Adobe exceeded 1 million subscriptions during Q3, proving that the transition to Creative Cloud is happening sooner than expected.
This is actually a big deal for a company that was known to sell desktop licen$e$.
Let me share a brief history/experience here – I have worked with Siebel team and when Salesforce was beating them down to hell, Siebel started working on its SAAS CRM product (CRMOnDemand).
The product never took off and here is why – while senior management decided to embrace SAAS, middle-management was totally confused whether to focus on enterprise product or the SAAS product. Especially sales and development team – which didn’t know what to prioritize.
For instance, shouldn’t you sell *that money making* Enterprise version to IBM? Well, actually not. IBM was one of the core reasons why Siebel was forced to enter SAAS space (IBM wanted to move away from Siebel Enterprise to Salesforce).
What did Adobe do right?
Adobe’s CreativeCloud Strategy’s first impact was the desktop products. That is:
1. There is no upgrade to the desktop/licensed version products anymore.
2. You just cannot buy (prepetual model) licensed version software anymore.
3. There is no significant development happening in desktop products. All energy is focused only on the *cloud* product (i.e. CreativeCloud).
The company has fully embraced cloud and here is a hit they are taking:
1. The $ value of cloud purchase is much lesser than a desktop product. Cloud is actually a fraction, I’d assume.
2. There are no license renewals (so can’t sell new versions).
3. Suddenly, it’s a web-based product with monthly renewal cycle. That is, fiercely uncomfortable for a company known to release mega versions after a few years (now, CreativeCloud gets new features every week or so).
“Our customers are overwhelmingly choosing subscriptions instead of perpetual model licenses which is accelerating our business model transition,” said Mark Garrett, executive vice president and chief financial officer, Adobe. “During Q3, 41 percent of our revenue was recurring and we exited the quarter with record deferred revenue on our balance sheet. These results are building a stronger, more predictable revenue model for Adobe which will drive higher long-term growth.”
The huge risk, apparently is paying off. Adobe exceeded 1 million subscriptions during Q3.
The lesson learnt?
Marc Benioff once called “Hosted On-Demand’ products as a wolf in sheep’s clothing. Historically, none of these “Hosted On-Demand” products from enterprise companies ever made it big (e.g. Ariba), because changing DNA of an organization (especially product teams) is a humongous task.
Adobe, on the other hand burnt all the bridges (i.e. no major upgrades to desktop version), took a $ hit and embraced cloud, as if there is no other option. And the strategy is paying off.
CreativeCloud and Piracy
Three years down the line, the company won’t have to worry about piracy (or ‘customers who forgot to pay’ 😀 ) – because all of the current desktop versions will get outdated (read: compatibility issues) and everybody will be forced to use the CreativeCloud product (interestingly, Adobe CreativeCloud Crack is one of the topmost search queries for the product!).
Subscription vs. Licenses : Imagine the revenue potential in the coming years!