Autodesk 2016 Annual Report Download - page 89

2016 Form 10-K 17
August 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. During our transition, revenue, billings, gross margin, operating margin, net
income (loss), 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.
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, each of which 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 our introduction of flexible license and service offerings. It is uncertain whether these
strategies will prove successful or whether we will be able to develop the necessary infrastructure and business models
more quickly than our competitors. 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. 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 other offerings and cloud-based services. We want customers using
individual Autodesk products to expand their portfolio with our other offerings and cloud-based services, and we are
taking steps to accelerate this migration. At times, sales of licenses of our AutoCAD and AutoCAD LT or individual
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.
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 create useful and widely accepted products and the rapid evolution of cloud computing, mobile devices, new
computing platforms, and other technologies, such as consumer products. Although we have articulated a strategy that we
2016 Annual Report