Adobe finds cloud has a gold plated lining

There has been quite a reaction to the announcement from Adobe that Creative Suite, as a boxed product, is effectively dead. There are many good reasons for Adobe to take this step although there are also some issues that it still needs to address. We take a first look at the benefits Creative Cloud delivers for Adobe and its customers.  When Bola Rotibi returns from Adobe Max in Los Angeles, we will deliver a more detailed view of where Adobe is heading.

Adobe Creative Suite has been a mainstay of the print and web creative industries for a decade. It was created out of the various tools that Adobe has created and those that it had bought through an aggressive acquisitions strategy in the late 1990’s and early 2000’s. Adobe was always keen to ensure that it supported both the Mac and Windows platforms in order to get the greatest possible sales and market coverage.

Over time, the number of tools available, meant that Adobe had to split Creative Suite into several packages as well as sell the tools separately. This created quite a problem for Adobe in terms of co-ordinating product release schedules and managing the huge support burden of a large and constantly growing software empire.

Two years ago, Adobe created Creative Cloud which provides access to all the tools in the Creative Suite via s Software as a Service (SaaS) solution. At the same time, it announced that Creative Suite would in future be based on a yearly release cycle.

On 6th May 2013, Adobe announced that the future lay with its online subscription solution rather than with boxed software. So what does this mean for the market?

Adobe cuts costs and stabilises revenue.

Creative Cloud provides Adobe with a number of key cost cutting opportunities and delivers a more stable revenue stream.

The key savings are:

  1. No longer creating physical media, manuals and packaging.
  2. No shipping or warehousing costs.
  3. No channel discounting (up to 35% in some markets).
  4. Lower support costs by reducing the number of products to be supported.

As well as savings, there are revenue improvements for Adobe:

  1. Monthly subscriptions mean that revenue is more stable, predictable and not subject to the vagaries of product cycles.
  2. Customers buying boxed Creative Suite rarely upgraded with each new version. This means Adobe has a lot of customers on old versions that are not revenue generating. With subscription only, every customer generates revenue.
  3. Once customers are in a subscription service, it is easier to upsell new products. This is a lesson that satellite and cable TV has proven.

Creative Cloud delivers customer benefits

Creative Cloud is not just about Adobe reducing costs and stabilising its revenue stream. It offers a set of real benefits to customers as well.

  1. Access to ALL Adobe products.
  2. Ability to take short term access for specific products.
  3. Team licences.
  4. Access to latest versions without having to worry about patching.
  5. Cloud storage.

Simplifying the acquisition and management of key business tools is a real cost saver for businesses. While the main subscriptions are yearly based, there are times when access to a specific tool, eg Photoshop or Dreamweaver, might be a customer requirement. With Creative Cloud you can quickly take out a monthly license as part of the project costs.

Not everything is perfect

Unsurprisingly, not everything is perfect yet with Creative Cloud and there are things that Adobe needs to address.

Creative Cloud needs to relicense itself at regular intervals. If you are working without an Internet connection at this time, you will be given a maximum of three days to relicense. The rational from Adobe is that this prevents people taking a subscription, cancelling the payment and still having access to the tool. As a user, I get this but it is frustrating and there needs to be a better way to handle it.

While nobody doubts Adobe will do its best to keep data safe there is no encryption of the data on the Adobe servers nor is there any backup process to pull it back locally. Instead, you have to copy it to your local servers. Adobe needs to make it easier to backup the cloud storage to a local machine and make it clear how you get your data back should your subscription expire or be lost.

A model for other software companies

By moving the bulk of its products to a SaaS model, Adobe is putting a seal of approval on cloud as a delivery model for software vendors. It is not the only software vendor to take the view that cloud is mature enough for business. Microsoft is looking at cloud delivery for email and Office although it is extremely unlikely that it will completely close its physical shipment model.

It will be interesting to see how long it takes other software vendors, particularly those in the mid-market to emulate Adobe. The lower costs and stable revenue models will be extremely attractive to a lot of software businesses but that doesn’t mean it will work for them. Adobe is a market behemoth and as such, it knows customers will stay with it and provided it doesn’t encounter huge cloud problems, business will be good.

Adobe is currently allowing some resellers to offer Creative Cloud subscriptions but for how long as at what price? This is something that the channel will want to know because should Adobe decide to go it alone, it will have serious ramifications for the whole distributor model.

Smaller vendors are also watching what Adobe is doing with the channel. Unlike Adobe, they lack the sway and market reach to work outside the channel. To be frank, many of them are happy with the channel as it means they do not need their own sales teams.

Conclusion

Adobe is once again causing waves in the market. With Creative Cloud now two years old and stable, Adobe is betting that customers are now ready to fully embrace it. Early signs from customers are that they like what Adobe has to offer and are willing to move away from boxed software to cloud.

Provided Adobe addresses the issues raised here and can scale up Creative Cloud as customers come on board, Adobe should be able to ride this wave of change for software delivery.

By | 2016-10-17T10:52:35+00:00 7 May 2013|Analysis, Licensing|0 Comments

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