Strong Upgrade Revenues and 2D to 3D Migration Drive Autodesk Growth

October 03, 2005

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About this Issue….

Welcome to AECWeekly! Back in August, Autodesk announced

record revenues of $373 million for its second fiscal quarter ending July 31, 2005. This figure was a 33 percent increase over the $280 million reported in the second quarter of 2004.

Overall, the company saw growth across all product divisions and markets, which derived from revenues from new seats, upgrades and subscriptions, and increased sales of vertical and 3D products.

Read what Mark Strassman, senior director of marketing for Autodesk's Platform Technology division, about the retirement of AutoCAD 2002 based products, upgrade to new products, and that division's contribution to the overall success of the company.

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Industry News

Strong Upgrade Revenues and 2D to 3D Migration Drive Autodesk Growth

By Susan Smith

Back in August, Autodesk announced

record revenues of $373 million for its second fiscal quarter ending July 31, 2005. This figure was a 33 percent increase over the $280 million reported in the second quarter of 2004.

[ Click to Enlarge ]

Overall, the company saw growth across all product divisions and markets, which derived from revenues from new seats, upgrades and subscriptions, and increased sales of vertical and 3D products. Second quarter revenues from new seats increased 24 percent from the prior year, and revenues from new commercial seats of AutoCAD rose 32 percent over the prior year. Most interesting was that the retirement of the AutoCAD 2002-based family of products, that topic that graced the pages of

AECWeekly quite frequently during the past year and a half, contributed to a 54 percent increase in upgrade revenues compared with the second quarter of fiscal 2005. To that was added subscription revenues which accounted for an increase of 55 percent.

I spoke with Mark Strassman, senior director of marketing for Autodesk's Platform Technology division, about the retirement of AutoCAD 2002 based products, upgrade to new products, and that division's contribution to the overall success of the company.

Retirement and Upgrade

Strassman noted that Autodesk is just now seeing the results of the retirement program, as it takes time for people to get the message about the new products and their functionality. “We planned our marketing activities and new products to line up with our retirement cycle so we had one message to customers,” explained Strassman. “This 2000-2002 base of customers is such a large base of customers we wanted to give them adequate time to receive the message about the new products, and give them and our resellers time move to the new products.” Although clearly the company is now seeing a 54 percent increase in upgrade revenues, Strassman added “It wasn't intended

to be financially driven.”

Great strategy, as the number of users on 2002 is actually larger than previous to retirement. Retirement is going well and is on track with the percentage of penetration of customers moving off previous versions.

2D to 3D

A striking change is reported in the platform products, as many 2D customers have moved from LT and AutoCAD to the 3D vertical products. “These products are higher priced for higher value,” noted Strassman.

To what does Autodesk attribute this move to 3D? “It's not so much a transition as much as that people are adding it to their workflow. People are upgrading their AutoCAD and LT and they're also adopting these 3D products,” Strassman explained. “AutoCAD has had 3D shape making features for a long time. What Inventor and Revit offer is the ability to model your whole model or whole machine or assembly. You can do simulations--it's not just geometry any more, it's actually building what you're building right in the application. It allows you to make easy changes and preview what you're doing more easily. It's what the manufacturing space adopted several years ago and the

building space is beginning to realize its benefits. You still need 2D representation, but in the design cycle it's good to be able to think in 3D see what the whole building looks like, then get drawings out of that.”

Also, from a technology perspective, Strassman said, Autodesk makes it easier to adopt 3D as there is DWG compatibility in terms of using AutoCAD or LT right along with their 3D products.

Autodesk doesn't share specific information about what percentage of their customer base is moving from 2D products to 3D, but according to the press release, revenues from commercial seats of Autodesk's 3D products which include the Autodesk Inventor Series, Inventor Professional, Autodesk Revit Building, AutoCAD Revit Series, and Civil 3D increased 93 percent over the prior year.

If it seems that the world is moving collectively toward 3D, that's not exactly the case, as AutoCAD sales have not slowed down. “We're getting a lot of new seats, both with the platform products and the verticals,” Strassman said. He attributes that growth to the productivity gains the new

upgrade has that include dynamic blocks and heads-up design.

[ Click to Enlarge ]

Easy Upgrade Path

A big reason why there are more customers on the upgrade path with this release, Strassman believes, is that in the past it was not easy to upgrade. Autodesk heard from its customers that they would like upgrades to be more like express tools, which would really mean installing the product and simply installing features on top of it.

“The average AutoCAD user customizes his product heavily - with menus, profile settings, third party applications, etc. and in the past you would have to go and manually move over all your customizations, your menus, your third party applications and then test it and that was a large process, especially for a big company. It would take months to do and potentially upset workflow,” Strassman said. “In the past couple of releases, we've gone out of our way and making migration more like just installing new features has been a major feature of the product across all AutoCAD and AutoCAD-based products. Now when you install AutoCAD 2005 or 2006 it will look at the old version

and installer and will see that you have customization and ask if you want to copy all your customizations over--menus, fonts, etc. You can say yes, and after the installation when you fire up your new AutoCAD applications, it will look just like your old one. All the menus and fonts will be there. Your applications will just work. In AutoCAD 2004, 2005, and 2006 there are no DWG changes. All applications will be compatible to third party applications and will just work.”

Strassman did stress that those customers who did their last upgrade in 2002 will remember that going from version 14 to 2002 was a painful process. “A lot of people are still worried about that.”

“We actually updated the API of the product between 2002 and 2004, so people going from 2002 to 2004 would have to get updated applications from third party developers,” he explained. “Between 2005 and 2006 we didn't change it at all so for anyone going 2004-2006, the applications will just work. When you install it you will automatically choose the application path, put them in your new AutoCAD and everything will just work. If you're going from 2002 forward and you're using a third party application, you'll need to upgrade that application if it's an ARX application. Every time we come out with new versions

of software and certainly every time we make an API change in the product, we work very closely with our third party developers all along the way, to make sure they have those applications developed.”

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