In this segment of the Q&A, notice Autodesk's senstivity toward the outsourcing controversy: the issue is framed as something their customers do because they are global -- a very different approach from PTC's "Outsourcing is the Wind in our Sails" statement of last year.
Growing the Market Share
Q: Who are you gaining share from?
A: In manufacturing, we have outshipped SolidWorks for the fourth year in a grow, plus any other in the pile, like Solid Edge. In architectural, it tends to be country-specific competitors, which aren't visible, of course, because each is in their country. Or even in-house systems, especially in Asia.
Q: In your numbers, EMEA [Europe, Middle East, Asia] grew almost twice the rate of the domestic market. Why would that be?
A: The #1 reason is that EMEA has unbelievable growth -- 70% -- in the East Block. The Americas [North, Central, and South America] doesn't have an emerging geography performing as hot as the East Block is. I don't want to take anythign away from EMEA: manufacturing in Germany, Revit in the UK, our Nordic countries are going really well. And also the Middle East, by the way.
Q: Does it have to do with any better compliance paying for software?
A: No, no. If you look at USA data, sales increased 24% over last year, and Europe is 35%. The other factor is our civil engineering business, which has been primarily based in North America, but with the introduction of Civil 3D, we are taking advantage of the that [EMEA?] market.
Benefits from Outsourcing
Q: What benefit have you seen from engineering outsourcing from North America, Europe, and Japan to less-expensive locales?
A: It's very clear to our customers that, first of all, if they don't think about that sort of thing, either outsourcing or being the people doing the outsourcing, their product costs won't be competitive. But backing that up, they realize they can't do that without better process software.
The real uptick is not some little feature in Inventor, the real change in our business is the fact our customers are in a very tough, competitive, global world, and buying a few seats of AutoCAD in Detroit or Iowa does not make them competitive company. But they have to have a way to model things, get it right the first time, they have to have a way to transmit this information around the world, they have to have a way at the other end for people to use the information -- wouldn't you want to go with a [software] company where, whether [the software] is bought or stolen, it is used all over the world, because you can find an Autodesk-trained engineer anywhere on this planet?
And so the real pick-up [increase in sales] you are seeing, and will see for years to come, is because the whole nature of how our customers do their business has forever changed. So whether you want to call it "outsourced design" -- I think you question was, have we found some companies who do outsourced design, sure. But the biggest issue is that design, construction, manufacturing is being done in multiple places at once around the world to get these products to market.
Future Growth
Q: Next year, you plan to grow in the double-digits [10% or higher]. Knowing what will be in the [product] pipeline, what makes you confident about that, when we're still six months out from next year?
A: We normally don't do that [predict that far ahead]. But in talking to our customers, our sales force, our channel [retailers], we look at the place our solutions are in, and I reiterate my three points:
- the move the 3D is 5x-10x [more revenue] per customer,
- the addition of PLM is 12x per customer.
- and the emerging countries are exploding.
So it doesn't take a whole lot for us to be comfortable with double-digit growth next year.
Q: What can you say about the pricing environment?
A: No pricing pressure [no pressure from competitors to drive down software prices]
Q: What is your market penetration [market share] for the major verticals [arch, mech, etc]?
A: You just have to look at our raw numbers. We've got seven million units out there, AutoCAD and LT are five [million] of that -- these are sold units, we not talking about all the [pirate] units out there that could switch to 3D but forgot to pay for 2D. With two million in 3D and other, there is a lot of upside in switching to 3D.
Q: But there must be a percentage--
A: Sure there is, but is it different for each group. When we talk about penetration, we talk about 3D penetration in the low teens [10-14%].
Q: What is the percentage of upgrades and of crossgrades [switching from one software to another]? I want to get a sense of what should be a lighter obit year next year [due to the later obit date].
A: We're not providing any kind of detail [information]. I think the important thing is that we are catching a lot of upgrade customers with subscriptions, because it's more annuity money. I am hoping this is the last year anyone asks us about [obits], because it is becoming less and less of an issue for us.
Q: Why do you feel obits will become less and less of an issue? Won't you always have products throughout the year going to end-of-life?
A: We will, but we are getting more and more customers on subscription, so we are less impacted financially by the obit. In the past, we might have gotten revenue from a customer every three to five years, we're now getting it every year.
Q: You said that 8,000 Revit seats sold in the quarter, and that Civil 3D was up 29%. Will you be giving us the seat installed base [for Civil 3D]?
A: Probably next year at the analyst's meeting.
Comments