CRN Interview: Carol Bartz, Autodesk

Autodesk could arguably be called the originator of the current channel model. Since its inception in the early 1980s, the San Rafael, Calif., CAD vendor has created a solar system of thousands of ISVs and resellers. Autodesk CEO Carol Bartz recently sat down with Editor Heather Clancy and West Coast Bureau Chief Rochelle Garner to discuss the state of the company, its industry and its ongoing channel efforts.

CRN: Autodesk has always been known for its community of add-on ISVs and resellers. And I see from your recent results that quarterly revenue rose more than 40 percent. How much of that is attributable to the channel?

BARTZ: Eighty percent of our business goes through the channel. Our past two quarters have blown it away on our top line and bottom line. The numbers speak for themselves. We beat the street two quarters in a row. We made a concerted effort to look strongly at the profitability of the company and to make our operating margins in the 18 percent to 20 percent range.

The strategy is simple: We believe that our customers not only want to author or design intelligent data, they want to use that data downstream in a more intelligent fashion. Think of the advent of cheap telecom and what that means. It's no longer about creating a drawing that represents a mechanical part but how you can use that drawing through constructing the part, manufacturing it [and] fixing it later. That has turned our strategy on its head, toward product life-cycle management. On top of that is [our mission] to sell other products to manage the data, collaborate and view that information throughout the supply chain and the construction process. Plus the fact that our customers face those issues"global customers and global supply. What's the most effective way to move that information around the chains of knowledge? Keep it digital.

The problem in the past is that a typical file is huge"we are talking terabytes of data, even. So we really have to have the convergence we are seeing of desktop performance and graphics and telecommunications. It's the ability to move this information to suppliers cheaply to the production site to the manufacturing floor. And while the bandwidth is important, so, too, is how you manage those drawings through Web services, portals, vaults and secure protocols.

CRN: So you look to your channel to provide those additional functions?

BARTZ: We have training partners, to the tune of a couple thousand. We have developers. One of the things we did way back"because we've had an open architecture, now you can say APIs"we've always had software partners, VAR partners, distribution partners, people who write books. We have always recognized that there is a bigger Autodesk than Autodesk Inc., and we pride ourselves on being respectful of that and trying to do a better job of always supporting them. Thousands of small businesses interact with us, and that's a full-time job. We know that's one of our jobs. People want to partner with someone you trust. But it's more than that--you want to partner with who you think will win. Who you think will be helpful and supportive. For us, it starts with the recognition that we can't do this without our partners. Remember, we have 22 years of relationships with many of these people. We've grown up together.

CRN: There's a huge push among software companies to approach their markets via a vertical strategy. Are you taking that same tack?

BARTZ: Yes, verticalization is important because if you're going to sell to the manufacturing customer in the morning, that's not the terminology you use to sell the architect in the afternoon. Because we're not trying to sell just a generalized drafting platform anymore with AutoCAD, we're trying to sell solutions that go deeper into these vertical markets. That vertical knowledge is very important for us.

CRN: You've just introduced a new Elite program. Can you tell us what is the importance of that, and what is the thinking behind it?

BARTZ: That's simple. If you sign up, put [in staff who] have good knowledge in manufacturing or infrastructure or architectural construction, it puts you in a different relationship with us.

CRN: What does that mean in terms of resources? Do you have to achieve certain certifications levels? Put money into marketing?

BARTZ: From my perspective, and what I'm looking for, is they have trained technical people and trained salespeople around the solution set and around the vertical. Again, you don't have the person selling the manufacturing tool in the morning and talking to a civil engineer in the afternoon. It's the domain knowledge and training from the technical side. Salespeople tend to be more convertible. The technical people that move along with the salespeople should have more domain experience.

CRN: A few years ago, you had an initiative to build out the Autodesk direct-sales force. Where do you stand on that?

BARTZ: We started about three years in the United States, less than that internationally, and we now are about 20 percent direct. In typical fashion, our first direct-sales people tried to grab any large order that was around, as opposed to doing a good job in a strategic accounts and getting the relationships going. A year ago, we turned many of these larger accounts back to the channel and had the salespeople focused on named, strategic accounts. We said, 'These are our strategic accounts, now go in there and do your job.' Today we have two kinds of direct-sales teams: There's the major account type, with named accounts. The rest are channel account managers. That's 80 percent of our business. So we want to make sure the channel partners are well cared for. That's everything from the four-legged sales call to holding the right forums. We also want to help make sure their business plans are solid and they really understand strategy.

CRN: Is this about the right mix?

BARTZ: I think you don't do anything now in your own city. There's some supplier"somebody someplace else who's connecting up with us. Or you're an architect-bidding in Bejing or you're a supply chain manufacturer concern where everything is everywhere else. So a lot of accounts want to be looked at more globally. Whenever that happens, when people want to cross boundaries, it helps for Autodesk to be involved because it's harder for multiple channels to be there. But I think 20 percent to 25 percent direct is a good number. Our channel partners are getting very sophisticated and are very worthy of going into larger and larger accounts. And as we talk more the product life cycle"the manage part of the data and the collaborate part of the data"whenever you break into a new strategic area, the vendor is better at explaining and doing the proof of concept. The channel comes behind and says, 'Ah, now I can take it mainstream.'

CRN: Are you planning any more acquisitions? BARTZ: What we like is small technology acquisitions, like the vault that's gone into Inventor. Last year, we had five or six acquisitions and the total was $10 million, which is really like acquiring features and an engineering team. That's the nice kind of acquisition for us. We get things to market quickly, we get smart people who come with it and we can do the productization and last quality checks and that sort of thing. Our priority is in life-cycle management. Now, understand that when we look at life-cycle management, we think not only about product life-cycle management. we think about what happens in building life-cycle management. So think about construction flow, bidding and maintenance and so forth. And then infrastructure, that's how to channel GIS data and how that comes together and goes down the flow from the time you do the bidding to the mapping to the dividing to the construction, again, to the maintenance of, maybe in this case it's telephone lines, or sewers or roads. The good news is life-cycle management naturally hits every one of our markets, and it really is a wonderful time of large pipes, or cheap telecommunications, and a lot of data. The problem with our customers [is], by the time you get that 3-D model put together and all the productization of that, that's a lot of data. It used to be rolls of drawings that would ship around the world. That should all go digital.

CRN: What about storage management vendors? How closely do you work with them?

BARTZ: We don't need to. We're up the stack from that. We are more worried about how you manage the access control and changes of the design process. I want to handle everything up to where you can turn a bill of material over to somebody. When I think of that, any time data doesn't do well in a relational database, that's my data to handle. Once something gets to a part list or an item list, when it has any graphics attached to it. The manipulation of how that's worked on is how we think about the manage and collaboration part of the scheme. The good news is, can you go through a day these days without someone saying the word 'manufacturing?' Without somebody saying the [term] 'construction starts?' All of sudden, everybody is realizing that the information economy is based on the manufacturing economy. The whole idea about making sure we have a very productive, built economy. What I say is that if God didn't build it, one of my customers did. It's as simple as that. Everything you see out there, with the exception of that earth and the plants and that dirt, is something my customers did. Everything. That's a huge amount of exciting things.

What we don't think about, it's funny, it's not the design of the water bottle, it's the design of the huge machine that stamped this water bottle out, which would fill half this building. By the way, what's the machine that printed the label. It goes on and on. It's huge. But we stopped thinking about that. We said, 'Oh that's all done. Excuse me, now you have to get more productive with this.' Now we do have the tools to deal with this. Companies have to be clever about where they're doing their manufacturing, where they're doing their procurement. Therefore, they have to get more clever about how they're managing their information.

CRN: Can you talk about how mobility affects all this?

BARTZ: Do I have to get a telco worker so that he can fix a transformer? Absolutely, no doubt about it. But, I also have to get a set of drawings to a factory in Taiwan so they can start laying out the factory. So that worker is remote from where I am or different from where I am. It's both remoteness and mobility. In the GIS area, our data goes right to PDAs. We have a location-based services division that does location logic for phone companies. You have to move the data to where the data needs to be. So of course, you have all kinds of complexities because again you are moving very sophisticated data to small devices, and you have to be able to do the parsing of the information. That's possible because of bandwidth. This decade, frankly, will be more interesting then the decade of the '80s when we were all blown away by graphics on the PC. In the '90s, we got a little faster, waited for the next chip, that's when we verticalized so we could understand different needs and, boom, came telecommunications. Now, we need smarter design teams. The more intelligent we make the design to start with, the more usable it is in digital fashion downstream. So the good news, as I've already said, is that we get to do what we've done all along, and that is to create an even better design station for authoring, which is why we are on annual release cycle now. And we get to work on the downstream problem from managing the data and collaborating, letting people collaborate outside the firewall. So we all of a sudden have had our market blow open because for every person who creates that design, 10 people have to do something with it. If you're the architect, you're the one person we dealt with before. We never dealt with those 10 people who took the drawings and did things with it.

CRN: What about technical services? What's your strategy there?

BARTZ: We're very unique for a software company. Because if you look at most software companies, they're 50"50 products and services. Or 60-40. We're about 90-10, if not 99 to 1, because mostly we let our partners do a lot of that. We have our own consulting group and that is based either on working on helping our partners come up the learning curve or, as we are getting into larger and larger installations, now if we are going into the CXO level, just helping them get the productivity they are looking for. . We're always mindful of the combination of making sure our dealers have things to do so they can be profitable and have a reason, and where we can enhance what they can do. Where we have to enhance, where we should enhance. The interesting thing about our model is that in most given quarters 60 percent to 70 percent of our revenue is new seats. Some people think that this is totally a go-back-to-old-customers-for-upgrades game. These are new seats. Everybody believes for some reason that Autodesk is all upgrades; that's not the case. They say, 'Every engineer in the world must have one of these things.' Au contraire. Did you know that only 10 percent of engineers in the world are on 3-D? We've been talking about 3-D forever, haven't we? You know why? Too hard. Too expensive. Way too hard, way too expensive. So, if I even take the conversion of 2-D to 3-D in the world"and that's just manufacturing, that's not even architectural, which is 99.9 percent 2-D, or civil, which is 99.9 percent"if we just take the 3-D conversion of the world, that's enough growth for this company for a long time. And then you add on top of that the ability to manage the information through life-cycle management. It's an amazing opportunity.

The only thing we don't do is the car body and the air frame. We do every part within a quarter-inch span of that car. Everything else. You know what else is hard to do? Barbie. Those are tough curves. But the point is, that's how sophisticated the software has gotten.