With an eighth consecutive quarter of double digit growth and subscription revenues now accounting for 84% of the total, Adobe’s cloud transition can safely be declared to have passed over the pain threshold that other vendors are still struggling with.
Net income was up 53% to $374 million on revenues up 27% to $1.77 billion, with Creative Cloud passing a milestone $1 billion mark. Throw into that happy mix the fact that Abobe joined the Fortune 500 list of companies last week and CEO Shanatu Narayan has plenty to be pleased about, declaring:
Digital transformation continues to be the burning agenda for creative professionals, enterprises, governments and educational institutions. Adobe is now the go-to company for creating world-class digital customer journeys from design to delivery to measurement and monetization.
The Creative Cloud milestone is clearly seen as a particular validation of Adobe’s gambit to move to a pure subscription business model. Narayan says it’s working with both existing customers and attracting new ones:
The strategy with Creative Cloud was initially to migrate existing customers. It was really important for us to simplify the offering and have a CC complete that we thought would be the right solution for the broad swath of customers that we have. That has played out really well.
We always knew that as we wanted to attract new customers, the single app product would be a great stepping stone to get people into the platform and then convert them into full units.
This is something that we did in the past whether it was within design during the print era. Or think about products like Dreamweaver or Photoshop or Illustrator. They have always been great ways to attract new customers who may have real experience with one product and then focus on multiple products.
The latest addition to Adobe’s cloud arsenal is Adobe Experience, a bundling of various other clouds to pitch at the customer experience improvement market. Announced in March, this includes Adobe Marketing Cloud, Adobe Advertising Cloud and Adobe Analytics Cloud. Ad tech remains an area of focus for the firm, says Narayan:
We have now integrated Adobe Audience Manager into Adobe Advertising Cloud, enabling advertisers to identify high performing segments and do automated, data driven media planning and buying across all channels, including linear TV.
The integrated elements of the Adobe Experience offering are what is of particular appeal to customers, reckons Narayan:
If you put yourselves in the shoes of a customer, if you are in retail what you are trying to do is ensure that all the assets that you have, from creation of these assets all the way out to delivery, are in a consistent lifecycle of content, all the way from our content creation tools to when it’s delivered either through a mobile application or on the website.
If you are in advertising or you are creating a campaign, you want to make sure that the brand content that you have created in one country rolls out with exactly the same fidelity across multiple countries. So when we go to customer after customer, they are trying to ensure that with all of the digital content that’s exploding, they have a good way to deal with it and to roll it out with the fidelity and the efficacy that they expect.
Also of note has been Adobe’s partnership with Microsoft, announced in September last year, pulling together Microsoft Azure, Adobe Marketing Cloud and Microsoft Dynamics 365. Narayan says that this alliance is delivering on its potential:
When you look at what customers are saying, they are all struggling with digital transformation and they want to understand how we can help them create this digital customer journey and help them take advantage of all of the technology trends that are happening. The combination of Adobe and Microsoft in that regard is clearly providing a more comprehensive solution than each one of us alone and as they are thinking about which is the cloud provider that they would standardize on the fact that we have a great application.
Azure also really provides great go-to-market synergy between the two build organizations. The first solutions that we identified and we have actually started to deliver are the Adobe Experience Manager solution, which is a managed service on Azure. The second solution is being able to run campaign integrated with Dynamics, a complete CRM as well as messaging and campaign and orchestration solution.
It’s the fact that together we have a more comprehensive solution, the fact that the field organization and the marketing organization are very aligned. And the fact that unlike all other partnerships which are press releases, the fact that we have actually executed against it and delivered value, I think is leading to a lot of interest in our joint solutions.
Very good. Just very, very good. A stellar example of how to transition an on premise vendor to the cloud.