Adobe's journey into The Cloud

Till 2008....Adobe was still selling shrink-wrap software..PhotoShop,LightRoom et al.
Customers could easily keep using perpetual software and not even pay maintenance ! Sales revenue wasn't growing & recurring revenue was non-existent
Adobe was feeling like this !
Adobe changed the game...instead of charging $600 for PhotoShop upfront, started selling $20/month subscription
It was a tough journey...revenue dropped from $833m in 2011 to $268m in 2014.....In 2016, Adobe had $4.01b in ARR from Creative & Document Cloud
Now Adobe is a pure cloud company with three Cloud solutions: Creative Cloud, Document Cloud, Marketing Cloud
Adobe's cloud transition completed in 2013 ! Rest is now a perfect Case Study for B-Schools
Two leaders credited for Adobe's Cloud transformation: Shantanu Narayen, CEO & Mark Garrett, CFO.

FOUR PRICING MODELS IN INDUSTRY

1. Perpetual - pay upfront and continue paying an annual maintenance fee. Traditional software pricing!
2. Term - this is often a first step towards cloud pricing. Pay an annual fee, less than Upfront fee of perpetual. Software will be deployed on your data center - cloud elasticity & scalability usually not available!
3. Subscription - Pay a rental fee every year. Software is delivered on cloud. Massively shared infrastructure costs allows makes this pricing viable. Usually comes with 3 years lock-in. Prevalent for business software.
4. Utility - pay only as much as you use. No min. usage or lock-in. Prevalent for IaaS - where computing/storage can be easily shared across customers. AWS offers same per unit price for all customers. As customer consumes more - AWS offers discount credits for future.
Let's have exchange of Ideas !

*****Conversation Starters*****

Business Advantages

  1. Simplicity of Delivery: Cloud provider must maintain on 1 release of software as opposed to 2-3 releases at a time. Lower Engineering costs.
  2. Prevent Piracy: As delivery of software is only on Cloud – crack copy CD is impossible. Applicable for consumer software – MS Office or Photoshop
  3. Easier to Sell: Less cost of sales as software is standardized. Low cost of adoption.
  4. Easy Adoption by LOB: Now CFO or CMO can buy their tools without having to go through CIO
  5. Long break-even period offers natural barriers to entry: Economy of scale – takes time to break even, once you break even at a scale – very hard for new plays to come in. Kind of winner takes it all.

Cloud Challenges

  1. Attrition risks: Customer Success is a new focus
  2. Technology risks: a single fault could impact many clients
  3. Less Sticky: Unlike traditional software where “Sunk Cost” fallacy keeps the software sticky – there is little stickiness with Cloud software due to Subscription pricing!

Recent news on Partnerships

  1. SAP - Google
  2. Salesforce - IBM
  3. Adobe - Microsoft

Thank You, Ankur Katiyar

Further Reading on Adobe's transformation : Reborn in Cloud , Adobe Completes Swift Business-Model Transformation

Disclaimer: Opinions expressed are solely my own and do not express the views or opinions of my current or past employer.

Created By
Ankur Katiyar
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