of fiscal 2014 net revenue. Our software is primarily developed
internally; however, we also use independent firms and contractors to perform some of our product development activities.
Additionally, we acquire products or technology developed by others by purchasing or licensing products and technology from
third parties. We continually review these investments in an effort to ensure that we are generating sufficient revenue or gaining
a competitive advantage to justify their costs.
The majority of our research and product development is performed in the United States, China, Singapore, and Canada.
However, we employ experienced software developers in many of our other locations. Translation and localization of our
products are performed in a number of local markets, principally Singapore and Switzerland. We generally localize and
translate our products into German, French, Italian, Spanish, Russian, Japanese, Korean, and simplified and traditional Chinese.
We plan to continue to manage significant product development operations internationally over the next several years. We
believe that our ability to conduct research and development at various locations throughout the world allows us to optimize
product development, lower costs, and integrate local market knowledge into our development activities. We continually assess
the significant costs and challenges, including intellectual property protection, against the benefits of our international
development activities.
In addition, our business and our customers benefit from our relationships with a network of over 4,100 third-party
developers who develop and sell their own products that further enhance the range of integrated solutions available to our
customers.
For further discussion regarding risks from our product development and introduction efforts, see Item 1A, “Risk
Factors.”
MARKETING AND SALES
We license or sell our products and services globally, primarily through indirect channels consisting of distributors and
resellers. To a lesser extent we also transact directly with a select set of customers who are primarily large corporations. Our
indirect channel model includes both a two-tiered distribution structure, where distributors sell to resellers, and a one-tiered
structure, where Autodesk sells directly to resellers. We have a network of approximately 2,000 resellers and distributors
worldwide. For fiscal 2016, approximately 79% of our revenue was derived from indirect channel sales through distributors and
resellers, and we expect that the majority of our revenue will continue to be derived from indirect channel sales in the future.
We anticipate that our channel mix will change to support our new business model and are proactively working with our
channel partners to ensure a smooth transition. We employ a variety of incentive programs and promotions to align our reseller
channel with our business strategies. Sales through our largest distributor, Tech Data Corporation and its affiliates, accounted
for 25%, 25%, and 24% of our net revenue for fiscal years 2016, 2015, and 2014, respectively. We believe our business is not
substantially dependent on Tech Data. Our customers through Tech Data are the resellers and end users who purchase our
software licenses and services. Should any of the agreements between us and Tech Data be terminated for any reason, we
believe the resellers and end users who currently purchase our products through Tech Data would be able to continue to do so
under substantially the same terms from one of our many other distributors without substantial disruption to our revenue. No
other distributor, reseller, or direct customer accounted for 10% or more of our revenue.
Our customer-related operations are divided into three geographic regions, the Americas; Europe, Middle East, and Africa
(“EMEA”), and Asia Pacific (“APAC”). Each geographic region is 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 international sales offices. Fiscal 2016 net revenue in the Americas, EMEA, and APAC was $972.8 million (39%), $934.6
million (37%), and $596.7 million (24%), respectively. We intend to continue to make our products available in foreign
languages. We believe that international sales will continue to comprise the majority of our total net revenue. Adverse economic
conditions and currency exchange rates in the countries that contribute a significant portion of our net revenue, including
emerging economies, may have an adverse effect on our business in those countries and our overall financial performance. A
summary of our financial information by geographic location is found in Note 13, “Segments,” in the Notes to Consolidated
2016 Annual Report