Incoming Autodesk CEO Gives His Channel Take

Two months before assuming the CEO spot at Autodesk, COO Carl Bass discussed his priorities for the $1.5 billion design software giant in an interview with Editor Heather Clancy and Industry Editor Barbara Darrow. Autodesk partners shouldn’t anticipate any major expansion of the San Rafael, Calif., company’s channel, but they can expect programs to help them specialize in their disciplines, as well as future technology acquisitions that continue to extend the vendor’s lines.

CRN: Moving into your new role, can you describe your commitment to the channel? There was a time in the recent past when you were pushing more direct.

BASS: Eighty-five percent of our business goes through the channel. I think we look upon that period, in which I wasn’t working here, as a mistaken thing to take more direct or to distribute more on the Internet. We think the channel plays an important role in distributing and selling our products.

The reason we have even 15 percent--there’s two reasons, and we're very clear to everybody about the two reasons. One is when products are new products, early to market products, we want to really subsidize those products. We want to bring them to market. No version one product is ever a great product. Version two products are OK, version three are the good ones. It's really expensive for a reseller to go through that selling and reselling of versions one, two and three. Also, to the extent possible, we want as much feedback possible to our development teams. So we want our own sales force in there, we want our own consulting organization. We want to learn as much as possible so we can really get to release three as soon as we can. And when we get to release three, then we want it to get to the channel. The second reason is, we do occasionally have customers who are so large, global, that there's no reseller that has a footprint that can adequately serve them. … On an ongoing basis, we'd like to keep it at that level. I can live with the direct piece shrinking, I don't want it to get larger.

CRN: Can you explain what you mean by subsidizing a product release cycle? Why wouldn't you work with a leading-edge VAR or reseller on an early phase product?

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BASS: We sell finished product. So when I talk about a version three product, I'm really talking about a finished product. You know, the difference is the volume we're selling. We sell millions of copies that we assume are going to be installed by either the people who use them or the IT staff. We wouldn't dare take a CD from SAP and just stick it in a machine. You wouldn't try to upgrade that way.

With our products, there's a very different mechanism. Many of our people are really VARs, and not system integrators who can make money by making up for the deficiencies in the product. We want [our partners] to be value-added, not compensating for value that wasn't delivered. That's what I think often happens in enterprise software. [But this] doesn't work in our market. I really want our resellers selling things that they can sell and make money on.

When we brought a new 3-D modeling program to market and nobody had ever done it in that industry, there's a lot of evangelism, there's a lot of early selling, there's a lot of early marketing activities and truthfully the channel is not compensated in a way that allows that to be a very profitable business. And then the products don't work as well as advertised and then [the partners] have to go back in and resell [customers] on [the next version] and [say], 'I know it didn't work so well for you the first time, but this time …'So, I think it's better for the manufacturer of the software to take on that task at that time. When we start seeing it getting toward volume, when we start seeing demand being created, that, to me, is the time at which you turn it over to the channel. CRN: So when you say version three, do you mean the actual version three of the product or do you just mean that phase of its existence?

BASS: A lot of times it really is version three. You know, people are very enthusiastic about their version one. Look at Windows, which was the one that everyone says is the 'first' Windows? It was 3.0, right?

CRN: Do you discourage VARs from representing early versions of the products and going out there and doing the kind of evangelizing?

BASS: At times, we've actually kind of restricted it and said don't do it, but we've done it in what I consider to be a partner-friendly way. [We've told them] this is going to be expensive. If it's your customer, come along on any sales call. Do whatever activity you want to, but you don't want to be out there doing advertising, you don't want to be doing seminars. We're willing to do this, and we promise you when we hit version three or whatever that magical moment is, we'll turn over all the business. We don't want it. We just think your time can be better spent, and we're in a financial position in which we can really invest in that way. We're doing things in our data management business where we have our most sophisticated, most dedicated to a particular industry VAR working right alongside with us. So, we're not really strict about it. ...

In some ways, what happens within organizations, and it even happens with our partners who come to us, they all think if they can just take a product and put it through the channel, as they like to say, it will just happen. If you've been around and understand the economics and the mechanics of how the channel works, just dropping something in one end doesn't mean it pops out the other end. I think that every channel partner can list the number of products they carried for a little bit of time before they realized there was no real demand for that product, So we just try to be a little bit sensitive to the economics of it. Our business has been going wild …. The average reseller for us has increased their business 250 percent in the last couple of years. It's coming from two factors--our business has nearly doubled over the last four years, and the number of channel partners has gone down. That means there's big opportunities that are much easier to go after.

CRN: One of the trends in the channel is loyalty. Vendors are asking for or requiring more loyalty, typically in the form of higher attach rates. I guess my question would be to what extent do you see the partners becoming broader and deeper with you?

BASS: We've actually been pushing in the other direction. What we've had, generally, in our segment is a broad portfolio that is really four businesses. You either support manufacturing, building, infrastructure --tunnels, roads, bridges -- and entertainment. Those are the four markets we serve, which are fairly broad, and what we've found is that most people cannot be effective at servicing all four. It's hard to get up in the morning and talk to a post-production facility and then talk to a utility in the afternoon. … So, we've been more pushing people to specialize. They all started primarily by selling AutoCAD and with AutoCAD, you did sell to all those customers.

CRN: How is the rise of China affecting your channel and the way your sales are going as more companies work to product more goods there?

BASS: For us, as a company, China has been a big, growing market for us. There's still a huge amount of privacy in China, so that still affects our business to some degree but it's been a really healthy grower in China. What we've seen is more of our customers do business in China or with China. So you see a lot more the use of the software here or the other partner or the subsidiary venture also use the software. Most of the trends have been positive with regards to China. It also pertains to our strategy of not just helping to create information, but helping manage and share it. Helping figure out how you do trans-Pacific, trans-Atlantic collaboration. CRN: You've been very Windows-centric, but you've announced some Linux products recently.

BASS: Particularly in our media and entertainment business, we have a fair number of Linux products.

CRN: Is that a receptive market for Linux?

BASS: For many of those companies, they have a long Unix heritage. Many of the products that we're moving to Linux have grown on SGI boxes. With the imminent demise of SGI, they actually withdrew from this market as of last week from selling anything into the media/entertainment business. I think they're concentrating on a couple of specialities, like the military. … The entire [media/entertainment] product line runs on Linux and that's where we're seeing demand for Linux. Amongst our design customers, almost no demand for Linux. It's not interesting to them.

CRN: What are compelling business cases for you right now? Where do you see growth in the next 12 to 18 months?

BASS: A couple of places. One is the emerging markets, which you touched on with China. It's equally true in Eastern Europe, Latin America, the Middle East, India. We've seen large amounts of growth in those parts of the world. A combination of reasons. One is the offshoring trend where people are moving some of these things offshore, but the other reason is it's just the natural growth of these markets as these emerging markets come online. If you go to China and go to those four markets I just talked about, you look around and see a huge buildout of infrastructure--roads and bridges and tunnels. You see an enormous amount of building. …

There's a big movement in our markets from using 2-D technology to using 3-D technology. That continues, and it's a real strong driver of what's going on. Other things that play to our advantage to lesser degrees have been things like our movement in our way of selling from upgrades to subscription.

CRN: Adobe has this Acrobat 3D thing and if you look at it, in one way it looks competitive to what you're doing. In another way, it looks complementary. Can you talk about that?

BASS: Generally speaking, Adobe is pretty complementary to what we do. They're more interested in the publishing of information. Most of our business is in the creation of information, the managing of the information. ... Most of the information flow happens in one format. At the end of the day, there's probably a dozen different formats that people archive it in. The Adobe 3D is one of those.

CRN: They announced related partnerships with a bunch of people. You guys were not one, and it just stuck out like a sore thumb.

BASS: Especially because we have our own format that does similar things. The other thing for us that is a little bit hard is we enable a lot of that same functionality for free.

CRN: Traditionally, you've been a very acquisitive company. What holes do you see in the portfolio?

BASS: I think there are some holes as we've expanded where we're going. The kind of acquisitions we normally do, Alias would be more of an anomaly. What we do a lot of is technology acquisitions to fill in gaps. What we're doing in analysis and simulation. We're moving to this world in which we've gone from a 2-D, line-drawing representation of what it is you're going to build to a digital, 3-D model. What comes with that 3-D model is the ability to analyze it, simulate it, avoid making prototypes of it. And with each of those are specialized software. So, there are gaps in our ability to visualize, analyze, simulate some of those things. You'll continue, probably, to see us do small technology acquisitions. These bigger acquisitions are much more opportunistic.

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