Autodesk 2016 Annual Report Download - page 94

2016 Form 10-K 22
Increasing regulatory focus on privacy issues could impact our new business models and expose us to increased liability.
Governments, privacy advocates and class action attorneys are increasingly scrutinizing how companies collect,
process, use, store, share or transmit personal data. Any perception of our practices or products as an invasion of privacy,
whether or not consistent with current regulations and industry practices, may subject us to public criticism, class action
lawsuits, reputational harm or claims by regulators, industry groups or other third parties, all of which could disrupt our
business and expose us to increased liability.
We rely on third-parties to provide us with a number of operational services, including hosting and delivery and certain of
our customer services and other operations and processing of data; any interruption or delay in service from these third
parties, breaches of security or privacy could expose us to liability, harm our reputation and adversely impact our
financial performance.
We rely on hosted computer services from third parties for services that we provide our customers and computer
operations for our internal use. As we gather customer data and host certain customer data in third-party facilities, a
security breach could compromise the integrity or availability or result in the theft of customer data. In addition, our
operations could be negatively affected in the event of a security breach, and we could be subject to the loss or theft of
confidential or proprietary information, including source code.
Unauthorized access to this data may be obtained through break-ins, breaches of our secure networks by
unauthorized parties, employee theft or misuse, or other misconduct. We rely on a number of third party suppliers in the
operation of our business for the provision of various services and materials that we use in the operation of our business
and production of our products. We may from time to time rely on a single or limited number of suppliers, or upon
suppliers in a single country, for these services or materials. The inability of such third parties to satisfy our requirements
could disrupt our business operations or make it more difficult for us to implement our business strategy. If any of these
situations were to occur, our reputation could be harmed, we could be subject to third party liability, including under data
protection and privacy laws in certain jurisdictions, and our financial performance could be negatively impacted.
If we do not maintain good relationships with the members of our distribution channel, or achieve anticipated levels of
sell-through, our ability to generate revenue will be adversely affected. If our distribution channel suffers financial losses,
becomes financially unstable or insolvent, or is not provided the right mix of incentives to sell our products, our ability to
generate revenue will be adversely affected.
We sell our software products both directly to end-users and through a network of distributors and resellers. For
fiscal 2016 and fiscal 2015, approximately 79% and 83% 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. Our ability to effectively distribute our products depends in part upon the financial and business
condition of our distributor and reseller network. Computer software distributors and resellers typically are not highly
capitalized, have previously experienced difficulties during times of economic contraction and experienced difficulties
during the past several years. We have processes to ensure that we assess the creditworthiness of distributors and resellers
prior to our sales to them. In the past we have taken steps to support them, and may take additional steps in the future,
such as extending credit terms and providing temporary discounts. These steps, if taken, could harm our financial results.
If our distributors and resellers were to become insolvent, they would not be able to maintain their business and sales, or
provide customer support services, which would negatively impact our business and revenue.
We rely significantly upon major distributors and resellers in both the U.S. and international regions, including the
distributor Tech Data Corporation and its global affiliates (“Tech Data”). Tech Data accounted for 25% of our total net
revenue for both fiscal 2016 and 2015, respectively. Although we believe that we are not substantially dependent on Tech
Data, if Tech Data were to experience a significant disruption with its business or if our relationship with Tech Data were
to significantly deteriorate, it is possible that our ability to sell to end users would be, at least temporarily, negatively
impacted. This could in turn negatively impact our financial results.
Over time, we have modified and will continue to modify aspects of our relationship with our distributors and
resellers, such as their incentive programs, pricing to them and our distribution model to motivate and reward them for
aligning their businesses with our strategy and business objectives. Changes in these relationships and underlying
programs could negatively impact their business and harm our business. In addition, the loss of or a significant reduction
in business with those distributors or resellers or the failure to achieve anticipated levels of sell-through with any one of
our major international distributors or large resellers could harm our business. In particular, if one or more of such
2016 Annual Report