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I did not enjoy writing the prospectus for our Initial Public Offering in 1985. Translating a clear statement of the company's goals and strategy into weasel words under a pressing deadline, in endless meetings filled with lawyers and accountants who argued with each other, billing the time to us pales, in my mind, with other avocations such as lying on the beach or juggling chainsaws.
Here is what we were trying to get across in the prospectus: the original draft that ended up devolving into the mealy-mouthed final document. It's the best statement I know of regarding where we were in 1985 and how we saw the company's future. The odd focus on “products” is because the big thing at the time was not to be seen as a One Product Company.
Autodesk develops, markets, and supports a family of software packages which allow computer aided drafting, design, and drawing (CAD) to be performed on desktop microcomputers such as the IBM PC family.
CAD packages are used to produce drawings in such fields as architecture, civil, mechanical, and electrical engineering, surveying, facilities planning: any field in which information is communicated via drawings. A general purpose CAD package such as AutoCAD can make any drawing that can be made on paper.
The benefits of CAD are faster, more accurate generation of drawings, more efficient revision of drawings, the ability to use predefined symbols, eliminating time-consuming repetitive work and automatically assuring adherence to drafting standards. The benefits of preparing drawings on a CAD system exactly parallel using a word processor to write documents.
In addition, a CAD system such as AutoCAD maintains a database containing every element in the drawing. Users may attach information to objects in the drawing (for example, in a drawing of an office, a desk might carry its manufacturer, model number, date of purchase, price, and depreciation information). This information can be retrieved and modified from within the CAD program or sent to other application programs to prepare bills of materials, job costing reports, or inventory updates. A CAD system may thus be used as a “graphic database”, allowing design information to be taken directly from drawings, or conversely, allowing the presentation of design data in graphic form. AutoCAD was designed to make the integration of application programs for such purposes easy. Software suppliers serving structural engineers, surveyors, architects, and facilities planners, etc., can build applications based on AutoCAD, using it to accomplish the otherwise difficult tasks of graphic input, output, and editing inherent to their application.
Before AutoCAD, computer aided design was primarily done on mainframe and minicomputers, often with proprietary graphics hardware. Usually CAD systems were sold as integrated hardware and software (“turnkey”) systems. With the introduction of the IBM PC and the many 16-bit desktop machines which followed, the basic desktop office computer reached a level of capability which allowed serious computer aided design to be done on the machine as supplied by the manufacturer. Thus, AutoCAD was introduced into an essentially vacant market: a software package for computer aided design sold separately from hardware and intended for use on existing desktop computers.
Additionally, AutoCAD was the first CAD package to support a wide variety of computer configurations. Today, AutoCAD runs on 31 different desktop computers and supports close to 100 graphic input, display, and output options.
AutoCAD's support of all major computers and graphics hardware is central to the Company's perception of the market and to its strategy. Exactly as portable, open-architecture operating systems such as Unix and MS-DOS have supplanted vendor-proprietary operating systems, and portable open-architecture networks such as Ethernet are supplanting those developed by computer vendors and sold only with their hardware, the Company feels that CAD customers will demand flexible CAD software which will run on a wide variety of hardware configurations and which can be expected to be available on newer, more powerful computer systems as they are announced.
AutoCAD is written in C, one of the most widely implemented and compatible computer languages for software development available today. Interfaces to operating systems, computer hardware, and graphics input, output, and display devices are completely separate from the main program, and may be changed without requiring alteration of the program itself. These design principles allow Autodesk to market AutoCAD on virtually any computer system which supports graphics and provides the C language. The C programming language is currently available on every serious candidate in the engineering workstation market, ranging from Apple's Macintosh to the Cray X/MP. This, combined with the proven portability of well-written programs written in C and the Company's experience in successfully moving its software from machine to machine, demonstrates that the Company can with minimal effort make its products available on any computer system it chooses as a potential market.
While CAD has been traditionally seen as a vertical market product (specific to one narrowly-defined industry), the Company feels that this has been more a result of the high price of turnkey CAD systems than the applicability of such systems. Just as word processors have become almost universally used by those who write and spreadsheet programs are widely used by those doing financial forecasting, CAD systems will soon be seen as essential by those who draw as part of their work as well as by full time drafters.
This large general market can be addressed only by those packages which require no special hardware, because such users cannot justify a special-purpose computer just for drawing. Instead, the drawing task will be done by a program running on their regular workstation, just as word processing and database software are used.
Autodesk's proprietary language translation utility vastly reduces the effort required to maintain foreign language editions of its products. Currently AutoCAD is available in English, French, German, Italian, and Swedish editions. Spanish and Japanese editions are in preparation.
The Company feels that the CAD component of an engineering workstation will succeed only if it meets the following criteria:
The Company's products have been designed to meet all these criteria.
AutoCAD is a general purpose computer aided design and drafting software package. It provides the functions of a graphic editing system with attached database which form the core of every computer aided design system.
AutoCAD was designed to run on desktop computers, but does not contain any design limitations except those imposed by the present capacity of such machines. The designers' extensive experience in systems programming enabled the removal of limits in the software without degrading performance in the desktop environment.
For example, many early competitor programs imposed limits on the maximum size of a drawing which could be created or on the accuracy of the coordinates stored in a drawing. AutoCAD imposes no practical limit on either. Most early micro-based programs did not allow the user to modify the menus, or the help text, or design custom templates. AutoCAD allows all of these. The Company feels the success of AutoCAD to date expresses the market's verdict that these features are essential in serious design work.
AutoCAD is entirely written in the C programming language, is
presently over 100,000 lines of source code (some small machine
interface routines for some implementations are in assembly
language).![[Footnote]](i/footnote.png){kind=small}
AutoCAD is microcomputer software only in the fact that it runs on microcomputers and that it exhibits the characteristics of ease of learning and use, good documentation, and user training tools one usually associates with microcomputer software. Its complexity, internal design, extensibility, and the general techniques used in its construction would normally identify the software as a mainframe or supermini package. As a result of AutoCAD's design, when presented with additional hardware resources such as higher resolution displays, faster processors, higher capacity internal memory (RAM), or larger discs, it automatically takes advantage of these resources and delivers their benefits to the user without software modification. AutoCAD's present internal design should easily accommodate the projected advances in these areas for the next decade. Thus, if run on a microcomputer, AutoCAD is a microcomputer CAD package. If moved to a minicomputer, it competes with other minicomputer CAD packages, and if moved to a mainframe, it becomes a mainframe CAD system. This, combined with AutoCAD's demonstrated portability, allows Autodesk to provide a compatible solution to the CAD industry on systems ranging from briefcase to room size.
The Company is committed to extending the capabilities of AutoCAD as well as the selection of hardware it supports. For example, the release of AutoCAD release 2.1 in May 1985 added three dimensional capabilities to the package, facilities essential for efficient use of drawings scanned by CAD/camera and for use with numerically controlled machines, and an initial version of what will soon become the full integration of the LISP language with AutoCAD. LISP is the first in a series of languages to be interfaced to AutoCAD, allowing users, OEMs, systems houses, and third party software developers access to the full capabilities of AutoCAD from their programs. Since LISP is the language of choice in artificial intelligence research, its provision within AutoCAD places AutoCAD on the leading edge of applying these techniques to the design process. The Company believes that the facilities these language interfaces will provide to application developers to be unique in the CAD industry, regardless of the scale of the system.
While AutoCAD provides a total solution to the individual user or small office using CAD, users in larger corporations often wish to use their desktop workstations to develop drawings which are later combined with others' work on mini or mainframe CAD systems. Conversely, operators of expensive CAD systems wish to offload the large amount of routine work not requiring the power of the large system onto less expensive desktop machines. To meet these needs, and thus penetrate the corporate market for desktop CAD, Autodesk is developing a family of bidirectional translators which allow interchange of data with larger CAD systems. Translators for CADAM and Intergraph systems are presently available, with others under development. Autodesk believes that development of these translators is the key to establishing AutoCAD as the desktop CAD standard in major corporate accounts, and assigns a high priority to their development.
An
architectural design consists of drawings describing the structure
to be built, plus extensive documentation provided to the contractor
who constructs the building. AE/CADD is an integrated design and
drafting system designed especially for architects which automates
drawing tasks and automatically builds the construction documentation
directly from the drawing, guaranteeing consistency between the
drawings and contractor information.
Driven directly from a digitiser template supplied with the package, AE/CADD automatically constructs walls from dimensions supplied by the designer, joins walls at intersections, breaks walls to insert doors and windows, and automatically draws stairs, plumbing fixtures, appliances, and structural details. Notes are automatically attached to markers in the drawing, and when the drawing is complete, AutoCAD's database link is used to automatically prepare the construction documentation describing the job.
AE/CADD allows an architect to make basic drawings much faster than with a general purpose CAD system, then eliminates the time consuming task of preparing the construction documentation. It is generated automatically from the drawing, preventing discrepancies which take time and cost money to correct in the field.
Autodesk plans to extend AE/CADD with additional templates to cover structural, mechanical, landscape, space planning, electrical, site planning, and plumbing drawings.
AE/CADD was constructed using the user-customisation features of AutoCAD. Written as a set of AutoCAD custom menus and symbols, AE/CADD may be installed on any machine which runs AutoCAD. The implementation of AE/CADD, accomplished initially by non-Autodesk personnel with access only to information provided to all AutoCAD purchasers, illustrates how AutoCAD can be adapted for specific application areas.
AE/CADD, sold with a suggested retail price of $1000, turns an AutoCAD
system into a powerful design tool for architects.
In order to take advantage of the many benefits of CAD, users with many existing manually-drawn paper drawings have had to manually transfer them into their CAD systems, in essence, redrawing them from scratch on the CAD system. The extreme cost of this labour intensive process has prevented most users from automating the filing and maintenance of their existing drawings when installing a CAD system. Rather, they have made new drawings on the CAD system, but maintained the old drawings manually. A system which automatically converted these paper drawings into CAD databases would be a great benefit to these users.
In addition, upon installing a CAD system, the purchaser must usually spend a great deal of time entering commonly used symbols and drawing details before being able to realise the full benefits of CAD. The ability to enter these symbols automatically for immediate use by the CAD system would save users much time and deliver immediate productivity gains.
Autodesk developed CAD/camera to satisfy both of these needs. CAD/camera allows users to automatically transfer their paper drawings to CAD databases. Taking an image scanned with an electronic scanning camera, the CAD/camera software package translates the scanned page to the vector form usable with CAD systems. Existing systems which perform this function are based on mini and mainframe computers and cost more than $100,000. CAD/camera, by contrast, runs on personal computers and is sold as a software package alone for $3000. When CAD/camera is run on an IBM PC/AT, conversion times for drawings range from 15 seconds for small symbols to more than five hours for complex engineering drawings. This is usually at least ten times faster than manually redrawing the drawings on a CAD system.
CAD/camera is implemented using rule-based expert system technology, which is responsible for its much greater price-performance, and its ability to run on smaller, less expensive computers. In addition, this technology allows Autodesk to continue to enhance CAD/camera, adding recognition of more complex drawing elements.
Databases created by CAD/camera may be directly read by AutoCAD, but
CAD/camera may be used to generate databases for any CAD system.
Its output format is fully disclosed by Autodesk, facilitating its
interfacing with other systems. In addition, CAD/camera is entirely
written in the C programming language, allowing it to be moved to
other computer systems, including other CAD systems should Autodesk
decide to do so.
As more and more graphics hardware comes onto the market, Autodesk plans to support it in AutoCAD to maximise the user's choice. The large installed base and rapid sales pace of AutoCAD makes it an important potential market for developers of graphics hardware. Autodesk's Developer's Tool Kit makes the union of these common interests less costly and time consuming to both parties. After evaluating a piece of hardware and concluding that support of it by AutoCAD would be beneficial to the Company and its customers, a Developer's Tool Kit may be sold to the hardware vendor. Using a manual specially written for use with the Kit, the hardware vendor can program a driver which allows AutoCAD to run his device. Since developers are usually more experienced in programming their hardware than Autodesk, this expedites the development process. After the driver is complete, is it certified by Autodesk's Quality department before shipment with AutoCAD. Autodesk retains title to the driver developed by the hardware vendor and has so constructed the Kit that it discloses no proprietary information. Autodesk charges a fee for the Kit which covers support costs in aiding the developer in using the Kit.
Autodesk actively encourages the development of third party software which works with AutoCAD and aids its use in vertical markets. Autodesk has established the AutoCAD Applications Program as a channel by which developers of such programs may communicate with AutoCAD vendors and users. The first AutoCAD Applications Catalogue contains more than 100 such programs. Autodesk derives no revenue from these third-party programs except that generated by additional sales of AutoCAD they engender. However, the Company believes that this Program is an excellent way to identify and qualify programs for possible acquisition, joint marketing, distribution, or licensing by the Company.
Getting screen pictures to print in the prospectus wasn't easy, either. In fact, nothing about the public offering was easy. However, difficulty shouldn't make one hesitant to break new ground and defy precedents. Dan Drake penned this press release in the midst of the prospectus drafting sessions.
Sausalito, California. May 10, 1985.
In what industry observers described as a radical and daring break with tradition, Autodesk Inc. announced today that the publicity pictures in its prospectus would not feature a picture of a toilet. The decision was announced following an extraordinary meeting of the Board of Directors.
“It's hard to part with an old friend”, gibbered John
Walker, president of Autodesk, emerging from the meeting which was
held in the company's washroom, “when our whole success has been
based on pictures featuring toilets, from the mini-apartment drawing
in PC World to the giant North Sea oil rig poster.
However, hard times demand hard choices. We at Autodesk are flushed
with pride in our forthcoming public offering, and as we stand with
one foot in the simpler world of private companies and the other in
our mouth, we hail the dawn of the new day confident that our
publicity will
continue to bowl over the industry.”
In keeping with Autodesk's overall strategy of delivering the benefits of CAD to a mass market, Autodesk's marketing strategy is to apply the time proven techniques of mass marketing to a product traditionally sold directly at high prices.
This strategy, unique in the CAD market, complements the technical benefits of AutoCAD. Its application allowed Autodesk to obtain its large market share in a short time. In addition to applying mass marketing techniques itself, Autodesk mobilises the sales forces of computer manufacturers, graphics peripheral manufacturers, and computer dealers through cooperative advertising, promotion, and appearance in numerous trade shows. Autodesk has a variety of innovative programs involving training, advertising credits, joint appearances at trade shows, and other incentives which encourage dealers and manufacturers to jointly market Autodesk products.
Autodesk supports its advertising with an aggressive public relations effort, combined with an ongoing program of seeking and arranging for the publication of articles in the trade press describing applications of AutoCAD in various industries. Autodesk makes a major ongoing effort to communicate with industry analysts and key decision makers, seeking to demonstrate the benefits of AutoCAD versus larger systems. Autodesk supports the development of tutorial materials and books based on AutoCAD. Finally, Autodesk has a major commitment to the educational market, offering support and incentives to institutions wishing to teach CAD, and encouraging the adoption of AutoCAD in their curricula.
To reach a mass market at a low cost, the Company has concentrated on two major channels of distribution: computer dealers and computer manufacturers. The Company's approach in promoting both of these channels has been to communicate the real advantages of selling AutoCAD to participants in both market segments.
Computer dealers who sell AutoCAD typically make more from the dealer markup on AutoCAD than the retail price of most of the software packages they sell. In addition, the AutoCAD customer usually buys a larger computer with more options (larger memory, floating point coprocessor, larger disc storage) and with graphics peripherals such as a digitiser and plotter. These options and peripherals are typically discounted less in the marketplace than basic microcomputers, so the dealer's margin on the overall sale is increased by selling AutoCAD systems. These larger margins and access to less competitive vertical markets usually more than repay the dealer's investment in learning to sell AutoCAD. The Company's policy of not selling directly to large accounts and not placing its products in discount prone national distribution channels serves to strengthen its dealer network and that network's loyalty to the Company and its products.
Computer manufacturers who sell AutoCAD gain access to vertical markets previously denied them and gain a tool which uses their hardware to best advantage. Because AutoCAD automatically makes use of the resources provided by a computer system, whatever competitive advantages a system may have (better graphics resolution, higher performance, larger memory, larger disc storage) are effectively utilised by AutoCAD. Thus in a crowded, highly competitive market, AutoCAD provides a computer manufacturer a product which dramatically illustrates the advantages of his product versus the competition, demonstrably promoting hardware sales. In addition, the manufacturer receives significant revenue from the sales of AutoCAD software, while encouraging the sale of larger, more profitable machines. AutoCAD provides access to vertical markets within which the specialisation of a manufacturer may yield much greater results than in the general PC market. Computer manufacturers typically distribute AutoCAD through the same channels through which they sell their hardware; some manufacturers sell through their own dealer networks while others sell directly, mostly to large organisations.
The Company's longer term marketing strategy builds on the concept of AutoCAD as a general purpose tool which forms the central component of an engineering workstation. While AutoCAD by itself delivers compelling gains in productivity easily communicated and justifying its purchase, an AutoCAD user is a prequalified customer for a wide variety of additional productivity tools. These tools include predefined symbol libraries; a wide variety of engineering and design automation programs for such purposes as preparation of bills of material, job cost estimation, structural analysis, numerical controlled machine tool programming, and electronic circuit analysis; and materials intended for use with AutoCAD, such as templates, tutorial guides, and other self-teaching materials. Autodesk regards its large and rapidly growing base of customers as one of its major assets, and intends to develop and market additional productivity tools into this base. CAD/camera and AE/CADD are examples of additional Autodesk products which will appeal to significant numbers of AutoCAD customers, as well as encouraging new sales of AutoCAD. The company's large installed base also leads third party vendors of applications software which complements AutoCAD to approach Autodesk with joint marketing proposals. These products, qualified through the AutoCAD Applications Program, provide a continuing source of new products for joint marketing or acquisition by the Company.
In short, the Company's marketing strategy is to create a mass market for CAD, where no mass market existed before, develop channels of distribution to address that mass market, and build on its emerging position as the volume leader with additional products and services.
Kelvin Throop was infuriated by the prospectus drafting process. He suggested we can the entire mess and use this prospectus instead. We didn't.
In the beginning CAD systems were overpriced, hulking boxes of hardware with the original nameplate pryed off and the name of some slimy greedhead stuck on.
Then came AutoCAD, a program that did all the same things on a PC for 5% of the cost.
Things got better. As they got better, we got richer.
Now's your chance.
Call toll-free 24 hours per day, (800) AI-STOCK. Visa/MC/Amex accepted.
One of the most repellent parts of the public offering process was the extravagance of the “road show”. Apparently investment bankers believe they can do their job better when consuming their firm's capital at an enormous rate on such things as first class airfares, limousines, $200 a night hotel rooms, and the like.
Now that Autodesk had obtained a large wad of cash, I was concerned that we would also start to go down the same road. This was my proposal to create an incentive system to keep that from happening. This was never implemented.
It sure is expensive to travel, isn't it?
Having just survived the “road show” phase of the public offering process, I've just been reminded of the needless extravagance the travel establishment lavishes on expense-account corporate America. If the people who were doing this traveling were paying out of their own pockets rather than “the company's”, I'll bet that hundred dollar a night hotel rooms and fifteen dollar dinners wouldn't be long for the world. Five minutes, say.
Now every growing company, especially those who have recently gone public and now have the world looking over their shoulders and watching their margins (sales less expenses), has to issue the Obligatory Let's Control Costs Memo and some utterly confusing policy which is destined to be ignored and end up in the circular file of history.
Autodesk was built on incentives, not coercion. The way to control costs is to make it pay. Henceforth, there will be a direct financial incentive to keep costs down. Those who travel on business have to fill out travel expense reports listing the direct costs of their travel. This form will be amended to add a calculation of the “sleaze factor” of the trip. Sleaze factor is defined as the number of days the traveler was out of town (one for day trips), divided by the money spent on the trip, exclusive of air transportation.
The accounting department will keep track of the cumulative sleaze factor for all people who travel. At the end of each month, the traveler with the highest sleaze factor (who therefore cost the company the least per day on the road) will receive a bonus in the next paycheck of $200.
At the end of the fiscal year (January 31), the employee with the highest yearly sleaze factor will receive a bonus of $2500 in the next paycheck.
In addition, the person who turns in the lowest cost per day will be honoured at the next monthly meeting and presented the Autodesk Sleazy Motel Roach Hammer Award.
This award program is not totally fair. But then life isn't totally fair. Somebody who goes to New York repeatedly will tend to run up bills higher than one who frequents Akron. But then some say that New York is its own reward. But in any case, the point of all of this is to reward those who treat the company's money as if it was their own. It is, you know. Everybody here owns the company, either directly or as the holder of a stock option. If we keep the costs down and consistently turn in results that meet or beat the expectations of the outside world, we can see the value of our company increase by a factor of 10 to 20 over the next five years. That is the goal, and if we achieve it, we will all be able to share the rewards of our work and the prestige of the company that we built together.
This notorious drawing was pulled from our sample drawings disc because it faked, by laborious manual methods, various features that would have been nice in the package but weren't there. Some of them still aren't in Release 9. The drawing was originally made by Peter Barnett in 1984, and was intended to illustrate the isometric grid and snap features in AutoCAD 2.0. The isometric dimensions were all hand-drawn, and the ellipses were made by differentially scaling a block containing a circle.
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