How Autodesk’s CEO is plotting its post-cloud future

Autodesk's bet on the cloud paid off. But CEO Andrew Anagnost faces other challenges, including public criticism of one of the company's signature products.

Autodesk CEO Andrew Anagnost

Autodesk CEO Andrew Anagnost thinks the pace of innovation in industries like manufacturing, construction and design is about to accelerate.

Image: Autodesk

Autodesk was the first software company within its peer group to pivot to the cloud. Now it is preparing for even bigger shifts in modern infrastructure.

It's deeply involved in nascent, but potentially game-changing manufacturing technology like digital twins, modular construction and generative design, emerging applications that are forcing a change to the way the company does business. It also continues to push for the maturation of applications like building information modeling, or BIM, tech that can help improve efficiencies in the design and construction process through 3D renderings.

But with the recent $1 billion purchase of Innovyze, Autdoesk is expanding its core focus. And alongside a revamped product suite, the company is also growing its direct sales strategy, a pivot that has helped increase transaction sizes to the tens of millions of dollars.

In the midst of all the activity under CEO Andrew Anagnost's tenure, however, Autodesk experienced a nightmare scenario for any software provider. A group of U.K.-based architects penned an open letter that, in very blunt terms, criticized the lack of improvements to Revit, the company's signature product for the industry.

In a wide-ranging conversation with Protocol, Anagnost discussed why he thinks the pace of innovation in industries like manufacturing, construction and design is about to accelerate, Autodesk's ambitions in infrastructure and how Autodesk plans to avoid another public critique of its products.

This interview has been edited and condensed for clarity.

Autodesk's focus on the infrastructure business has come in and come out. That's changing. How are you viewing the trajectory of the business differently than you have in the past?

At a high level, Autodesk was in and out of the infrastructure business. But what we've done over the last five to six years is we've picked a couple of places where we really wanted to win.

The two spots that we focused on were road and rail, and we're very interested in water. Road and rail infrastructure is either deteriorating or in massive need of reimagining. We believe that building information modeling (BIM) and the technologies associated with it is the right path to make these projects more efficient. The fact that we've built out the construction cloud and can now go from plan to build changes how we view certain end markets.

Innovyze was an absolute investment in water scarcity and water reformulation. Even in countries like the U.S., people still have bad water. We still have lead pipes, we still have water contamination, clean drinking water is still a challenge in places you wouldn't expect it to be. Water treatment facilities and management facilities are all going to be areas of investment.

We're the only player taking a lot of these processes to modern cloud workloads. It was time. Notice we're not going everywhere in infrastructure. There's a lot of infrastructure we stayed away from. We didn't go into electric infrastructure, even though that's hot in a lot of places. We decided that wasn't a place we wanted to invest right now. We don't go into the process and plant infrastructure.

Analysts say the BIM market has a lot of runway left. But the challenge is getting industries ready for this shift. When you look at the infrastructure business, what makes you think they are ready to make that jump and what does that path look like?

The BIM transition has been a long journey. The architecture, engineering and construction industry, it doesn't change quickly. But there's a fundamental capacity problem in these businesses. AEC is recognized as being one of the most wasteful and unsustainable aspects of our economy, bar none. It generates tons of waste. It designs things in unsustainable ways. It builds and rebuilds in unsustainable ways. There's not enough money to build everything that needs to be built.

There's not enough labor to build everything that needs to be built. And there's not enough materials to build everything that needs to be built, if we continue to use the previous low-productivity, high-waste, high-cost processes. This has absolutely reached a massive pressure point. It's still a complicated industry. But if it doesn't change, we can't do what needs to be done. Governments are starting to realize that as well. And what you're seeing are mandates for new types of processes. In the U.K., the government mandates BIM.

While it's taken 10 years to have gotten to where we are with BIM today, it's not going to take 10 years to get to the next round because there's just too much pressure from inside the industry and governments that actually pay for and buy this infrastructure to do this differently.

Autodesk, to your own acknowledgement, spends a lot on R&D each year. Analysts say it's the most in the industry. What's been the return on investment on that?

In the past, we had a lot of trouble getting a return on the investment. What you are seeing now, because we are more focused and we're pushing for R&D synergies, we are getting a pretty good return. There was a period where the company was not getting a good return. In the past, R&D spend was going up but revenue was not going up in a commensurate way. That's not what we are seeing right now.

Now, we're seeing robust revenue growth in the construction cloud; that was a significant R&D investment for us. We're seeing robust growth in infrastructure, which is another significant area. We've invested in Fusion 360 for a while and we're now starting to see the return, large subscriber growth. Right now, I'm happy, but this is something I stay really vigilant on. As we move to become a platform company and more and more of our capabilities sit in a horizontal platform, I am absolutely going to be looking for increased R&D efficiency.

See also: Autodesk is dragging the industrial world into the cloud — and showing it the future

What's changed with the R&D model that is driving these higher returns?

We used to have a very bottom-up investment model, where each team could independently decide whether to start a project. There were a lot of projects in the company that never got to escape velocity because we can only absorb so many bets. Fundamentally, I moved the company to a more balanced approach. We're going to focus on a narrow set of areas. And some of those areas came top-down and people started to generate ideas to respond to the top-down guidance.

When you see the slow pace of BIM adoption, what gives you the confidence that digital twin technology is going to happen in a meaningful way within the next decade?

We are patient. When we bought Revit years ago, it was considered very expensive. But now, it's one of the most successful products in the company. We are very patient on these things.

But digital twins will move a lot faster than BIM, because there is a real need to manage physical assets throughout their life cycle; 80% of the cost of a physical asset is in its life cycle, not in its construction. You are seeing people build new facilities, new buildings, they are starting digital first and they are wanting to end digital. So I suspect the rise of the digital twin as an end deliverable is going to be a lot faster than what you saw in the early days of BIM. You can see everyone is interested in digital twins, like Amazon, Microsoft and IBM. There is going to be plenty of opportunity in this place for people to succeed. But customers want it and the technology is ready.

What are the areas Autodesk can own in the digital twin space and what are the areas you can rule out Autodesk playing in?

Water infrastructure, we are probably going to do pretty well. We think we are in a good position there. Buildings, we are going to do fairly well. Digital twins for factories is going to be a competitive space. Factories are changing, moving to these more agile factories. Digital twins for factories is a place where Autodesk is likely to play a significant role. When you look at process plants, power plants, pharmaceutical plants, we're not going to end up being a significant player in that area. That's not an area that we're pursuing and I don't think it's an area where we have the expertise to be successful.

How will the partnership model have to change as this digital twin concept gains steam?

We are already changing the way we partner with a lot of various different types of companies. Some of these things are going to go together. The notion that a digital twin is one thing is naive. A digital twin is going to pull data from different places and there will be different partners participating in it. So we are going to be competing and partnering with people. But the good news is the space is so big that there's plenty of opportunity for everyone. But we're definitely going to be partnering with people who have their own competing capabilities. And that's OK.

Will the existing partnership with Microsoft have to expand?

Most of our cloud infrastructure is through Amazon, but we definitely look towards Microsoft as a vertical leader in providing digital twin infrastructure. Microsoft does a very good job of focusing on specific verticals and they build out capabilities that allow people to track specific assets inside a digital environment. I could see us partnering robustly with both of those companies — AWS and Microsoft — to get the customers what they need.

Why haven't you done that yet? You look at rival Siemens, they have a partnership with Google Cloud that's wading into this territory. So what's been the impediment on your end?

There's no impediment. We're deeply partnered with Amazon. The digital twin that Innovyze built for water infrastructure is all built on Amazon. It's just a matter of us deciding which markets we want to go after. More likely than not, we are going to be partnering with Amazon and Microsoft to achieve those means.

You're the clear market leader in AEC, that's not the case in manufacturing. Analysts point out that one of the reasons you've been able to gain share is the price point for Fusion 360. Will that have to change?

Core Fusion 360, we don't see any reason to change the price of that product at all. But if you track what we are doing, we have modules that work on top of Fusion 360. We have an advanced manufacturing module, we'll ultimately have additional advanced modules. Those modules will be occasionally used, some will subscribe fully, and you'll see the Fusion ecosystem grow by people using what they need when they need it. But the base price of Fusion, we don't see any reason to change that because the modules are where the value is going to be generated long term. You're going to see a new kind of ecosystem with really great tech with an innovative business model.

Do you view generative design as the key to closing whatever gap might exist between you and competitors?

We were certainly the leaders in generative design and we continue to be. But it's the cloud and generative design. We're first to the cloud and we're deepest in the cloud. When you combine that with generative design, we have not only a pricing and business model advantage, we have a technological advantage. It takes a long time to get good at doing the cloud and we've been doing it a long time. Our competitors are just waking up to this and are trying to acquire companies to get more cloud-y, but we think we have a significant head start.

You are still seeing cloud adoption lag in some industries that Autodesk sells to. What gives you the confidence that the cloud is going to be predominant in a way that justifies the investments you've made?

The simple fact is the amount of productivity that can be generated in the cloud is enormous. Just looking at data flow. Our customers spend an enormous amount of time trying to make data flow from one project to another or from one persona in a project to another. All of this is solved in the cloud. If you go with the cloud information model for everything you are doing, you can flow information seamlessly. The benefits of just that one productivity lever are so enormous that customers are already moving. We can also throw an amazing amount of inexpensive compute power that our customers were never able to get. We are going to be not only able to automatically generate designs for them, but provide information that helps them make better decisions in real time. And that is only possible in the cloud.

The letter from the UK architects, what did you learn from that as a CEO?

Here's the interesting thing about the letter: We already knew that Revit was falling behind the expectations of our architecture community. This was something we were aware of and it was a deliberate choice to invest in construction [instead]. However, a year before that letter showed up, we had already started shifting investment back to Revit. One of the things we learned explicitly is that you've got to let customers know that you know that there is pain out there and that you are going to do something about that.

We're now connected to a smaller class of customers that we weren't directly connected to before. A broader swath of customers see our roadmap, what we are doing, what our thought process is. We also learned that some customers don't understand where we are going and why we are doing it. We were already working on things that were going to address some of the concerns that were raised, but nobody knew it. We learned a lot about reaching out to a segment of customers that maybe felt invisible to us.

With the cloud, there's an expectation for more continual updates. And you mentioned one of the reasons for the letter was because Revit was last on the upgrade cycle. So how do you have to change how you think about the product roadmap as the expectations for improvements grow?

Every one of our products is ultimately going to be moved to the cloud in some way, either by a new capability like Fusion 360 or wholesale shifting the products. As a result, customers are going to get continuous delivery and functionality. The problem is the customers also have to be able to absorb that functionality. And sometimes they can't absorb it because of project cycles. Frankly, Revit already has continuous delivery. It's just the customers don't update all the time so they tend to grab the big annual release and deploy rather than update as the improvements come out.


Judge Zia Faruqui is trying to teach you crypto, one ‘SNL’ reference at a time

His decisions on major cryptocurrency cases have quoted "The Big Lebowski," "SNL," and "Dr. Strangelove." That’s because he wants you — yes, you — to read them.

The ways Zia Faruqui (right) has weighed on cases that have come before him can give lawyers clues as to what legal frameworks will pass muster.

Photo: Carolyn Van Houten/The Washington Post via Getty Images

“Cryptocurrency and related software analytics tools are ‘The wave of the future, Dude. One hundred percent electronic.’”

That’s not a quote from "The Big Lebowski" — at least, not directly. It’s a quote from a Washington, D.C., district court memorandum opinion on the role cryptocurrency analytics tools can play in government investigations. The author is Magistrate Judge Zia Faruqui.

Keep ReadingShow less
Veronica Irwin

Veronica Irwin (@vronirwin) is a San Francisco-based reporter at Protocol covering fintech. Previously she was at the San Francisco Examiner, covering tech from a hyper-local angle. Before that, her byline was featured in SF Weekly, The Nation, Techworker, Ms. Magazine and The Frisc.

The financial technology transformation is driving competition, creating consumer choice, and shaping the future of finance. Hear from seven fintech leaders who are reshaping the future of finance, and join the inaugural Financial Technology Association Fintech Summit to learn more.

Keep ReadingShow less
The Financial Technology Association (FTA) represents industry leaders shaping the future of finance. We champion the power of technology-centered financial services and advocate for the modernization of financial regulation to support inclusion and responsible innovation.

AWS CEO: The cloud isn’t just about technology

As AWS preps for its annual re:Invent conference, Adam Selipsky talks product strategy, support for hybrid environments, and the value of the cloud in uncertain economic times.

Photo: Noah Berger/Getty Images for Amazon Web Services

AWS is gearing up for re:Invent, its annual cloud computing conference where announcements this year are expected to focus on its end-to-end data strategy and delivering new industry-specific services.

It will be the second re:Invent with CEO Adam Selipsky as leader of the industry’s largest cloud provider after his return last year to AWS from data visualization company Tableau Software.

Keep ReadingShow less
Donna Goodison

Donna Goodison (@dgoodison) is Protocol's senior reporter focusing on enterprise infrastructure technology, from the 'Big 3' cloud computing providers to data centers. She previously covered the public cloud at CRN after 15 years as a business reporter for the Boston Herald. Based in Massachusetts, she also has worked as a Boston Globe freelancer, business reporter at the Boston Business Journal and real estate reporter at Banker & Tradesman after toiling at weekly newspapers.

Image: Protocol

We launched Protocol in February 2020 to cover the evolving power center of tech. It is with deep sadness that just under three years later, we are winding down the publication.

As of today, we will not publish any more stories. All of our newsletters, apart from our flagship, Source Code, will no longer be sent. Source Code will be published and sent for the next few weeks, but it will also close down in December.

Keep ReadingShow less
Bennett Richardson

Bennett Richardson ( @bennettrich) is the president of Protocol. Prior to joining Protocol in 2019, Bennett was executive director of global strategic partnerships at POLITICO, where he led strategic growth efforts including POLITICO's European expansion in Brussels and POLITICO's creative agency POLITICO Focus during his six years with the company. Prior to POLITICO, Bennett was co-founder and CMO of Hinge, the mobile dating company recently acquired by Match Group. Bennett began his career in digital and social brand marketing working with major brands across tech, energy, and health care at leading marketing and communications agencies including Edelman and GMMB. Bennett is originally from Portland, Maine, and received his bachelor's degree from Colgate University.


Why large enterprises struggle to find suitable platforms for MLops

As companies expand their use of AI beyond running just a few machine learning models, and as larger enterprises go from deploying hundreds of models to thousands and even millions of models, ML practitioners say that they have yet to find what they need from prepackaged MLops systems.

As companies expand their use of AI beyond running just a few machine learning models, ML practitioners say that they have yet to find what they need from prepackaged MLops systems.

Photo: artpartner-images via Getty Images

On any given day, Lily AI runs hundreds of machine learning models using computer vision and natural language processing that are customized for its retail and ecommerce clients to make website product recommendations, forecast demand, and plan merchandising. But this spring when the company was in the market for a machine learning operations platform to manage its expanding model roster, it wasn’t easy to find a suitable off-the-shelf system that could handle such a large number of models in deployment while also meeting other criteria.

Some MLops platforms are not well-suited for maintaining even more than 10 machine learning models when it comes to keeping track of data, navigating their user interfaces, or reporting capabilities, Matthew Nokleby, machine learning manager for Lily AI’s product intelligence team, told Protocol earlier this year. “The duct tape starts to show,” he said.

Keep ReadingShow less
Kate Kaye

Kate Kaye is an award-winning multimedia reporter digging deep and telling print, digital and audio stories. She covers AI and data for Protocol. Her reporting on AI and tech ethics issues has been published in OneZero, Fast Company, MIT Technology Review, CityLab, Ad Age and Digiday and heard on NPR. Kate is the creator of RedTailMedia.org and is the author of "Campaign '08: A Turning Point for Digital Media," a book about how the 2008 presidential campaigns used digital media and data.

Latest Stories