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Autodesk, the biggest spender on research and development among companies of a similar size, plans to keep spending as it shifts more resources toward technology that helps distribute its design software via the Internet.
During its last fiscal year, Autodesk spent 25.4 percent of net sales on research and development, the largest percentage among U.S. software or Internet companies that have a market value above $5 billion and an annual R&D budget of at least $300 million, according to Bloomberg data.
The largest seller of engineering and design software, Autodesk aims to deliver more products over the Web, ramping up its use of so-called cloud computing. Chief Executive Officer Carl Bass is spending such a high percentage of sales on research even as Europe—the company’s largest market—struggles to contain a debt crisis. New products will help the company withstand any drop-off in the region’s demand, he said.
“When there are technology transitions in place, you better be more mindful of that, or you become road kill,” Bass says. Failure to innovate would pose a bigger threat to long-term prospects than turmoil in Europe, he says.
The enhanced-spending plan marks a change in strategy for Autodesk, whose software has been used to design everything from bridges to special effects in the 3D blockbuster Avatar. During the last recession, San Rafael (Calif.)-based Autodesk cut its annual research and development budget 21 percent, to $457.5 million, for the 2010 fiscal year in order to preserve cash.
For Autodesk, the problem with cutting back on R&D now is that developing new products can take longer than a recession lasts.
“If they stop [developing] them, they may have stripped the cupboard bare just in time for the economic return and their competitors will have new products and they won’t,” says Barry Jaruzelski, partner at New York-based management consulting firm Booz & Co.
Indeed, IBM CEO Sam Palmisano last year faulted Hewlett-Packard for relying too much on acquisitions, rather than spending on R&D, to pursue innovation. HP’s research and development spending fell 20 percent in the fiscal year that ended in October 2009, compared with the previous year.
Autodesk, meanwhile, boosted R&D expenditure 8.5 percent, to $496.2 million, in the fiscal year that ended in January. During the most recently reported 12-month period, it spent $525.5 million, or 26.7 percent of its sales, on R&D.
“We are devoting a larger percentage of our R&D budget to cloud computing, with a significant portion of our new product investments going toward products that are cloud-enabled,” says Paul Sullivan, a spokesman for Autodesk. “We expect that all of our major products will be available in the cloud within the next three years.”
The company is also using the cloud to deliver its applications for mobile devices made by Apple and those that sport the Android operating system from Google. That may be helping Autodesk reach a broader audience more quickly.
Autodesk’s SketchBook application, which works on the iPhone, iPad, and Android devices, attracted 7 million users in less than two years. That compares with the nearly 30 years it took to attract 12 million customers with software products delivered through conventional shrink-wrapped boxes. In September, the company released Autodesk Cloud, a collection of more than a dozen Web-based capabilities, products, and services.
Microsoft, Intuit, and EMC are also investing heavily in the transition from packaged software to online or cloud services.
EMC CEO Joe Tucci, who spoke last month at the University of Washington about the risks of not making the transition to the cloud, said his company is “going to spend a lot of money on R&D.”
