Ladies and gentlemen, please welcome President and CEO, Carl Bass.
Good morning, everybody. Let me extend my greetings. Thanks for taking the time to come here this morning. Welcome to the Autodesk Gallery. Just want to spend a few minutes this morning trying to frame the issues about what we're trying to accomplish. I know people have been, for the last few weeks, doing a lot of speculating. We want to get to the heart of it. What I wanted to do first was kind of frame the conversation about what we're going to hear today. What we've been doing is we've been trying to change our business, and we've been trying to change the business along three different axes, three vectors that we're interested in. The first one is the markets that we're trying to address, the problems of customers we're trying to solve, and we really are expanding our markets.
The second one is about the technology platforms we work on and the technology platforms we build. The third one is about the business model. While there's been a lot of attention paid to the business model, and understandably, people have lots of questions, and we're here today to try to answer those questions and explain the rationale for the change in our business model. I think it would be a huge mistake to walk out of here and not recognize the other things that are going on in our business, which I think are really important for driving the change and transformation. If you walked away with only focusing on the business model, I think you will have missed a bunch of what we're trying to accomplish.
Whenever you go through one of these changes, there's always lots of questions about your ability to carry it off. One of the things I wanted to make the point is we've been through a number of these transformations before. As you go through the transformations, you learn a bunch about doing it. They're imperfect, but they're not perfectly planned from the beginning. I would look back in retrospect and say we have been very successful at making these transitions. If you look back and you see in the business transformation, we went from a business that was all perpetual licenses to one in which we added subscription. We went to one that served mostly medium and small businesses to one where we had enterprise licensing. Most recently, our business model changed by the introduction of suites.
This morning we'll detail some of those changes. Just to remind people, in all of these axes, we have made significant changes over the years. The second part is the new markets that we're addressing. As we've gone here, we entered the manufacturing market, we created BIM, we went into construction, we entered the simulation market and the PLM market. Those are new customer segments that we'd previously been addressing. So while we look at the entire industry, we've chosen those portions of the market that we think are the most attractive, that have the greatest return, and that we have the assets that we can best deploy to satisfy our customers. The third part of it is, it's also been a platform transformation.
If you look back at the long history of the company, the company started running on a host of PC computers and then Unix computers. We went through a big transformation. People forget that, for example, just the introduction of Windows many years ago for many companies was a hurdle that many companies didn't get to the other side of. We've gone through that transformation. We're doing the same thing as we move to redo it again, as we move to a cloud and social and mobile platform. Let me just detail this a little bit for you, that when you look and you go back at the business model, this has been the business model of today, which is one in which subscription is an important part of our business, switching an increasingly big part of the business, and our enterprise licensing.
We've talked about the composition of our customers there, how important our large customers are, and the way in which they choose to buy from us. What's new and what you'll hear a lot about today are these new forms of subscription. One is about product subscription that we are often called and referred to in the market as rentals. It's also the cloud subscription, our SaaS offerings, and what we're doing there. The third are consumption-based models. We'll go into a lot more detail about this. They'll all go under the heading of subscriptions and we'll detail each of the different kinds, in addition to the maintenance subscription that we already have today.
When you look at the market, you can see that the markets that we're in. Just to remind people, when you look at these new markets, construction is now an important market for us. If you look back historically at the AEC market when this company started, even though we spoke about AEC, it was really a capital A in a small e in a tiny c. If you look at our business in the industry today, it's almost completely reversed. The construction part of the market is what's driving it. It's the biggest part in terms of revenue. It's the most important driver of change in the industry today. Same thing with the simulation and analysis market. We entered it in the last few years. We bought a lot of assets.
We deployed them differently using new business models on the cloud, we have now become an important player in simulation. We entered the PLM market about a year and a half ago, we're doing well in the PLM market. I'll talk a little bit more about consumer, because people have been interested in what the consumer part of our business is. The third thing is the platform. Like I said, we've historically run on a lot of platforms, but this is one of the really important things I think people need to walk away with today. That in addition to a solid core business, we have built the most advanced, most sophisticated use of cloud and social mobile technology for engineering and design in the world. Nobody else has built the same platform. Nobody has the same offerings.
Most everyone is far behind in terms of their adoption of this. We have believed for many years that this was going to be an incredibly important change in the industry. We invested accordingly. We've been building products. Now when you look today, we have this rich combination of, you can see all the. There's BIM 360, Fusion 360, CAD 360, all those 360 products. Both Amar and Buzz will talk about them and give you more details. I think it's important to recognize that what we're doing is we're using the introduction of these new platforms as a way to go into new markets and serve customers differently. We think this is incredibly important.
In addition to the business model transformation, which is important and has immediate consequences, it's also important to recognize the new value we're bringing to customers, the new customers we're addressing, because of both the platform and the products and services that we're building. There are two other things as we look at subscribers, we won't talk about this much today, but I thought it was important just to give you the background. We've changed our approach to education over the last couple of years, making it more accessible to students. We have had phenomenal success. We have over 100 million students who now have access and use our software.
We've been building a pool of users who are committed to using our software and a bunch of institutions who have incorporated into their curriculum and are teaching, and it is the backbone of the engineering curriculum in many places. It's really important, the kind of the optionality we've built with that. The second place where we've also continued to find customers is in the consumer space. We've now built a community of over 150 million consumers who are using our products. Just to put a little financial perspective on this year our consumer business will be about $20 million plus in revenue and probably double that in bookings. It's a business that we started from scratch, but is growing and growing at a hefty pace.
In addition to our core business, I think it's important as you think of our ability to grow the subscriber base to understand the size of the market in terms of consumers and students that are part of that. When you look at this market, people are often confused about the opportunity we have in terms of the new customers. If you look at just the available market, counted as conservatively as possible for the competitors that you can readily identify and the parts of the market that we can address, at a minimum, this is a $20 billion plus market, and we have a fraction of this. For some people say, you have the lion's share of the market. There's almost no way to come up with that calculation that says we have the lion's share of this market.
This is a big market, and it's growing substantially, and our ability to enter into new markets and to attack new markets with new products and services means that the total available market has been growing. What we're really going to talk about today is about getting more growth. We're going to talk about more growth really from two different perspectives. One is from increasing the lifetime value of our subscribers, and the second is about adding more subscribers. The backdrop for this, what I tried to describe to you is how do we get to more value per customer? How do we make more attractive offerings? How do we add more services in so that customers pay more and get more value from what we're giving them?
We can attract new customers, either customers who are non-consumers or they're non-payers, or they come from competitive swap out. All of those are new subscribers. Most of the presentations of the day are going to surround these ideas. It's important to realize, just the context for it is just remember that we're really talking about a business model transformation. We're talking about a platform transition, and we're talking about Autodesk going into new markets. The agenda for today is first we're going to have Andrew come up and kind of the meat and potatoes of the business model transformation, speaking specifically about the changes that are going on in the subscription program and some of the details about the recurring revenue and the new offerings that will be ratable and giving you an overview programmatically of what we're trying to accomplish.
The second two parts are, Amar is going to talk about the AEC opportunity and talk about the products and why we believe we will continue to capture share and why we believe we're building the right products and services for customers. Buzz will do the same thing in manufacturing. Finally, Mark's going to wrap it all up by trying to bring this together and present the financial model, including both short-term guidance and what the long-term opportunity is and guidance for that. With that, what I'd like to do is bring up Andrew and have him discuss the business model transformation.
All right, my job today is to be as concrete as possible about what we're going to do to turn the transformation we're working through into real billing and growth for Autodesk. I'm going to come back and speak simply to a couple of themes. One, I'm going to talk a lot about the new value we're creating in the cloud. It's highly differentiated value. Value customers are going to want to attach to their current solutions. I'm also going to come back to how we're changing the business model, both around the cloud, because you have to adjust the business model for the new cloud offerings, but around how we're doing it in the core to really connect the two things and turn these into billing. There's going to be two buckets over and over again.
I'm going to try to give you some confidence and facts around them. The first one is how are we going to get more value from new and existing subscribers? That's going to be very much around attaching the cloud, very much around new types of models. The other theme I'm going to come to again and again is how are we going to use some of the new business models to bring new subscribers into the Autodesk ecosystem? What I want to do is start diving a little deep on the first bucket, the more value bucket, so that you can understand some of the opportunities we want to pursue in order to get more value from our existing and our new subscribers. There's no better way to start than where we ended last year with the move from desktop products to suites.
Those of you who were here last year, you probably remember we were measuring success in this initiative through a couple of key metrics. We were looking at over a three-year period, a 20% uplift in the AFP of the new seat in the mature market, and a 20% uplift in the AFP in subscription. This is how we were deriving the equation that was generating more value from new customers. Why don't we pause and take a look at how we're doing, how the initiative has gone, and look at some of the metrics in a really solid way. Here is a chart of the AFP trend in mature markets for our products for the new seats. We start in FY 2009, really start in FY 2009. At that year, we benchmarked ourselves against internally when we started the suite journey.
It was before the great crash of the following year, where we were able to get solid data. What you're seeing here is a nice upward trend. We're well on our way within the three-year window to hit that 20% target. We're very close right now. If you feel a little dip in FY 2012, that was the year we introduced the Design and Creation family. That dip is completely driven by the introduction promotions we did to prime the pump and get the machine moving. When you look at the subscription trend, you see even something a lot more startling. We've over exceeded our goals around a 20% target in the subscription space. We've seen solid growth in customer value, both from a subscription measurement and a new seat measurement. We did all of that by programmatically also driving the growth in the subscriber base simultaneously.
We now have a 26% larger, and I'll be able to look at this chart, look at the axis. We now have a 26% larger subscriber base than we did in FY 2009, roughly about 1.8 million subscribers. If we continue to look at this, you can see the progression in suites on the billings number as well. The mix in billing is continually favoring suites more and more and more. The last lens I want to look at is on revenue. Now, what you see here is Q2 of FY 2011. That was the last year before we had the Design and Creation Suite family, and you have Q2 of this fiscal year. Now, there are a couple of things I want to point out on this graph.
One, the blue bar for standalone products didn't change significantly from the pre-Design Suite era to this quarter we're looking at here, which goes a long way to answering a question I get frequently about, did you cannibalize your standalone business when you rolled these suites out? The other thing you'll notice is a lot of the growth was driven by the growth in suites, 77% growth in suites quarter-over-quarter between those two time periods or year-over-year, between those two time periods, really driving the growth of the company, which kind of begs the question, if this is what's happening with the suites program, why isn't the overall performance of the company doing better? Fair question. The real answer there is that our focus on suites, both programmatic channel marketing fields, left behind some of the non-suite buyers.
Those non-suite buyers are primarily people that buy AutoCAD LT and Vanilla AutoCAD. What we've done is we've looked at the program, we've looked at the focus, and we've shifted our demand generation activities and some of our other programs to reignite growth in these applications. These customers were sitting dormant because they were not hearing a buying message that fit what they wanted to do. We've moved forward on that. You're going to see the effect of that over the next few quarters. We're already starting to see some of the effects now. The net I want you to get from the suites initiative is that suites drive increased customer value. They drove it. They're still driving it. We're still going to play this play. This is a programmatic play. We know how to drive over and over again.
I also want to be clear, we don't do this simply by increasing prices. We do this by delivering real value to the customers. We're getting value back from the customers by delivering value. It's a play we know how to run very well, and I want to now drill into a couple of areas where we're going to run this play again and again. The first one I want to talk about is in some of our existing accounts, specifically our enterprise accounts. We've got thousands of these. They're our largest accounts. The blue bar to the left there is the TAM. The TAM, in terms of design and engineering software, that is sold into those accounts. The little teeny green bar is our penetration into that TAM. Four years ago, that penetration was significantly smaller.
We've actually gotten better at penetrating these accounts, we're actually going to be using the transformation, both the value we're creating in the cloud and new models based solely on consumption targeted at these enterprise customers, to increase the penetration into that TAM. These consumption models, which I'll go into in a little bit more specifics are great tools at driving adjacent application use and displacing competitive solutions, whether the competitive solutions are free or they're paid for or they're currently on maintenance. The other opportunity I want to talk to you goes straight to the value you're going to hear about from Amar and Buzz in terms of the applications we're delivering on the cloud platform. These are powerful tools. They're highly differentiated. Many of them are unique in their market.
There's no other alternative to them, we're going to go into the broad swath of our current subscriber base, we're going to layer these on top of them. Most of these only cost a few hundred $ more a year, customers are going to see the value, we're going to be able to programmatically attach these onto the current subscriber base. It's going to be a big opportunity for increasing customer value with those current subscribers that are going to stay on the current subscription program. As we move forward into getting more value out of new subscribers, I think a lot of you, I know because some of you have done the math, renters are more valuable long-term than a perpetual customer paying maintenance.
We're going to do a lot programmatically to focus getting these new subscribers on the rental solutions, which over time we're going to be calling product subscriptions. Also, if you get these customers up and running on our desktop design software, they become targets for layering on the cloud applications. There's value we can create by getting them on the rental, there's value we can create by coming back and layering on the cloud applications. Those are the three new buckets we're going to be attacking in order to create more value from all the customers we have today, subscribers we have today. Which moves on to the other piece of the puzzle, getting more subscribers. This is going to be all about leveraging the new business model and modifying our existing model to get more subscribers into the Autodesk ecosystem.
What I want to do is pause and talk about, again, Carl alluded to it, I want to be very clear about what we mean by subscribers, then dig in a little bit about the opportunity we have to bring non-subscribers into the Autodesk ecosystem. First off, let's pause and talk about the type of subscribers we're talking about. Maintenance subscribers, current buyers of our perpetual desktop software that pay us maintenance every year. They're good subscribers. We want more of them. Product subscribers, otherwise known as rentals. Still a subscriber. Cloud subscriber, someone buying one of the cloud services, still a subscriber. This is a subscriber universe I'm going to be talking about, this is the subscriber universe. This is the set of subscription offerings we're going to use to grow our overall subscriber pool.
What are we going to dip into to do that? Why don't we just start with looking at some of our non-subscribers in our current desktop space? I'm going to give you a minute to process this chart because it shows the commercial pool of non-subscribers over the last five years. There are five releases back. You see the number is roughly constant at about 2.8 million over a five-year period. We have many more non-subscribers if you go six, seven, eight, nine years back. However, this five-year back view gives you a very stable picture of what is indisputably an active pool. If we converted just 30% of this pool to subscribers, just 30%, we'd increase our subscriber base by 50%. This is a real active pool of users. This is not the only pool we have access to.
We have been creating new pools of users actively over the last few years. They're equally as exciting as this pool of users. Let's take a look at one of them. This is a new pool of users, non-subscribers, that's also a new breed of non-subscribers. These are the people that use the AutoCAD 360 application, the current free version we have out there in the universe. It's the number of people that have registered since we brought it online. These people are using this application. You can see what it does is it takes us north of 14 million non-subscribers. A new breed of non-subscribers, comfortable with SaaS, using SaaS. Even if the overlap was 100% with our desktop non-subscribers, we'd still have a huge opportunity. We know for a fact that the overlap is actually pretty skinny.
A whole new pool of non-subscribers out there. Convert 7% of that pool, that total pool, the FY 2013. You've got a 50% increase in our subscriber base. Just 7%. We have one more pool that we've been building aggressively over the last few years. Carl said this year it's going to get upwards of 100 million. You can see what we've been doing as we've driven students to get access and adoption of our desktop tools. In some cases, we're also driving access and adoption of some of our cloud offerings. We now have a large pool of student users. When you look at our total pool of non-subscribers, just a 1% conversion of that total pool gets us to a 50% increase in our subscriber base. Large untapped opportunity both in the desktop non-subscribers, the cloud non-subscribers, and the student non-subscribers.
There's other types of opportunity we're going to dip into as well. Piracy is still a problem. The new business models are going to help us there. We know our emerging countries, piracy rates are somewhere north of 70%. We know our developed piracy rates are still stubbornly north of 20%. We see it in the number of trials that seem to go over and over again to the same person. We know these are real problems. Some of these new business models are going to help us penetrate this piracy problem moving forward and turn these non-payers, they're not even non-subscribers, they're non-payers, into our paying universe. Which brings me to a next very important bucket, especially as we're looking at economic expansion coming out of all the downturns all over the world. It's this new type of buyers.
These are new companies coming in at the bottom of our market, and they're also a new type of buyer that we can reach with the new value we're creating with the cloud applications, which Buzz and Amar are going to give you a lot more color on. These new companies, a lot of them starting out again are using free solutions, they're using back rev as a software, they're using subpar solutions or tools they've borrowed from friends to get up and running. Our new business models are going to let them get into our universe at lower upfront costs and become paying subscribers. When you see what we're delivering in terms of new value in the cloud, you're going to see how we're going to pull new types of users in the construction ecosystem, in the manufacturing ecosystem, into our subscriber universe.
The last piece I want to talk about, as you can see, the opportunity is pretty broad, is this project-based space. These are people who need the software for a short burst of time, three months, and then have these large lags or feast and famine cycles where they don't need the software. A lot of these users stay on back rev. They bought a rev a few years ago. They milk it. They want the latest technology, but you know what? Their feast and famine cycle doesn't allow them to get there. Some of them are simply non-users. As a matter of fact, a lot of them are non-users, or they're using some subpar free tool to try to get their work done. A lot of them in the M&E space, especially now. A lot of them in construction.
I'll give you some examples later about customers that are becoming subscribers based on just what we've done in the last three months. We even have them in manufacturing, project-based users that really need the software for bursts of time, not for long periods of time. What I just told you is some of the pools we're going to dip into to fuel that billing growth around more value per subscriber, new and existing, and more subscribers. What I want to do is give you some more specifics about how we're going to do that and how we're going to use our business model triggers to enable some of that change. The first thing I want to do is start with our existing business model and how we'll modify it to get more of those non-subscribers into the subscriber universe. I think everybody's familiar with this.
Pretty classical, even use the discs just to make sure that it's an older business model. They buy standalone product, they buy maintenance, and they buy upgrades. Well, you know what? In a year, a little over a year and a half, they're not going to be able to buy upgrades anymore. This is a logical change. It's been something we've been conditioning the base to for many years. We've been making it clear that maintenance subscription is the best way to stay current on all of these applications. As of February 1 of 2015, they won't be able to purchase an upgrade anymore. You can imagine this is going to have a pretty significant impact on the sales programs, the marketing programs, the campaigns, and things we do next year to encourage customers to move out of that non-subscriber pool into that subscriber pool.
Give us a significant event, gives our customers plenty of leeway to assess the implications to them. We have lots of levers we can pull with this current maintenance subscription model to get them there. The good thing is we have a lot more levers we can pull because we have the new ways to buy. I want to take you through the new ways to buy it and why some of these new ways to buy are going to be so attractive. One, of course, is desktop rentals. You know about that. We have lots of levers to pull in terms of customers seeing differentiation between these offerings, the spread between the perpetual price and the rental price, what's in the rental offering versus what's in the perpetual offering.
There's many things we can do to differentiate these offerings and make one offering more attractive than the other. I think cloud services, we've been very clear about. These are going to appeal to a lot of people. Some of these offerings are going to appeal to our core design users, and they're going to be able to get up and running pretty quickly with them. Another model we haven't talked a lot about is the consumption model. I alluded to it earlier, but this is an all-you-can-eat model that we serve up to large companies where they have access to the entire portfolio. Don't care if it's desktop, don't care if it's cloud, they pay for what they use. It's a powerful model, gives them access to the latest technology and the latest adjacent technology.
When you look at this through a customer lens, it's pretty easy to see what customers appreciate about these various models. Both cloud and rental have the lower upfront cost dynamic. It costs less to get them. If you're a company struggling with cash flow, you're able to get in there, get on the model, but you're also able to scale up, scale down, always have access to the latest tools. Remember those buyer types I talked about, the new buyer types, the project buyer types, all of these offerings are going to be attractive to them. Cloud, of course, has the same appeal, but it also has all this new and existing workflows and compelling new ways, you're going to hear about some of those things later, but really compelling value created in the cloud. The consumption model, very simple.
Pay for what you use, measure it, bill it back internally in your enterprise, access the latest tools all the time. All the time. What I want to do is spend a little time making this strategy, making these tactics real for you, so you can see how it's playing out right now. It's not a fiction. This is something we've been working on for a while, we have real examples of customers we're taking through these cycles and some of the ways we're capturing some of these new offerings today. The place I want to start is with the consumption piece. This is an example of a global manufacturer of automotive parts. They have been on a consumptive journey with us for 18 months. During that journey, a couple of interesting things have happened.
One, their usage has increased 13%, and that usage has increased by a couple of critical drivers. One of them is displacing competitive solutions. This idea of having broad access to the Autodesk portfolio just gravitated people to, "Well, I'm going to use this. I have access to it. It's great. I'm going to use it. Oh, I'm not going to use this free thing. I'm going to use this other thing. Oh, I have this older release of some competitive product, but I can get the latest release of this Autodesk solution. I'm going to use that instead." The other thing that drove this usage, and it's equally important is the increasing usage of an adjacent product.
These were core Design users in the company, but over the period of that 18 months, the uses of adjacent products, specifically Simulation in this case, increased by 2.5 times. A lot of that usage was driven by an increase in usage of the adjacent products. The customer was happy about this. They paid us more for the flexibility, and they also paid us more to get their users access to these technologies because they like the model. It works for them. Now, at some point, they're going to want to cap out, but we're a long way from having to cap out just in this one account, and we're a long way from having to cap out in our enterprise universe. That's one, preemptive models.
Now let's turn more to our core small and medium business market and give you some examples of medium-sized businesses that are doing exactly what we're going to programmatically do over the next few years. Here's an [NAC] firm. They do all these wonderful workspace designs. Happy users of Building Design Suite, very happy users of Navisworks for sizing up the construction site issues. They are now very happy users of BIM 360. They've layered on a cloud-based solution, one of these differentiated cloud-based solutions, onto their desktop world, just like I talked about earlier, and they're delivering more value to Autodesk because Autodesk delivered more value to them. There's also a great example inside of manufacturing. Here's a manufacturer of industrial centrifuges. They were very happy building of a Product Design Suite customers. Very happy. Lot of features.
Now they're happy Simulation 360 customers, and they actually paid us more than the competition for Simulation 360 because they liked the flexibility and power of the offering. It computes in the cloud. They're able to do more, they're able to understand more, and they were willing to pay more to get it, more than they were quoted from a competitor. Another real example of how layering on the cloud onto a current desktop subscriber drives an increase in customer value for the company. For the rest of that large ecosystem of small and medium-sized businesses, we believe we're going to have an offering as popular as AutoCAD to layer across all of them, and it's what we call Autodesk 360 Pro. Mark going to give you a lot more specifics on this.
It's essentially a collaborative platform that aggregates some tightly integrated core services together, some high-value services, but it's only going to cost a few hundred dollars a year, and we're going to aggressively attach it to that broader base and supersize them and get more value out of them by delivering more value to them. Brings me down to the bottom of our market. Small businesses are going to be an engine of new customer acquisition for us. They love the new model. I'm going to give you some specific real-world examples of customers embracing the new models right now and doing the kinds of things you're going to see become commonplace over the next few years. Here's an example of an environmental consulting firm. They were LT users.
They were back rev LT users, 2012 LT users, not current, not paying us money, not a subscription, not interested in paying subscription, not really using LT all that much. They found out about the Inventor LT Suite rental. They rolled it out to their entire team. They're now happy rental customers. They're telling us they're going to stay renters for six months, but you know what? Once a renter, once they're in, they start keeping it. They see the power of it. They're able now to use LT, Inventor LT, and they're thinking about using Infrastructure Design Suite if they can hire the right kind of expert to do it, and they're going to look at a rental for that. Example, right in our small base of a customer doing this. Here's another great example. These are two small companies. Very small companies.
This over here is a plumbing contractor and an architecture company. They're both using LT. One bought it, doesn't use it that much. One is on the trial. Plumbing contractor found out that he's working on a contract that has a BIM mandate. Got LT, find out about the rental. He's an LT customer renting Revit LT Suite so that he can compete more effectively on this project that had Revit models integrated with it. Great story. Architect, starting her own business, on an LT trial, doing real work. Didn't know that that's actually piracy. Happens a lot.
Doing real work on LT, gets to the end of her trial, gets a message, "Why don't you try a rental suite?" She's a very happy Revit LT customer because she got access to the product she was using in a trial mode and the product that she knows is out there in the ecosystem doing bigger projects. New customer, totally new to Autodesk. Here's another example of a non-subscriber. AutoCAD Mechanical, back rev user, not paying us any more money, sitting on a back rev, now a BIM 360 user, happily paying us more using a cloud-attached model here. There's one more example I want to talk to you because I like it. It's not a paying customer, but it's an example of reaching new types of buyers we never would've been able to reach before with new cloud offerings.
This is an industrial design customer. They're using Fusion 360 to do industrial design. Probably would've used an application like Rhino previously, but they saw what we're doing. They love it. They're going to become a paying customer someday, I know it. We've acquired this customer net new with the power of the cloud. There are many, many, many, many more examples like this. These people are going to be the engine of new customer acquisition as we move forward. There's one more pool I want to talk about. I want to be very clear, this is an upside pool. None of our models include this pool. It's an exciting opportunity, and we see a lot of potential there. It's the student pool that I talked about earlier. Right now, like I said, we provide free access to our desktop products.
We also provide access to a set of cloud services in a metered way. What if for less than the price of a textbook, they got near unlimited access to visualization, simulation, things these students in the countries where we have these available love, less than the price of a textbook for a year. A lot of these students are going to take that deal and use these applications to do better on their projects, to be more effective in their classes, to get better grades, and to learn about where the future is going in the commercial space. That's a completely untapped opportunity. I painted a picture of the buckets we're going to attack, how we're going to attack them. What does it mean to Autodesk? There's a few numbers I want you to take away, and I'll summarize them at the end.
The first number is we're going to use all that new value creation, all that new opportunity to drive a 12% billings CAGR between FY 2014 and FY 2018. We're specifically talking about billings. We're specifically talking about subscribers. Mark will talk more about that, but this is the target. This is what we're driving to, and we believe all of that opportunity is there. The way we're going to get there is another 20% uplift in the value of our current and new subscribers. I told you specifically about the tools we're going to use. We're going to use attach of the highly differentiated SaaS applications. We're going to use the rentals for the new subscribers, and we're going to use these consumptive-based models to increase the value we get out of some of these enterprise accounts to 20. 20.
The other number I want to talk about is 50%. A 50% increase in our subscriber base, driven primarily by leveraging the price point associated with these new models, the rentals, the cloud offerings. We're going to bring a whole new universe of subscribers into the Autodesk ecosystem. Let me net it out for you. 12, 20, 50. Okay? 12, 20, 50. Lot of new value being created here. Lot of new value in the cloud. Highly differentiated value in the cloud. New solutions that allow us to target new types of buyers. New business models layered on top of our existing portfolio. New business models attached to the new portfolio. It's going to drive the billings growth of 12%. The customer value increase is going to be driven by layering on the new cloud offerings onto existing subscribers.
It's going to be driven by getting new subscribers on rentals. It's going to be driven by using these consumptive models in enterprise accounts to really increase the value of these accounts over time. Subscriber base is all about using the lower upfront cost, the compelling value in the new applications to bring more people into our ecosystem. I've given you lots of examples of how this is going to work. I've shown you that we've credibly done it in the suites scenario, we've got a lot more room than we ever had with suites with the new models and the new offerings. With that, what I'd like to do is I'd like to transition over to Amar Hanspal, so he can tell you about all the exciting value we're delivering in the AEC space. Thank you.
All right. Thank you. Thank you, Andrew, and good morning, everyone. I'm here to talk to you about the opportunity that we have in the AEC industry, I'm really excited. Those of you who have been following Autodesk for many years know that the AEC industry has been a key component of our growth over all these years. I got to tell you ain't seen nothing yet, because I firmly believe the best opportunity in the AEC industry remains ahead of us.
To sort of share that story with you, I'm going to sort of really do a quick orientation on the AEC industry, the main trends and challenges we hear from our customers who are in this industry, talk about sort of what technology enables in terms of addressing some of these challenges in this industry, then really talk about how cloud services really provide us with a breakout opportunity in the AEC industry. Let's begin by sort of a quick baselining and orientation of what it is that we mean by AEC. You all know that AEC stands for architecture, engineering, and construction, but you and I experience it as the built environment around us. Buildings, roads, bridges, dams, railways, airports, process plants, utilities. It's around us everywhere. You and I rely on it to lead our lives. It's a huge part of the human endeavor.
In fact, I saw a study from some Oxford school of macroeconomics or something important like that said the economic output of the AEC industry is about $15 trillion. It's about, if not the largest, one of the largest employers of people in the world. It's a huge industry. It's all around us. All of this work then results in a significant software opportunity that Scott shared with you, the AEC and E&I or engineering opportunity inside this $20 billion. It's almost over $10 billion worth of software. The reason customers are investing in technology really ties to the challenges they see across all of that work that they do for the planet. When I go around the world and have a chance to talk to these large companies and small companies, I hear of individual issues.
Sort of a pattern emerges of three large issues that you hear over and over again. The first issue is that the construction industry effectively deals a lot with what you would call waste and productivity issues. In the world of manufacturing, people make many of the same thing. In the world of AEC, they make one thing consisting of many components. That leads to a lot of complexity and coordination, and it leads to things that are, by some estimate, 30% of the material that shows up on a job site doesn't end up in the building, it ends up in the landfill. That's like torching a third of your money on any investment that you make.
It's a huge issue for the industry, they've been trying to address it over all these years, adopting techniques like what they would call lean construction, which sort of borrows ideas from the manufacturing industry in driving things like prefab or fabricating components off-site, assembling them on-site, sort of agile planning and things like that. It's a huge effort in the construction industry to address those fundamental issues of waste and productivity. Likewise, with the issue of the impact of climate change. If you think of any building, it is the largest consumer of energy resources in the world, are buildings. Then you can think of any large infrastructure project, they have significant environmental impacts. There isn't a project that starts today that doesn't, at its core, have this idea of sustainable design. Right? That's another major trend sweeping the industry.
The third one is that given the sheer financial investment required by many of these projects, people have been searching for a better shared risk and reward model in executing these projects. You hear the word design build, you hear the word integrated project delivery, you hear public-private financing. There's a lot of terms, but it, in fact, comes down to people finding a way to share risk and reward as they execute these projects. If you think about this idea, lean, green, and integrated are the three big challenges that our customers in the AEC industry want to see addressed going forward. The good news for us is that it all requires a fundamentally common technology substrate, and that substrate is what we would call Building Information Modeling.
Building Information Modeling, I'm sure many of you are familiar with it, but to just provide a quick refresher on it is the ability to share a single set of coordinated information, which is model-based, across all of the players in a particular project, and have that information be the way in which subsequent deliverables are derived. So whether that be drawings, that be energy calculations, that be schedules and quantities, all of that is derived from this higher representation, this model, this Building Information Model. As you know, we kind of pioneered this concept just over a decade ago, and our flagship offering for this is something we call Autodesk Revit, which anchors the Building Design Suite. Since its introduction, it's really gone from being a promising concept to really the way buildings everywhere in the world are designed.
Whether you see one of the tallest structures in the world. Here is a design by a customer called Gensler. You can look how not just this interesting shape, but wind forces, structural steel considerations, all of that is done using Building Information Modeling. Whether you're looking at that or you're walking down a street in New York and you're watching a hospital come online, all of the coordination issues associated with a building like this, all the ventilation, microclimate, all of those things are designed, coordinated, and delivered using Building Information Modeling. Then you can even see halfway across the world, a renovation project being done using BIM. I don't think it's an exaggeration today to say that BIM has gone mainstream.
It is the way today buildings are designed and delivered. That is the current practice in which all of this vertical infrastructure that you see around you is being designed and delivered. Another sort of piece of evidence of that is if you look at what owners are specifying now, they're demanding the use of BIM in the design of their buildings. In fact, governments around the world have started legislating it into policy. The reason for that is they all believe that the use of BIM technology is how better buildings are eventually delivered. It's kind of unusual for governments to get involved in specifying a particular technology approach, but they have been because of those issues of lean, green, and sort of managing the risk and reward around the world. We really seeing BIM become a really powerful concept in the industry.
We're in a great place. Why we have a bright spot in the AEC industry, reports that you see from us today. As great as BIM is and as powerful and pervasive as it is, we're about to take it to the next level with the arrival and the opportunity that the cloud platform creates. The cloud brings with it inherent connectivity, elastic computing, and all these various form factors. It's the combination of that idea with the central thing that I talked about with BIM as an approach to the design and construction of all this infrastructure that really opens up a whole set of opportunities for us.
Probably the best way to explain this to you, to tie it to what Andrew talked about, which is new subscriber growth and more value in existing subscribers, is to sort of take you through discipline by discipline. Let's start in the world of architecture. What does BIM, what cloud enable in the world of architecture? Well, first it lets us get to users that we may not be serving today. Imagine Revit LT on a rental. Let's just get to a small architectural or contractor firm that might have found Revit LT not that affordable. Let's go further. Within an existing firm, we're able to get to different users. Principal architects, the guys you read about who sketch their brilliant ideas on napkins or pieces of paper.
Well, now they can go and work with their clients using a tablet and explore their ideas in real time, and cloud-based services such as energy analysis or wind analysis give them feedback. Cloud gives them the ability to collaborate, Cloud gives them the ability to analyze, and they're able to be more effective. Similarly, the computational power of the cloud now lets people explore not just form. Here's what a stadium might look like, and that's actually what you're seeing right now, or function, here's how it will connect up. In this case, they're understanding fabrication because they're trying to understand whether their design can actually be made. The computational power of the cloud, we can give them solutions and give them options in studying the various kinds of elements that they need to assemble to make their designs come to life.
In both the examples that I showed you so far, the underlying form that's being created is BIM compatible. It's not just cool-looking graphics that you're seeing on screen. This is actually starting or priming the BIM process really upfront in the design process that these firms go through. New users, new subscribers, and value to cloud services. What about existing users, existing subscribers that may have already started using BIM inside a firm? Well, a cloud service like Autodesk Rendering makes a big difference to them. This is one of those things that it takes them hours to do, and it's frequently required as part of their design process, as they're constantly trying to communicate, through planning or through their client or to somebody else in the firm about the progress of their design and to generate an image.
This is a synthetic rendered image, not a photograph. It's something that takes them hours and powerful computers to generate today. Using the cloud, this is done now with Autodesk cloud rendering services in a matter of seconds. Since we rolled this out, today we are clocking a rendering on our servers every six seconds. This is early days, okay? This is early days of us rolling our cloud services to our existing customers. You can see that in the world of architecture, we have plenty of opportunity to add services to existing customers, as well as find new subscribers within those firms. Now let's look at the world of engineering. Engineering is a very broad term for the AEC industry because engineering covers people who design building systems such as air conditioning or plumbing or electrical and fire sprinklers.
It includes people who are designing large structural support systems for skyscrapers and bridges, and it includes engineers that design roads and bridges. It's a very broad term. To get across this segment of the industry, BIM is being adopted. The MEP guys are adopting, structural guys are adopting. I'd like to actually start by highlighting someone or a segment that has traditionally not been a very big part of model-based design, and that is the world of horizontal infrastructure. Think about roads, bridges. These are really large, challenging projects, and we've been pioneering the idea of BIM for infrastructure recently through our introduction of a platform called InfraWorks. I want you to think of InfraWorks as what Revit did for buildings, InfraWorks is doing for the world of civil design.
It's really bringing the idea and the concept of model-based design in a big, democratized way. Again, like Revit, we are the only ones doing it, really, and it's addressing some of the key challenges of that industry, sort of the historic software stacks of that industry. For example, scale, where people have previously had to break down projects in smaller, minor increments instead of designing it at true scale. With InfraWorks, let them work at the right scale and not at the limitation of the computer. It's access to cloud-based services that as you design, not only does it look real, but it's accessing optimization services such as calculating horizontal and vertical alignment or cut and fill or grading analysis. All of that is being done on the cloud via rule or procedure-based design that it's accessing.
Things that you're putting up there are already code compliant in the right areas around the world. I know if you are a civil engineer in the audience right now, your mouth would be falling open because this really is a paradigm shift in that industry. Since we introduced InfraWorks, our position in this segment, our competitive position, has started changing dramatically. Just a few years ago, we almost had no significant customers from the U.S. Department of Transportation, the guys that design all the highways and roadways around the U.S. or maintain them. Since we introduced and started having conversations about BIM for infrastructure, we've now secured almost 10 of these major DOTs, including the one right here in California, which is the largest Department of Transportation. We are securing competitive displacement.
Competitive displacement is new subscribers, and it's part of the story that Andrew just shared with you. Not only are we winning new business, our customers tell us that using BIM for infrastructure, they're winning new business. That example on the left-hand side of the light rail transit, that was one of our customers who won new business by leading with BIM for infrastructure. We have this big opportunity in engineering to change our share position, to change our competitive position in the industry, which also is the same story we have in the world of structural engineering. These are all those DOT support structures that you see where the combination of something like Revit Structure and then cloud-based analysis, such as the structural analysis service that we have built, and you can calculate wind loads and static loads as part of your structural design.
This really starts to change our competitive position, and it lets us do best, do what we do best, which is to democratize the industry, bring things that were only done at the high end down to the medium size and small businesses around the world that do this kind of work. Again, BIM plus the cloud platform really is letting us secure new subscribers through competitive displacement in the engineering space and add value to existing customers in the space. I want to touch on construction because I want to sort of elaborate on what Carl was saying, which is we've gone from big A, little C to big C now. That is really true in the world of construction. Originally, the whole growth in construction was driven from the fact that construction or contractor companies really started adopting BIM for their work.
That tied to that idea of lean construction, right? The more you are trying to automate construction, doing prefab, the more model-based information you need to drive your machines or to figure out how reinforcement or rebar and concrete would work. There's a lot of investment or steel connection details, lots of things that construction companies have to figure out that have driven that BIM investment. We've been really trying to help them with this. As you saw this morning, we made a major investment by buying assets from a company that had developed advanced steel and advanced concrete capabilities, a company called Graitec. This is perfect. Again, we will use that democratized structural BIM, if you will, BIM for construction, and drive that across a large base of construction companies around the world. That is not the only opportunity we have in construction.
If you have driven by any construction project, you know that for every one or two designers or engineers sitting in the office or maybe even in the trailer, there's at least 10 folks walking around in hard hats. Superintendents, people actually pouring stuff, safety inspectors, quality people, trades, a tremendous number of people. This is a large, dispersed, and disconnected workforce. Until the arrival of the cloud, because the cloud, if you will, lets us connect all these individual neurons into a single construction brain, okay? Lets us connect them with critical information.
Sometimes that's BIM information, sometimes that's just workflow, the sort of the automation, things that they would have done on paper, they're now able to do using automated tools, especially using something like a tablet or a mobile phone, which is a very practical device for them to walk around, and instead of the clipboard, start to use on construction sites. To address that opportunity, we've been busy building a family of products we call BIM 360. Salesforce, the guys who try and share this building with us, they have this concept called the Sales Cloud or Service Cloud. Well, think of BIM 360 as the construction cloud. That's really what we've been busy building with our individual offerings, Glue, Schedule, and Layout. I'm just trying to explain to you what it is that a construction company can do with BIM 360.
Well, for one thing, they can plan. As design or engineering information changes, the folks sitting out on the job site can understand the impact. They can detect things like clashes. If somebody comes up with a new structural design, they can instantly understand whether that interferes with any of the installed equipment or HVAC stuff. You know that 30% waste I talked about earlier? That comes from things like those clashes that you see, which oftentimes people only discover when they've actually already ordered the material or are trying to install it on site. This is worth a lot to a construction company to detect, predict issues, eliminate issues well before they are too far committed down the actual work. They can plan even things like schedule, because we have started bringing a lot of scheduling tools.
Our goal here is not to replace their Gantt chart or their critical path stuff. It's to do their daily work and understand that if the electrical goes in before the plumbing, you've got a problem. You won't believe how often that is. There are lots of little issues where they're planning in this agile, short way, and they need to understand these what-if scenarios as they're planning the construction. This whole connection to the construction job site also lets us get to that last mile. Okay, the last mile here is what if instead of spray cans and measuring tape, you actually just project the digital model using lasers and hardware from Topcon or Trimble out onto the job site and guide the layout and installation of key things on that particular construction site. This is not that science fiction as it might sound.
You just go down here to the Southern market, to the [inaudible] big hospital project. You see construction crews using digital twin models to guide the installation of hangers and brackets, they are saving a tremendous amount of time and error as they do this. We're doing this through BIM 360. All of those people that I talked about, those safety inspectors, those commissioning folks, all these guys walking around today with clipboards can use a tablet instead to track, do their workflow. They can manage their checkoff list. They can manage their punch list. They can manage all of the equipment.
They can look at what is installed on site, compare it to the specification that came as part of the design and engineering, make sure that the right things exist, if there are any supplier problems, connect back from the field office back into the head office. This is what BIM 360 is enabling. It's enabling a level of automation on the construction job site and process that was not possible before. This is completely greenfield. This is all new subscribers. This is all cloud, all the time. How big of a deal is this really to customers? I think I'd like to share that with you with one anecdote I just heard from our head of sales, Steve Blum, who just got back from a trip to the southern hemisphere.
We talked to one of our good customers, this customer has bought Autodesk technology from us before. He used to spend, over the course of two years, about $50,000, he just spent over a million this year because of BIM 360. The entire investment was done using that. Okay? If you look at the combination of what we're doing with BIM 360 or this construction cloud, along with BIM for construction, we are starting to make a significant dent in the opportunity in the construction industry. Since we started focusing on this theme in AEC, in the last six quarters, we've secured over $300 million worth of business from construction. Over half of all deals that Autodesk secured over a million dollars in that same time were from the construction industry.
We have all the storied names in construction, and this is a great story for us in terms of a growth opportunity. If you want to understand why I'm so bullish on our opportunity in AEC, this is a great story for you all to remember. Let me sort of wrap the AEC piece up. In architecture, we can add value with cloud services. In engineering, we can do a lot of competitive displacement, gain share, and in construction, we have this greenfield opportunity to secure new subscribers. The one other opportunity that Andrew touched on, and when Buzz talks about what the opportunities in the world of manufacturing, you hear similar discrete opportunities. Our one opportunity is to tie together all of the various players in both of these industries with a very broad-based collaboration platform, if you will, called Autodesk 360.
One way to understand Autodesk 360 is to think of it like social capabilities for projects, sort of like Yammer or Jive or even Facebook, if you will, for design and engineering. Just like any of those platforms, all of the people, all of the projects, all of the activity, and all of the data that is relevant to the project that you're working on are found in one place. Why is this critical? It's because one of our customers once told me, said, "Look, today I can find out that my nephew 600 miles away scored a goal in a soccer tournament, but I can't find out if something critical changed on my project." Well now, if something changes, if someone changes the design of this hospital, you're alerted that there's a new mapping study available.
You can use one of those integrated tools that we just talked about to actually examine what that proposed change is, take a look at it, and then based on what you see there, pass that information on to the right person. You might ask the structural engineer to run a new analysis here and say, "Hey, tell me whether that change in design means anything." The person will respond. Yet the updates are visible and relevant to the right set of relevant people. Then you can continue that process until, for example, if construction sequencing needs to change as a result of that, it's all coordinated from one place. It becomes the homepage for your project, sort of the digital backbone for any design or engineering project.
That's what we're building with Autodesk 360, this integrated set of tools, services, and collaboration that any and every design and engineering project will utilize going forward. Let me just close out by reminding you of what we talked about in the world of AEC, that is that we pioneered the idea of BIM, and we're set to take it to the next level with cloud services in existing accounts, in existing users, existing subscribers. We're set to change our competitive position, and we're gaining in the world of engineering, and we have this tremendous opportunity in the world of construction. Thank you. I think we've given you such rich information that you now need a break. We're going to take a 10-minute break and start Dave, anything else in terms of logistics? Okay, good. See you back here in 10 minutes. Thank you.
Ladies and gentlemen, we're going to begin again in just a couple of minutes. Welcome back. Please take your seats. We're going to begin in just a couple of minutes. Thank you.
[Break]
Ladies and gentlemen, please welcome Senior Vice President, Design, Lifecycle and Simulation, Buzz Kross.
Good morning, everybody. I'll give you a couple of minutes to settle in. Good morning. I'm Buzz Kross. I'm responsible for basically what's R&D for our manufacturing products. Got a lot of exciting things to tell you about in the few minutes that I have here. Here's what I want to cover. I want to talk about the manufacturing market, be sure we're all on the same page about what manufacturers do and what's important to them. I'll talk about some new trends affecting my customers. I want to give you an overview of what's happening with our current products, our desktop products. Last of all, I want to go through our new generation of cloud products, some new exciting things that I think are changing the market and changing our position in the market. In manufacturing, we think about four different sub-segments of the market.
First is the automotive market, a really big segment for us, really specially designed, a big combination of aesthetic requirements and very difficult mechanical requirements. High volume in this market. Next is the industrial machinery market, really complex, really large machines. Traditionally, this has been our strength. This has been our wheelhouse where we did really well. I think you'll see how we've expanded into some new spaces. There's the building product manufacturers, another real strength of ours because we do both sides, building design as well as mechanical products that fit into buildings. Last of all, the consumer products businesses are also an important segment for us. The market is a sizable one. It's been said many times, a $21 billion market overall. About 45% of that is the manufacturing market. A large and really important segment for us. The segments look like this.
Automotive is about $2.75 billion. Industrial machinery is about the same size, $2.8 billion, really two really large segments. It also reflects the complexity. Those two markets are the biggest. As I said, industrial machinery has been our strength to date. I think you'll see through this, we've done a lot, particularly in automotive, to strengthen our position and drive considerable new revenue there. In terms of trends, I see three things that are affecting manufacturing companies. One, there's a lot of time-to-market pressures. Often in my market, there's this expression of better never than late. If you come out with a consumer product six months after your competitor does, there's just no point to do it. Customers have to hit their date. They have to come out on time. There's huge increased product complexity, more than we've ever seen before.
Last of all, a lot of requirements are innovation and aesthetics. Things have to look great, and they have to be innovative and changing the game. Product requirements have changed a lot for manufacturing. That leads to a couple of different things that customers need to do. One, there's a premium on agility and the use of an all-digital process. If you have manual processes or gaps in your digital process, you're in a lot of trouble. You're not going to be able to beat the market as fast as your competitor. In terms of complexity, there's a greater need for simulation. Customers want to make the part as simple as possible, but above all, they want to know how it's going to behave. I'll talk about how we're helping our customers there.
Last of all, on innovation and aesthetics, there's just a whole new generation of products needed. The 21st century CAD/CAM solutions that haven't really existed before are needed for our customers to handle the complexity, the innovation, and the aesthetic requirements. Autodesk, I think, is really hitting on all eight cylinders in all three of these areas. I'll talk to you a little bit about what we're doing about all of this. Our solution is what we call a Digital Prototyping solution, the concept is a really good one. The idea that you can build something that's digital and you can prototype it digitally. You can know everything about your product before you make it. Traditionally, that's meant, for us, design. We did a really good job of designing a product and letting the customer understand its design.
One of the changes you've seen from Autodesk recently is we now do everything. We do from the beginning of the process all the way to the back end. This has opened some new areas for us, letting us attack customers we have never attacked in service before. We're helping customers in new ways, with not just design, but in manufacturing engineering, knowledge workers who use product information, managing data. The whole gambit of concept through producing a product is how we serve and help our customers today. Our customers, I think, are really doing well. This image you see here is a tunnel boring machine. Our customers are designing these sort of really complex systems with our products today. They're solving really complex design challenges. They're doing multifaceted simulation, and they're doing ultra-realistic visualizations.
Customers can do things today that were impossible just a short time ago and are solving just amazing problems. It's impossible to do these things without sophisticated tools like the Autodesk toolset today. Our lead product is a Product Design Suite, okay? It's a tool designed for customers that design and simulate products. Its core product is Autodesk Inventor, a 3D solid modeling tool. Inventor is doing great. We have a very engaged community. We're adding new capabilities. We're seeing good, steady growth. Product Design Suite's growing quite nicely on our system. That part of the business for mechanical designs, doing very well. Here's a good example of one of our customers.
This is a very industrial machine, but the customer makes great effort to make this thing look aesthetically pleasing, to the point that they'll use really good visualization tools as well to show their customers how they design. The aesthetic requirements, even on heavy industrial sorts of products Have become strong, severe, and important. Customers pay attention to those things, and they go to a lot of executive review. They pay a lot of attention and put a lot of energy into these things. Our tools really help customers do those things today. The other interesting part of our business is the Factory Design Suite. Factory Design Suite is not for design engineers, it's for manufacturing engineers, a whole other department that helps you design a process to make a product, a new revenue source for us.
We really did not get revenue from manufacturing engineers in the past. Factory Design Suite lets these new sorts of users benefit from 3D models to arrange and optimize their factory. This is one great new source of revenue for us. It lets us leverage many of our traditional tools in a new way to solve new problems. The other interesting new market for us, an area we started to see significant growth, is automotive. Historically, we've done really well at the beginning of the process, where you're doing the creative design work. There's four segments where you're doing sketch, concept, design, and Class A modeling. Customers, what they try to do is they try to improve the efficiency of that whole process. Their automotive customers are trying to squeeze this process to make the whole cycle time shorter.
They also are trying to get 10X new ideas in the top of the funnel. They want much more early creativity. Autodesk's strength and leadership in the automotive has been in this section here. We've always had fantastic sketching tools that all the autos use to conceptualize and build their latest new ideas for their concept tools. They also use our tools to do things like interiors. Interior is becoming increasingly important in your ability to sell the car. We have a couple of different strengths, our visualization, our design tools, but also our plastics ability. Important thing for all automotive companies is to make their cars more fuel efficient, lighter. The way you make cars lighter is you take steel out, you put plastics and composites in.
We have fantastic capabilities in helping our customers build really good designs out of plastics because of our Moldflow product. World leader in things like plastic design, critical for interiors. Also, Class A modeling is really a new area for us. We're seeing a lot of growth in the Class A business, displacing competitors here, where they used to use us for the front end only. We're now starting to extend that into the Class A technical surfacing portion of the automotive design process. We've seen some very large customers start to shift their process based on this, and I'll give you a couple stories about that. The fourth area is visualization. We have a world-class visualization tool named VRED. Our visualization is really one of our strong wheelhouses for automotive in particular. We do a fantastic job. Image like this is a pure digital image.
It's often better than real. We no longer talk about photorealistic. We talk about better than real. What customers try to do is they try to get an emotion, a feel for this car. You want this thing to feel fast. You want it to have a sexy feel. You can do that digitally better than you can do physically. Our customers use these tools to visualize and review their designs. They also use those assets to do other things to promote and sell their cars. I got a little car story for you here. This is an Aston Martin. This is the Aston Martin One-77 . It costs 1.7 million GBP to buy one of these things, 1.7 million GBP. They only made 77 of them.
The really interesting part of the story, and by the way, it's hard to imagine something more beautiful than that. I mean, this thing is just a beautiful car. The great thing about the story is that Aston was able to sell 75% of their cars digitally before they made one car. They were able to use Autodesk images to sell these cars to customers. Think about this. Customers spent 1.7 million GBP based on digital images, 75% of those did. It's a pretty phenomenal success, and it's a great use of the tools to really understand the design and make something that has this emotional, powerful feel. Aston Martin is a first-class company all the way around. If you go to their factory, this is an image of their factory, it is like a showroom. It is immaculate.
First class from Aston Martin. They do things like when they sew the interior, one seamstress handles each car because you don't want to have a difference in stitching style between the front seats, the back seats, the dashboard. Everything has to look uniform and simply gorgeous. When they finish their cars, Aston spends more time finishing a car than most cars take to build the entire car. They pay huge attention to quality and detail. The great thing, Aston Martin is standardized on Autodesk. From the top to bottom through Class A, they use the Autodesk stack. In fact, we've done some press reviews with the automotive companies and Aston Martin, where they talk about how they've done it. They do concept work. They do executive review. They do Class A modeling. They do visualization with Autodesk.
We're really making some great strides in the automotive companies, and it's because of these design tools. It's also because of tools like our plastic tools, our factory tools that are helping these automotive customers get a competitive edge. Another really good example is VW Audi. We've made a lot of progress with VW. This image is generated by our VRED visualization tool. They're using our visualization tool to do all their executive reviews of their cars. They're also starting to convert their Class A modeling tools from the old system to our system. Just because they feel they can get more throughput, they can do a better job with it. A whole new set of customers with the automotive companies, a whole new set of prospects that we're starting to generate, and new types of revenue and business.
It's not just the couple of cases I gave you. Every automotive company in the world uses the Autodesk tools. 100% of them are using our tools, at least parts of the process, always early, always the conceptual design process. We're starting to push that further and further into the cycle and making good progress for virtually every company you name. These are just a few of the logos here. It's not just automotive. I know I talked about automotive a lot, the other markets are even bigger for us and are continuing to grow, whether it's consumer product companies, food packaging companies, industrial products. We're seeing really good success with a large array of customers who are doing really well with our software. What I would say, in summary about the beginning, is we've seen a lot of strength in our traditional markets.
Product Design Suite, highly competitive. The suite really serves customers well, does all the things that they want to do in one integrated package. We're also winning new types of users, things like Factory Design Suite. Lets us get to the manufacturing engineer rather than just the design engineer, a very attractive proposal for both us and our customer. Last of all, serving new markets. Auto is a new example of places we're starting to extend our reach in the automotive segment to get new types of users in a new industry. That's a little bit, it's not quite looking back, but it's sort of looking to today. Okay? Looking to the immediate future is this whole idea of reimagining digital manufacturing. As I said, a lot of pressures on customers to innovate, do a new aesthetic design, to do things in brand new ways.
We have reimagined manufacturing based on the cloud. We have tremendous tools out there for the cloud today and are continuing to do more and more. I'll talk to you about some of these things. Traditionally, this has been our market, the CAD industrial design market. We now have a solution that extends to all four major disciplines for manufacturers, CAE with our analysis tools, PLM with our PLM 360 tool, and we're about to do something. We've shipped an Inventor-based product for CAM already. Okay? Now, in this environment, we have produced a whole new set of cloud tools, Fusion 360, the first-ever tool designed to do CAD, CAM, and industrial design on the cloud. Sorry, I said CAD, CAM. It's industrial design and CAD on the cloud. Cloud-based design. Okay? Same thing with our Sim 360 tool. It does CAE on the cloud.
PLM 360, it does PLM on the cloud, and you'll see later, in the very near future, CAM 360. It'll do CAM on the cloud. This really helps customers in fundamental new ways. To do things in the cloud isn't just moving a process from a desktop to a cloud. The whole process and what we deliver for customers is very different. It very much attracts and born in the cloud customers who just think about the problem differently. Autodesk has a definitive lead in that we're not talking about this as a future. These are things we have today, customers are actively using today, and we're starting to see a lot of build-up of excitement about these things. Now, let me go through each one of these things and talk about them. First thing I want to talk about is Fusion 360.
Fusion 360 really is reimagined CAD in the cloud. With it's very dynamic. You can do industrial designs like this guitar, for example. With it's not as numeric as it used to be. If you want to change a design, you grab it and pull it. You can see how you can really easily change the design. I talked about the need for aesthetics. Fusion is perfect for those things because you can conceptualize and change so well. It is mixed industrial design and mechanical design, so you can do early concept work and real detail mechanical work all together in one package. There's no separation. It's as if we took Inventor and Alias together, put them in one product, and put it on the cloud. Okay, we think this is a revolutionary approach that customers have really latched on to.
We have a large user base using it right now. Okay, now, it's also, as I said, reimagined CAD for the cloud. It's not just a geometric modeling package. It includes an environment that works the way customers think about a cloud package work. For example, a gallery. With it, you can share your design ideas. This is the way 21st century designers work. For them, they collaborate on the cloud. They don't necessarily all get together in an office. They collaborate through the web. That's built right into our tools. Even things like YouTube and Twitter connect right into it, so you can communicate really easy. Learning tools built right into it.
These are the sorts of things that make this thing collaborate much better and let you extend outside the old world of just geometry into a very modern 21st century feel for a new generation of CAD products. Fusion 360 is revolutionary in the way it approaches these sorts of things. I'll give you an example of our gallery. These are some of the things customers have modeled. They vary from things like a customer has modeled a drop of water hitting the glass, the splash effect that you see. 747, sneakers, robots, watches, all sorts of things being modeled today. Some very conceptual, some very theoretical, some hard mechanical design. An automotive brake, for example, in here. Customers doing a wide variety of work with Fusion, not just mechanical, not just industrial, but the meetup between the two. They're sharing these things.
The new world is I want to let the world kind of know what I do. I want to have other ideas about these things. All those things are built into Fusion. Revolutionary, not just from the CAD, CAE side, but the web use as well. The same thing is true with simulation. We felt we needed to do simulation in a new way. Sim 360 really helps people who analyze how designs work. It's deeply integrated with the Fusion environment. There's no separation from your design tool and your simulation tool. You can very easily do things like change the diameter of this bar. Okay. You can also very easily analyze all these things at the same time. Another really good example of how we've used the web to do simulation in a new way.
In this case, it's the high-performance compute of the cloud that we can analyze 100 different variants of these headphones rather than just one. Easy to operate, easy to get lots of different designs, has the same sort of integration and collaboration tool that Fusion has. We're able to attack this part of the market in some very new ways to help customers analyze things very differently. It's not just about new tools, though. A lot of it's also about who analyzes things. We have simulation tools for all sorts of different segments of the market. Plastic parts with Moldflow, the world-leading solution. We have awesome fluid flow tools. Fluids have become a commonplace. They are now mainstream.
People are using them for-- It used to only be done for ship hulls, and NASA used to do it, but now people do it for valves and all sorts of common parts. It's being done everywhere. Composite design, we're seeing more and more composite works. We have a dedicated tool like that, things like Pipeflow. Sim 360 will do the vast, any kind of simulation that's commonly done, we approach and handle very well. As I said, we do it on the web. We've also made it a really good tool for designers. Here's an example of a common problem, a drop test. Drop tests used to take a day or so to set up. We can now do it with one click. Our assumption is you're doing the drop test on Earth. Okay. We know what Earth gravity is like.
It'll do hundreds of analyses to come up with a single answer. The setup is very easy. As long as you have a model and you want to analyze it on Earth, we can do one input. We'll analyze this whole test for you. What it does for you is a designer can now conduct these really sophisticated analyses to understand how they're going to work. I mean, how important is it for a cell phone user to know, is the phone going to break when I drop it on a concrete floor or not? It makes a big difference. Designers can understand that early in the process, and doesn't have to be offloaded to a specialist analysis team. Sim 360, we think, really changes the game in how designers work. Last year, we also announced the PLM product.
Our PLM product's doing really well. We're capturing many customers. We have more than 10,000 users today. It has lots of advantages. Biggest advantage is its ease of deployment. Because it's a cloud-based solution, you don't have to deploy servers. You don't have to manage your own network. It is really a simple matter of customizing the solution to fit to exactly what you're going to do. Times have been making that up are dramatically less than others. Customers have used it to deploy. Some have deployed it to solve problems that they feel it would take too long or too difficult to get their current PLM systems to solve. PLM 360 has a deployment advantage, a huge price advantage as well. We think it's another good example of revolutionizing the industry by using the cloud to do things that haven't been done before.
A good example of a customer is D-Wave. D-Wave makes supercomputers, $10 million computers. They really only sell to NASA and Google today. Okay? These guys are 21st-century users. They think about things in a modern way. They needed a PLM system to manage their complex designs and make sure all their employees could have access to their data. To them, it was just a start and a begin that I need to find a cloud-based solution that does this. They didn't even understand why would anyone go anywhere else to try anything else. They found our product as the right, fast, easy way to do it. Just its cloud nature by itself is what attracted D-Wave to this company. What we're seeing is a lot of modern, aggressive companies are very attracted to these sorts of things. Again, the next generation and sorts of users.
PLM 360, we're really happy about that. The newest thing is CAM. CAM has changed a lot. The world of NC machining used to be a dark, dingy factory. Okay? It's now become mainstream. It's done everywhere. If you go to TechShop, if you see Pier 9, if you track the maker movement, these sorts of things have gone beyond the mainstream to the average individual. This photograph is Carl teaching a bunch of young girls about NC machining. This is the five-axis mill that Carl's demonstrating for them. This sort of thing is a common thing. NC really has started to go mainstream because of this democratization that's happening in the manufacturing market. This market is ready to be used by different sorts of individuals. Okay? Dentists' offices typically have an NC machine in them today to mill replacement teeth.
Okay, cycle times have gotten to be so important, people do those things on-site now. Big changes in this market is driving lots of new change. We decided to get into this market. Here's an example of our high-speed machining works product running in Autodesk Inventor. We've had a product out in the market for quite a few months already that works with some other solutions, an Autodesk Inventor-based solution now as well. We're also working to get this to the cloud. Very soon, this will be out there available for users on the cloud as well. Just like CAM, just like FEA or simulation, the high speed availability of the cloud helps users a lot. Okay. Sometimes tool paths take 40, 50 hours to generate. High-speed machining and the cloud will let you do those things in minutes.
We think it's a big changer for this market. For Autodesk, a whole new set of users, someone we did not have a solution for, someone we didn't offer products for and didn't drive revenue from. The material there. Autodesk now has two different ideas here. One, many new types of customers, not just the designer, not just the industrials anymore. The analysts, the CAE, the knowledge worker that works on product with our PLM solution, and the manufacturing team, manufacturing engineering that work on our CAM product. We have the first to market products on the cloud, with Fusion 360, the first ever production solution for CAD. With Autodesk Sim 360, the first production solution for CAE. Autodesk PLM 360, the first ever cloud-based solution for PLM. CAM 360 will be the first cloud solution for CAM as well.
We're in a position of leadership here, having first-mover advantage in this portion of the market, and the ability to attract very new but adjacent users. In manufacturing, big market, a well-established market. Autodesk is in the challenger position. We have some tremendous new assets that will let us change where we are, let us serve customers in new ways, new types of users that we haven't had a chance to drive revenue from in the past, and new technology that we think really revolutionizes. In automotive, we're making huge steps. Every automotive company uses our product at the front end and are starting to extend what we do today into new areas. In consumer products, our desktop products are doing really well.
We have a new offering also that customers, when they're ready for the cloud, we'll be ready before they are and have a great solution available now. New products, new customers, new markets, and first in the cloud position. Thanks much, everybody.
Thank you, Buzz. My presentation's around driving transformation and also driving shareholder value. It's a pleasure to see all of you. I welcome you back to the Gallery. Let's jump into it. My agenda, I want to talk about the financial objectives. There's four key ones I want to call out. I also want to review some key financial attributes that we typically make sure that people understand around Autodesk, we'll call those out as well. We'll talk about capital allocation, which some of you have already spoken to me about just over a cup of coffee, and it's near and dear to all of us. I'm looking forward to diving into that.
We'll get into the meat of the matter here, if you will, in terms of the business model transformation, talk about the business outlook, also talk about the long-term goals quantitatively. That's my intention, let's press on. When you look at the financial objectives, there's four key pillars, if you will, for us. We just want to make sure to set the table correctly on this. The first mission that you've heard throughout today is around the acceleration of billings and revenue growth. We think we have a great opportunity in front of us. I think you've heard throughout, starting with Carl and all the way right up to me now, about this opportunity and the pathway, the very tangible pathway to get there. The second pillar is around expanding our operating margins.
I want you to know that we are absolutely committed to continuing to drive our operating margins to a higher level long term, notwithstanding the business model transformation aspects that we'll talk about. The third thing that I want to put on the agenda that we haven't talked a lot before about is this notion that we want to continue to increase our % of recurring revenue, as well as our % of ratable revenue over time, and there's a good reason for that. It improves financial predictability, it improves the ability to be flexible with customers on how they want to consume, as opposed to trying to spend all of our time gearing a deal and the structure and the nature of the offering to recognize up-front revenue.
We want to unshackle our go-to-market team by continuing to go to a model that's a more flexible model, and I think you guys get that. That ground has been well plowed in the secular space of software. We're pressing on with that translates into more growth. We want to optimize the capital structure, you'll see tangible actions. We've said some things that we were going to do at our last IR day. I'm looking forward to reporting back to you quantitatively on what we've actually done since that time. Those are the objectives. The next aspect on the agenda that I said I would cover has to do with the attributes around the company financially, that I think it's important to understand. Just to make sure everybody's level set before we go into the transformation.
The first thing is the diversification of our revenue. It's obvious when you look at a chart like this, very diversified from a business unit market viewpoint, number one, but you can also slice it internationally and say that it's very diversified from a geographic standpoint, and beyond any measure, we're a truly global company. With over 70% of our revenue coming from outside the U.S. We are truly a global company, and we get the benefit of that diversification. Another attribute that I think is important, and it builds on some of the earlier discussions today, we're not new to business model transformations and transitions. 10 years ago, we started something called subscription maintenance. You can see today, in FY 2013, it's rapidly approaching $1 billion in revenue per year. Quite a dynamic, and it's continuing to grow.
Going forward, you've certainly heard that with our cloud offerings and with our rental offerings, you're going to see that number continue to grow even more so. It's a very important attribute to our business today. This is all recurring revenue as well. It's going to grow even more so going forward. When we talk about the balance sheet, strategically, we know how important that is, both operationally and strategically, to have a sound balance sheet. A couple of things that I will call out to you that I look at. Certainly, we have a strong growth in our deferred revenue, I'll show you numerically what we're doing there. The beautiful part about deferred revenue is it's revenue waiting to happen, and that's going to be an important metric to watch going forward. We'll talk about metrics to watch going forward.
That's one of them, certainly a strong growth in deferred revenue over the years. A healthy DSO. I pay attention to that. I'm sure a lot of you do, because I think that's a key part of an efficient cash conversion cycle, and we certainly, you can see with the results, even in Q2, that that looks like it's in good shape. A robust cash generation. We'll give you the numerics around that. That's a very good part of our model and in the financial attributes you should be aware of. Certainly sufficient cash balance. We'll give you a map on that. The last point I do want to call out to you is around channel inventory. Historically, for years and years, we've said four weeks is fine. Two weeks is kind of low. Four to two weeks is kind of the range for channel inventory.
About four years ago or so, we were at four weeks. Today, we're at roughly one week. If you think about the impact of taking that to one week, that's a very good attribute. It's very tight, and it's something you should just be aware of. Deferred revenue growth. I told you I'd give you a little bit more detail on this. You can see how this is growing again, pointing toward $1 billion, again growing certainly last year, 16%, and this year, 7% for the first half. If you look at our robust cash generation, I'll show you a couple metrics here. Certainly one of 17% growth in half one of FY 2014 is strong cash generation. I think if you look at the metric I think is most important around cash, though, is around our cash flow margin.
That kind of speaks for itself just in terms of the fact that is significant. You then push on to sufficient cash and investments, we've got about $2.4 billion. About 75% of that is internationally offshore. Shouldn't shock you, right? I said over 70% of our business is international. Makes sense. It kind of maps together. In fact, we have the sufficient cash to do what we need to do in the currencies we need to do it in, that's a good fact pattern. We talked about, at the last IR day, this notion that we would appropriately use debt. That was prior to the fact that we did a debt IPO, which happened less than a year ago now. We raised $750 million.
Looking back, it was great timing, I think you can see that, all the details are of public record. The other thing that we accomplished was to get investment-grade rating for the first time, just getting a rating for the first time as a company. We're very pleased with this. This is important to us. It gives us flexibility for the future. I think that's another good attribute that we just want to make sure everybody's square on. Talk about optimizing the capital structure. M&A we have used to fortify our growth and accelerate our transformations. I want to show you some detail on that that you may not have seen that will give you a sense of perspective.
That's the first choice as being very select and discerning, typically it's been small tuck-in M&A that we've used as part of our company to accelerate our transformation over the years. I'll give you some more detail. The second thing, as I called out, is we were going to go and do a bit of a policy change. For years and years, we covered dilution only. We announced at the IR day that we'd cover more than dilution. I'll show you the math. The appropriate use of debt, of course, we have demonstrated that and will continue to do so. M&A, I want you to see this perspective over the years. In the early days, we had AutoCAD, right?
I don't know if you're aware of this or not aware of this, one of the M&As that we did in the early days was a company called Interact, which was a core part of AutoCAD. We bought a company called Generic, which was a core part of LT. From the very beginning, we used M&A to push ourself forward in addition to all the we're doing internally. Autodesk 2.0 talked about the industries, it talked about the verticals. Those that have tracked this company for a long time, there's some of you that have tracked it for a long time, you know how important that was to the growth in taking the company to the next level. In fact, when you look at the M&A, we did small tuck-in acquisitions largely, that became very important to us over time.
They planted seeds that would help us later. For example, on this list, let me just call out Revit, for example. Almost no revenue, technology ready to go. We work it in, and now look at what that's blossomed into as we've continued to grow our business. Let's go to today and to the future. We've looked at accelerating the move into the cloud, and those that are tracking our M&A will notice that we've made some very select M&A. For example, Buzz talked about PLM. We did the PLM, some of the core technology to start our PLM business. Amar talked about a lot of the different products in our Autodesk 360 and some of the social capability in there from a company called Qontext. We are doing this with small tuck-in acquisitions that have helped us move the ball forward.
It is a good use of our capital and will continue to be. Looking at our share count, if we look at the number of shares outstanding, we said that they would come down. You can see the math again accomplished, and it won't be a perfectly linear every quarter kind of thing, but just expect us to continue to operate with the intention that we have. There you have it. That's some of the financial attributes we've covered. We've talked about the financial objectives, that's clear, and optimization of the capital. I want to go down into now the meat of the matter, which is the business model transformation. You saw this slide earlier in the presentation around the growth. I don't need to rehash all the different aspects of this, but we know there's new offerings.
We have unmatched cloud capabilities in the world, full stop. It's exciting to hear both Buzz and Amar talk about that. You can see it tangibly, and we're building that. You heard from Andrew about our rental offerings that have gone pervasive here. Those are new offerings that are going to help us. We'll go all the way through this, but it has an impact on our financials. Let me talk about a couple things that I think are important for you to see. The first thing to see is when you're driving this transformation, basically, there's a transition where the % of a recurring revenue is going to start going way up. Let me just set this slide up. For example, this is the % of recurring revenue of our total revenue of the company. Okay? And time.
In 2008, as a reference point, about 28% of our revenue is recurring. That was largely subscription maintenance. You get to 2013, it's about 40%. We got it. We're pointing out towards 70% in FY 2018. I've just given you the data points, 2013 and 2018. I understand you want all the data points in between. That's a different topic. I want to make sure you're very, very clear that we're driving recurring revenue aggressively. What does that mean, recurring revenue? We'll talk about what it means. We know what it is, and in our particular business today with the offerings, it is cloud, rental, and maintenance subscription. We know it's financially attractive. It's very attractive because it's a largely ratable model.
We don't worry about spending time and losing cycles by having our sales team try to configure selling something up front with a license to get revenue recognized. We try to sell what the customer needs and let them consume and interact with us on a sticky basis, on a continuous basis. We know that this is an attractive model. It's well proven, and that ground has been well plowed in our secular space. We also know that it's more predictive. When you have the preponderance of your revenue starting to come from your balance sheet over time, as you build up your deferred revenue, it's a very attractive model. Keep in mind, we're getting the cash up front, the deferred revenue, and it ratably recognizes and amortizes. I know you guys get that as well, and it enables flexibility and growth, basically.
You just go back to a number of examples that we have with customers. They want to consume. We got to get the barriers out of the way to allow them to consume even more. I think Andrew touched on that a bit. There's another thing that I want to be very clear on, and this is a point that's important to understand. In addition to the % recurring going up, okay, the other point that I want to make is the % that is non-recurring is going to be increasingly ratable. Right? If the % recurring is already ratable, the part that's not ratable is going to become more ratable as soon as possible. Historically, these non-recurring revenues have been recognized upfront due to the attributes and the way the configuration and the deals been put together and what's been offered.
In the future, you can expect from us that the non-recurrings become more ratable over time and when it's soon as possible. That's clear. Why, I think is very, very clear. Imagine Autodesk continuing to get more and more focused on a totally ratable model. Think about the clarity in terms of the communication with this community. Think about the clarity internally. Think about the go-to-market clarity where nobody is getting in the way of a deal because they're worried about upfront revenue recognition versus supersizing a deal to actually get more growth for the company. These are things that I just want to make sure people capture. As we continue to progress, we're going to continue to communicate quantitatively what that means for people. Let's focus on the transition. What should you focus on?
I've talked to a number of you, and you say, "Hey, Mark, tell me the metrics I should look at as you guys go through a transition and a transformation." I'm telling you, these are the ones. Billings. You heard Andrew talk about 12% CAGR for billings growth. I just want to make sure it was explicitly clear with what he said. It's all billings growth. Okay? 12% CAGR in billings growth. The second thing that I'm telling you is that we need to look and track over time subscribers. You saw very clearly our view of subscribers. You know from that standpoint, I just want to also clarify one number, and this is important for you guys that have models. It's 1.9 million existing on the subscriber list today, not 1.8. Just want to clarify that.
You're going to see that going forward, you saw a huge opportunity that Andrew talked about. Deferred revenue, we know that's important because if you increase ratability, the actual money goes to the balance sheet to deferred revenue before it ratably comes off. Then cash flow, of course. Those are the metrics, and I want to be very clear on those. Obviously, we look at other things. That's a given. These are ones I want you to point to really look at as well. Transition impact. Again, this is well-plowed ground.
We know when you're taking largely upfront and going more to a ratable model, whether it's due to the recurring growth revenue because of our cloud offerings or our rental offerings, or whether it's due to something that could be a little bit more lumpy, like actually moving our non-recurring revenue to a ratable model. You know the effect it'll have on revenue, operating margin, and EPS. It's been clear in the marketplace. We will also have that effect. As we get up to those things, we will continue to post to you on what you should expect as we're working through those transitions. Let's go to Q4, which I think is a great example and is illustrative, and I want to be really clear on that.
You heard Andrew talk about a global automotive manufacturer who began to get on a consumption-based, we call it a token-based, consumption-based offering. What happened? This is not the only example. Basically, it supersizes the deal because it takes away the barriers and lets people consume. That supersizing is a good thing. We have a very specific number of enterprise customers, a very specific deal list in Q4. It approximates about $50 million, roughly, that we are going to move to a consumption enterprise base in Q4. Okay. What it means is we're going to put that revenue largely on the balance sheet. When you saw guidance, it would have been $50 million higher in the absence of us making that decision. We know that making that decision is going to drive billing growth for the long term.
We know that that's going to be a better model for our customers. We know it's a better model in the marketplace. We'll go into the future. This is one example of that. The long-term impact is more growth. The short-term impact is less revenue. We get it. We get the transition impacts. There's an example of it. You got the intention. Recurring revenue is going up. The non-recurring revenue is going to be increasingly ratable. We're going to have a more ratable model in total. I think it'll be an easier message for all of you and also for our go-to-market teams. For Q3, we reiterated. That message already went out. You guys get that. For Q4, you can see the numbers that we have.
You could add approximately $50 million above that compared to what we're going to push to the balance sheet as we close these deals and get these guys on consumption-based, supersizing-type deals. We're excited to be taking that step. I have a couple other things that I want to cover, and one of them is I just want to really bring it all the way home, and then we'll talk about another series of numerics. Our opportunity is clear as we keep growing our business. The opportunity is a double-digit growth opportunity. It's not hard to imagine when you've heard everybody talk today with all the different things and the pathways, the very specific pathways that are happening today. You look at a $21 billion TAM today. You look at all the opportunities you've heard of best-in-class offerings, no doubt. First to the market with cloud.
There's nobody in the world that can say that like we can. This is not vaporware. This is realware. This is out there. We're at the beginning of the beginning, we've been working on this for years, and you've heard and seen firsthand some exciting discussions from both Buzz and Amar about our offerings. Continue to grow our core and further penetrate and expand in TAM. These are opportunities. This is the opportunity for us when you think about us three years from now, and I think people get that. Winning in the cloud, winning with the best model that's a more attractive financial model is quite a prize that I think we aspire to. When we come down, let's hear some numerics that you're going to want to see for sure. Again, I clarified 12% billing growth CAGR all the way up through FY 2018.
That is the plan. 20% increase in customer value. You heard that very clearly. 50% increase in subscribers. You heard all the different ways that we're going to do that. I'm saying 70% recurring revenue by FY 2018, and that's separate from the next bullet that we're going to significantly increase our percent of ratability even beyond what's in the recurring, because the recurring is naturally ratable. I'm saying we're taking non-ratable stuff and making it ratable. You can see that that number is good. We're going to get to a much more singular model, and it'll be more familiar with some of the, even born in the cloud companies that you deal with in terms of the financial models that you're dealing with, and the kind of things that people are focused on. The last two points, 30%+ non-GAAP operating margin. That is absolutely our intention.
Obviously, there's an effect we have to work through with the transition. Everybody gets the transition metrics and impact. Unequivocally, that's what we're driving toward, and that's in 2018, we're going to be posting above and beyond that, and we see that is definitely an opportunity and definitely part of our plan. The last point I want to also reiterate, maintaining our investment-grade rating is important. It gives us all kinds of flexibility strategically. We will continue to do that, and that'll be important to us for the future as well. Those are what I would call the long-term financial goals. I know that there's thousands of questions. I'm sure that you guys have. The good news is I have an esteemed group that's going to come join me, and we'll get into that.
Without further ado, we will just welcome everybody in, and just give us a second to transition, and we will get on with the rest of the discussion.
I do not think it matters.
I should have asked you when I was.
No, I am sorry. Go ahead.
I think we're good.
Thanks. You going to orchestrate?
Oh, okay. Actually, I want to thank you.
Oh, it's Jay.
Good morning, Jay.
[Power]
Much of what you've talked about in terms of your compound growth expectations have to do with volume. I'd like to compare how you were thinking of your future business in volume terms versus where you were. For example, under the prior model, you would typically be shipping roughly half a million or more new commercial licenses across your technical software businesses, including LT, but not including M&E. One part of the question is, in light of everything that Buzz and Amar and everyone else talked about in terms of your increased addressable markets and share gain and so forth, how would you think in terms of equivalent volume of licenses going forward compared to what you had been doing previously, if our numbers are right?
For Mark, could you reconcile that $1.9 million subscriber number versus your last reported active maintenance base number of $3.16 million, which is probably higher now, a year and a half later? Could you reconcile those two numbers?
Yeah.
Just one last follow-up.
In fact, what do you want me to start with the number 1?
Yeah. Why don't we start there, just before we do, let me just make sure I introduce, in addition to the people who presented this morning, Steve Blum has joined us. He's in the middle there. Steve runs our worldwide sales and operations. He'll join and be able to certainly answer questions as we go to market side. Why don't you start with a number?
Sure. The difference is actually very straightforward. We're talking about commercial seats, that is the difference. We have education as well. Commercial is what we're focused on.
Okay. I think in general, many of our numbers over the years, we've tried to break out education for this exercise because it's particularly important.
Yeah.
Particularly as people start doing calculations like averages. It really throws it off. The mix of that really affects the numbers, you could imagine.
Yeah.
In general, on the question of volume, what we've said is we think the volume will go up, and we think it will go up substantially. We're not giving guidance about units. We never do. I don't think that's going to change in the short term. We may, as we work our way through the transition, give more guidance around what's going on with subscribers and the subscriber base. Just stay tuned. We think given the factors that you mentioned, the things we talked about this morning, the volume should go up.
Just a quick follow-up on the upgrades. You're terminating that, which I think is essentially the correct thing to do, although it's a relatively small business. What do you think the future equivalent revenue would be if you convert $150 million-$200 million of upgrades revenue into future lifetime value of a subscriber?
For each one of them, it's more. The question is how many convert. It's going to be really hard to get at because that base plus the ones that Andrew detailed, the five years or less active but non-subscribers, if we convert that. Each one we know will be more. We'll give you more details. We can actually track it, and we'll be able to report out on it as we go forward. We're not going to share projections at this point.
Thank you.
I'm not allowed to pick it looks like.
Thank you. [Wes Cummins], B. Riley. Question on the non-maintenance or non-subscriber base of 2.8 million seats. It's been flat for some time. Could you talk about how the ASP has been trending for that group? That's the first part of the question. Second part is, it would appear that your attach rate, your commercial attach rate on new customers coming into the business has been quite high. How do you approach these two groups going forward in terms of increasing subscriber performance?
The ASP trend for that base don't vary from the core ASP trend that we have for the rest of the base. They just buy less frequently. Obviously, a lot of that base is in the upgrade camp, but a lot of it is in the buy-a-new-feed-every-few-years camp as well. The ASPs don't vary much from the rest of the base. I have to admit, I didn't understand the second part of the question around subscribers.
I haven't actually done the math up a chart, but it would appear that you've had actually a very high attach rate on new business in recent years. What is that level of attach, and is there actually room to drive it higher?
Yeah. We haven't given details. I think it's reasonably high. I think when you look both at our attach and renewal rate, there's certainly room to go on attach rate to drive it higher.
Okay.
Again, it's driven a little bit by mix. Certain products have much higher attachments than others. I think there's opportunity to some of the lower-performing attach rates. Same thing on the renewal rates. I think we've done well, but there's still room to improve on our renewal rates. I think we have a fair amount to go. We know that theoretical maximum is not 100% because we put seats, not firms. While we have about 100% renewal rate on firms, we have less on seats. We don't know where that is, but we still think there's improvement there that can be done as well.
Maybe some tactical questions. In terms of when a customer that's not on subscription, that $2.8 million, if they do want to get onto subscription, just what's the mechanism for them getting onto a subscription? Do they have to pay back, sort of get current on the most current version, then they start paying subscription? Can you just walk us through that?
Question number two was, on the $50 million that we're kicking out of next quarter, does that $50 million, is that mostly in the bucket of going to ratable but non-recurring, or is that $50 million, does that include stuff that's going to be ratable?
Why don't you take the first one, and you can take the second, Mark?
The way they become subscribed is they get current, and they attach. We run lots of programs to do that, and obviously, with the news that we announced today, we're going to be running a lot of programs associated with that. That's exactly how they get up there.
Yeah.
As far as the consumption-based opportunity, in this particular case, that will be non-recurring. That will be ratable. That's correct.
Hi, it's Ross Cincotta from Jefferies. Two questions, one short-term, and one longer-term. On the short-term, that $50 million, just want to be clear, when you convert those deals, are those multi-year? Is that $50 million deferred actually for beyond one year of billings? Does it include a multi-year element so that, in other words, the quid pro quo on revenue wouldn't have been the full $50, it would've been a part of that? Second, we haven't heard much about churn in the existing subscription maintenance base. Could you talk to that, give us any parameters about kind of roughly where we are, and what you think you could do to reduce churn over time? Thanks.
Maybe Steve, I could tag him on the $50 million. The $50 million, just to be clear, are a series of very specific enterprise customers, very specific ones that we're going to get on a consumption-based model, basically. These deals, again, this is $50 million. Think about it this way. Think about them being in the forecast. It's $50 million, where there's a big chunk that would've been revenue up front, and that was part of the $50 million, and there would be some that would be recognized over time naturally if they had licenses and subscriptions. But the up-front revenue recognition portion would've been in Q4, would've been $50 million. Okay. Just to give you, Ross, kind of a specific example, just imagine it was one customer.
Imagine it was a three-year deal, and imagine that $30 million was a license and $20 million was subscription. You could do different math. In this particular case, if it was one customer, it's $50 million of up-front revenue recognition, and all the other stuff would've naturally gone to the balance sheet anyhow. We're taking $50 million that would've been up front and pushing it out.
Yeah. What we try to do is we try to do the math for you on the $50 million.
Yeah
You didn't have to guess at it.
Exactly.
We've filtered it out. There are some multi-year deals in there, but we've already taken into account what would've been recognized.
Exactly
in the fourth quarter.
Exactly.
You didn't have to ask us a lot of questions, and we had to give you vague answers, and.
Yeah
try to meet in the middle.
Exactly.
They're all going to be multi-year deals. The $50 million is the amount of revenue we would've recognized up front if we didn't change the business model.
Exactly.
The total value of the deals will be larger than that $50 million.
Exactly. That's why we're trying to be really straightforward.
Hopefully, we've done that for us.
Yeah.
Yeah.
He asked about churn rates.
Churn rates.
Where we're at. We don't talk about where we're at.
Yeah
I can talk about some of the things we're doing moving forward. We're going to be changing the way we engage with customers. Right now, we kind of have an event-driven engagement with customers around renewals, where they attach, we come back and ask them to renew later. We're going to be moving to much more of a continuous engagement kind of model with our customers. Obviously, that moved to the cloud precipitated that, but the move to rentals also precipitated the two together. We're looking at our systems, our approaches, our go-to-market processes to just basically be more continuously engaged with customers. That's going to have a significant impact over time on churn rates.
I think the other thing that we can say is there are a number of places on a product basis, on a geo basis, particular demographics of a customer that are weaker than the others. Those are the ones to focus on.
Right.
I think we have some opportunity in individual areas. We've put programs together specifically targeted to the places where we don't see the same level of attach or renewal that we do in the other places.
Exactly.
Hi, guys. Gaurav Kapadia from Soroban Capital. I thought you guys did a great job laying out the expansion of the total market opportunity, the increased revenue per customer. The one thing I'm having a little bit of trouble getting my head around is, given the high incrementality of the revenue that you're articulating, leaving the transition period aside, at the end of the transition period, because you're increasing the market size, increasing growth, and ultimately more of the business is coming direct, shouldn't the margin be somewhat to substantially in excess of 30%?
Yeah. The one thing that we didn't do is we didn't model. None of the assumptions that we showed today assume a shift in channel mix. Should there be a shift in channel mix, that would be considerably higher. This is all independent. It's around the programmatic changes we've made and what we control as opposed to anything to do with the mix of channel partners.
Right. Even just because you spent so much R&D dollars expanding the product offering, that the incremental dollar sale should have, again, very high incremental margins. Shouldn't one think that, say, relative to our discussions a year ago, that the end-state margin, even leaving channel shifts aside, should be somewhat to substantially higher?
The point that Oh, go ahead.
Go ahead, Mark.
I just would say the key thing I would say is when we said 30%, it has a plus sign on it. I think what would be powerful is to come up and over the 30%, and then we can have another discussion on that, I think we need to get up and over that. I certainly register your point, for sure. Carl, I don't know if-
No, that's fine.
Yeah. In the back.
Hi. Kash Rangan, former mechanical engineer, former Autodesk, because we're sitting in the back here.
Great.
Nice job laying out your presentation. I had a question on how to model your business. We look at Adobe, who paved the path, as you said, Mark. It's a fairly tight set of parameters. You know what they're shooting for in terms of number of subs, you know what the pricing is, you know what the retention rate is. In your case, there seems to be a lot of different subscription offerings with varying price points. We don't know where we're starting from and what we're shooting for in terms of the goalposts. Can you help us put a little bit more of rigid parameters on how to drive a model that can help us understand what the end goal looks like more concretely?
Also secondly, how do you think about the execution of Autodesk as a relatively simpler company in the past, but you've got licensed products, subscription products. Execution becomes a little bit more complicated. How are you putting your heads around that? Thank you very much.
Let me start and if anybody wants to jump in, we certainly can. Kash, I think the key parameters that we're laying out, for example, are the 12% CAGR and billings growth over time. This is not around guidance for next year, for example. You're going to get some much more specific parameters that you're going to be able to track each time. Certainly in that case, we're going to be outlining a number of different things that will help reinforce the transformation that we're going through, and I think it'll be very specific. Today, you've got clear information on how to model Q3 and Q4. We're going to come up at FY 2015, so certainly you're going to get a lot more there. Hopefully the parameters and the metrics that we're calling out are very specific for you to look at.
You should expect me to be reporting more actual information on some of that, those key metrics, so you can track the success as well. Stay tuned. I think the FY 2015 guidance will be very informative. You've got a little bit of runway right now. Carl, I don't know if you'd add to that.
I would add, I would just reiterate what Mark said. Any long-term model you build, I would make sure that it triangulates with the 12, the 20, and the 50.
Yeah.
I think that's a good basis to look at. We'll provide more short-term guidance in between the two. I think you can draw the curve from there.
The operating margin, of course, is the other angle that you could pop in there, and then you got a good view of where we're going.
We've already hit on a couple of things. There are a bunch of things that we're more than willing to tell you what's in the model and what's not included in the model. We already hit on a couple of those. There are some variables that are not accounted for, and so you can think through that dynamic as well.
Yep.
Hi there. Walter Pritchard from Citi. Just one quick follow-up on Jay's question around the numbers. You talked about the $1.9 million, I think, subs. You mentioned you have $3 million that aren't. If you go back to 2008 disclosures, current numbers imply about 40% penetration of the base on maintenance and subscription. You go back to 2008, that disclosure, I understand there's some education, other things in there, but that was about 37% penetration on subs, which it strikes me you've been very successful at maintenance over the last five years, and the numbers suggest haven't seen the attach go up. Just wanted to clarify that.
For Carl, a lot of these tailwinds that we saw in the core business up on stage around BIM. There's lots of great things going on in this market, and your business for the last 12 months, you haven't seen a lot of growth. I'm wondering, you talked about renewing the focus on marketing around the AutoCAD base.
Right.
Which is a premature bake, but maybe that helps a bit. I'm just trying to get a sense of, in the core, [inaudible] and cloud and so forth, what's really changing that it drives a different growth rate in the next three years there versus what we've seen? It seems like the stuff has been there.
Yeah.
In terms of some of the drivers?
Yeah. No, why don't you take the first part? Just the numbers.
Okay. In terms of the actual, going back to 2008, I think, again, we don't reveal exactly the attach or the renewal. I agree with the point Carl made that they're high, but there's definitely room for progress to improve on both of those. Very specifically in your question, the thing I would want to normalize, Walter, and make sure is making sure that I understand education versus non-education, make sure I'm doing an apples-to-apples on the calculation you're doing. That's the only thing. Dave, I don't know if you want to follow up with that, but that would be the one reaction I have on that.
Yeah. I think we kind of have outlined, I think our attention that we placed on moving people to suites, and before that, it was on subscription, I think took a little bit away from the AutoCAD and the AutoCAD LT business. What we've seen is a direct result of marketing investment in AutoCAD and LT drives more business. We probably had moved to one side of the boat a little bit too far. The rest of the things that we talked about, and that's why I thought it was important to spend some time this morning reminding you these other drivers, what's going on with Digital Prototyping, what's going on with BIM, some of the new markets. Those businesses have been doing really quite well.
You can see it in the suites growth on a product line, the aggregate suites growth, where most of those products are sold. In addition to the first thing is continuing to grow the core AutoCAD and LT base, and I think the second thing you're going to see is an acceleration of growth and the numbers becoming more meaningful in some of our new cloud-based businesses.
Mark, when we've seen subscription transitions in software historically, there's a ramp down in terms of revenue as you get the migration to that ratable recognition. It typically takes either a short period of time, like maybe a quarter or maybe a little bit longer. When you look at what you're instituting, do you have a sense or a feel for when we see the bottom of the revenue? Then the add-on to that is we typically then see, as you get to a large recurring revenue, that nice smooth growth up and to the right.
Yeah.
Is that going to be mainly predicated on what you do to drive the non-recurring to a ratable model? Maybe just give us some sense of how you're going to do that.
Sure, Sterling. I guess a couple points there. One is, obviously you track a lot of the software industry. What I see, I don't see a quarter. I see really highly regarded companies where it could be a year or a couple years even, in terms of the transition that they're making. I'm not sure which ones that you're referring to, but I see it as
Hitting the bottom. The full
Oh, yeah
is probably going to take three to four years, correct?
Right.
When you hit that bottom, you have that first initial surge that moves you to a ratable.
Right.
Yeah.
I think you'll get a better sense of the shape for the FY 2015 guidance from us. Carl, if you want to share anything else?
No, I think you'll see the low point in FY 2015.
Yeah.
I think the time frame you've down and up, not a full transition, is probably closer to six quarters. Maybe five or six quarters is where we've seen the model. There's still a couple of moving parts, and to be fair in our disclosure, there are a couple moving parts, not only about what we choose to do, but in order to get the proper accounting for it.
Yeah.
Highly impacted by the accounting of these things. I think the time frame I kind of lined that laid out is kind of the right one to think about.
Recently, three pieces of news that came out that show you're at a challenging time. I'd like to know how you integrate what we've discovered with what you've said today. One, of course, is that you're laying off a lot of people, and number 2, you're closing facilities. Three, that the earnings are not meeting expectations before. How does all this integrate in this difficult period here with the presentation you just made today?
Let me start. The disclosure in our 8-K around the restructuring probably created more confusion than shed light. It's less than 100 people who are affected. If you want to look at our workforce, our workforce is over 7,000 people. If you include temporaries and interns, contingent workers, it's probably close to 2,000 more. You're talking about 9,000 people, and about 90 were affected. I probably wouldn't start with the hypothesis you started with. The second part of that is most of the restructuring in this case was about go-to-market activities to try to make sure we have the right people in the right places. One of the things that's happened over the last several years is opportunities have grown in parts of the world, and they've shrunk in others. Let me make that more specific.
For example, it's no surprise to anybody who's read the news that Southern Europe doesn't have the economy that it did three years ago, five years ago, 10 years ago, and certainly doesn't have the growth prospects. For us to have too many people in Southern Europe and not enough in Central or Northern Europe or in developing economies or some of the other places doing great, would just be a misuse of our resources. We've tried to make sure that we've aligned where we have people selling and marketing our products with where the opportunity is, and the vast majority of this restructuring we just announced was done to accomplish that. The second thing, the closing of facilities will be almost equally trivial. It may be one or two.
One of the things that happens in a company like ours, in which we acquire a number of smaller companies, it is not uncommon for us to find ourselves with multiple facilities in the same city or in the same area, and it makes absolutely no sense for us to keep multiple facilities open. There's an economy of scale that comes by combining it, and it actually makes for a better environment for the people who work for Autodesk to be in larger facilities. Combining facilities is another one. I would just say, I wouldn't take the same implication from that you did.
How about the earnings?
The earnings? I think our earnings have been strong. Mark talked about the cash generation and the earnings. Some of the earnings that we're talking about in the next quarter are a result of the accounting changes. The earnings, maybe we should just step back a second on the earnings and look at this. The earnings are going to move at a pure arithmetic with the move to more ratable revenue. As you get more ratable revenue and you recognize it over a different time frame, your earnings move along with that. Expectations were set under our previous business model. As that model changes, the earnings will change. What we tried to outline this morning is the fact that we believe that our earnings power actually grows over time, even if that doesn't align perfectly with expectations that people had under the previous business model.
Hi, it's Brendan Barnicle from Pacific Crest. I have one for Mark and one for Steve. Mark, when you talk about the non-recurring and making that all ratable, is that just through the usage model, or do you envision doing something where maybe you'd attach a deliverable so that you could move all that over that was non-recurring and make it ratable?
Yeah. Two things there, Brendan. One is that the recurring, that it's clean just in the sense that it will grow smoothly with the growth and the cloud offerings and the rental offerings, in addition to the maintenance subscription. You get that part. The other side of it is in terms of offerings that we have that are non-recurring, everything else. Basically, if you configure a deal in such a way where, for example, you add different things to it actually can change the treatment of it to actually make that be appropriately counted as ratable as opposed to upfront. Those are things that will happen over time.
Got it.
Okay?
Steve, on the go-to-market strategy, as you think about distribution, when you do these big usage deals, I imagine you guys are doing that direct. Do you see fundamentally sort of a shift towards more of the direct as we've sort of seen over the years, and how do you plan on kind of getting that channel up to speed on all the changes that you're making?
Yeah. We see it as a mixture. We do more of our named account business direct, but our partners actually are involved as well. Many of these companies are very large companies. The support requirements in order to help drive adoption are critical to the success of driving consumption. Our partners actually play a role. They deliver services. They do many other things with us. We bring them along. We help them actually participate in the overall sales strategy, the adoption strategy, and providing a great customer experience. There is more of our business going direct in that space, but our partners are also involved in many cases as well. In different parts of the world, they play bigger or smaller roles depending upon the resource requirements to drive adoption and consumption.
Steve, it's Matt Sell, UBS. I just had a quick follow-up to Brendan's question on the channel. Where do you think they're at in terms of their understanding and the willingness to move? If it's a change in their behavior, so where would you state, if you had to rank on a one to 10, one to however high
Yeah, so.
Who's been the furthest along? How do you
This change, you're inferring a much bigger change to our partners' requirements than perhaps they're actually seeing in real life. We're still having them lead with our perpetual licenses with subscription attached. That's something they've been doing very well for quite some time. That's the predominant model that they're taking to market, and will continue to take to market. We're doing a lot of the heavy lifting with our new cloud offerings. These are new offerings, and we want to be very heavily engaged with our customers to make sure we get it right. We are bringing some of those partners along in key spaces to help participate in that process. Over time, they'll play different types of roles in those areas.
With any new offering, we want to actually do a lot of that heavy lifting and get in that close engagement process with our customers up front.
Does that make them nervous?
Our partners get nervous on anything.
It does matter because they're invested.
Our partners get nervous no matter what. They do see opportunity. If anything, we have to hold them back, right? They want to get involved in everything from the very beginning. I view that as a positive. If they didn't want to be involved at all, that would be a real problem. We used to just throw it over to them, and they had to assume all the cost associated with bringing new things to market. We've learned from that process. It doesn't always work so well. We have to hold them back a bit. That makes them nervous. We tell them where we're heading, and we show them the opportunities, and then we actually bring them along and train them.
We usually will bring them into the process with us so that they are engaged together with us so that they learn how to do it then on their own. We've also been signaling to them that they should be building services around these different offerings and things like that, and our best partners are focusing on building out that service capability so they can help drive adoption in the long term. Just because.
Let me just one thing and then she can ask her question. Our partners have been nervous. I tried to outline a little bit the history of the changes we've made in the business over the years. I can't remember a single one of those, and I can remember dozens in addition to those changes that I outlined this morning, in which our partners have been nervous.
Even things like, for example, the move to subscription was met with a huge amount of skepticism about it being good for their business. I would say now, looking back, many of our partners would not have even made it through 2009-
Right
if it hadn't been for subscription, but it started out the same way. Our move into verticals was met with skepticism. The move to suites was met with a fair amount of skepticism. Our partners are heavily invested in our business. As explained to some people this morning, they're more so than other channels. Our channel partners for the most part, particularly our traditional VARs, rely on us much more heavily than someone else. They don't carry a dozen different CAD products. They don't carry a dozen. They are really tied to our business. They're very aware of how important it is that the changes we make support their business. Anything we do that changes, causes some degree of alarm. We're also really aware that the success of our business has to do with the success of the partners.
We see changes taking place with our partners. For example, I would continue to imagine a trend that we've seen for a while, where we have fewer partner companies, yet more partner feet on the street selling. Some amount of consolidation that's been going on in parts of the world. I think we'll see trends like that continue through this, but I don't see dramatic shifts in direction.
Just to be clear, the shift to the cloud, you don't need any additional capital expenditures to get you up. You're going to utilize Amazon. Is that the view?
Our CapEx, I think you're asking about that. Historically, as you know, it's been around
3-ish% of revenue, plus or minus a little bit. I don't see that as a huge change right now for the foreseeable future.
Yeah. Just to get it on the record, I don't see Amazon as necessarily. We use Amazon today for some of our services. For some, it's appropriate. I don't think long-term that's it. To reiterate what Mark said, I don't see CapEx changing a lot.
Hi, it's Gregg Moskowitz from Cowen. Mark, first of all, just wanted to ask you with regard to the consumption model. One clarification, you'd outlined, I think, about, again, $50 million of a delta in Q4. Are these all customers that volunteered for the consumption model? Did you approach them and they were receptive to it? Also geographically speaking, does that map, roughly speaking, pretty closely to your ideal revenue split?
Sure. In fact, I'll plug Steve into this. These are a very specific set of enterprise customers. You're exactly right, Gregg. I'll let you talk about the geography of it. I think you're totally clear that if we didn't make this change, it would be $50 million of additional recognized revenue today, and in Q4, rather. Excuse me. With that noted, I'm going to turn to Steve briefly to add a little bit of additional color to the meat of your question.
In the first part of your question, just to be clear, our customers are pulling us here.
Yeah.
That we're actually providing them value they want. These are our named accounts. We've been engaged with them. We have active campaigns. Many of them have worked with us in the past, and they've been requesting new ways of acquiring and really using our software. We're basically accommodating the needs and the voice of the customer with these model changes, which is what's really exciting about it overall. These are established opportunities that we've had. From a geographical mix perspective, whatever you've been modeling, you should continue to model.
Yeah.
With just one piece of color, we've worked historically to be able to recognize revenue up front, the customers would desire this licensing model more than anything we provided.
Yeah, I think so.
Yeah.
We've been holding back. This is actually meeting their needs.
Okay, that's great. I have a follow-up for Mark. Are you anticipating any Q4 revenue effect from customers embracing the cloud rental offering? Thanks.
What we're anticipating is factored into the guidance that we've given, Gregg, so there will be some effect. What's in there is encompassed in the guidance we've given.
We will see the adoption rate.
Yeah
It may change. Right now, we factored in some.
Yeah.
Should it be faster or go down, it should be slow in the other direction.
Yeah.
Sterling Auty from J.P. Morgan again. Mark, you talked about the 26% cash flow margins.
How should we think about that out in FY 2018, given the operating margin guidance of 30%-plus?
I think that the way I look at this is, if you think about the CapEx answer that I just gave in terms of 3%-ish, from that standpoint, to the degree that that doesn't change a lot, and we are making more money, I think the cash flow margin will potentially go up. We're not guiding that at this stage, but I think there's a reasonable cause that that could go up, assuming that we had operating margins at a higher level.
I want to circle all the way back to my earlier question in terms of, you've given us billings guide of the 12% CAGR.
How should we then kind of wrap our minds around what that might mean the reported revenue would look like in FY 2018?
Right
In terms of relative to peak? I know you're not going to give us a specific number. I'm just saying, as we layer this in, are we well above the 2009 peak revenue? Somewhat in line? Just give us some framework.
Well, a couple of things, Sterling. I think I can help on that. Is that when you look all the way out to 2018, you start to see revenue and billings growth converge. The difference is that when you're going through a transition, you start to see billings growing faster than revenue because you're pushing things to the balance sheet until you walk through the transition. Right? If you think about revenue growth on a CAGR over a longer period of time, it starts to match your billings growth over that kind of a long period of time, assuming that you're all the way through the transition. I hope that helps, number 1.
Number 2, in terms of peak revenue, the only thing I would say to you is look at where we're at today and think about the correlation I just said between revenue and billings growth, you can start to extrapolate where we'll be in FY 2018 based on that CAGR. Okay? I hope that answers exactly but just what you're looking for.
Hey, Mark, just a quick one for you on R&D spend.
You haven't given us sort of a business model breakout of the 30%, but if I look at your R&D spend at 24, 25-ish.
You're fairly aggressive on the M&A side. Not big numbers, but buying lots of projects and turning them into products, arguably additional R&D spend on the M&A side. You're quite a bit above your industry average if I look across the software space and even companies like Adobe.
Yeah.
Could you help us understand why that's so high, and are there pieces that with the transition to the cloud, does that go higher or lower, or is this sort of the steady state with the R&D spend?
A couple things I would say. One is that everything is going to scale when you get to 30%-plus operating margin. Everybody's going to get more productive over time, and R&D would be no exception, number one. Number two, in terms of the kind of M&A that we spend per year, if you look at it over the last five years, we look at it very carefully as a % of free cash flow, and then we benchmark it against all the compares in our industry and all the compares within our immediate competitive set. We're very much on track with that. The % of free cash flow that's dedicated is right in the zone.
I would say what's different, Walter, is we do more small ones and other people do more big ones, but dollar-wise, the free cash flow %, I guess, would be important to call out. I don't see really different. I think very much in the norm. The third point, when you look at R&D, and certainly welcome Carl's additional comment on this, but one thing that's different about our business is today about 85% of our business is indirect and about 15% is direct. Not considered direct or anything like that, but just roughly. When you think about that model and you compare our R&D dollars, keep in mind we're giving contra away for the portion that's indirect. If you have something that's 85% direct and 15% contra, they don't have a lot of end user spend that's higher compared to like we do.
Think about both the R&D dollars being fixed in the same circumstance. If you look at our R&D dollars as a % of end user spend, you get a completely different view of where we're at. Obviously, we look at both. Product and technology and being a leader like we are is important to fund. It will scale as we go to 30% plus. I think these are factors that give it a bit more of a holistic view. Carl, I-
I think if you really want to understand the spend, I think Mark's right. As the operating margins go up, across the board, you'll see improving efficiency. To triangulate and benchmark more accurately, I think one of the things that really helps is to do it against end user spend. If you made the denominator, in our case, end user spend, and I'm not talking about services and everything else, but about $4 billion that's directly spent on our product, I think you come out with a slightly different conclusion where that I think a bigger haircut is probably in order in sales and marketing than in R&D. Because we incur almost the entire R&D for the $4 billion in end user spend.
When you add in the amount that our channel partners get back, you add in our sales and marketing spend, that's much higher. Most of the channel, of course, is some kind of go-to-market activity. I think you come up with a slightly different picture in terms of where we could be more efficient. Certainly, it's a fairer comparison when you benchmark direct and indirect companies against each other.
Yeah. Sure.
Like we're doing a round trip here. Never done that before. In terms of the subscriber growth, the 50% of that equation, how should we think about it in terms of today, the vast majority of them, honestly, are maintenance customers, or what we call maintenance customers. Can you give any kind of indication, is there any significant portion of cloud subscribers in there today? Then on a going forward basis, how should we think about the growth of how much of that comes from cloud subscribers versus maintenance-based growth versus rental?
Yep.
I have two follow-ups.
I would say today, they're growing quickly, but small relative to the overall base in terms of other subscribers, people who use the cloud. We're not going to give guidance specifically on the proportion, but in the out years, we anticipate that that part of the business is growing much more quickly, and that more of the growth in the number of subscribers certainly happens on the cloud side than it does on the maintenance subscription.
Right.
It shifts over time. If you just run any models, and you look at this, and you assume a small base now, and over a five-year period, you can see the shift pretty clearly what happens there.
Got it.
The other thing that will be true is that not all subscribers will be equal.
Yeah.
One of the things that can be a little bit hard is I don't think we're going to have a great representative of kind of the average subscriber. They will range across the board from a subscriber who may be a PLM user paying us $25 or $35 a month to someone who's paying the equivalent value of, let's say, rentals.
Right. [inaudible], on the rental question, should we think about those rental customers as durable subscribers? Meaning, at some point, they're going to do the math and say, "Hey, listen, if I'm going to use this more than two years, I might as well go to a professional license and attach maintenance." Right? Should we think of those guys as, will somebody be paying an annual rental for three to four years? Eventually, when they find the utility of the product, they're going to switch into something that economically is more attractive over a three- to five-year period?
I think all the evidence about customer buying behavior is that they don't do necessarily the long-term. Whether you look at cable companies, gym members, I can give you endless examples-
Right
In both personal and corporate environments in which people often make short-term decisions.
Right.
Their interests are definitely served in the long term by a different decision than they make. I also think Andrew pointed out a number of cases where it makes less sense. There are those project-based users. There are people who are cash flow constrained. There are a number of reasons that motivate. It's not a lack of understanding of-
Right
the math that does it. There's other things that affect their decision. Uncertainty of their business environment and requirement for that peak demand for their business, where the jobs in there are different. There are a number of things that drive that. We have seen this repeatedly, and it's incumbent upon us to make sure that that's valuable enough so that people want to pay for that.
Right. One question for Mark. You mentioned that you want to push as much of your revenue to at least to ratable recognition, if not recurring, to ratable. Thus far, we're talking about $50 million, which is a select group of customers with this floating program and whatnot. Should we expect more shoes to drop, if you will, as we go forward, or that there's going to be other buckets of what's today upfront professional revenue going to at least to a ratable model over time?
I think you should. I think over time, our intention is to move more ratable over time.
Okay.
We would like to move to ratable as fast as possible.
Yeah.
We think one of the things that really will make it much easier for both us internally, and there was a question before about internal operations. It'll help us internally, as well as, I think it'll help our external constituencies to have less of a mixed model. I wouldn't want you to walk away and say the accounting is driving this, but I think the more clarity we can provide in the simpler, in which we don't have conflicting metrics, deferred revenue going up, recognized revenue going up, the more we can be straightforward about that and as clear as possible. I think it will help us run the business in a more streamlined fashion. We would like to, and I think shoes to drop is probably the right way to think about it, in that it does happen in some kind of quanta.
Okay, you want to rip the Band-Aid off as quickly as possible.
As soon as possible.
Okay. Should I just hand it to you?
I, the mechanical engineer, back again.
Oh. By the way, are you one of those mechanical engineers who doesn't pay and Maybe you've been through models which Bill has been looking for.
25 years back, there was no piracy.
There you go.
Anyway, maybe a question for Steve. What are you seeing with respect to the government shutdown, since you're an October quarter company, you don't have to hustle, whatnot, but any thoughts you have on procurement cycles and how you, maybe as it relates to implications for other software companies, what are you seeing in that vertical, especially in the last few days? The other question was, keep going back to the rental versus the license, and Keith asked something here. Why would you not just lower the price of the rental even more aggressively like Adobe did? They started off at $120 a month. They brought it down to $30, $35. That way you would get less churn, but more of a solid uptick as you build this business up to a large business.
Okay. I'll answer the first part of the question. Can't really comment on what's happened in the last two days. It's hard to judge changes in that short a window of time. I will say that federal government has been lower, based upon the sequester and just some budget tightening up, and that's not something that's happened this week. It's been out in the marketplace. It's nothing that hasn't been built into our expectations already. Certainly the federal government spend in the U.S., specifically, has been different than what we've seen in the past. Doesn't seem to be impacting state and local and things like that. Federal U.S. certainly is having a different dynamic this quarter, than what we've seen in prior Q3, which is the fiscal year end.
Yeah, I would agree. I would not be bullish about companies that have a large proportion of U.S. government business, very simply. Unlike other times, one of the things we didn't see was a big spending rush. Usually, like with a budget, when people know the money's going to freeze, there's often a rush of that money out the door. I think there was a little bit of it, not enough got out the door.
I think the sequester more than the shutdown was slowing things down. The shutdown just ended up being a halt. We thought that this dynamic being very different, a crawl point, we think that year-end, fiscal year-end spend rush didn't occur.
Yeah.
It was
Yeah.
I'll answer the other question for you. Remember in my presentation, I talked about two dimensions, the separation between the perpetual price and the rental price, and then the value differentiation between the two offerings. Obviously, over time, we're going to be looking at that separation critically. Right now, we think we're in the right place, given what we know, what we want to learn in terms of the separation between the perpetual price and the rental price. That could change over time, but we feel like we're in the right place. The other knob we're going to be pulling is the differentiation between the offerings, what's available with a rental versus what's available with a perpetual purchase. Those things will evolve over time, too. All of this will evolve as we learn more and get to more momentum.
Yeah. Thanks. Keith has taught me how to ask three questions here.
You don't need any help.
No, exactly. First question for Amar and for Buzz. Your comments about the greater breadth of your functionality, and you and Buzz talked about share gain in automotive, for instance, brings up the following question, which is: How do you think about the possible ability to gain share from or recapture, so to say, the large amount of maintenance revenues that your principal competitors have? For example, if you look at DS, PTC, and others, their combined maintenance revenue is somewhere between $2.5 billion-$3 billion across all of their industries. There's precedent in the industry for a new competitor to make a very nice living off of somebody else's base, i.e., SolidWorks and Pro-E, for example. Do you think about that at all in terms of anything you're doing here, in terms of being able to induce share gain through your pricing model coupled with your tools?
A couple of follow-ups for the other guys.
I certainly think about that. An example is the factory model. Our competitors have very expensive, very complex, very high maintenance fee factory design products. We see in every case, we are either adjacent or displacing one of those older tools. I think it's not only that they're expensive, they're really old, and they're not being developed as aggressively. I think that's a significant option. Factory is one example. I think there's many of them like that. It's one of the things that's attractive about that space. It's really the cloud that really enabled and emboldened us to do it. We felt we had a new way to help those customers with a different sort of solution as well.
I think when you look at entrenched competitors, Jay, it's hard to make a frontal attack unless you see some difference in the environment. In this case, the two things that are there are this technology platform transition and a business model transition. I mean, it's very hard to go into 20-year customers and just be incrementally better, marginally cheaper. That is not a compelling reason. If you can be better, less expensive, and differentiated, it's a huge opportunity. We think about exactly what you point out all the time as an opportunity to go after those, and if you looked at almost everything in our portfolio that ends with 360, you could find opportunities there. You could map it against the competitive set and see what customers are doing today and why we think what we're offering will be perceived to be more valuable.
I think the business model of consumption really supports that as well. It makes it easy for people to trial.
Now that there's data management, it's a very easy on-ramp into expanding into that.
Yeah. One of the businesses we're most bullish about is our PLM business. If you look out there's huge recurring revenue for others in their PLM and maintenance business. We think the cost of procuring PLM, the cost of deploying PLM, the cost of maintaining PLM is out of whack. It is no different than what we've seen in a lot of other markets, what we've seen in ERP or CRM or HR, and you can map the old to the new, the old people who provide that and the new. By the way, PLM is identical to that. We look at that as a great opportunity to provide that same kind of value. What we're seeing is really easy deployment. Customers get up and running with PLM really quickly. It's dramatic.
I can't emphasize how different it is than the year or the year and a half, and the tens of millions of dollars that people used to spend to do that. We think something like the PLM 360 product is really disruptive, and we're getting it not only into medium-sized customers, we're getting it to large customers on a department level where people can try it out.
Jay, that consumption example I gave you, that usage growth and the dollars that came back to Autodesk, those came out of those legacy bases you were talking about.
Okay. Two for you, Andrew. LT is your largest product by new volume and in terms of cumulative base, at least historically. Earlier this year, the company talked somewhat unusually about LT as possibly being one of your growth drivers this year, which unfortunately has turned out not to be. For the long term, how do you think about converting that very large base or upselling that very large base of LT into higher-end products with more recurrence? Lastly, at the meeting last year, you talked about an inclination towards industry solutions.
Yeah
Coupling ad hoc configurable products with consulting services. I don't think you really talked about that very much today, how are you thinking about that industry solutions orientation?
First, let me answer the LT question. There was a long perception for a while that LT customers don't buy anything else. We've certainly overcome that expectation. We're already showing that LT customers can and do buy other things. It's just a matter of talking to them. The typical LT buyer tends to be a smaller business, though it's kind of a bimodal business with a large chunk in enterprise. There's this large pool of smaller businesses. They tend to have different buying patterns, different needs, so we've proven we can upsell them. They also tend to be less attached on subscription than the rest of the base.
One of the things you're going to see us do pretty strongly as we look at that LT acquisition engine, we're going to be looking at some of these new business models and using that as a compelling dialogue with some of these customers. I gave you some examples during my presentation to say, "Hey, you know what? You should be using the right tool, and here's a way for you to get to the right tool." That's a way for us to begin having a recurring relationship with some of these customers that are less likely to have a recurring relationship with Autodesk. We're going to put a lot of energy into that and using the new model to enhance and expand that LT price point. In many ways, LT is more of a price point than it is a product.
That's one of the things we're going to be doing. On the industry solutions side, you see us doing that in selective areas. The automotive discussion we had earlier, we're being very deliberate there. We're continuing on that. You see us being very deliberate in infrastructure and construction in particular ways. We'll do that in those places where it makes sense. You'll also see us flex product solution and product marketing muscle in the places that make sense as well.
Jay, because we didn't talk about it much today, our consulting business is focused on those industry-specific solutions. Our global services team does work very closely with the sales teams on helping to put workflows together and wrap around complete solutions, and it's helping actually to drive consumption with our largest customers. It's an integral part of the strategy overall.
Yep.
Hi, this is John again from UBS. I had two questions. One, how are you addressing the opportunity in 3D printing? Second, related to the channel, if you could give us an idea of what portion is today enabled to sell the cloud product and the rental product?
Yeah. Let me start with the 3D printing. Maybe Steve or Andrew, you want to take the other one? The best thing about 3D printing is you can only print something that you have a 3D model of.
That's sometimes lost on people. Most of the 3D printing business these days is around a business that's built around the consumables. It certainly is a good business. I don't know if you guys have looked at that business closely, but people are selling consumables for 100 or 200 times the price of the commodity material. I don't know about you, but I like being in any business in which you could do that. The 3D printing business is a very lucrative business today. It is ripe for disruption.
Our angle on it is, in order to do the 3D printing, you need the 3D models. What we're seeing is from manufacturing, construction, and media and entertainment, our customers build 3D models and want them 3D printed.
We're also doing some amount of research in 3D printing that you'll hear more about later next year in terms of research on material science and some other improvements to 3D printing that we do. Let's wait till next year for that. On the cloud and rental models relative to the channel, we talk about them separately because they're really two different things. The rentals first. Rentals are basically a different way of acquiring our perpetual licenses, our suites. We've made those available to all of our partners. We just rolled it out a couple weeks ago. They can sell quarterly and annual subscriptions. We've educated them on how to have that financial discussion with customers to help them navigate through what the right business model for them. Partners are turned on now and ready to go with our rentals.
As I mentioned on one of the earlier questions, from a cloud offering perspective, this is a newer offering. We focus more on specializations and where our partners have actually invested in real resources, feet-on-the-street technical resources that they'll be able to help drive customer adoption. That's a more deliberate approach. We're working with just specific partners that are investing in that capability and are basically growing that business with us. We don't make that wide open. We basically have our partners that specialize, that add resources, that get trained and then go through an early process working closely with us. We're doing a lot of that heavy lifting ourselves in our own resources, both sales and technical wise, to make sure that the cloud offerings are getting to the right customers.
Thank you. Cindy Shaw , Discern. Also a mechanical engineer. Actually, I sell ME CAD for HP.
Oh.
Currently covering the 3D printer makers, when I talk to them, one of the things they say is that a lot of the design software out there now doesn't really have the capability to design for 3D printing. In other words, it assumes that you're still constrained by the classic manufacturing techniques and doesn't allow you to take advantage of the 3D printing. If you could comment upon that, I'd appreciate it.
Yeah.
You want me to take this one, Ed.
Sure, go ahead.
We've spent a lot of time on that problem. Part of it's true. I think there are some shapes you can make on a 3D printer you can't make any other way. Okay. It's a very unique material. It's strong in one direction and very weak in another because it's layered. You have to design things very differently. I would say 95% of the things that are made on 3D printers, any of our 3D software can do perfectly. Okay. There's the 5% I think we need to do some innovative new work. We are working on those things today. We have done all the right things to connect to 3D printers. We can simulate those things. We can do things like toppling sort of programs, so we can add bracing and those types of things that let you print.
We've gone a lot further than most of the printing companies are aware of, but I think we do have some innovative new work to do, too.
I would add, I think this often happens when you see industries converging. I think the 3D printer companies, some specifically, are kind of shooting at the tail. They identify something that's a minor weakness, and they go shooting at the tail, and 2 years later, they come out and realize that everybody else has recognized the same thing. I think in the 3D printing market, what you're seeing is a move from just using them to prototypes to being used for real production.
In that same way, we're seeing the same thing going on with composites. Buzz talked about the analysis of composites. It turns out the design of composites have a little bit of the same problems, that a lot of the stuff that people are doing with design don't anticipate both the new materials and the new processes used to do it. There's definitely some things that we can do to aid it. For example, we kind of joke about people making black aluminum. Black aluminum to us is carbon fiber, where you take an aluminum part and you. By the way, that shows what a funny group we are. We joke about these things.
Carbon fiber, if you just take an aluminum part with all the ways that you would've manufactured it before and just do it in a composite like carbon fiber, you probably don't get the optimum design. It's less that the tools are not capable of it. It is much that the designers need to think about how they design these products differently, given that the processes and the materials are going to be different.
If I can follow up.
Yeah
talked about you have to have a model to print. One of the things interesting is 3D scanner technology improving. [Jalen] talked about his MakerBot, just introduced a low-end one earlier this week. Any comment on how much you think 3D printing will be done from a model that might be built in software such as AutoCAD, versus how much of that could be things that are scanned? I know you've got a scanner in the gallery here as well.
Yeah. One of the things I'd talk about is we actually have the leading technology for actually processing the information that comes from scanners, as well as we have the ability, and we demonstrate it out here in the gallery, of taking photographs or video and turning that into 3D models. We actually I think the scanners, particularly like the one you saw from the MakerBot guys, at this scale, it's a great solution. You still find even after you scan, in order to be able to print, there's often some post-processing.
We think an important new workflow is capturing reality. Whether that comes from photographs or video or laser scans or lidar scans, we think that's really important. We have both a product that we aim at consumers called 123D Catch, plus we have a product called ReCap for reality capture that actually allows people to do that. I actually think it's important for both 3D printing. We also think it's really important for a workflow in which people's initial starting point is not a blank screen, but you capture something that already exists, and you modify it slightly, and then you print or manufacture it in some other way. We think there are a lot of important workflows that are going to start with objects already there, rather than starting with a blank screen in a traditional CAD program.
We think it's really important and really promising.
One more question. If you look at Autodesk, and I'm going back in time, I'm not as current as I'd like to be. Autodesk was always sort of the inexpensive everyman solution competing against, say, Dassault or Parametric or something. How much of your opportunity now do you think is being disruptive with capabilities that a more expensive solution has versus creating new solutions?
I think that's a good question. I think historically, we have always been on the disruptive side of trying to democratize or bring to volume things that have existed before. I still think at our heart, the core DNA of the company is doing that. In doing that and looking to where problems are with customers, I think we've probably stepped over the line quite a bit in terms of being the leader. When you look at things like reality capture with 3D scanning, or when you look at what we've done on cloud and mobile, I think more so now we see these as being appropriate for a broader swath of people before even our traditional competitors have made it available to the really high priced. I think it's a mixture. I kind of talked about it in PLM.
PLM and CAM and some of those other things I would say is more traditional disruption in which we go in and we take something that was done in an older, more expensive way and make it more available. I think some of the other things that we're doing are actually we're breaking new ground, and that's a slightly different position for us.
Thank you very much.
You're welcome.
Chaitanya Yaramada from Baird. Question on the outlook. You said 12% CAGR over a four-year period, 2014 to 2018, also you said 20% increase in customer value. Is it fair to read that as being roughly less than half of the growth coming from existing customers and roughly a little bit more than half coming from new customers?
I mean, that's a fair way of looking at it roughly. I mean, the numbers kind of play out that way. I mean, some of the customers in the existing base we're getting more value from, we're going to be getting more. I mean, that's a reasonable way of looking at it. Does it break out precisely that way?
It's also non-subscribers turning into subscribers, like the AutoCAD 360 example, right?
Right. Exactly.
I think for everybody, if you're doing your homework, copy from her paper.
A question on the increase in subscription base. You said 50% increase by 2018. If you could rank for us what the contribution to that is going to be from cloud, whether it's rental versus maintenance subscription. Thank you.
We're not going to break that out. What I can tell you, though, is in terms of our new customer acquisition programs, we're definitely going to be turning the focus and the preference engine towards the new offerings and towards the cloud, towards the rental offerings. Over time, you're going to see a fairly dramatic shift over those years in terms of our new customer acquisition to these other types of offerings. How that plays out in the mix long term, we don't have guidance on. You can see where we're heading.
Great. Thank you very much.
Well, I think we have a few more minutes.
Okay. One more question.
It was interesting when you discussed about how you try to increase the value from a customer. Of course, essentially it's good for the company to make you more money. Have you found any resistance, say, "Hey, I don't want to pay extra for this." What do you do in that situation? I mean, how do you talk about value? In terms of pricing, it seems like it's a very important dynamic of your plan going forward, and I'd like to hear from whoever appropriate, what you do in this situation.
Let me start with the big one, then maybe Steve can hear. The first thing I'd say is absolutely, we meet resistance in some cases. I think, for example, subscription is a good example. Andrew gave you some detailed metrics on subscription. I mean on suites. My apologies. On suites. We believe they brought more value to the customers and more value to Autodesk. It was a win-win for both of us. I think in aggregate, that has turned out to be true. Many customers have chosen to buy our suites, and they get more value, but individuals have chosen to stay with individual solutions. In that case, one of the things that we've done, and you'll see this all through this, is one of the things we have not done is the more draconian measures.
For example, when we introduced suites, we could have eliminated individual products. We chose not to do that. When we introduced rentals, we didn't get rid of perpetual license. We could have done that. We continue to give our customers a choice about what they want to do. The flip side of it is we also try to incent behavior through various prices, pricing, packaging, promotions, and other policies.
I mean.
Yeah, I'll just add one more thing to what Carl said, which is that many times the customers pay us because they're taking money from somewhere else. It isn't like we're just increasing costs on their side, it's that they're spending money either with a competitor or on paper-based workflows, and it's there that we're creating value and getting rewarded for it. Maybe the cloud bit of it that you're talking about is really replacing something they would've spent money elsewhere, and you're turning that into value they would reward us for. I mean, I wouldn't think of how we get more from a customer by selling them the exact same thing and just charging them more. We're bringing new solutions that help them solve problems in different ways.
Amar used an example in his presentation from some discussions I had while traveling last week where a customer has been dramatically changing their go-to-market, winning more business by leveraging a solution of ours that they didn't have before. One of the things I find as I'm talking with customers of Autodesk use our software and our cloud services to drive their businesses. We're on the front end of their business. They're using our tools to actually win business, to compete in their marketplaces, if we can help them win more, if we can give them a competitive advantage in their space, they're happy to spend more with us. We're not trying to just get the same thing and sell it for more money. We're offering more value, we're extracting more value in return, it's a good win-win.
Yeah. Let me just try to bring it back to, for example, when we showed those CAM slides in the beginning, you had a total up to $21 billion. What we're counting in there, to reinforce Amar's point, is mostly revenue that's going to competitors. Jay brought it up in his question. People who have these big maintenance bases, in which there's a lot of revenue going to maintenance. Many of our offerings are trying to serve customers who are either over-served and paying too much for what they're already getting. This is a large part of what we see being the additional subscribers, us providing better services at lower cost to our customers.
To the person who asked before, that's been, I think, really the history of what we've tried to do as a company, is provide more for less, make it easier to use, easier to deploy, easier to maintain.
Can you think of an example of doing something like that? Let's say someone has a higher-end, more expensive product, and you're giving them something that says more reasonably priced, but essentially does the same thing. That seems to be sort of the previous discussion. Can you give an example of how that might happen?
Yeah, sure. I mean, for example, let's use the PLM example. Typically, PLM are deployed inside companies. $1 million is a reasonable amount to pay in a year. It might cost $10 million for implementation. It'll be widely distributed between all the people in a manufacturing company. We come in with a different model, and the way to probably think about what we do with PLM is totally analogous to, let's say, what Salesforce did with Siebel, what NetSuite's doing, or Workday with-
PeopleSoft.
PeopleSoft. Those are the same kind of things. The change in what people expect in terms of the productivity and efficiency they get from IT tools is going up. Every company is having the same discussion of how do I do more with less that we were having before, and we provide them opportunities. With PLM, one in which they would have had an otherwise much more expensive and probably risky deployment. We simplify that by giving them easy access. Same thing with our design tools. We believe our design tools. For example, we think Inventor at $5,000 does a much better job for the vast majority of customers than something that might be priced at $10,000 or $15,000 or $20,000. If you look back, this is a classic disruption, if you're looking at the literature from someone like Christensen.
What ends up happening is our competitors, to some degree, have ignored many of these customers and have focused on other areas, and they just enjoy the profit that comes from milking their customer base. We come in, we continue to invest in it, and we build better products for them, and we're proud to do it. When we go in, it is really not a sense of how do we get more from the customer. It's really a sense of how do we make them more efficient, more productive? How do we make them win more business?
Thank you very much.
You're welcome.
One more from Steve.
Is it too simplistic to think about that 20% upsell in terms of the existing customers by just taking the subscription revenue last quarter divided by the $1.9 million, you get about $523 of annual contribution per sub. You think about that growing 20% over that forecast period. Is that too simplistic, or are there factors that need to be thought of to layer on top of that?
Well, it's probably simplistic in terms of the mechanics of how it'll actually happen. I mean, I think I was pretty clear about the way when you look at that existing sub base, how we're going to layer on some of these SaaS applications and how we're going to layer on the consumption models. You can see roughly that some of those offerings, when you look at them on an annualized basis, they come out being on average 20%, 30% of the cost of a maintenance contract in a year. You can see the additive effect. You can do the math from there.
I do think it's important to recognize that there will be a distribution amongst our subscription customers in the amount that they pay per year. For somebody who is getting $10 a month worth of value, that's a fine customer. Someone who's getting $1,000 a month, that's also a fine customer. Well, thank you all for coming. I think there's a little bit of lunch being served, and the executive team's going to stay around, and happy to interact, and if you have any more questions, happy to answer them.