So let me just talk a bit. A few things this morning. First one is we're going to primarily talk about our 2 largest markets and 2 biggest opportunities. We're going to talk a lot about AEC, architecture, engineering and construction and we'll talk a fair about manufacturing. We've upgraded the size of the TAM as we've calculated it.
The other thing I want to make sure that everybody understands, most of the day we will spend reiterating what we talked about last year, which we think of is 12, 20, 50. And in particular, the way to think about it in this equation is that what we're really trying to drive is the 20 50. And so we'll spend a lot of time talking about how to get more value from customers and how to get more subscribers. That's what we'll be talking about most of the day. If we are able to achieve the 20 and the 50, the 12 is a natural outgrowth of that, it's easily accomplished by getting the other 2.
Now we are going to spend most of the day on the nuts and bolts of the 12, 20 and 50. But before we kind of go down the rabbit hole here and spend lots of time there, I just wanted to back up and spend just a drop of time kind of discussing what I think is really to some degree more important because at the end of the day, our ability to do twelvetwentyfifty really depends on many of the strategic decisions we've made and many of the strategic decisions that we made over the past few years. So these are big things and in many ways I think they distinguish us from our competition. After all strategy is how do you compete more effectively. And so let me outline what these big choices that we made are and that's really where our big bets are.
The nuts and bolts of the 12,050 follow from these. So the first thing is about 3 to 4 years ago, we decided that there was a dramatic shift in the technology platform. The computing platform that would be used for design, engineering and architecture was changing. And this changing computing platform was as big a change as any we've seen in our lifetime. So for those of you who remember as we went from the mainframe to the workstation or the workstation to the PC, in some ways it was new technology would take over and come to dominate.
But does anyone know any engineering software running on mainframes today? Not that much. Not much running not much even running on workstations anymore. And in the same way, I believe all of the engineering software of the future will run on a cloud and mobile platform. We've made a heavy bet here.
It is different than what I see our competitors believing and what they're acting on. And it's a really crucial part of how our business grows in the future is this bet on cloud and mobile. Now the second big strategic choice we made is we've decided to have an open approach to the markets. Many of our competitors have long felt and acted upon the belief that they were somehow going to convince customers to use a single stack of engineering software that all of their engineering software would come from a single vendor. And while in the short term, you occasionally see customers who consolidate around a single vendor.
I've been in this business way too long to believe that that's a lasting trend. Over time, best of breed, best solutions, heterogeneous environments triumph. It is in the customer's best interest to do that. And so while many of our competitors spend a lot of time trying to figure out how to lock in customers through file formats or pricing mechanisms or a million other things, we've decided and acted upon the belief that allowing our customers to choose the best answers for their problems are there. And you'll see this in many of the things we do.
So you'll see that whether it's with our PLM products or our CAM products, many times the design system of choice may not be Autodesk. But given a choice of as they select the PLM system, would I rather be ours or not regardless of what CAD system they use, I want that to be ours. And I think we are distinguishing ourselves and gaining market share as a result of this strategic choice. The third thing that's also important is which markets you choose to compete in. It's a very important first order effect is where you decide to compete and where you decide not to compete.
And we'll talk a lot about not only where we're competing today, but where we've put bets for the future and where we will compete going forward. And the last part of the differentiated strategy is the business model change. And we've talked a lot about the business model. We spend a lot of time on the business model today. We will go deep into the nuts and bolts as I could tell by the conversation around the bagels, there's a lot of interest in subscriptions and perpetual licenses and so we'll go through all of that.
But these are really the 4 pillars. And as you go through the day and you hear a bunch of the people talk, I ask you to reflect upon these 4 things and put them in context of them because I think they really lead the way to understanding where we're going and what we're doing. And what follows from that are lots of the tactics around the programmatic stuff that we'll discuss in detail. So let me just outline the agenda for you. Andrew is going to come up and he's going to talk about the business model transition.
It will be followed by Amar and Buzz taking turns talking about the AEC industry, the manufacturing industry and then our new based collaborative platform A360. You'll get an update from Steve about sales and then an update from Sue about finance. Then I'll come back and have a few closing comments and then we'll do Q and A. So let me bring on at this point, Andrew and Agnosto.
Thank you, sir.
All right, let me grab
a glass of water here. All right, I'm the nuts and bolts guy. So let's get into the nuts and bolts, all right. So like Carl said earlier, our fundamental commitment the twelvetwentyfifty model hasn't changed. I want to talk about a few details though and some language changes so you can appreciate some of the things we're evolving moving forward.
The idea around what drives the 12, more value from existing customers, more subscriptions is completely intact. What we're going to be doing moving forward though is we're going to quantify the 20% for you a little bit more precisely. Last year we talked about value per subscriber. You're going to see us moving forward talking about value per account. Now not this year, but next year, just like we did with suites, we're going to start tracking that number to a baseline.
So if you recall the suites transition, what we did is every year we came out and we talked about how we're doing towards the 20% ASP uplift as part of the suites initiative. With this initiative, we're going to start tracking moving forward how we're doing with the 20% growth per account. That's one of the changes I wanted to highlight in terms of the conversation here. The rest is completely the same as we were talking about last year. So we'll move forward with that moving forward.
So let's talk about how we're doing so far. If you look at how we're doing so far, billings are up 18% H1 over H1 from the previous year, subscriptions are up 11% H1 to H1 from previous year. So we're well on track to achieve some of our objectives and we're starting off really strong in the transition. And what I want to do is I want to kind of give you some sense about how we're breaking some trends and some of the important metrics that are not only driving the business this year, but are going to drive the business forward year after year after year. So first off, let's look at our historical subscription additions trend.
And what you can see is we're actually breaking the old trends around subscription additions. We're doing more this year than we've ever done before. And the momentum you're seeing in subscription additions this year going to continue into next year and the year beyond. And this presentation and the presentations as follows are going to tell you why that's going to be true. There's lots of confidence in this and there's lots of evidence we're going to be maintaining that momentum moving forward.
So we're some of the underlying fundamentals here, the maintenance subscription growth has been 7% year over year and you know that's off a large base. So this is driving a lot of those subscription additions right now and that's great. We're seeing a lot of strength in our core perpetual plus maintenance subscription business. We're also seeing some strength in some core areas around the fundamentals of this business. For those of you that track how these models evolve over time, you know renewal rates are important.
And one of the things we look at pretty closely is the renewal rates around things like AutoCAD LT, where we have lots of sensitivity. And right now, year over year, we've driven that renewal rate up 5 points. And I'll kind of point a little bit more later in the presentation why this is so significant. But what you get from this is that we have a lot of strength in that perpetual plus maintenance subscription business. Most of that's driven by upgrades going away.
But there's a whole bunch of other things that are happening in our business, much more forward looking things that have absolutely nothing to do with upgrades going away. And let's take a look at some of those. First off, it's the desktop subscription growth. We rolled out desktop subscription in Q3 of last year and it has continued to accelerate since we did that And this acceleration is not slowing down at this point. We're driving more and more momentum here as we light up new products into the desktop subscription stream and as we light up new channels.
This is going incredibly well. It's also reaching out to 35% new customers. The customers that are coming in here are 35% of them are new. And why is it? It's pretty simple.
No one's been able to get access to this kind of high quality price point software at these kind of price points before. They're responding to the shift and they're buying. Another thing I want you to understand about the dynamic here because it helps you understand how the momentum is going to grow moving forward is right now currently today 51% of those desktop subscriptions are coming from our e store. Now why is that number important? I think if you know our whole business, you know our whole business, 51% of it does not come from our e store.
What this means is we're seeing this momentum and this acceleration and we haven't even begun to light up the partner network with this offering. We've only started that journey, right. So we're just in the very early stages of it, but we're showing huge momentum here. Now if you look at the other types of new offerings, let's take a look at cloud. We've doubled the number of cloud subscribers.
This has nothing to do with upgrades going away, nothing, right? This is a significant momentum. You're going to hear a lot about this throughout the day, how we're doing with some of these applications. There's significant growth. And again, when you look at these customers, 30% of them are new to Autodesk.
They've never bought anything from Autodesk before, 30%. This is a non subscribers, these are knit new customers to the company. So we're not only going out there growing subscribers, we're bringing new people into the fold, into the The enterprise business agreements drive what we call consumption models into our large accounts. Now if you don't remember what these are, the consumption models offer our customers access to the entire portfolio and they pay for what they use. They use more applications, they pay us more, they add more users, they pay us more.
We've seen a 37% growth year over year in the subscriber base of these enterprise business agreements. And that's a very significant metric because that's right. We're well on track to achieving our goals for this year. And all right. We're well on track to achieving our goals for this year and we're planting the seeds to achieve our goals for the next year and the year beyond.
And what I'm going do now is I'm going to talk to you about some of the things we're going to do both this year programmatically, next year programmatically and what we're going to do continuously. So I'm going to start with some of the things you'll see us do continuously year after year after year during this transition. The first thing we're going to do continuously is pay attention to this number. I told you last year that the number of customers that are 1 to 5 releases back on our software stays relatively consistent year after year after year. We are going to exit this year with that being no different than previous years.
All the execution we're doing, all the subscribers we're adding, we're still going to have 2,900,000 subscribers in our base. That is a huge opportunity. And it's important for us to pause and talk about what are some of the attributes of these people? Why are these people so interesting? 1, they are real customers.
These are not pirates. Pirates are coming in from other places. We're getting pirates in with some of these new offerings, but these are real customers. These are people that pay us. They just happen to purchase from us perpetual licenses on an infrequent basis because they can.
This really isn't really good for our ecosystem. This creates a large ecosystem of people off non current releases. We would like to see everybody on the most current release in our entire ecosystem. We think that's good for customers. We think it's good for them.
The other little piece I want you to take away from this is 45% of them are LT customers. And we're going to go back to that a little bit more. So over and over again throughout this transition, we're going to be looking at that base and looking at that number. Another thing we're going to be looking at is moving the business north of 90% renewal rates. Like I said, if you model this business, you know how important it is to retain the subscribers.
It's not just important to bring them in, it's important to keep them. We're going to continue to build beyond 90% renewal rates. The next thing we're going to do and you're going to hear a lot about this from Amar later and others is we're going to add cloud to just about every account. Every account is going to be purchasing some kind of cloud application from us and this is going to be a huge driver of subscriber growth. But we're also going to be using the cloud to reach out and capture a whole new set of subscribers that Autodesk doesn't currently engage with.
The last piece I want to to you about in terms of the continuous activities that don't go away, right, is this increased penetration in named accounts with these enterprise business agreements. We're going to do more and more in these accounts and I'll talk a little bit about in this presentation. So those things I just outlined for you, those are going to happen every single year. They're just going to be special changes in terms of how we address them. And let's talk about some of the special changes we're going to be looking at as we move into next year in terms of maintaining and driving the momentum for the business model transition.
So first, let's talk about leading with the new offering. Next year, what we're going to do, all of our go to market, all of our marketing activities are going to be focused on the new offerings, in particular, the desktop subscription offering. Now, we not only believe this is the right thing for our business, we also believe it's the right thing for our customers. Not only does this provide the lowest cost access to the products that customers have ever seen, it also provides a superior experience. The download experience, the license experience, the deployment experience, the use experience, all of the experiences are superior in these new business models than they are in our existing business model.
And because of this, because we believe in this so much and because we're going to focus so much on this, what we're going to do is over the next 12 months to 24 months, we're going to stop selling new perpetual licenses. Now, I want to be very clear here over the next 12 to 24 months, this isn't going to be an event. What this is going to be is a transition where we work on products and regions at removing new perpetual licenses from the offering mix. That's an important step. It's going to drive a lot of activity and we're going to put a particular initial focus on AutoCAD LT as we begin this transition, right.
Now, why AutoCAD LT? Let's talk about why AutoCAD LT? It's a couple of really important reasons. 48% of the new seats that come into the company currently are AutoCAD LT. That's 48% of our new seats buying the wrong business model.
So we concentrate on this one product, this one piece of distribution in this one area and we're going to move 48% of the new seats over to the new business model right out of the gate. The other important stat I want you to pay attention to is that 76% of these LTE users are non subscribers. So what that means is there's a huge opportunity to increase the value of this LTE buying stream for Autodesk. There's a huge opportunity to go out there, at how the value of a current LTE subscriber looks relative to an LTE subscriber in the new business model. The number on the left, that is the actual average value, annual value of an LTE customer today based on all the behavior that our LTE customers do.
Some upgrade in 3 years, some upgrade in 5 years, some are in maintenance, but on average they're worth $2.40 a year. You move them over to the new desktop subscription model, they're worth on average $3.10 a year. That is a 30% increase in value back to Autodesk with an offering that provides access to the customer at prices they've never seen before. Remember, we price the LTE offerings at 30% of a perpetual new seat. So that is a huge shift in value for a very important stream that we're going to be focusing on and it's really going to up the value to Autodesk and it's going to up the benefits of this whole customer ecosystem.
That's something I want you to watch as we move into this year. The next thing we're going to do is we're going to increase access to the new offering. So I've talked about some of the things we're doing to move away, target that non subscriber base more aggressively. Now what are we going to do provide broadening access to these new offerings so that we light up all these channels. So one of the things we're going to do is we're going to take these consumption based models that we've been working on and move from just executing on dozens of accounts this year to hundreds of accounts next year.
So you're going to hear a lot from Steve's team about what he is doing to increase the focus here, build closer relationships with our customers around these enterprise business agreements and these consumption models and these are going to long term drive that 20% in really significant ways. The other thing we're doing is looking at both our traditional VAR channel and our volume channel partners and getting them more access to these new types of business models. So first off, next year all of our channel partners are going to have access to monthly and annual subscriptions for desktop software. Right now, they only have access to quarterly and annual. And the monthly is a significant feeder for some of the annuals.
We're also broadening our engagement and access with some of our high volume partners in terms of selling desktop subscriptions. Just last month, we lit up Amazon for selling desktop subscription. They're now out there selling monthly and annual desktop subscriptions for us, primarily around LTE and they're doing a great job and we're going to light up other partners that work in volume CDW and Dell and this is going to allow us to execute even more effectively at the top and bottom of our lighting up more of that channel, which is going to create a lot of momentum, especially in combined with the transition away from perpetual purchases. As we do this, you're going to hear from Steve about how we're shifting the margins away from perpetual offerings to desktop subscription offerings. So, it's going to be attractive for our partners to sell these offerings, not just long term, which we already know it will be attractive for them, but in the short term as well as they transition their businesses.
So, a pretty big shift in how we're providing access to some of these applications and some of these tools. Next thing I want to talk about is what we're going to do to increase the value of these offerings. So not only are we going out there with a succession of perpetual purchases in some areas over the next 12 to 24 months, but we're also going to increase what is already a highly valuable offer and make it even more valuable. And one of the ways we're going to do this is simply add new types of things to desktop subscription. The first thing and this is important because we think it's going to be a pretty powerful tool for connecting with that non subscriber base is we're going to offer multi year subscription to desktop subscriptions, 1, 2 year and 3 year subscription.
We'll promo some of these, we'll discount them, we'll target non subscribers with some of these offerings, allow them to get on board, get engaged with us in recurring relationships and we'll also offer more flexible ways to pay for this, buy 3 years pay annually, new terms like that. So we're going to introduce new terms. We're also going to have streamlined access built into these offerings, new ways of deploying, new ways of managing the users for these offerings. They're going to be superior to the experience we can deliver on the perpetual side because we're able to deliver a superior experience. We're also going to provide exclusive support offerings, things that help the customers get up to speed, help them get successful with the software that are exclusive to desktop services.
So that's a nice direction we're going in terms of adding value to these applications. You're also going to see us introduce a lot more new offering that blends a desktop software on term and a cloud offering on term as well and targets a particular customer need or particular segment. And I'll give you one example of something we're doing today. We actually already have a bundle of BIM 360 and Navisource 360 that's completely term, that targets a particular persona in the construction workflow and has no perpetual equivalent in our portfolio. You're going to see more of those, they're going to be targeted and they're going to be high value.
All right. So, I've told you some of the things that we're doing on a recurring basis to drive the business model shift long term. I told you some of the specific programmatic actions we're going to be taking in FY 2016 to continue that momentum, see the same kind of subscriber growth next year that we're seeing this year. What I want to do now is kind of go back to those principles doesn't go away. As we remove perpetual rights, this is going to fuel growth in terms of attacking and working with that 2,000,000 non those 2,000,000 non subscribers, the 2 point 9,000,000 non subscribers.
As they come into the buying pool again, they're going to be buying a term offering from Autodesk, not a perpetual offering from Autodesk. That will provide significant long term subscriber growth and significant opportunity for us to continue building up momentum. We're also going to be changing our culture around retention. We're going to be moving to a retention culture. We're already well on that journey.
You're going to hear a lot of this from Steve, but we're building it around a couple of pillars. 1, the way we engage with customers. Our whole method of touching the customers, talking to the customers is moving from offerings and information to being helpful and continuous in our engagement with customers. This is a big cultural shift that's going on. We're also building out a pretty significant analytics infrastructure that allows us to know who's at risk, why they're at risk and also predict well ahead of any renewal event what they're doing and what we can do to move them forward and keep them engaged.
And all of this is going to funnel into inside sales teams that really have the mission and the drive to keep renewing these customers. That's how we're going to continue to build up this culture of retention. And if you run the numbers, you know retention is critical to making these numbers over the long haul. And this cultural transformation is going to continue to drive those numbers for the long haul. The next piece I want to talk about is moving these consumption models down market.
Right now, we have T Flex, we have these consumption buy, get access to the whole portfolio, pay for what you use, you're going to see us introduce similar models down market into the SMB space as we move out beyond FY 16. So other people will be able to access some of these consumption models that provide broad access to portfolio, but operate on a pay for what you use type basis, which is really powerful because we've seen tremendous results in terms of what people do with these and how much value it brings back to Autodesk and you're hearing a lot of that from Steve. So that's going to be a big long term development that continues to drive momentum. The last thing back to those things I talked about earlier that are going to drive some of the momentum is this whole notion of capturing new subscribers in the construction market and in very unique areas in the manufacturing market. You're going to hear a lot of that from both Amar and Buzz today in terms of what applications we're deploying and how they're actually bringing in completely net new subscribers that we were never able to reach before.
This is going to be a massive engine of subscriber growth over the next 2, 3, 4, 5, new name it number of years. And I think that's pretty exciting. So when you look at where we're at, we're doing incredibly well this year and we're going to be building momentum into FY 2016 and beyond. And there's a couple of things that we will do over and over and over again. We're going to target those non subscribers.
We're going to add cloud to every single account. We're going to reach completely new types of subscribers with the cloud. We're going to expand those consumption models and those enterprise business agreements and we're going to drive to a 90% plus renewal culture. All of that is going to continue the momentum and energy that you're seeing right now well beyond what we're seeing this year. So with that, I'd like to introduce Amar Hanspal to come up and talk to you about the opportunities in the AEC business.
Thank you.
Thank you, Andrew. Good morning, everyone. It's been a pleasure to be here. And I'm excited to share with you the opportunity we have in the AEC industry. But just to remind everybody what we mean when we use the term AEC stands for architecture, engineering and construction.
And what we mean by that is all of the activity involved in the creation of vertical structures like buildings, skyscrapers, hospitals and schools horizontal infrastructure like roads, rails, bridges, dams and then all of the infrastructure required to extract and process natural resources things like refineries or mines. So it's a very pervasive industry and you all experience it every day when you go to work and go home. Now it's a large industry. It's almost over $8,000,000,000,000 in economic output today and it's set to double in the next 10 years to nearly double to almost $15,000,000,000,000 in terms of economic output. It's underpinned by secular trends, population growth, rise of emerging by secular trends, population growth, rise of emerging economies, rapid urbanization and all of this leads to increased infrastructure spend around the world.
The AC industry is booming. It's creating a really compelling software opportunity. We estimate the TAM to be nearly $12,000,000,000 in software alone across all of these categories. And we at Autodesk, we've really been capitalizing on this opportunity. Now to quote my sales colleague Steve Blum, the AEC business at Autodesk is on fire.
And why? Because we are at the right place at the right time, but most importantly, we have the right offering. Let's begin with that right time, right place conversation. If you just look around you, any macro index you look at, labor statistics, construction starts, any of the reports that you see from the Bureau of Labor Statistics or from ENR, from AIA, all these indices are up into the right. Sure, there are a couple of pockets around the world where the economic activity is still restarting, but by and large the macroeconomic environment in the AC industry is really, really good.
And you can do your own sort of analysis of this if you look out of the window in any major city around the world, New York to London, Doha to Tokyo, the cranes are back. But this time around, our customers are looking at more than just cranes. They've been looking at some of the fundamental issues that plagued the AEC industry around productivity and they've been borrowing lessons learned in the world of manufacturing and applying that to construction. Approaches, those things that you see used on ships and airplanes are being used now on large scale building or infrastructure projects. And that all of that approach means and of course it's sustainability and all of that kind of new sort of imperatives for the industry.
And what all of that means is that this industry is automating as never before and it's automating through software. And if you look at that graph, software spend in that industry is accelerating faster than spend of any other category in that industry, including hardware. So software spend is accelerating and when firms in the AC industry look to spend money on software, the software or the category of choice is Building Information Modeling or BIM for short. Very similar to how people run supply chains using ERP or manage customers using CRM, BIM is now the way customers manage and run projects in the AEC industry. It is strategic.
It's at that same level of an imperative technology choice for AAC companies as an ERP or CRM decision would. And that's because it delivers real value. And I'll talk about that in a second, but because we're going to use the term BIM many times today, I want to level set by explaining what it is that we mean or what is it that the industry means when they use this term building information modeling. BIM stands for the Intelligent Model Based Process that BIM is the way our industry does what you BIM is the way our industry does what you would call what you see is what you build. You've heard of WYSIWYG?
This is the industry's equivalent in terms of driving the build process. And it's more than the visual representation. It contains all of the rich metadata, cost, schedules, quantities, the I in BIM stands for all of that. And because it's an information rich environment, it lets the industry coordinate all of the work across disciplines, all of the stakeholders, as well as across the lifecycle of that project. And that's what we mean by BIM.
It's a fundamental change in the way people manage their projects by putting the digital representation of the built environment at the center. But it's more than technology for technology's sake. It delivers real benefits and you can read all of those costs and time savings numbers up there. But let me give you a personal anecdote. There's a customer of ours who's just finished work on a major skyscraper project.
In fact, it's one of the tallest buildings in the world today. And at start of the project, they were estimating the amount of waste that project would typically result in because they have to budget for that. A typical construction project steel for that skyscraper. They were anticipating about 3% of that going to scrap, somewhere in the neighborhood of 2,000 tons. Because they used a different process, this time around only 2 tons went to the scrap heap.
That's a savings of 1,000 times over. And that's a significant change in the cost equation for these building projects. Likewise, the glass panels, this 20,000 square meters of glass panels, 19,000 individual glass panels on that skyscraper. Typically, again, they reject about 10% of these because they don't fit on-site. Not one of those 19,000 glass panels went back.
Significant cost savings. This is why customers are voting with their wallets to make the move from the old way of managing projects or designing projects to building information modeling around the There's a better result, there are better buildings as a result of using BIM and that's a reason why around the world governments are now mandating the use of BIM. BIM is sort of unique in the technology industry where it's moved from customer adoption to government policy. So whether it is the GSA in the USA, someday somebody will make a song out of that, GSA in the USA or the UK BIM standard or the BCA in Singapore or all of these various agencies around the world, they are increasingly mandating the use of BIM because they really want to reform the process, not just in terms of productivity and time savings, but with better results at the end of that process. At Autodesk, we've really been leading the transformation of the industry to building information modeling.
And not only are we continuing to do that with everything on the technology stack that I'm about to share with you, but we're accelerating that leadership position across all of the disciplines in various geographies around the world. And in fact, if you want to just look back or reflect on the BIM story, BIM really took root in North America and North Europe in sort of the building, building industry. And what I mean by that is the vertical structure of buildings. It's took root in the architecture industry and then the engineers involved in those projects started plenty of opportunity around the world as well as across disciplines with BIM. We are still in the early stages of BIM adoption around the world.
So let's begin at the heart of it all with Revit, because Revit is our flagship product. It's the heart of the building design suite and it's what defines that what you see is what you build experience. And Revit continues to set the bar for BIM in the industry. And as you can see this, it really helps describe the building in all of its details, helps visualize it, put all of the information in place so that you can analyze it, understand it, figure out the construction sequence and Revit continues to just absolutely drive forward around the world and gets adopted by the who's who of the AEC industry. And as strong as Revit and Building Design Suite has been, we have expanded the opportunity for BIM by bringing out a more affordable and capable solution with Revit LT.
And Revit LT is just like what we did with AutoCAD LT in the CAD market is making that technology accessible and affordable to more players around the world. When Andrew talks about net new subscribers, we're bringing on net new subscribers, subcontractors and all of those kinds of companies that would not have been able to afford the full solution, but now can participate in a BIM based process expanding our opportunity with tools like Revit. But expansion is more than just a price point. We are going across disciplines. Revit MEP is a great example.
Now, I wanted to celebrate the MEP guys for a second because you don't notice them when you're in a building, right? What we mean by MEP is all of the work that is put into a building to give you heating and cooling comfort, fire safety, all of the electrical conduits, all of the stuff that brings Internet to your computer, that's put in place by engineers, contractors, subcontractors that work on these buildings. This is a great example of where we've taken Revit and purpose built a tool for that design process and brought those people onto the BIM process, expands our opportunity. But it also adds value because many of these customers some time ago were using 2 d based processes and now they're using a full suite of tools from Autodesk, a great example of adding value on an account basis. Another example in that yield is what we're doing with simulation.
So as we have these more computable building information models, you can analyze and simulate more. You can do energy analysis. In the case that I have up here, this is a CFD, a computational fluid dynamics analysis in a hospital surgical room where you can understand people have to do the trade off between comfort and sterility, right? And they're constantly trying to understand infection patterns and things like that. Data centers, another example where heat transfer is a big design point.
And so there's a lot of opportunity for us to add value in accounts with simulation. But sticking on that discipline front, here's another really key discipline that all of us should be grateful for and that is the structural engineering skeleton upon which these buildings are built. And structures underpin some of the most ambitious projects around the world from stadiums to skyscrapers. In fact, the most recent project of the Kingdom Tower in Saudi Arabia, another huge ambitious project was all done using Revit structure for the structural design of that. And in Revit structure has matured a lot.
All the structural engineers are using it. We also have inside Revit structure. We have concrete detailing. I'm sure this is fascinating. It's a lot of And we've taken the next step forward in detailing steel with what we are doing with the product we call advanced steel, bringing that level of detail into the BIM workflow.
Because to get steel structures in place, there's a lot of fabrication detail, there's a lot of connection detail that has to be put in place. But we've added this to our portfolio and what we are doing with it is not just delivering more value to customers, we are winning new accounts because we go head to head with Tecla, we go head to head with Bentley ProSteel and we're starting not just starting, we have won every fight up to this point where we've taken them head on in account with Advanced Steel. So we're broadening our opportunity with this level of detail. A good example of customers using advanced steel is this company called Steelway. They do all of the steel structures, hot roll, cold rolled steel that goes inside a building.
But more importantly, they are a great example of how manufacturing technology is being in the construction industry because they prefabricate all of the structure and they're driving sort of modular assembly of that structure on-site, which is a major way not to save time, but to save lives. It's way safer to do these kind of modular assemblies and they're driving this upstream in the process in the BIM process all the way to the architect. So, bringing it all together in our core industry between architecture, MEP and structure, here's a good way to look at it. A project that recently finished in Singapore was a sports stadium they put together. And what's unique about the stadium is not just that fact that they have a retractable stadium is reconfigurable.
A whole host of sports from soccer, hockey, athletics, my favorite, cricket can all be played here and the stadium moves around. But also what's unique about the stadium is since this is in Singapore, air conditioning is delivered to every seat. So you can imagine that MEP system I talked about has to reconfigure itself as the stadium moves around. There was no way this could have been built. All of the data, all of the coordination, all of the decisions, all of the dependencies could have been done any way other than with BIM.
And it's a great example also of an international project that is now starting to drive BIM adoption in a place other than United States or North Europe. So, that's the core story in the building, building industry. So now let's look at the word building in a different context in another discipline, because as we talked about earlier, the AEC industry includes the world of infrastructure or civil work. And that world has been mired in mostly a 2.5D or a pseudo 3 d process, right? Why?
Because roads are flat many times, but they're complex, right? They involve lots and lots of details that you and I take for granted from trains to overpasses, but they're also huge, right? Roads can stretch for miles. And there has never been a technology to do this all effectively in 3 d or in a building information modeling paradigm until now with what we started to do with Infraworks. Infraworks is to infrastructure what Revit is to building.
That's the way it's the sort of replica of that. It's purpose built for the world of infrastructure because it breaks those size barriers, right? It understands not just what it's designing, but sort of the constraints of that design like you have to design in miles, you have to include GIS information, you have to make it easily accessible to the public, you should be able to do environmental impact analysis. It captures all of that and expresses that for the world of infrastructure. It's a we are off to a really promising start with InfraWorks, a major engineering customer here in San Francisco, called it a shining star in their portfolio.
And it's another example of where existing customers are now adding infra works into their workflow, driving more value on a per account basis. And speaking of engineering customers, we've been democratizing the plant market for those engineering customers. Instead of complex expensive 3 d systems, we now have more affordable AutoCAD based 3 d environments for them to do their work. So our story in the world of infrastructure keeps getting better. Every year we tell you about how well we're doing in the world of roads and highways, how many DOTs we've won.
This time we can tell you in Canada, in Mexico, we're also winning. We're winning around the world. But because of our broadening portfolio for the world of infrastructure, we're winning in rail now. We started taking share from competitors in rail and we're starting to win in the world of airports and aviation. So these are really big projects that we're starting to penetrate.
And a good example of that here is the Denver International Airport. And they use a whole host of our products. And the one that you're seeing shown on screen right now is what we call recap or reality capture or scan to BIM. You can see they've scanned the terminal to understand the exterior and interior, so they can refurbish it. So this is a great story.
They've used Infraworks, they've used Revit, they've used Recap, AutoCAD, a whole host of our tools to do this new terminal design. San Francisco Terminal 1, when you fly out of there, they're using our tool set as well as the Panama Canal guys. And in the case of the Panama Canal, all of the catchment basins, the visitor center, the core canal is using Autodesk products, but the locks that are being designed for the Panama Canal are also using Autodesk technology, specifically Autodesk Inventor. So selling our portfolio to our customers, this is a great example of how we're penetrating this world of infrastructure really with a signature product like InfraWorks, but with the entire Autodesk portfolio adding value in that account. So we've world of the world of civil engineering.
But I want to go back to something I said in the beginning, which is that the AEC market is doubling construction companies in particular are increasing their spend. By far as strong as our growth is in the A and the E side of our industry, our biggest opportunity lies in the world of construction. Very simply put, the construction part of AEC employs the most people. It's more than double of what all the other A and E firms employ. They have the biggest need because they manage all of the costs, all of the risks, all of the schedule in the construction project.
They have to coordinate a whole bunch of work and they are the ones that are automating the most. And we got a foothold in this industry or this segment with what we started to do with Revit and the Building Design Suite many years ago. Because construction companies embrace that what you see is what you build paradigm and really drove a high level of detail and documentation using the toolset that we provided. And a lot of construction companies have adopted our core BIM stack. We really cracked this opportunity open with what we're doing with BIM 360.
BIM 360 simply put connects the office to the field and the field back to office. So, people out in the field instead of walking around with reams of paper and clipboards have access to the billing information model on their tablet device. When on-site they find something and they have to report an issue, that issue is not just reported on a piece of paper, it's tied back to that digital model, so that the people back in the design office can now understand what's on-site or what's being discovered on-site. And that loop between what's discovered on the field and what is being designed in the office, it's a huge, huge game changer for the construction industry. And it's really it lets people automate many, many steps of that process.
It lets them automate planning, production planning, quality control, commissioning, handover, a whole bunch of things. Our customers absolutely love what's going on with BIM 360. Here's an example, Mortenson Construction, they call it one of the best software rollouts. They've saved a bunch of time and money. But more importantly, they were for the first time in their history able to measure something they had never been able to measure, which they call first time to quality, FTQ, really key metric.
And it's a huge change for them, a cultural change in their company to be able to do things like this and connect the job side back to the design office for the first time. And customers like Mortensen, they're resulting in this rocket growth of BIM 360. Our current number of BIM 360 billings growth is over 200%. It is simply put, one of the, if not 360. And in fact between BIM 360 and what's been happening with the building Steve
and
Andrew touched upon these enterprise business agreements and Steve and Andrew touched upon these enterprise business agreements and Steve will talk more about that. Many of those are these kinds of firms because they're really again back to that strategic value of BIM. They're really at the core of what BIM is at the core of what they're trying to do in terms of automating their entire process and embracing the new way of building things. So we're really pleased with the speed at which we are capitalizing on the construction opportunity. It is and will remain our biggest growth opportunity.
So just to summarize, we've got great strength with our leadership position in the architecture and engineering disciplines. We have plenty of opportunity around the world in terms of going to Japan, Germany and many other regions to drive BIM adoption. We also have this increasing opportunity to drive BIM adoption in engineering disciplines. We talked about MEP, structure, civil. Civil is one of those really promising segments as it starts to move from 2 d great.
So construction is a huge opportunity for us. Another huge opportunity for our company is the world of manufacturing. And to tell you more about that, I'd like to turn things over to Mr. Buzz Cross.
Thanks, Amar. Thanks, Amar. Good morning, everybody. Let's just start with a little talk about manufacturing. And everyone knows what the products are in manufacturing, the sort of things that our customers do.
But the thing that's really interesting about this industry is it's not just about design. Autodesk traditionally has had its strength in that we helped our customers design their products, but there are many, many engineering different engineering disciplines. There are designers maybe who are more artistic. There are engineers who do functional design. There are manufacturing engineers who do something very different.
There are analysts, again many, many. Each one uses a different type of software and does a different sort of function in their company. So there's lots of expansion capability in this market just by getting to new discipline. Now the market is big. It's about $11,000,000,000 in size.
And it's a little bigger than it's been. It's been steadily growing. This index here is the purchasing managers index. It shows purchasing managers confidence in the market. What it's shown is it's shown rapid expansion for quite some time now, okay?
The market itself grows at about 8%, okay? So $11,000,000,000 grown 8% means there's lots of expansion every year. Manufacturing Autodesk market and revenue has grown at 17% during our last announcement period. So that's about double, a little more than double the rate of the market expansion. So it tells you we're growing share.
Now if you look at things like billing, which we think are even a better measure of how our business is going, it's considerably north of the 17%. So we're pretty positive about where our manufacturing business has been to date. This presentation, however, is what we're doing for the future and what we're doing to per Andrew's point, how we're helping drive 20 or twelve-two thousand and fifty. In manufacturing, we have specific programs and products to drive each. So one of the questions is how do we drive more value per account or how do we drive this 20% that Andrew talked about.
So there are lots of different ways. I'm going to go through a few of them. One is the automotive industry, really important for us. If you have a beautiful car, if you make a beautiful car, it was designed in Alias. It's just a leading solution for conceptual design and is used for every car company in the world.
Okay. So it's been used that way for a long time. For us, this business has an expansion in Class A surface definition, which is the step right afterwards. So we're seeing a lot of growth in that solution in that category where we're taking conceptual design into the more technical phase modeling it. We also have some very new types of products driving revenue in this business.
Visualization is of huge importance to the car They put so much investment in a car before they make it. They want to know exactly how it's going to look like, what it's going to look like. They want to know if they put this little notch in a corner there, how it's going to appear on the car. So we have a new solution called V Red, which is really starting to take the industry by form. Whether you use Autodesk in the front stage or the back stage, auto companies are starting to use the visualization from VRidge because of the high quality surfaces and images you can generate.
This is a pure digital image although you certainly could not tell. And so they use it for big high quality stills as well as video as well. The other area that's becoming really important in automotive is interiors. Interiors more and more sell the car, okay. Interiors are very hard to do, a lot of soft materials, a lot of light reflection inside the car.
So making a good digital model really fast is difficult. Again, you would not think that's a digital image of that. That's an Audi interior obviously, but it really tells the auto company a lot about the car before they produce it and that helps them make really good design choices. So vRad marks a really good way we can add value to customers in way we can increase the value we get from customers as well. I want to switch to mechanical design now.
This has been the mainstay of our business. The product we use here is product design suite. Inventor is the heart of this solution. So we have a lot of advantage with our Inventor product compared to our competitors. Okay.
One of the things we have is modeling. When you make a
a
direct modeling and free form modeling, all integrated together into that one product. Now mechanical design tools traditionally were really good for products like those first two images there. They're prismatic, they're very functional, they don't necessarily have an elegant look and feel. But if you're going to produce something like that 3rd image there, the handle, how it feels in your hand is really important. So I want to show you some of our modeling here.
I'm going to run a little video here that shows you how Inventor modeling now works in this newest release. So if you're going to make a design like this, this is an immersion blender. Now when you buy something like this, a consumer product like this, how it feels is really important. If you're a cook in the family, you're going to pick this thing up and just feel it. Very hard for traditional solid modelers to make designs that have that elegant look.
But you can see the dynamics here. You put something like a fill it in and you just stretch it really easy. So you really get a feel. Now here's the real magic of it. When we're making the handle portion of it, it's not driven by complex equations, traditional engineering rules, very much how it feels and looks.
The user just grabs the surface and pulls it. So he gets something that looks very much like he wants. But in this case, he's doing it over a set of sketches. So an artist had designed the sketches and he's able to model exactly to the sketch parameters without a lot of the complexity of the math they use. So it very much differentiates how you would use this product and how you could design a new sort of tool.
It's a big advantage we have, in that you can design really complex tools like this. So even things like the very top here, really easy just to cut it off. So it looks has that elegant shape along the very top of the curve. It's really I think very impressive about how far we've been able to come with these tools that you can model a super complex shape like that. This sort of thing was virtually impossible with traditional modeling tools.
All right. Let me go on and talk about another really interesting advantage. It's BIM for manufacturing. Omar did I think a really good job talking about the big advantage of BIM. Construction companies are switching to BIM for everything they start to do.
Well, many manufacturers make products that go into buildings. So, our product design suite has a fantastic, the world's best connection between mechanical design products like this chair. If you were to beautiful, have that really good connection. So manufacturers that design for building products have a big advantage with the Autodesk solution and that they can design things for a BIM environment. No one else can do anything like this and it's a good way we can drive extra value from our customers and driving to new customers.
Now I said before that there's lots of different types of engineers that go into designing a product. One of the really good big segment is simulation. So it's a way we can add new value and add new customers in simulation. We have a very full range simulation solution. Well, the big news for us is, NAST TRAN is the engine we now do mechanical design.
The biggest portion of mechanical design or excuse me, of simulation is mechanical analysis, stress analysis. There's lots of different types you might do, but there's about 5 times more users doing mechanical stress and 3 times more revenue than any other segment. So it's an important segment for us. Confidence in the results that you get on NASTTRAN. This is an acquisition we did a few months ago.
We've already integrated into the Autodesk product and customers are using it. We find our win rate is much, much higher now that we have a NASTRA driven engine. So our solution in simulation is very broad range from mechanical simulation, the fluids, the plastic injection analysis. We have many different ways we can drive value per account by letting them analyze their products a lot better than they could ever do before. So there's lots of ways we can drive value with our existing products into our customers.
Let's now talk about the 50% issue. So how do we drive net new subscribers? There's quite a few different methods. So let me just deal just talk a few of them. 1 is fabrication.
Okay. So I mentioned there's lots of different types of engineering that goes on to make a product. So an important engineering discipline is something like this. How do you actually make a product like this? Manufacturing engineers have a whole discipline in how they make those sorts of things.
This is revenue we used to really not partake in at all. We really only did design, then did design simulation. Now we've entered the fabrication or manufacturing engineering market. Now that market is big. It's about a $1,800,000,000 market by itself.
Okay. So again, markets that we weren't participating in before. So we now have dedicated products that work toward those things. So we drive net new subscribers business market with a set of solutions that vary based upon the complexity of design from very simple manufacturing problems like sheet metal part on the lower left side to more complex 2.5 axis stuff to full 3 axis, 5 axis machining, all the way up to specialized functions like composites. We have dedicated tools to do each one of these things, including composite tools that help you manufacture layout the layers in a composite model in a very advanced area that's becoming hotter and hotter.
Now we did an acquisition of Dell Cam a little less than 6 months ago. Okay. So Dell Cam's part of that market is right in the center. The complex machining, if you make complex parts of molds and dies, Del Cam tends to be the solution for you. Del Cam is pretty interested in terms of driving net new subscribers.
It's the world leader in NC. Everyone views Del Cam as the Again, I said, we used to not play in the manufacturing engineering portion at all. We now drive about $100,000,000 in manufacturing engineering revenue, which includes Del Cam as a part of it. We have other tools that help there as well. Now it's an acquisition we did about 6 months ago.
So often you see acquisition have a little bit of a different revenue. We haven't seen that. We've been able to continue to grow it and grow it faster than before. So I think we've done a really good job in terms of driving net new subscriber with our Dell Cam solution and our other manufacturing engineering solutions. So a whole new set of users for us.
Now you can't talk about making things without talking about additive manufacturing, okay? So we're really focused on this space. But to be clear, it's not about this stuff here. It's not about printing little plastic crap out of for the consumer market, okay. It's interesting and all, it's not going to change my industry.
And I know that's very popular. I think it's way overhyped. This is what it's about right here, additive for industrial. So that's sort of the quiet revolution that you don't read about in the newspaper, but it's making a big difference. Now a really big problem in the manufacturing industries is the strength to weight ratio that you have to produce things.
If you make something that goes into a car, a train, a plane or even a common consumer products, what it weighs makes a big difference. Now the thing you see in this design here and that's just a bracket, just holds three things together is the open lattice in part of this design here you see it right along here. Okay. So that lattice structure makes the product dramatically lighter, but has as much strength as it had before. Now un manufacturable unless you're using additive manufacturing.
Fact, people don't even think about it this way. Now you can take this far further and Autodesk has. Autodesk leads the industry because we can do design like this. Now this might look like the same image you saw before, but it's actually really different. If you look at the lattice structure along the bottom side, it's a larger use of the product.
There's more stress on the bottom part, so you add more mass. Optimize the sort of design that you have. Again, people won't naturally come up with designs like this. It takes software like Autodesk software to do this sort of design. It goes a lot more advanced.
People can kind of visualize that. That's simple octagon sort of or hexagon sort of shape. It goes quite a bit further. There's all sorts of complex lattice structures that can be produced. Okay, shaped optimization is impossible to traditional methods.
We're really the only ones who are paying attention to this and it's starting to make a big difference in key industries. Now this is sort of for the leading edge today, but it's very quickly going to go everywhere. If you started to see it more, you hear more and more common products that are looking for these sorts of things. So the next thing we do is the cloud. Okay.
So we have a really advanced cloud business. I want to give you 2 examples of that are real specific about what we've done. 1 is PLM 360. So PLM360 is our PLM product, okay, is now entering a growth stage. Product has been out there for about 2.5 years, Okay.
I think we're really pleased with what we've seen with it. In case you don't know about it, let me give you a little reminder about what PLM 360 is. It is a unique product in the PLM market. Now, we entered the PLM market about 10 years after everybody else. We waited until we could make a difference.
Product with something that was like Teamcenter or Innovia. It would just be another similar to. This let us make a product, the cloud made us let us make a product product that was very, very different. So it's cloud based, which means 0 deployment. You don't have to buy servers.
You don't have to spend 1,000,000 of dollars that our competitor solution require to spend to set these things up. Because it's cloud based, it's successful in any device. So it'll work on your iPhone, it'll work on a tablet, it'll work on a PC, it'll work on a Mac. We see users doing it on all sorts of devices wherever they are, any location and very, very fast deployment up in minutes, not months or years as is traditional. Now business for PLM360, I think has been quite good as well.
We see solid growth in new seats. Last year was all new seats. This year, the new thing is we have customers returning. Customers that bought that last year are coming to buy more new seats from us this year. That for us is a very, very positive sign.
A very, very high retention rate, I wanted to put exactly the number in there, but I wasn't allowed to. But let me just say it's the highest I've ever seen of any product in my long history of making things. So excellent retention rate of customers continuing to buy it. And this is one of these modern products 96% growth rate in billing, We've seen a 96% growth rate in billings and a 2 37% year over year growth in new customers, pretty phenomenal results for our brand new product. So one thing we see is there are a bunch of companies out there in the market that I call cloud only company.
This is a new trend that I see. When we first introduced these things, many of our customers said, not me, I'm never going to go to the cloud. Okay. Now they say, well, tell me more about it. We also have started to encounter these companies say, I don't know why I'd use anything that's not a cloud based application.
They're trying to get rid of the things that are installed on these expensive servers they have to maintain. They want to do things that are a more modern way. I would say Autodesk by the way is one of those companies. We're looking to replace a lot of our old infrastructure with cloud based tool because we think it's just a modern system that works a lot better. I got a couple of examples for you of customers who have done just that.
So you all know Quirky, a very interesting company, very interesting products. I've got a bunch of them, they're interested to try. They're trying to drive even faster than the fast pace they're on already. So they're now trying to drive new product launch cycles to just 30 days. This is really an amazing accomplishment in an industry that used to take multiple years to introduce new products.
So they're trying to really drive them down. Multiple years to introduce new products. So they're trying to really drive them down. And at the same time, more than double the number of products they come out in that cycle. So from 20 a quarter to 45 a quarter.
So they needed a PLM product to do this. They wanted of course a cloud based product. They're one of these cloud only companies. They're looking around, they said the Autodesk solution is the only one that there is out there in the market. So we're able to drive a solution to the customer that was really unique and that's in the only category.
Another interesting one is Memjet. So Memjet is a NetSuite user. That's how we first met them. We met them at a NetSuite conference we were at. They're definitely saying we only want cloud based applications around this place.
In fact, what they say is SOLIDWORKS Enterprise PDM is the last on premises application they have. We don't think that's going to last either, frankly. Okay. So they're starting to buy solutions like PLM 360 as well. So we see this new part of the market that would only consider applications like this.
I think it speaks well for where we can go in terms of driving net new subscribers. Now just a couple of little other information about our PLM business. We have a lot of really new customers. In fact, all these companies here, in fact, a big portion of the companies we see don't use Autodesk for their CAD solution. They have some other CAD solution.
So we've been able to go into new account in a new way and sell them a new solution to new types of users. In fact, what we see is an average of 130 net new users per account with our PLM product. Okay. That's far higher than our average CAD products. So we're seeing a lot more net new users per account.
We also see subscription billings to be much higher, 2x our normal subscription billings for our PLM product. So pretty phenomenal results from our PLM team. And I think the product is so differentiated, it gives us a new way to attract new customers. Last little thing I want to talk about, I call it a little thing, but it's actually I think an incredible shift in the market is Fusion 360. Okay.
So Fusion 360 is a brand new entrant, actually been in the market for about a year now. The way I would describe it just like this, it is the 1st ever CAD in the cloud product. I think Fusion is now certainly hit its stride and starting to drive real new business, okay? It is a new very fast easy paradigm. Companies that are looking to do things in very different ways are drawn to Fusion because it a very creative new way to design products.
I'll show you a little bit of it. We have 2 types of users we see a lot of, those that are brand new to CAD. They haven't used the CAD system before. Maybe they've made product that didn't think you could design with the CAD system before and generally you couldn't. It took a product like Fusion to do that.
And the other type of user is those that are replacing multiple old CAD products, Rhino, SolidWorks, aesthetically pleasing and something that's functional. Fusion does both those things together without any kind of data loss, so it's really ideal. Now Fusion is targeted at these new types of users, new types of company. 21st Century Product Development is just fundamentally different than what we've before. So first, lots of rapid iteration goes on in this market.
Customers often design things days instead of months. That we have customers that say, I design on Monday Tuesday, I sell my products at Walmart or some distribution system like that on Wednesday Thursday, I get my operations running. We see this cycle going over and over again. Old CAD, it cannot work to do those things. A product like Fusion is the only way.
Now one of the reasons is extended teams. Teams are not just in one place. There's lots of different disciplines. If you're going to design and make a product in a week, you have to have everyone involved in the design and manufacture together at the same time. So only products like Fusion can do that.
The last thing is access anywhere. Of course, if you have extended teams, they don't live in one city, they don't work in one office, they need to be able to get access to everything. So Fusion makes it ideal because of its cloud based to let everyone gather at the data, which is the center. Now a few examples. So one is ModBot, a real heavy duty mechanical application.
They make robotic systems. The magic they make is this little module you see up in the right hand corner. It's a real smart system that lets you control joints. So completely configurable robotic arms. The way they describe their engineering team is its 2 friends, 1 electronic expert and 1 CAD Guru, okay?
So Fusion is the 1st product ever that would fit for that sort of environment. So in the old days, we would have been able to sell to the 1 CAD Guru. So we can now sell to all 4 of those guys. They can all use together. They can all share it even though they have very different views of it.
Now this next one I think that you'll find to be really surprising. Products like this, Creative Things is also a Fusion right there is a mermaid. Or this is even better than a right there is a mermaid. Or this is even better than little monster, whatever. Just impossible in the old days we can.
Fusion can do that really, really well and they can do this since it's been a team. Now one of the things that Fusion, it's not just that it's a CAD product that's on the cloud. It's a full product development solution. So it lets you do modeling of course like CAD always has, but it also lets you test the design. It lets you do things like rendering.
It gives you documentation, so you can make drawing. It lets you MC machine the molds of the product itself. And it's built into the collaboration engine that Amar is going to talk about after break, okay, A360, which lets these teams share information even if they're not very technical. Now let me show you Fusion in action and you'll see why it's so good for things like toys and advanced shapes. So we're going to make this little headlight here.
So it is unbelievably easy. You just grab shapes and drag them with this little triad. So if you want to adjust how this thing looks, it does not take a real deep technical expert to do this. It takes a product expert. He can explore all sorts of shapes and determine something that's going to be really ideal.
And again, how this thing appears will make a big difference in your ability to sell it. So Fusion, the first cloud based product ever, really easy, highly dynamic and fun, attracting a new type of user for us. Now one of the reasons it's so interesting is Fusion runs on the Mac as well as on the PC. So we just put it up on the Mac App Store a few days ago. We saw 30,000 new accounts in the 1st 10 days.
Okay. It was ranked number 1 in graphics and design in the top countries worldwide. So we've seen real good pull through and think about how important the Mac is to this new generation users. You just don't meet that many 20 year olds that are going out and buying a PC, they're using Macs. So this is the ideal place to be for this new sort of market.
So let me summarize all the things I've said here. So we're really working on a twelvetwentyfifty. We're driving value with our from our existing customers through product differentiation, products like product design suite really do things better and different than you've ever seen before. Things like V Red add a lot of value with new sorts of customers that we can drive. We're also adding new net users, new users via new engineering disciplines, things like manufacturing engineering.
Again, we used to get no revenue in that portion at all, now about $100,000,000 in manufacturing engineering revenue. And last the cloud. The cloud is real business today. It's not a future any longer. It's out there.
We're driving revenue with it. We have thousands and thousands of users. We've been able to produce the first CAD product on the cloud in history and we've been able to produce the first PLM product in history. So we think we're well on our way. So thank you very much.
I think next is a break. I think we're due to be back at 10:30. Thanks everybody.
Ladies and gentlemen, if you'll come back in and take your seats, our program will begin again shortly. Thank
you.
Please welcome back Amar Hanspal.
Well, welcome back everyone. And I want to begin this session now by reminding you of something that Andrew said at the start of the first session and that was our drive to attach cloud to every account and drive value in every account by doing that. And Buzz and I both touched upon AC industry how cloud services like PLM 360 or BIM 360 are being added or being used by our customers. Buzz used the example of Memjet, I shared Mortensen, we're seeing wins and adoption of our cloud services in each of those industries. But you ain't seen nothing yet because we have a real ace up our sleeve.
We have this one cloud based offering that we believe will drive broad adoption that every single one of our customers would subscribe to. And that's the solution we call A360. So in helping you understand how we're going to add cloud to every account, I want to spend some time talking about A360. So just to summarize where we are, every single product of ours is leveraging the cloud for computationally intensive tasks. We're doing things like BIM 360 and PLM 360, but we have identified a broad based opportunity that we are tackling with A360.
And that broad based need really lies in what our customers do every day. Because no matter what they work on cars or windmills, bridges or buildings, the one thing common in the design and engineering community is all of our customers work in product. That is the single organizing principle for the work that they do. And the other observation is despite this being sort of a universal need that exists across the design and engineering community, there is no good solution today to help them work in a project centric environment. You contrast that with the software industry.
The software industry uses source code control tools, but today with distributed development, we have tools like GitHub and lots of ways of organizing and connecting information and people, but the design and engineering community does not have until now and what we're trying to do with A360. Our customers have tried. So for many years they've used email, they've used SharePoint or FTP, they've even tried tools like Box and Dropbox to do their work. And each of these solutions is kind of like just one facet of the problem and really to have this project centric environment, they need the ability to pull it all together. Design and engineering information is complex.
The fundamental challenge in this world of design and engineering is that there are many players, engineers, designers, suppliers, customers, people involved in quoting, lots and lots of players in that whole process to bring a product or a building or piece of infrastructure to life. All of these people use a variety of tools, CAD tools, simulation tools, CAM tools. And you've heard all of this in when I discussed our AC portfolio or Buzz discussed our manufacturing portfolio, lots of tools creates lots of data. And it's not just the size of data, it's also the fact that it's heterogeneous. All these different CAD formats that are out there or office formats and CNC milling information and G codes and all of that stuff that's out there.
But it's also the fact that there's no it's complex. There's no easy way to understand that. You can't visualize it. You can't discover patterns in it. And to just compound the problem, when you think of our customers trying to figure out what's going on, who's got the ball, when is it supposed to be finished, who's got the next action item, they now have to resort to all of this fragmented communication, e mail and phone and text messaging.
Steps smack into the middle of to solve, to connect all of the people with all of the information that's relevant on the project, make that information digestible, make it understandable, index it, make it visualizable so that even if you don't have the source authoring tools, you can see what was created. And also to provide an infrastructure for tracking all of the activity on that project to make sense to put tasks and milestones and notes visible, accessible and actionable to the project team. And to do that on any device at any time from anywhere. So we're addressing a really universal need in our industry, a broad horizontal universal need across all of our customers and across even our competitors' customers. So when our customers now log into A360, they can see all their projects at a glance.
They can see what's going on. They can see into the project all of the activity in the project. They can initiate new projects, add information. I actually want to take a moment and ask you to look at the thing that's labeled to search anything, because it just sounds like a feature, but think of this. We all today use Google to find information that we're looking for.
Our customers have no way to look across all of their projects to find things that they may have worked on before. So, if they're looking for a component or a design part or something that they had worked on 6 months ago or they knew another team had worked on, there is no easy way to do that until 8360 comes along and indexes all of that information and makes it discoverable. So much like Facebook has the social graph, we are standing up the design graph, the relationships, the patterns between all of the projects and all of the information in the project. Now within any project, again, customers can look at the people in the project, the activity specific to the project, they can look at the data within the project. Addressing that universal need.
We're combining all the things that they had to use email and phone and SharePoint and Dropbox, all of that capability is now in one so I talked about all of the complexity in the design and engineering world, they just send a URL to somebody that is part of the project or invite them into the site to look at a piece of information just by clicking on that link that person participating in the project is able to look at the data in all of its rich visual and information detail without ever needing the source CAD system. We support over 60 file formats. We continue to add that every day. We support our competitors' file formats. We just make it dead simple, dead simple to share information no matter what the source data is, source system is with the extended project team.
The information is indexed, so things can be found and discovered. So in the case of this beautiful engine, if you're looking for this one part number, this one component, you can just type in that in the search field and the system will isolate it for you. This real combination of making sense of a project, letting you discover things, letting you see things, letting you invite and understand the activity on a project is a real universal need. And we put the product out at the A360 now. And our customers really are for A360 now.
And our customers really are giving us positive feedback on how this product is working for them. We're getting great responses and we're continuing to improve the product as we go along. So A360 is the way we are going to drive that add cloud to every account going forward. We're really confident that our customers will not just like what they see and use it, but that they will subscribe and add A360. We have a real focus in our company around A360 going forward in the product group, in the sales organization, the marketing organization.
It's a key part of that 20 story where we're adding value in every account. It's also a part of the 50 story because as I mentioned earlier, some of the customers who are using 8360 are actually competitive accounts. They really have had no good way to look at SOLIDWORKS information or any other kind of competitive information in this shared project environment. So we're really excited. We're getting great feedback.
And in fact, to tell you more about this adding value and getting new subscribers with A360 and in fact the entire Autodesk portfolio, it's now my pleasure to invite Steve Blum up here.
Thank you, Amar. Good morning. So I'm going to actually come back to A360 toward the tail end of the presentation, because we are very excited about it because it does attack both the 20 and the 50 part of the equation. So more to come on that. So today I want to step you through basically four things.
I'm going to give you a reminder of our sales approach by customer segmentation just to make sure we're all on the same page about how we're going to market with named accounts and SMBs and very small businesses. Then I'm going to focus in on 3 areas that are of top importance to us and I know from some of our conversations, high interest to you and a focus on what our partner strategy is going forward, going to focus in on our named account sales approach and strategy, and then give you an overview of what our subscription sales strategies are focusing on all three of our subscription businesses. Okay. So using the same approach that Andrew had, we basically break up our customer segments into named accounts at the top of the pyramid, small to medium sized businesses in the middle of the pyramid and very small businesses at the bottom of the pyramid. So for our named accounts, this is an Autodesk led sales approach.
I have dedicated teams, sales and technical folks that are assigned specific accounts and are responsible for driving business with those accounts. So this is a direct fulfillment process in most instances and we're leading with enterprise business agreements, the consumption based models that Andrew talked about earlier. But what's important is we're not just focusing on getting a licensing model in with those accounts, we're focusing on the full adoption, the full engagement process with those customers. So I'll go into that in some detail here in a little bit, but it's focusing on services and how do we really help them be successful when they're given access to this software. Now we're also of course leveraging all of our cloud service subscriptions in this space.
There's high interest there as well. And I do want to make sure that you understand there are some instances where our partners play a role with named accounts. They may be able to help add value in either the pre or post sales part of the engagement process. And we've developed service fee models. I'm going to use the term service fee.
Some of you may actually think of it as service fees, so you can use that as an alternating statement. But we have those engagement models in place for partners in the named account space where appropriate.
Next, I'm going to talk about the SMBs.
This is where the majority of our business comes from. And this is a partner led sales approach. So we're leveraging our partners around the world. I have territory teams that team up with them to help sell the solutions to our customers and ensure that they're being successfully adopted. Our partners take a lead in that capacity.
They lead with suites with maintenance subscription attached, but of course desktop subscriptions are also available for customers in the SMB space and we are certainly seeing interest in our cloud service subscriptions. Now this year we've invested in building out an inside sales team. I'm going to go through that in a little bit here, but we do have our inside sales teams focused on driving subscription renewals, especially when customers have expired and move past when they were supposed to renew and I'll get step you through that in a little bit. And then in the VSB, very small business space, we really have either a partner, e store or e tailor based approach, depending upon the market and the best way to get the market based upon customer buying preferences. Now predominantly they're selling perpetual licenses, sometimes maintenance subscriptions attached, sometimes not.
LT is a highly bought product in this space. But our different subscription offerings of course are available to these customers and we're actually seeing strong traction for desktop subscription, specifically with LT and to some extent our animation products as well. Now again that inside sales team I mentioned is also focusing on driving subscription renewals in this segment. So that's our sales approach by each of the segments. Now let me step you through our partner strategy overall.
I know this is an area of interest. So our primary focus well, first, let me make sure you understand our partners have been and continue to be a very important part of our overall go to market. We do typically 80% to 85% of our business through our partners. It's been that way. We expect it to continue to be that way.
The partners are critical to our success. This is why we're focusing on helping our partners prepare to transition their businesses to support our new business models. I'm going to give you a very specific example of something we're doing the Q4 in a few minutes. Now as I mentioned, we have set up service fee programs to help support selling our cloud service subscriptions or selling opportunities into our named accounts with our partners. Again, we fulfill that business directly with Autodesk, but we have service fee programs for when partners are playing a role in either pre or post sales part of the process.
We're going to continue to invest in our high performing partners. We're going to continue to reward specialization and the investment in resources to drive those specializations in particular industry segments. Now we know we've seen partner consolidation. Partner consolidation has been happening around the world for many years and we expect it to continue.
We don't see that as
a bad thing, the way. That's an opportunity for us to actually focus on working with fewer, but stronger partners in each of the markets you should expect to see partner consolidation continuing. That's not an issue. We actually recognize it. There's healthiness in that for our partners who get stronger and for Autodesk and as well our customers.
Now I do want you to know that we are expecting to bring new partners into the Autodesk ecosystem as well, specifically to help us focus on our newer offerings, our cloud offerings as an example. We recognize that there are going to be specialized partners that want to come into our ecosystem and just focus on one of those new offerings. And we're encouraging them to do that and we're developing new partner models to support that. Okay. So let me step you through a partner economic example.
And now it's building differently. All right. We didn't need that. Okay. So this is something we're rolling out for the Q4.
This is an actual example. In fact, we have been in the process of making our partners aware of this program for Q4 this week. So what I'm showing you here are absolute dollars. These are margin dollars that our partners get on selling AutoCAD LT as a perpetual license, that's the bigger bar, that's what it looks like today or a desktop subscription version of AutoCAD LT. This is exactly the margin profile in dollars today.
In the Q4, we want our partners to focus on desktop subscriptions for AutoCAD LT. And as a result, we are lowering the margin dollars on perpetual LTE seats and we're raising the absolute margin dollars on desktop subscription LTC. In fact, our partners will make the same margin dollars selling a desktop subscription version of LTE that they'll make selling a perpetual license of LTE. Now the partners will see this as a plus because they can sell an LTE perpetual seat once. They may be able to attach maintenance subscription, maybe not.
They can sell the LT desktop subscription over and over again and they'll make these margins over and over and over again. So we think this is going to be an interesting test to see how we can start changing the economics to incent our partners to promote what we think is the best business offering for our customers, which is desktop subscription. Okay. So we also have introduced 2 new partner models to support our new business offerings, the advisor program and the referral program. So again, these are service fee programs that we're paying we're basically transacting business directly with the end customer and paying our partners a fee for the services they're providing.
Now the advisor program is a program where our partners need to apply to become an advisor. And it requires dedicated sales and technical resources focused in the particular area of specialization to support the offer that they're applying for. So there's a cost for them to do this. But once they're accepted, they're in a position to be able to go and identify opportunities. They register them.
We Autodesk work together with the partner to sell the customer the solution, again, transact the business directly with the customer, the partner stays engaged in helping drive adoption and use of the offerings, it will be involved in the renewal and will earn a service fee for doing that. We also have a referral program. So this program doesn't require anyone to apply. It doesn't require dedicated resources. It's an opportunistic program for any of our partners who may be engaged with a customer and they may identify an opportunity say for PLM 360 or BIM 360.
They can register that opportunity. We then Autodesk take the whole lead and the entire responsibility of engaging with the customer, closing out a contract, helping them to adopt and renew that offering over time and we pay a referral fee when the contract is closed to the partner. The referral fee for this program is lower than you would expect we would be paying to an advisor partner who is making a greater investment. But this is how our partners can engage with cloud service subscriptions moving forward. And as I mentioned earlier, there are instances where our partners add value in either the pre sales or post sales part of the engagement process with named accounts.
And when they do and they work closely with our teams, they can put together a teaming service agreement and through delivery of a set of responsibilities defined in that teaming agreement, we would pay them a service fee. Okay. Now I'm going to transition on to our named account sales strategy. So we're continuing to invest in dedicated sales and technical resources focused on our named accounts And we're leading with our enterprise business agreements. Again, this is what Andrew talked about earlier, our token based licensing model that gives access to our entire portfolio to a customer engaged in this model.
So it's a consumption based business model. One of the things I want to make sure you're clear on though is that that's just one element of the engagement process. In fact, if that was the only element, I wouldn't be excited about the model. Included in an enterprise business agreement are enterprise priority support requirements, a dedicated customer success manager focused on that account and identified consulting credits and even consulting implementation projects to ensure that the customers are successful in adopting and using the offerings, sometimes even helping them get their work done in some instances. It's this entire reshaping of the engagement that is what we call an enterprise business agreement.
And we see this as critical to having this direct engagement with our named accounts and truly developing strategic relationships that are lasting and long term and added value to our customers. And again, as I mentioned before, but highlighted here as well, we do have partners engaging and helping us in this process from time to time. And in those instances, we set up a teaming agreement and pay them a service fee. Now we introduced the TokenFlex model Q4 of last year. Since then, 10 customers, 10 named accounts move from our prior enterprise business agreement, which we called multiplex to the new consumption based token flex model.
And I have actually shown here all 10 of those customers. And what we're evaluating here are the number of active users that we have in the token flex model compared to the prior multi flex model. And what we're seeing in the early days of our new model is a 2.4x or said differently a 2 40% growth in the average monthly users of Autodesk software within these named accounts, within these 10 named accounts. So we're really pleased to see that we're driving deeper account penetration into the named accounts. We're taking advantage of more of the offerings because now those offerings are available we're actually reaching into other parts of the enterprise that before we weren't getting to.
So again, these are early days and if you're wondering, okay, why would one customer be on the one end or the other end? There's lots of reasons. These customers may have been in the Token Flex model longer because we actually see it growing over time. Some of them may have had more licenses available to them in the old model compared to the newer model. They may be in different places in their implementation and adoption plans overall, but the early results are very exciting and are absolutely aligned with our expectations.
Now, when I visit with the executives from the named accounts that have implemented TokenFlex, these are the types of things they're telling me. They're saying we love having access to the full portfolio. And it's so much easier now to track and report how we're using that software. Many of these companies are actually using it to start build back that actually track who's using the software and actually have the departments that are getting the most value paying the bill and they like that. It's an easier way of tracking than they had before.
They love that they have the flexibility to access the software at any time whenever they need it. They also recognize the level of support they're getting from Autodesk is dramatically different. In fact, it's game changing different. The amount of comments about enterprise priority support or the value of that customer success manager come up every single time I have a conversation. And absolutely, they continue to say, hey, we are certainly viewing Autodesk very differently and we feel like we're moving into a space where we have a strong strategic for FY 2016 and beyond, we want to lead with desktop subscription as the best overall economic offering or business model for our our customers.
So there's going to be
a whole lot of emphasis and work done to drive customer awareness about why that is the case and how they can benefit by moving their business model to a desktop subscription model. Andrew talked about the 2,900,000 non subscribers. These are the active users of our software that have not become subscribers within our ecosystem. We recognize that the premier offering to turn those users into active subscribers as desktop subscription and we'll be leading with desktop subscription as the primary offering to that 2,900,000 users who are non subscribers next year. We also see a tremendous opportunity to use desktop subscription as a competitive win strategy to get customers who are using alternative solutions to actually move to an Autodesk solution through the desktop subscription business model.
What I'm really excited about as well is that for our partners, we'll end up we'll we'll introduce the monthly option that Andrew talked about. But more importantly for our customers, they're going to want multi year desktop subscription options, which we also will be rolling out next year. Now we're going to align the incentives with our partners to ensure that they have a business model that's set up to support driving desktop subscription. And I just showed you the example of what we're doing in Q4 with AutoCAD LT and I expect we'll learn a tremendous amount from that actual work and that will give us guidance on how to continue to drive that evolution and evolving business model so that our partners embrace selling desktop subscription with all of our offerings. Now we also want to maintain the focus on desktop subscription with our partners and we recognize some of them haven't engaged heavily in desktop subscription yet.
So we're going to focus on helping them understand the value proposition. We're developing sales enablement tools for them and partner toolkits to be able to best position the value of desktop subscription as the best economic offering for our customers. And as I mentioned, we have put in place an inside sales team, which we will continue to invest in and grow. Right now from a desktop subscription perspective, those people are focused in 2 areas. They're either focusing on renewing expired desktop subscription customers, whether they each purchase directly from us or through a partner, if someone hasn't renewed them and they expire, the inside sales team is contacting them to see if we can get them to reengage.
We also recognize that quite a few, a large number of our desktop subscription customers are purchasing on an e store and there's no reseller involved. We want somebody responsible for driving the renewals there and the inside sales team is focusing on that set of customers where no reseller has been involved in the sales subscription customers are new. That was based upon an analytical approach of us subscription customers are new. That was based upon an analytical approach of us taking a look at parent companies and doing some data analysis. I'm going to show you a different point of view, which is also accurate.
So we actually had an independent company contact our North American from customer self selected point of view. And what's interesting is that 56% of these customers who we spoke with say they were new customers to Autodesk, which means that 44% of them were existing customers. But peeling the onion back further actually tells us something quite interesting. More than half of the existing customers say they used Autodesk software, but they did not attach maintenance subscription. So they were users, but non subscribers and they have now become subscribers in the model.
That's goodness. That's exactly how we wanted this model to work. What's interesting about the 56% that say they weren't Autodesk users, a large chunk of them said they were using non Autodesk design software. Good. That means we're penetrating into competitive accounts.
That's exactly what we want to have happen. A bunch of them said, well, I didn't use any design software. We kind of see that as they weren't paying for the use of design software before and now have a business model available to them to monetize and actually pay for their use. And then if they didn't fit into one of these categories, we had other, but other was something other than being an Autodesk prior user. So we're really excited about this information.
Desktop subscription is giving us the opportunity to grow the overall number of subscribers. It's giving us a competitive advantage to grow the overall base of business we can go after. It's hitting the mark of what we expected it to do. Okay. Let me move on to maintenance subscription.
So first, as a reminder, our partners who 10 years ago didn't feel so comfortable about maintenance subscription do most of our maintenance subscription business today. They do a large majority of our maintenance subscription and we need them to continue to focus on that business. And in fact, we continue to use renewal rates and attach rates as requirements for the tiering of our partners. And we are continuing to raise the expectation. We want the renewal rates to continue to go up, attach rates to continue to go up for them to maintain the higher tiering within our partner framework.
Now, this has been a key area of focus for our inside sales team. So like I said before, the first place we had them focus were on expired maintenance That becomes an opportunity for our inside sales team and the inside sales teams go and contact those customers to bring them back into the ecosystem and to actually renew. And we're getting great results there. We also recognize we don't have 100% attach of maintenance subscription on our sales. So any customer that purchases a new seat of software and does not attach maintenance subscription is now an opportunity for our inside sales team to contact to attached maintenance subscription.
And then we also recognize there are a large number of users out there, subscribers don't have a reseller of record, either because they purchased on the e store or perhaps the reseller they were working with has gone out of business, so they don't want to work anyone. And when we find those opportunities, we're also turning them over to our inside sales team. Now all these opportunities are being closed directly with the customer through our inside sales team since the partners haven't renewed them themselves. So this is something we're fulfilling directly. But what's helping us as well as our partners drive renewal rates up is leveraging big data, this early warning system and the analytics that Andrew talked about.
By focusing on big data and by looking at analytics, we can identify early in the process where the high likely non renewal subscribers exist and we can start working proactively with those customers maintenance subscription before the time of renewal, so that they actually become renewing maintenance subscribers overall. And this information is it continues to expand and grow, will be used by our own teams as well as by our partners to drive those renewal rates up. Okay. Now we move on to the 3rd type of subscription, which was our cloud services subscription. If you don't know this already, I'll make sure that you know, we are investing and increasing our investment in dedicated product specialist teams focused on each one of our cloud offerings.
So for BIM 360 or PLM 360, CAM 360, SIM 360, Fusion 360, InfraWorks 360. I have dedicated sales and technical folks that wake up every morning just focused on selling those offerings, engaging with customers and driving these offerings to volume. Now, we recognize our partners want to engage in some of these activities, which is great, which is why we introduced the advisor and referral partner programs, as I talked about earlier. And here's what I want to check back in on A360. So A360 is very exciting to us and that we see this as the cloud offering where we could attach it to every user in our customer base.
So that's all of our current maintenance subscribers and all of those 2,900,000 non subscribers that we want to bring into the subscription ecosystem. We recognize that by focusing this way on A360, we do 2 things. 1st, we will drive deeper account penetration. We'll get to more users and turn them into subscribers within each one of our accounts, which of course adds more subscribers and attacks the 50 part of our equation. But each time we bring more users and subscribers in from each of these accounts, it works on that 20% metric of getting more value from each of those customers.
We also recognize that this is a competitive sold by our own sales teams as well as our partners that we have a better position, a more competitive position to compete in the manufacturing and in the AEC marketplaces. And these new offerings are bringing in new customers. Now, Andrew showed you a total metric of 30% of our cloud service customers are new. I'm giving you some specifics here, all right. So I'm taking you one level deeper.
Other than the first offering, which is HSM, this is a CAM offering, which is new. The others are BIM 360, Fusion 360, PLM 360, and InfraWorks 360. The green bars are the number of new customers brand new to Autodesk. You can see Fusion 360, 84% of our customers are brand new to Autodesk. That's awesome.
PLM is bringing in 36% new customers into the Autodesk ecosystem. HSM I put on here because the CAM offering is new for us. It's a new market. 76% of our customers are brand new. This is exciting.
This is focusing on the 50, the 50 growth of our subscriber base. Now, I do want to highlight the gray bar. The gray bar are our existing subscribers who have now We're getting more value from these accounts by having them attach and start using our cloud service subscription. So I'm really excited about this. InfraWorks, by the way, if you're wondering, early days.
We have a lot of traction in the infrastructure space right now. And we actually have been focusing on a lot of our existing customers because they're helping us work through scaling this and really solving some really big problems. But I'm really, really pleased about the results so far. So in summary, we have first of all, I want to say I'm really proud of our direct teams, my Autodesk sales teams as well as our partners. The results they've driven so far this year have been fantastic.
Our sales approach is best suited for the needs of the customers in each of the segments we're focusing on. And we're focusing on that partner framework and we're focusing on ensuring that our partners are prepared to make the business model transition along with us. Our named accounts have great traction and we're really moving to a space of having strategic relationships with these customers via leveraging the enterprise business agreement. And we have a long way to go. We're in the early days of that and we have a lot of progress ahead, but great traction moving forward.
Throughout this year, as you've seen, maintenance subscription has really led the day as far as driving net new subscribers into the ecosystem. But we absolutely expect that desktop subscription and cloud services are going to become big areas for subscriber growth in FY 2016 and beyond. So thank you very much again for joining us here and it is my pleasure to introduce you my finance business partner who's going to focus on the
distinct privilege of starting my presentation with something everybody is familiar with. The legal and finance guys have asked me to remind you of the Safe Harbor. This We've made a lot of forward looking statements about our business that's subject to risks and uncertainties that are spelled out in our 10 Ks and 10 Qs. So with that, this morning, I'm going to cover the business model transition and how we believe that it's going to drive shareholder value for Autodesk. We'll talk about some of the key metrics that think are important for people to focus on as we drive through the business model transition.
And we'll also talk about our capital allocation strategy. That's something investors have a lot of questions about and we spend a lot of time and we want to bring you up to speed on where we are there. We'll talk about this business model transition specifically how it will impact our financials and then talk about the guidance for both this year, this quarter as well as the longer term guidance numbers. Before I get started, I want to remind everybody and do a quick level set on the strong performance we've had this year already. About a year ago, we set out some long term guidance ourselves around the business model transition here at Investor Day.
And as we entered fiscal 2015, we did what we always do, play out our targets for you for what we think we'll do this year. On several of our key metrics, billings growth, revenue growth and our net subscriber additions, we've already significantly raised our targets for the year. And we think that that's a sign that we're off to a fast start with the business model transition in this fiscal year. One of Autodesk's key advantages in the market is that we're so diversified. We have diversification across industry segments.
You heard Amar talk this morning about some of the things in AEC that are driving our strength. We've got new product offerings, strength in the commercial construction business is coming back as well. We're entering new markets there. You heard Buzz talk about some of the things in manufacturing that are driving the business. Suite strategy has been particularly effective in the manufacturing market.
We've got new markets that we're entering there as well. When I think about Q2 performance, we had really strong results. Mar mentioned 23% revenue growth in the AEC space, 17% growth in the manufacturing space. And I want to mention that Platform Solutions, which is our horizontal AutoCAD and LT products grew 5 percent in the quarter. So strong growth for products that are our historic base.
As well, we're well diversified by geography. Now these numbers are for fiscal 2014, but you can see that Americas and EMEA are about the same size and APAC is a little bit smaller, but well diversified across the geographies. And one of the things that was great in the second quarter is we saw double digit constant currency growth from every geography, really strong performance. So net billings is something that we really started talking about last year as we introduced the business model transition. It's something that we think is an important metric for you to monitor the strength of our business.
It will show the underlying strength and velocity of the business in a way that's more reflective of what we're doing than revenue is right now as we go through the transition. This slide shows net billings for the growth for the first half of the year. And we started talking about the growth rates in Q1. We'll continue to update you on growth rates on an ongoing basis. I think the exciting thing here is that you can see we had 18 percent growth in net billings in the first half.
That's based on strong license growth as well as strong subscription growth. The subscription growth has been mostly driven by maintenance subscription because that's a big part of the subscription model right now. But we're beginning to see desktop and cloud come on and have some meaningful impact. The strong growth in the first half gives us confidence in our 10% to 12% billings growth number for the full year. As well, subscription revenue is an important part of the business model.
You can see we've had steady growth over the years. This is a 5 year model. Our subscription program, subscription program, the maintenance subscription program particularly started about 10 years ago and have shown steady increases over that time. You see we grew 7% last year and 14% in the first half of this year. That's based on strong growth in the particularly the maintenance subscription model.
We actually in fiscal 2014, we passed the $1,000,000,000 mark in subscription revenue for the first time, predominantly on maintenance subscription. Again, as I mentioned before, as desktop and cloud begin to accelerate, we'll contributions from those and we believe that our subscription revenue growth rates will increase. So switching gears a little bit, I want to talk about the balance sheet. It's a strategic asset for Autodesk and it's as strong as it's ever been. In the Q2, we saw strong growth in deferred revenue.
In fact, we had record deferred revenue on the balance sheet. We also had DSOs at 52 days, which is a great result for a company that's as globally diversified as we are. On an ongoing basis, we've had strong cash generation. We have $1,400,000,000 of cash and investments net of our debt. And channel inventory is something that we've worked on over the past few years to bring those balances down through things like electronic distribution and different programs, our channel inventory levels are near their historic lows and we expect them to remain low.
So let's talk about some of the balance sheet metrics in a little bit more detail. I mentioned deferred revenue was at a record high. It grew 22% in the 2nd quarter compared to quarter of the previous year. That's predominantly based on maintenance subscription, which is the biggest part of our subscription gains. But as I mentioned, cloud and desktop are beginning to have contribution there.
As we successfully transition more of our customers and users to subscription models, we
expect that deferred revenue will continue to grow.
It's currently about $1,000,000,000 Auto has been a strong generator of cash over the years. You can see in this slide in fiscal 2010 when we were having a bit of a business downturn, we even in that time, we generated positive cash flow. As the business recovered, we saw strong growth in our cash flow and we've maintained that over the years. We expect the cash flow growth will continue to be strong. We had 9% cash flow growth in the first half of the year and we expect it will continue to be strong throughout the year.
The exact finish at the end of the year will be a little bit dependent on billings linearity in the 4th of fiscal 2015. That was an increase of 1% over the previous year, which was an increase of 1% over the previous year. So we're seeing steady growth there, which we think is a sign of a healthy business and a positive attribute of the business. As well, our cash and investments balances, which I mentioned were $1,400,000,000 net of debt at the end of Q2. This is one of the prize assets on the balance sheet.
I should note that 78% of that is located offshore. So I'm going to switch gears a little bit and talk about our capital allocation strategy. It's something we get a lot of questions from investors about spend a lot of time thinking about. In addition to funding our ongoing operations, we have 2 main uses of our cash. It's investing in M and A and our share repurchase program.
As well, we've got a note here on the bottom, we believe that debt is a healthy part of every efficient balance sheet. To that end, nearly 2 years ago, we issued $750,000,000 of debt and we believe that debt will be an ongoing part of our balance sheet. So if we can talk about M and A for a little bit. M and A strategy at Autodesk has centered historically around small tuck in acquisitions or technology purchases that add features and functionality to existing products in a low risk way. We don't like to buy big businesses or do mergers of equals.
We believe that our sweet spot is with small tuck in kind of acquisitions. And that's what we've done very well. You can see from this slide, many of our major products have had some impact through features and functionality or even been acquired. If you look at the slide, you can see AutoCAD here, Inventor, Revit was an acquired product, 3ds Max, Maya, all in some ways were impacted by acquisitions either through features and functionality or actually acquired. So our M and deep product portfolio.
M and A will continue to be a part of our existing or a part of our strategy going forward. We do expect to continue to do M and A, but I should note that fiscal 2015, the volume of M and A has been a little larger than it's been in the past. Buzz talked about Del Cam. It was a little bit of an anomaly in the typical kind of M and A that we do. The strategic asset in a new market that we thought was very important, price was nearly $300,000,000 So it was a little different than what we've done in the past and we don't expect to complete many of these going forward.
But M and A will continue to be a key part of our strategy. As well, over the past few years, our M and A strategy has begun to focus more and more intently on collecting assets that will accelerate our move to cloud and mobile. As you can see in this slide, across the board and some of the cloud technologies that we've got and cloud offerings that we've got, we've been adding pieces of technology and new offerings through M and A that are driving and accelerating our cloud and mobile strategy. This has been a key investment area for us over the past few years and we will continue to strategy really centers on our stock repurchase program. We have 2 main goals in the stock repurchase program.
The first is to return excess cash to shareholders and the second is to reduce the share count over time. As you can see from this slide, in the last 2 years, more than 80% of our free cash flow has been returned to were repurchased at a price just under $425,000,000 So it's been something that we've been very focused on continuing to return cash to investors through that efficient mechanism. We've had a lot of questions recently about currency volatility and what our hedging program as I've got a couple this morning as a matter of fact. So I wanted to remind, I know many of you are already familiar with this program. Our hedging program has been in its current state for several years.
Our policy is not to be speculative when we do our hedging. It's merely to try to lock in FX rates to reduce foreign currency fluctuation risk and help with our forecasting process. We hedge net exposures in our major currencies and we use a classic 4th quarter rolling hedge process. It's simple and effective. So switching gears, I want to circle back on the business model I mentioned earlier, we've already raised our revenue growth guidance for the year, our billings growth guidance for the year as well as our desktop or our subscription additions guidance
for the year.
We've seen meaningful increases in attach and renewal rates for our maintenance subscription program, which is really important going forward. The more of those customers that we keep in the Autodesk portfolio, the more customers we have more services to sell to, we can move to cloud and mobile and get them onto recurring revenue streams. As well, I mentioned deferred revenue reached record levels in Q2. And through all of this transition, we've been increasing our cash flow. So we've seen early success in the business model, the plans that we laid out for you last year at this time.
That success has led us to have confidence in the guidance that we issued for Q3. We believe that's on track. We reiterated that this morning. As well, we reiterated our guidance for fiscal 2015. I want to call specific attention here to the net subscription additions 200,000 to 250,000.
We believe that's on track and you heard Andrew mention this morning
that we'll do at least that many next year.
So as we think about the Autodesk opportunity, we believe it's fast. We believe that growing double digit billings growth will be attainable to us through a number of venues. We've got a large addressable market where we can offer best in class offerings in our core business. We're increasing services to existing users through products like A360. We're also expanding into new markets.
Steve just had a slide up here with PLM 360, Fusion 360, CAM 360. We're reaching all kinds of new users through extending our portfolio. As well, we've been establishing leadership in cloud services. We were the first mover in our industry to cloud and we believe that we have a significant advantage there and we will continue to invest and drive that. That optimism translates into a final confirmation of some of guidance numbers that we gave you last year, our long term targets.
You've heard a lot of talk this morning about the 12%, 20%, 50%, 12% billings CAGR over through deliver that. As well, I wanted to talk about 3 other metrics that we mentioned last year. 70% plus recurring revenue by fiscal 2018. We believe that's entirely possible. The speed and the final level of that number will greatly depend on the strategic decisions around perpetual offerings and those ends of life.
As well, we believe we'll continue to see a significant increase in the percent of ratable revenue as a percent of total as we move to subscription models and more of the ratable models. And finally, we remain committed to our operating margin at 30% by the time we leave fiscal 2018. So we're on track for the guidance that we put out last year on the business model long term growth targets and we think that the company is executing well against those
for Carl. Thank you, everyone.
Thanks, Sid. Okay. So hopefully, we've given you nuts and bolts. And I'm sure as we get to Q and A, we'll follow-up more on the twelvetwentyfifty. But hopefully, we've given you sufficient detail so that people understand why we feel like we're on track with 2,050 and what we're going to do in future years to continue to drive the progression to our goals of 12, 20 50.
I just wanted to remind you a little bit. Hopefully, while we provided enough detail, if you step back and at any point want to understand what we're trying to do, I think it's important for you to look at what strategic decisions we've made. One of the ways we go about planning for the future is to take a point out on the future. We form an opinion about it and we go after that. And certainly, we course correct along the way.
But many of the decisions we've made have been in the works for a long time. So whether it's about our cloud and mobile and social strategy as the new computing platform, what we've decided to do to compete more effectively by a more open approach, the markets we choose to compete in or the business model are all long term decisions. We don't wake up that way. And so as you go through and look at the things we're doing, it's certainly worth digging into details and understanding the nuts and bolts. But I urge you also to use this other lens to look at what we're doing and you'll better understand some of the things that are going on with Autodesk.
Talked about at the beginning, there's the opportunity. We think the opportunity is growing. As you heard, there's secular growth in these markets. We think there's ability to grab more market share as well as in many of these industries their spend on IT is going up considerably as the solutions provide more value. And as we look going forward, one of the things that we've spent a bunch of time on is trying to choose the areas in which we want to compete.
One of the interesting most interesting areas for us is we've spent most of 30 years helping people design and engineering things. But if you look at the complexity, if you look at these two images, one is stadium on the left, the other is an airplane on the right, the complexity of actually getting these built is where a huge amount of the money is spent and a huge amount of money is lost and where a huge amount of value can be recaptured by doing this better. And so one of the areas we focused on particularly is how things are going to get fabricated in the future. We're really interested in how we can help our customers make things. You may have heard us talk in the past about additive manufacturing.
Buzz mentioned it today. By the way, for those of you who haven't seen it, we announced what we're doing with our Spark 3 d printing platform as well as our Spark printer. 1 of the printers is out there. So if you want to see the Autodesk 3 d printer, that's our first foray into hardware ever. You can go out and see the 3 d printer out there.
But that's just part of a larger effort along with what we're doing with CAM, what we're doing in carbon fiber and composites to help our customers manage the process and manage the materials and be able to better realize the things they've designed and engineered. So with that, we'll end the prepared remarks. Let me invite everybody on the team back in here, and then we'll spend the last bit of time with some Q and A. And I think Dave is going to organize the Q and A. Otherwise, I'll start calling on people.
Let's just wait for them to bring in the chairs.
Good
morning, Jeff. Two questions, perhaps mostly for Steve and Andrew. First, could you share your thinking about what your annual new license volume opportunity or equivalent thereof might be, particularly as compared with your historical volumes and specifically for LT. When you last disclosed your annual volume about 6 years ago, you were doing about 600,000 or more new licenses a year. That's probably dropped now to maybe 500,000 or so if you think about the drop of AutoCAD and the mix shift to suites, but still a lot of volume and half of that volume as you said Andrew was LT.
So maybe talk about how you think about the new volume opportunity. Secondly, could you talk about the operational issues pertaining to the wider availability of the usage based model beyond just the largest accounts? And why that model wouldn't be the prevalent post perpetual part of the model rather than rentals. When you think about the breakeven period for example for monthly and quarterly rentals, it might not be that compelling for a lot of your customers where the usage based model might be more compelling?
Thanks. That was 2, it was probably 8 questions. All right. So let me dodge the first question and answer it at the same time. So one way we actually get a lot of insight to what we think the volumes are going to be is what we've been doing with some of our direct experiments, especially around the eStore.
So let me give you a number to ponder as you think about what might happen to our speed volume. As we rolled out desktop subs onto the e stores and let's just use the microcosm of the Americas e store because it's our most vibrant and active e store right now. We saw doubling in feed volume, basically a kind of a steady state volume of perpetual licenses and then an additional uplift of desktop subscription licenses being sold. Now that's not going to presage exactly what's going to happen to the total seat volume as it runs out during moving forward. But because we're able to bring in new buyers like this and we're able to attract new activity, you're going to see those numbers change pretty significantly.
And rather than try to guess what that change is going to be, I refer to these experiments because they're real in the market experiments that we do to understand exactly how the dynamics are moving forward. And yes, some of those numbers as we've learned from some of these experiments end up baked up baked into our models and what we view as possible. So there's kind of a half answer to your question. And the other question was operational challenges. Now the consumption model.
Yes. You roll out an offering like that, it has a huge potential to be a very popular, very prevalent offering. It could be the next generation offering we have. Maybe next year, we'll start talking more about what we've learned in terms of rolling it out and trying to drive that to volume. It's absolutely got the potential to replace the buying pattern when you roll out a model like that, but not everybody is going to want a model like that.
It all depends on how it's packaged and delivered. But yes, it has huge potential to become a new model moving forward and a new preferred buying model. And yes, operationally, there is absolutely challenges because if you're deploying an access and consumption type model like you're going to have to be able to track the consumption on a very large scale and we're definitely working to do that.
Hi. I had a quick question on the 20% portion of the 15 twelve are doing today. When I look at the customer lifetime value slide you put for AutoCAD LT potentially going up by 30%. And then I look at just potential price increases that you could have on license and maintenance, traditional license and maintenance model. How do we why is it the kind of why do we think about 20% price increase for a customer?
Why can't it be larger than that? What are kind of the pressing factors?
Well, I mean, I think you're right on the math. I think right now, really it's these are new experiments, these are new offerings, and we'll see how they go. And so we've put out what we think to be is reasonable guidance given where we are, but as we learn from them. As we've shown already in the 1st year, we've already upped the guidance considerably. And if it proves out that these models work as well as they should, we will continue to do so.
So we'll continue to not only need, but exceed the guidance we give and we'll correct it as we go. But yes, most of the activities there speak to an ability to drive more revenue and particularly billings and drive more to the bottom line.
Awesome. Thank you. This is Keith Weiss from Morgan Stanley. Thank you guys for having us and definitely very impressive progress in that business model transition. Just a couple of definitional questions for you guys.
One, just an understanding, if we're getting rid of perpetual licenses over the next 12 months to 24 months, why isn't the FY 2018 target 100% recurring revenue? What else is going to be in there that's not recurring? And then part 2, I'll just throw it out there. In terms of the renewal rates, definitely when we do our models, renewal rates is a key factor in terms of driving that billings growth. Can you give us an idea of where billings or where renewal rates are today in your subscriptions?
How close are we to that 90% level to help us sort of benchmark and sort of level set in terms
of our model?
I can do number 2. You want to do number 1?
Sure. So on the recurring revenue, we have our well, we've got our plans on how we're going to roll out the perpetual changes and we haven't announced those to anyone. We're not ready to do that. We don't want to change our guidance because we don't want to update and give out those plans. But certainly with an end of life of perpetual 24 months out, it could certainly be more than 70%, but we weren't ready to give a more updated number at this point in time.
So, I know you shook your head. So, Keith, yes. So yes, if it is completely gone at that point in time, it will exceed 70% by a considerable amount.
Yes. If perpetual licenses are done in 2020, there's nothing definitionally that we're not understanding.
No, no, no, no.
There's no other revenue.
We just didn't have a better number. I mean, you can really get close to 100%, because if you think of the offerings available at that time, every one of them should be recurring. And there's a little bit of Consulting is the one, Kevin. Consulting is the one which we've just kind of given you a rough figure at about $100,000,000 So you can take that off. There may be some other nits and gnats around, but the majority of the revenue will be recurring and the ratable still hangs a little bit on the new accounting you should think of them in the mid to high 80s.
Thank you.
Thanks. It's Brent Thill with UBS. Just as
it relates Carl, you've talked
a lot about the channel differences between you and Adobe. But when you look at the model that is progressing, Steve, thanks for the color on how this is going to build out. It just seems like over time, there's no question that you can drop the percent of sales and marketing, which has been pretty heavy relative to other software companies we all cover down as a percent of revenue. So can you just walk through your assumption on sales and marketing? Where you find the efficiency in the small as you make this transition?
It seems like if you do have resellers drop off, it feels like there's more revenue that's going to go direct to you, which means better margins over time. So what how do you see the progression of this?
So I think there are a
couple of things in there. I think there's Brent the back somewhere. Yes. So yes, there are a couple of things to think about as we make this transition. One is, I think overall, just our sales and marketing numbers are high.
So regardless of any model change, I think they're high relative to the business that we run. I think if you look at how much we spend ourselves plus our partner spend, I think it's a number that we can manage down over the next few years. Other things in there that will contribute are things like increased volume makes the huge difference. Channel mix will make a difference. New models will make a difference.
So there are a number of factors that would give me lots of confidence that we will be able to lower the percentage of spend on sales and marketing.
So I wouldn't expect that. I was just to add something, guys. Yes. Don't read into my statements that if partner consolidation continues, that means that everything goes direct. Consolidation means that as some smaller partners get consumed by those larger partners, the business stays indirect, but goes through those larger partners too.
So I didn't want you to leave with a misinterpretation of that point. Great.
Thank you. Heather Bellini with Goldman Sachs. I had two questions. Just a follow-up on Brent because you did have a big jump in OpEx this year for your thoughts on that? And then I have a follow-up.
Yes. So I think the first one is, I think you should think of the growth rate this year, we talked about a number of reasons, including Del Cam, bonuses and commissions coming back from down last year. There are a number of reasons. And the other one has been investment in cloud infrastructure. I had a little discussion before with folks and I said, the way we think of our OpEx growth rates is kind of a nominal growth rate for us is around 4% that all other things being equal, you could start with a bogey of kind of 4% and work from there.
I think you'll see our OpEx growth rate moderate over the next few years as well as our M and A spend. And I think you'll see both of those come down in order to hit those targets.
Okay, great. And the follow-up would be given the initiatives around the elimination of perpetual over the next 2 years plus the rapid adoption it seems that the cloud offerings that you discussed today, is there any reason why the sub ads can't be actually considerably better than the 200,000 to 250,000 you've guided to this year and you've mentioned as a target for next year?
Yes, I think they can, but I'll just put Andrew on the hot seat.
At least that level.
Certainly, they can be better. There's no reason for us to look the model is solid. We've got a real sense for where the money is coming from, where the customers are coming from the hit the twelvetwentyfifty. So we believe in it. Do we look at these now and look at the performance and look at some of the things we're doing and say can we exceed some of these metrics?
Yes, we absolutely feel we can exceed some of these metrics. And as we progress, as we learn more about what happens next year, we may start talking to you about revisions or updates to some of those, but absolutely there's potential.
Yes. And as we get to our planning for next year, we'll start figuring it. We felt it was just a little premature now. I mean, I think the first half has been stronger than expected, but we'll update as we move into next year. Hey, thanks, Karl.
So you
guys are arguably well positioned better than just about anyone out there, but you don't operate in a vacuum. So could you talk as best as possible how you see what's going on in your competitors' range on everyone's doing a range of reaction and response to what you're doing, because it feels like you're 1st mover in a lot of areas. But just kind of at least at a high level think about that, because it's you have to care about what other people think and do?
Yes. Care less about what they think. It's a personality flaw. So if I was to look out there, I'd say so let's start with manufacturing. My friend Buzz will jump in.
What has surprised me most in manufacturing has been the hesitancy for any of the companies to do anything dramatically different. I see most of the companies doing more of the same old thing they've done before. In a couple of cases, you see them kind of reaching out to slightly new markets, but kind of with an old business model and old technology.
I think they're trying to protect an old fashioned expensive labor intensive business model and it baffles me why they haven't.
And the interesting thing is at a time of transition like this, you can always get signs that tell you that the old model is good. You can always find the recalcitrant customer. They're going, I'll never move to the cloud. Mobile is stupid. I'll never let you know these devices are insecure.
We'll never do anything. I mean, there's a million reasons why not to look forward. And so you can get some great comfort in talking to your most stubborn customers about why the past really is the future. And I think some of them are just having too many
the current spend. And so you can confuse yourself.
But I mean, I think Buzz is an current spend. And so you can confuse yourself. But I mean, I think Buzz's examples of some of the fusion customers, some of the ones we're looking at, I mean, these are new companies. And even inside mainline whole companies, they're all looking to these new companies as consultants and to bring in the techniques that they have to bring products to market. So I don't see a lot of move there.
My guess is what will happen in manufacturing in particular is that there will be a number of startups that come into the field. People will do analysis online. People will do simulation online. They'll do design online. And a bunch of these companies will wake up kind of late, realize that they better do something and they'll be forced to overpay in some acquisitions to buy something.
So I don't take great comfort and we're going to be ahead of the pack forever because people will go out there and they'll wake up and most of them have relatively strong balance sheets and can go spend lots of money. But I think it will be a game of catch up. I think the one thing that I feel confident is that we proved that the direction we're headed is the right direction, whereas 3 or 4 years ago, you could have been a little bit more suspect about whether or not engineering could move to the cloud. AEC, I think, is a little bit more interesting. It's always been a lot more fragmented regionally.
The only things I see different there are lots of new entrants, just like in manufacturing, but doing very different things. And I think that's what's exciting. It's these companies who are coming in and saying there's money being spent on the maintenance and operation of buildings and we're going to put sensors analytics to understand how to run these projects more efficiently. And so that's where they're focused. And in some ways, it makes the most sense.
There's new opportunity. It's kind of a greenfield to go into. I mean, there are a handful of people who are like Trimble trying to buy some of, I'd say, last generation technology. And look, I don't want to take the high horse too much in that CA, plenty of companies are proving. You can sell old technology for lots of years and make money on it.
But that's never been what's interesting to
us. Amar, you've You said
it really well. I don't think.
I mean, I think the other you mentioned Trimble, they've Bentley, that's another company in this similar model.
Yes. I just haven't I haven't seen a lot of movement there. What is the most interesting to me is the fact that there are lots of startups coming. And because there's so much money in the venture community right now, what do they say? 1st, the disruptors get funded, then the copycats get funded and then the stupid gets funded.
And we're somewhere between the copycats and the stupid right now getting funded. And but the good news for us is that there are a lot of experiments getting funded in both manufacturing that's new and different as well as stuff for the AC industry.
Thanks. Matt Hedberg, RBC. So LT is a huge component of the 2,900,000 active customers you're trying to convert to maintenance. And I'm curious, certainly appreciate 30% increase in value on an annual percentage. That's very helpful.
I guess for modeling purposes, can you help us understand what the contribution from a margin perspective is from an LTE customer paying a perpetual versus desktop subscription?
So we don't break out margins by product at all. But I mean, if you think about it, it'll be a more direct model, although we'll start with partners and you can sort of apply the same principles, but we don't break out specific information by product.
Then maybe a quick follow-up, given the new Flex token pricing, which seems interesting. I think you have 10 now active on that. Can you give us a sense for the relative size of that opportunity inside the base? What could that 10 turn into? It seems like it's been very successful thus far.
So I could say that. So we think there's an opportunity to move all of our named accounts over time to a consumption based model. It's just a matter of time and their needs growing. The more that they start using more of our products, the more they benefit from that overall. So we have a goal of moving all of our named accounts there.
It's going to be a matter of
time now. You want to quantify how many named accounts?
So in our named account program, we have varying degrees of focus. So I would say there's several 100 named accounts that are targets for us right now with our current token flex consumption based model. I'd just like to ask about how the cloud may play a role with your core desktop customers today. How does the cloud get involved in their lives in the future? And do you see that ultimately migrating to the cloud?
Yes. So I think the cloud becomes the predominant platform for our customers, kind of full stop. So for anyone who thinks it's some kind of cute add on or random or it's not where the real stuff happens, like I said in my opening remarks, that's what they said about the workstation, that's what they said about the PC, nothing real would ever happen here. And I still remember my trip to this automotive company that insisted they had to build their own workstations in order to be able to do engineering work. So the first thing I'd say is that the cloud becomes the platform of the future for people doing architecture, engineering and design.
If you want to understand the reasons why, there are 2 main things that I think are really important about the cloud, possibly 3, but there's 2 principal ones. 1 is the ability to have totally scalable elastic computing, as much computing power as you want at any point in time. And as I've talked about before, it requires a change in toolset and a change in mindset. I mean most people don't go about their daily job of saying, what if I had all the computing power in the world, how would I do this differently? But I think for those who do, there's huge opportunity ahead in recognizing that we're totally underutilizing the power of computational design to accomplish what many businesses want to do.
So if you just understand that at any point in time, I can scale up to really almost an infinite amount of computing at relatively low cost and I can scale down when I don't need it, the first thing is this notion of infinite computing. The second idea is that's really important and it probably manifests itself best in what we're doing with A360 is this idea that almost none of our customers build, design, engineer things by themselves. Every project that we're involved in or our customers are involved in is a collaborative project. And so this idea of having a central coordination place where you can understand as well what's going on with your construction project, with your manufacturing project, if you can understand that as well as you understand your neighbor's kid's soccer game, as we do on Facebook and Twitter, I mean it only makes sense that this is going to become a primary way people organize and coordinate their projects. So it's this combination.
The third one, which is interesting and is touched on by both Andrew and Steve is the old model of delivering software is going by the wayside. People don't want behind the firewall installed software, whether that's at the desktop level or at the enterprise level. It's just a model of the past. Nowadays, that's that, then it's 1 foot in the past, 1 foot in the future, because I think the applications of the future all look like that. So I think the cloud is an enormous contributor to what our customers do going forward.
And I have just a quick follow-up question on your e store initiative. Where are you in terms of your capability there? That's something you're spending money on? It sounds like it's still under development. And what role do you see that playing in the business going forward?
Yes. So the e store is a couple of things to us. 1, it's a direct channel that allows us to talk directly to our customers. 2, it's also a way for us to test, deploy and push out new business models. And 3, it's also a way for us to drive behavior and interact with the channel in specific markets.
In our wildest dreams, if you look out how many every years you want to look out, maybe it's a $300,000,000 channel, but its impact on the business will likely be more significant than that because of what we use it for in terms of testing new model, deploying new models. Jay, you speculated on consumption models going down, where would we end up testing those first, likely through the direct channels. And the direct channels also allow us to build out certain things in our back office that enable us to do more interesting things with our partners around digital distribution in the future and other aspects of that. So it's actually a pretty strategic aspect in terms of the moving forward
Andrew. But when do you get out of the business of versioning software and Adobe sort of moved to a version list every couple of months drops features, people pick it up they just open the applications up. So that's a quick question number 1. Then question number 2 just on the disclosure. If I think about this modeling, I mean billings are more helpful than revenue, but probably still not that helpful in the next few quarters or next few years because of upgrades and perpetual licenses and all the shifts going on around that.
In subscribers, you've got so many different kinds of subscribers that one subscriber isn't really the same as another. So we can't really count subscribers. I want to see if you guys have thought about ARR as a metric and recurring revenue and potentially disclosing that. It feels like Adobe is kind of shifting away from subscribers towards ARR and wondering if you're kind of thinking the same way.
Yes. So one question I'm
going to defer to one. Yes.
There's at least 3 or 4 questions there.
So I think the first part of your question is how far along are we in terms of developing the always updated experience. And we've started that process and as the desktop subscription experience rolls out by product, by region, you see it reflected in products. I mean, we made a first stab at it with what we did with desktop subscription last year, but we have lots of ideas on how to improve it, how to expand it, make it more seamless, make the upgrade just like what you experienced on mobile devices. So we're well on our way. And next year, I think we have a lot of work to do on making that superior experience that Andrew talked about come to life.
And I think we're going to do it across products as they roll into desktop. Yes.
The other thing to do, I was going to say, we have a handful of products. So you brought up Adobe. And so one of the things to recognize is we're doing something fundamentally different in that many of our products are actually cloud based products. What Adobe is doing is digital delivery of desktop products and the updates that you talked about are updating desktop products. So if you were to look at our PLM products, our user products, BIM 360, A360, those are all true cloud based products in which the drops look more like weekly or every few weeks than even monthly.
And so we not have to They're really versionless. And so I think you need to understand that we on the now in the end game, I think us, Adobe, Microsoft, and 2 will end up in the same place in terms of business models and how we deliver software. But at any point in time, we may not be traversing the 2 axes at the same pace. And so mostly what they've been working on is digital delivery of desktop software. So to the extent that people continue to get desktop software, we'll improve that experience as you mentioned.
But the other one is to recognize we already have lots of customers getting true multi tenant cloud based software.
And it is a huge benefit for customers too that they never have to worry about versions of data. So there's no backward, forward compatibility issues ever. There's one version of the entire world.
Let's see what other questions
I'll just take a stab at that and I'll turn it over to Steve. Obviously as the business matures, we're going to look at things like ARR. But I want to challenge your statement about billings and subscribers not being meaningful. Over the next by the way, Adobe just started transitioning to look at ARR as kind of a driving metric. Absolutely, if you want to look at the health of our transition in the next 12 to 18 months, you're going to be looking at the subscriber numbers.
You're going to be trying to understand the subscriber numbers and see that subscriber growth. That is by far going to be the best indicator. As we move beyond that era and other eras, you'll start looking at ARR and other things like that. But I will not discount the importance of looking at those subscriber numbers over the next 12 to 18 months. They're critical.
Yes. And like always, it's not just the nature that we have 3 different kinds of subscribers. Even within one bucket, not all subscribers are equal. And Sue will kick me if I get into my ovary and testicle jokes again. So I won't talk about averages again.
But an average is just an average.
That's where that ends, didn't you?
It's just an average. And so even if you were to look in maintenance subscription, the difference between an LTE maintenance customer from a product design suite ultimate is pretty substantial.
Yes. Hey, Saket Kalia from Barclays. One question and one follow-up if I can. So lots of talk about the twelvetwenty50. I think you gave a lot of reasons why you can grow that 20 part the value.
But I guess what is the line in the sand that we should use as sort of the value per customer or however metric you define it that will grow 20%. Because I think we all have a great handle on what the subscriber number is and how that's going to grow 50%. But what is that line in the sand to grow 20%?
I mean, I think you need to look at value per account. I mean, I think that is the okay, that is the best indicator and the most reliable metric we can calculate. We've spent a lot of time looking at this. And we think if you just look per account, if the value goes up by 20% per account, that's the best way to understand it. And that's what you should hold us accountable for.
So to the extent that's the line in the sand, yes, subscribers are easy to count given the previous caveat. But on this one, it really is value for previous caveat. But on this one, it really is value for account and we'll report on that.
Yes. We'll start reporting a metric that defines that. If you remember when we went to the suites transition, it wasn't until the 2nd year of the suites transition that we started actually showing what where our progress was to the ASP target. We'll do the same thing with this metric as well. And we'll actually give you a line in the sand, a benchmark and you'll be able to track our progress to it.
That's really helpful. The follow-up is for Sue. So you talked about sort of the cash flow margin as a good indicator. Any idea where that could be by the end of this transition or even if it's an absolute cash flow number, however you think about it? Because the cash flow is going to presumably with a more recurring business, the cash flow should benefit disproportionately.
Yes.
It certainly does. And as we do our modeling, we see strong increases in cash flow throughout the transition and certainly in the end period. But we're not ready to give a different metric on that. But I think you should think of it as something that's going to increase over time.
Is that the absolute cash flow number or the cash flow margin? Margins.
Margins. Got it. Thanks. Steve Kiani with Wedbush. Just stole the microphone.
Thanks. So, obviously, the modeling of the optics is an enormous challenge for the analysts. The optics don't matter too much except it's a headline for our model. But I do want to ask you some things that impinge upon your trajectory towards the long term targets. So I know you're not ready to give like guidance for perpetual license next year, but how do we think about that?
And in particular, one question that might bear on that. Did you say when the LT perpetuals will become available at the end of Q4 after you do your experiments? And then I've got one related follow-up question. So why don't you I didn't quite understand what So the LT perpetual licenses, when exactly do they that shifting the margins, so that they're neutral between the perpetual and the matter of fact it's actually better. It's now even the neutral it's better for the partner to sell a desktop subscription for the long term health of their business.
So we're already making some pretty dramatic moves there. In terms of how we end selling perpetual new seats, that will be staged and we haven't revealed a date exactly when that process is finished.
But my one of the dynamics that I think you will see play out is as we announce phasing out of perpetual licenses in a particular geo byproduct, you will see a rush to buy more perpetual licenses. And particularly customers who already have a fairly large installation, but even some new customers who say that is my preferred method of buying. This is my last opportunity. I want to buy more perpetual licenses. So I think there'll be add ons to existing.
So that's the dynamic that you'll see. A little hard to model because we haven't revealed the plans of which country, which product.
And then one clarification question on the LT margins that you'll be paying to the resellers. I think you said that they would the resellers would be made whole in terms of absolute margin dollars between a perpetual and a So that sounds like a very expensive proposition. How exactly does that work? So I'll address that. So what we're doing is we're changing the margin so that the absolute margin dollars are the same in selling a new seat of LT perpetual or selling a new contract for desktop subscription for LT.
My comment about the renewal is oftentimes when you sell a perpetual seat of LTE, that's the last sell you get for quite some time. Our rate of attach of maintenance subscription there is lowest of all of our offerings. Desktop subscription should go over and over and over again. Our partners should have the opportunity to continue to go and drive those renewals. I wasn't talking about the renewal absolute dollars.
I was talking about the new seat sales, but there's a benefit to our partners to continue to renew those contracts compared to our current state of selling a perpetual LP license. I just want to ask a quick follow-up to that. Is the payout going to be the same on the renewal as it is on the initial sale? So the current payout is not the same. I don't expect the new the updated renewal dollars to be the same, but they will be better than they are in the today state.
We see by the way, I'll add, we think it's really important for every customer to get that first renewal. We find that once a customer acquires a license and renews one time, they become really sticky and recurring and things. So it's very important to us that we not just get that first sale, but we get the first renewal. Typically when that happens, our renewal rates are very, very high. So we want to make sure that we get not just that sale, but the first renewal.
Hi, Gaurav Pavadia from Sorobhan Capital. First of all, congratulations. It seems like a tremendous amount of progress has been made since last year and that's I think very exciting. Just one question on the 20%. Now as we think about it, given a lot of the initiatives you discussed, including a higher direct mix shift, essentially a similar commission dollar, but a lower percent commission as you shift people into subscription.
Shouldn't that mean that while it's a 20% uplift in
way. We're not prepared to forecast what that would be, but certainly the bias on at least those two facts and several others are
that the bottom line effect is larger than the top line effect. Exactly. And that's given your relatively low margin profile today that should be very, very powerful on the EBIT margin line, I would say. Yes.
And it compounds nicely as the billings go up. And you got the bias right on that.
Hi, thank you. Greg Moskowitz from Cowen. Just a couple of questions. On the margin dollar profile changes made to LT effective Q4, I just wanted to confirm, is that the only product for which you are changing the margin dollar profile that quarter? Yes.
Right now, again, we want to try piloting things and see how it works. Ironically, though, we're piloting on our volume products. So it's a big change even though it's just one product. All right, great. And then secondly, so Steve on getting back to consumption, you talked about a goal to effectively instill this within all of your named accounts.
I think earlier, it might have been Andrew who was talking about in fiscal 2016 2017 moving consumption down market. I would think as you start to get to smaller target customers as well as the ones that frankly aren't using or utilizing as many apps with new Autodesk product portfolio that might be a little bit of a tougher opportunity but it will be helpful to get a sense of really how broad you think consumption could be across your customer base? Thanks. Sure. So I'm excited about what we can do in the SMB space in the area of consumption, but we got to figure things out.
I mean, we definitely see an opportunity to drive deeper account penetration and also get a stronger competitive position in that market space. It's a very large space. It may not be the exact same offering we have for the named accounts. The requirements for our largest accounts are specific to how they're running their enterprises globally. They have lots of different needs that may vary or differ from the SMB space.
This is the reason why this isn't beyond FY 2016 thing. You should expect that we're going to pilot and test a lot of different configurations and learn from specific customer feedback what are the right options or offerings that that base of customers are looking been
Go ahead, Sumar.
I was
just going to say,
so one of the tests that we've been running is some of our cloud consumption services like simulation, rendering. So that's a great place where that middle tier has been using services on a consumption basis. We've seen a lot of success with that. In fact, with visualization or rendering, we just crossed 10,000,000 renders. So those are kinds of offerings where our customers, in addition to what they're already using are flexing into the consumption model and that's the kind of test I think we'll continue to extend over time.
Yes. All I was going to say is just generally speaking, hopefully one of the things you take away from today is that we're very willing to spend time experimenting, designing pilots as scientific experiments so we can get good data back from it and then we change our behavior based on that. And so we've been doing that with almost all the success you've seen today. There was an early pilot 2 or 3 in order to try to get it right. One of the things, once we get the whole machine working, we know what it can accomplish, but it's critical to make sure that we're pointing it in the right direction.
And doing these small scale experiments have been very effective at doing that.
Can I ask you a nuance question about
the $3.10 for AutoCAD LT versus $2.40 number that you put out there? Does that $3.10 for the subscription include, I guess, Okay.
So that
includes
all the initiatives that you Those are apples to apples. Okay.
So that includes all the initiatives that you're doing?
Those are apples to apples compared to value back to
Based on historical. Yes. So it's not like projecting forward new ones. This is just taking the historicals and kind of basing it on that. You could add to that if you were to change some of those assumptions that we would do better in the future on some of those things.
That 300 number could go higher if we do better for example on renewal rates. But what we use to make an apples to apples is we took the historical metrics on the one side and then we applied it to the other side.
No, they're not the data on the the data is the actual this is what the value is today, right? The data on the right is it hasn't assumed renewal rate, but it's on par with what we're seeing. Those things are all steady state, right. Value remember I'm saying it's value back to Autodesk. So it's Yes, the per I'm sorry, it's Gord, just to come back Albert.
The per Karl's point though that is a layer of conservatism that's probably built in because you have a little bit of a channel shift which should be higher margin, so as well as potentially higher renewal rates. So that per what Carl just said,
those are the mechanics as
to why the $300,000,000 tank could be higher.
Yes. Got it.
If those were higher than the
number of those were higher, the value shift is different. Sterling Auty with JPMorgan. Last year when you introduced the rental program, you talked about how it would probably expand the user base. I'm kind of curious, I didn't really see a lot of metrics around the rental piece, but specifically I gave you a 35% number.
Yes, that subscription is rental.
Yes, that subscription is rental. So specifically Adobe initially, it's a lot of monthly purchases and as time gone, it's shifted to annual. So we're seeing the bias is now much more towards annual than month. Why don't you
just repeat the 35% just
over a quick Right out of the gate, 35% of the desktop subscription coming in the company right now are net new buyers, buyers we didn't have before. And specifically when you look at the customer base, is there any industries or any type of user profile that kind of are attracted? They're actually well, okay, they tend to be smaller companies, okay, out of the gate they tend to be smaller companies by other, which is great because that's where we get a lot of our new customer demographic shifts across the industry is actually pretty evenly distributed. Initially, when we rolled out the desktop subscription model or rentals, there was a huge influx of virus from the media and entertainment business. We've seen that level out.
We see kind of proportional representation from all the industry now.
Yes. I mean there are a number of reasons contributing. It's companies who are managing their cash flow closely. That's one group of people. Another are the ones who are project based.
And so media and entertainment and AEC tend to be more that way than manufacturing. And then there's people who deal with peak demand that would be another reason to do it. And then I think for the last group, it's just a preference of how they want to buy. And so it's a combination TAM up by several $1,000,000,000
Where was the incremental jump in the TAM
from last year? Yes. Okay. And TAM up by several $1,000,000,000 Where was the incremental jump in the TAM from last year when you gave us that number?
That's a good question.
I mean, for example, the construction industry is growing. So the overall economic output is growing. They're spending more on software. That's one of the reasons at least in AAC that TAM is growing.
Yes. No, no, no. But the reason why I was a little bit avoiding it I mean most of our TAM numbers are coming from 3rd party sources. So we're sourcing that data from external ones to validate it. And so both certainly the overall size of the manufacturing construction industries are growing, but also the software component.
And as Amar talked about, software spend within the construction industry is going up at a much faster rate than the overall growth of the industry.
Okay. And then for Buzz and Amar, just it's hard to get market share figures where you're at in terms of share of your respective end markets. But is there a sense of where you're at today? And maybe you could just comment a little bit, Buzz, we've talked about this in the past about how you've typically lagged some of the customers in terms of some of the requirements. Now it feels like some of the products you're bringing the market are now well ahead of them understand what they are, so you're helping drag them into some of these new offerings, which are
can you just walk through? Yes. So Amar, if you can share it first. So I think we've led the market in terms of unit volume and number of seats out there that are being used by ourselves, particularly if you consider the whole portfolio, the many things that people do. I think we've shifted from being the 4th player in the market to the 3rd player.
I think we're outgrowing our competitors in that sense. And you're right on the last point. I think we have shifted from being the volume player, the eightytwenty player to be the innovator. I think we're coming out with more news than our competitors are and doing things that are attracting really new types of customers. So yes, I think there's been a big shift in the last 3 years.
Yes. The other thing is, I mean, certainly in Buzz's arena, when we critically hold ourselves to number 3, remember that a large proportion of the revenue that our competitors have is in a part of the business that would be the PLM part of the that historically we didn't participate in, right? So the numbers change dramatically when you look at the CAD portion as opposed to the PLM portion. Now that we have our cloud based PLM product, it's fair to consider it. But we have a couple of year old PLM product compared to
AC side, I mean, we've been the leading vendor, especially in the buildings part of the AC industry. In the engineering, which is a little more competitive with other folks, We've been gaining share and doing better with the examples that I told you about. In construction, we're certainly out in front with the software component of the construction industry. I would say the process and plant industry is 1, we're kind of like Buzz's world in the dynamics. We are the challenger.
We are the disruptor. We are of course up against a couple of giant companies there. But I think across the board, we have really established a leadership position. Nothing new. They're a little bit like the PLM example that Buzz said in manufacturing.
They've been relying more and more on that project wise business of theirs and they feel more similar to a the sole or Stevens type company now and they innovate. So nothing new really dramatic.
Yes, thanks. Follow-up for Buzz and for Amar. Buzz, in simulation, you would appear to have less than 5% share of the simulation revenues. If we're right, that it's about a 2 point 5 dollars maybe $3,000,000,000 market. What do you think is a realistic share objective for you in simulation?
And then for Amar, when you last reported infrastructure as a division and perhaps someday you'll do it again, it was just over $200,000,000 a year. How would you describe it today or where again for that business you think it could grow?
Mike, when do you start?
Well, I think simulation market, I think as it shifts more toward the designer, we will do relatively better and away from the heavy duty analysts. So I think we do a lot to focus our business there. That's a long term shift as you know. That's taken generations I think to start to change that. I think there's movement in the market.
I think when you start to see some of the way Fusion, for example, is doing simulation, it just has a very different perspective. We don't call it simulation. You notice my slides, I refer to it as test, right, which I think is really what customers want to do. So I think that can change our shift. But we are at our center a design and product company.
Okay. So I think there will always be specialists. And by the way partners, ANSYS is a partner of ours as well as someone that we compete with sometime that I think customers will continue to use those products. We'll use them in conjunction with our products. I do think we can see lots of expansion.
Okay. We can probably and I wouldn't expect it to be I certainly see we could get to well over 10% of the market, maybe more towards 20% of the market.
And on the infrastructure side, so it's substantially larger than the number that we had previously reported. I think that we are certainly, Bentley was a company that we mentioned that we're taking share from. Some of the wins that I shared with you, we used to have a lot of story in just road, but now with rail and aviation and water, there's a lot of spend happening in the world of infrastructure and there's more software spend. So that business is set to grow nicely. With something like Infraworks, we're even capturing what people would have spent on GIS systems with ESRI and those kinds of companies for urban planning.
So all that upfront that there's a potential to shift some of that. So I think the opportunity is very large for us in this infrastructure.
Thanks. Dave is allowing me one more follow-up for Steve. As you pull the perpetuals out by product and by region, would you in conjunction with those changes implement an agency model to supersede the VAR model, model, again, region by region, so that eventually you will have a mostly, if not entirely agency model. By the
way, Dave, the rule is if Jay wants to ask another question, next year he has to commit to bringing bagels. We're going to fill his luggage with bagels on the trip from New York, so we don't have to eat that stuff.
Better quality bagels. And white fish. So we're going to take a look at it product by product and region by region. We are seeing places where it makes more sense to use the agency model, again, we call it service fees, but agency is the same thing. So we're already using that with our cloud based offerings.
We have ideas about other places we'll use it as well. So we really want to evaluate it. There'll be a lot of piloting going on and we'll figure out what makes the most sense based upon how we keep our partners engaged, but also really how we serve the needs of our Steve Ashley, Robert Baird. I have a quick follow-up on the slide you put on the named account penetration with the consumption pricing. And you have 10 just 10 accounts very small pool, but that the average number of subscriptions went up 2.4 times.
Does that suggest the amount of revenue under a new licensing model would be maybe twice what it was under the old model if that were to hold that kind of usage level? So first, I want to make sure those 10 were the ones that moved from our older model to the newer model. We actually have customers that have come in that didn't have that older model that are now in the consumption model. I wouldn't want anyone leaving thinking we just have 10 customers in the consumption based model. It's hard to specifically draw a line in saying by having more users you get a linear increase in the billings and revenue overall.
It's going to vary account by account, situation by situation. It's a safe bet to assume we're getting more because we're delivering a lot more to our customers. We're giving them a lot more flexibility. They have more access to the software. As a result, they're applying it on more of their projects.
And again, a reminder, we also in our current, the new version of EBAs, we have other items that are also bringing in billings and revenue, enterprise priority support, dedicated customer success managers, a lot more work with our consulting group overall. So very safe to assume they're driving deeper penetration and extracting more value out of that as well. I just wouldn't necessarily draw that straight line between numbers. Or maybe I
we get a little mathematically. I might draw the straight line, the slope might not be 1. Right. But there is a linear really. I mean the relationship is linear.
It's not exponential and it's not It's not logarithmic. There is a linear relationship. But the slope of the line may not be exactly 1.
A follow-up question, your 2,900,000 active users seems to be a great target for your subscription offering lowering free. But I'm wondering, is there a way to quantify the inactive users on your platform? And maybe as a follow-up, is there a way to think about the desktop subscription product? Will it have you believe to phone home to potentially eliminate the piracy issues and maybe talk about maybe how that could expand the TAM?
So the 2.9 number, right, is the number of users that are in 1 to 5 release is back. There's other users that are 6 or more releases back. Generally, that pool isn't as stable as the 1 to 5 release back release back pool. So there's lots of people to drop off, they become inactive, the companies go out of business. Is there a long tail of more inactive?
Absolutely. There's even a bigger tail of Pirate users out there that are using the software and not had never engaged in a purchase relationship with us at all. So yes, there's a larger number out there. It's just that when you talk about customers that are actually already in a relationship with us, it's just kind of spread out over a few years. That 2,900,000 dollars really creates a reliable pool to go after.
That's why it's such an interesting number.
Yes, I
like it Mike. One of our worst cases, I went and I saw this customer recently. It's a construction company in Germany and they run their whole automated factory using our software, but it was running on like AutoCAD 2,002 or AutoCAD R14, which came out in the last century. And they were trying to tell me what great customers they were and how happy they were and I was just trying to tell them what lousy customers they were and the conversation went downhill from there. But seriously, I mean there are people and there is beyond the 2,900,000 people, it just becomes a lot less approachable for us.
It's not something we can bank on. Hopefully, we convert some of those people over time, but that doesn't really figure into it. Exactly. The second point you made is most of the things that we're doing around digital delivery of desktop software or cloud based software will involve a different mechanism for licensing that helps eliminate some of the piracy. Just generally people as they move towards using online services or online delivery, those become much more difficult to pirate.
And to be totally none of those are in the $2,900,000 That's a different number that we can't count easily.
There's been a view that the transition could actually be net negative on NPV per sub basis. So it was good to see the 30% metric you guys talked about for LT. Could you just about a comparable metric for some of the other products like Revit or anything else like that? Just so we can get a better understanding of the change in per seat, per sub NPV economics as we go through the transition?
I think at this point, we're not prepared to do it around other products, but I think you could expect things in the same ballpark. Like we said, a lot of what we do is experimentation. We'll see how this goes. We'll update you on how we do. Our best thinking at this point is that the things we're doing around LT are not specific to LT.
But as we learn from that, we may adjust.
So if we should think about it in the same ballpark and if only the move to subscription result in a 30% increase in per seat NPV value and yet you guys are adding so much more value to the customer with cloud, etcetera. Maybe this goes back to Albert's initial question. I'm struggling to kind of map 30% plus to the 20% metric that you guys have been guiding to.
Well, but you started in negative. So we've gotten you a long we've now gotten you from negative to greater than 30%. I didn't say I was negative. There's been a view out there. Exactly.
So we're somewhere in the middle of that too and we came and that's where we got to 20%. We don't believe it could be negative either. Okay.
Sorry, if you had time for
one quick one. So on that topic of the 2,900,000 customers on the last 1 to 5 releases, roughly 50% of it is LT. What's the other 50%? And then how do you incentivize an existing LT customer to pay that 30% rather than going to a competitor?
So let me talk to one and Andrew can talk to 2 or Amar. The first thing is one of the interesting dynamics about the 2,900,000 customers is that the distribution of products within that 2,900,000 is very similar to our distribution amongst subscribers or amongst total products sold. There's is not a dramatic difference. And what I was telling people is if you were going to look for first order effects, I'd look at places like geography rather than product, if you wanted to start teasing it apart. So there are differential rates of attach and renew in different parts of the world that are more dramatic differentiator than the product is for disarming between people who subscribe and people who don't.
Is that fair way? Fair way, yes. Now when you get to the 30% value, you got to remember, the initial purchase they're putting down for this LT is dramatically lower than what they would have ever paid for the product upfront. So if you're one of these occasional LT buyers and you were looking at your 5 year or 3 year buy a new seat cycle, you're going to pay a lot more than that initial fee we deliver. And if you feel the product is valuable, you keep paying that fee year over year and the lifetime value starts to come out in 3, 4 years out.
So you're already putting the customer in a situation where they're getting access to a professional grade, well respected product at a significantly lower price point than they've ever seen before. Now our competitors going to try to come out and attack Deborah, guess what they already are. Okay. ZW CAD recently came out with a campaign to try to match our upfront price. They're going to see as little traction with that as they've seen with some of the other initiatives because people want the real deal.
They want the real DWG based application. They want to be part of the ecosystem that's on that. So they're not going to see much traction that love to see them matching that price point because it's going to undermine their little business even more. So remember, a customer's upfront experience with this price point is just being, wow, really? I mean, you should see what our partners are doing in some places.
They say, get AutoCAD LT for as little as €360 a year. It's a big deal to be able to say that.
So just two things to add to what Andrew said. Look, our customers want industrial grade software, right? They are in the business of making important things. They don't want to take a chance with some rinky dink clone thing that falls apart. So they value industrial grade software and I think that that's the first thing.
The second thing is our customers actually want to be on the latest technology and we need to make it and with this digital delivery we're going to make it a heck of a lot easier to stay current and to be able to use everything whether it's cloud based tools or new capabilities in the core software. That has not been easy to do in the perpetual experience. That's going to become a lot easier with the digital delivery and a continuous update type capabilities we're putting in. So I think a combination of attractive price offer, being able to stay up to date at all times, being able to collaborate with people and have a reliable piece of technology that's going to keep this move very compelling for our customers.
All right. Well, I think that
concludes our formal presentation and Q
and A. If you have time, please stick around. We're going to have a buffet lunch right out in the gallery. And thank you for attending.