Software VS The Cloud. Adobe Case Study
THE DAY ADOBE BURNED ALL THEIR BOXED SOFTWARE SENDING THEIR CD’S TO THE CLOUDS
May 6th 2013 was the day that Adobe decided to host a massive bonfire and burned all of their boxes sending their cd’s to the cloud! Well maybe this is not exactly how it happened. But for their millions of followers this statement is pretty much bang on. Adobe has always been a forward thinker, or maybe they were just pissed at all the people that were always pirating their software illegally. When they decided to go 100% to the cloud…a lot of other companies took notice.
I for one noticed this, seeing that I had spent thousands of dollars for their software. I thought to myself about their strategy and how shifting from large upfront fees to smaller monthly revenue would impact their company. This makes me a fan, both being a customer and a business of the reoccurring model.
WHY THE RE-OCCURRING SOFTWARE SUBSCRIPTION SERVICE WORKS:
- The end to all pirated version and illegal downloads. By having to use their own cloud system there is no way you can download illegally. All users will be forced to submit to the monthly recurring business model at one point. This will most likely happen once the computer operating systems update and change. Plus the technology will be so outdated nobody will want to use, it let alone pirate it.
- Less upfront cost for customers. With monthly plans from $19.99-$49.99 a month it will take many years for it to equal out what you would have paid for Creative Suite 6 Master Collection with one upgrade (i.e. $3,650).
- Not to mention, continually up to date. Because Adobe usually offers a new versions every two years or so. So you always have the latest and best versions. They added a ton of cool features, like access to 50 million royalty free images, free 20 GB of storage, and desktop and mobile apps for ease of use.
WHAT FINANCIAL IMPACT DOES CHANGING FROM SOFTWARE TO CLOUD HAVE ON ADOBE AS A COMPANY?
But…is it worth giving up the large upfront revenue for the concept of many more smaller monthly reoccurring revenues? How will the customers feel buying with only renting the software vs buying? Over 50,000 people signed the change.org when this change happened. Perhaps my main image should not have been an image of their stock price that has taken off since the change.
Every year Adobe experienced massive growth before achieving record revenue of 4.80 billion. Most of this generated from 74% of reoccurring monthly subscriptions. In fact, the company did so well that it repurchased 8.1 million shares during the year, returning approximately $627 million of cash to stockholders. Not bad for a company that went public back in 1986.
Adobe has managed to pull off something that most successful companies cannot. It completely changed its revenue model while acquiring millions of additional users. Not only this, but think about the thousands of trees it saved in the process.
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