Adobe's digital design means no software
- Summary:
- Consumers expect an immersive digital experience, both in terms of creation of content, as well as in terms of the consumption of content, says Adobe. So no more software for them!
Although it will continue to sell and support the latest version of its Creative Suite packaged desktop design software, from here on in all new features will go into its Creative Cloud, the online suite of all its products it introduced a year ago.
The applications themselves will be branded “CC” rather than “CS.”
Adobe CEO Shantanu Narayen explains the rationale behind the move as emerging from talking to customers who are he says:
"all struggling with what they do with this content life cycle that's increasingly moving digital. The same trends that we've been talking about, namely, the move online, the move for all marketing to go digital, for every device to be connected to the Internet, those are the trends that in the macro point of view are really driving our business. We continue to see consumers expect this immersive digital experience, both in terms of creation of content, as well as in terms of the consumption of content."
Marketing and Creative
Adobe's solution to this challenge comes in its combination of its Creative Cloud and its Marketing Cloud. (Marketing Clouds are like buses, you wait for one for ages then a whole clutch of them comes along at once, all heading in slightly different directions as well!).
For the record, Narayn defines Adobe's Marketing Cloud as:
"an industry-leading marketing platform right now, that not only does content management, but also does a lot of predictive algorithms in order to allow people to optimize the services that they are providing to their customers."
The big picture vision is:
"to put everything that the digital marketers need in one spot, whether it's analytics, whether it's social, whether it's advertising, whether it's targeting, as well as Web Experience Management, in a single platform that is easy to both deploy, as well as to administer, so that individuals can go from data to insights to actions faster and smarter than ever before."
What that means in practice is taking 30 products and grouping them together into 5 branded solutions:
- Adobe Analytics
- Adobe Experience Manager
- Adobe Target
- Adobe Social
- Adobe Media Optimizer
As for the Creative Cloud, Narayen explains:
"Our focus was really on reinventing the entire creative process, re-imagining it so that we attract the next generation of customers, being able to have a broader canvas on which we can innovate at a far more rapid pace, on building a more sticky business and on using that as a franchise to really develop our solutions within the Marketing Cloud."
The introduction of the Creative Cloud has had a wider impact than perhaps even Adobe first anticipated.
"Customer satisfaction for people on the Creative Cloud is significantly higher for people who transact business with us in other ways, and we're able to deliver innovation on a far faster pace than we could by the traditional 12- or 18-month product cycle. In order to focus and align the entire company around the opportunity with the Creative Cloud, we decided to make available all of the Creative Cloud innovation only through the subscription service."
Implications
OK, big move with huge implications for Adobe and its installed base. David Wadhwani, General Manager of Adobe's Digital Media Business Unit, confirms:
"All future innovation in our CC applications will come through Creative Cloud, and you need to be a Creative Cloud member to receive those, and that we have no future plans to rev updates on the old perpetual Creative Suite products. We will continue to sell and support the CS6 product because we believe some customers will continue to choose to purchase that way in the short term."
So this is a transition that needs to be handled carefully, in the first instance to monitor its impact on customer satisfaction. Wadhwani concurs:
"As we've gone through this process, the customer satisfaction has been something we've been watching very closely, especially as we make this move in the business model. The thing that's going to matter most is how quickly we innovate, how high a quality is of the products we release are and how effectively our customers start to advocate for us on behalf of this, and that's something that we're working very hard to do, simply by releasing these products on a regular basis and just giving them, delighting them with the features that we're adding."
Mark Garrett, Adobe CFO, makes the point that a year since the release of Creative Cloud, 500,000 subscribers have signed up.
"The installed base for Creative Suite is at various release points obviously. Half of the installed base is made up of individual users and half volume purchasers.Between CS3 to CS5, there are approximately 4.3 million users, with a further 4 million on CS6 suites. There is also another four million on point products rather than the full suite."
Adobe defines its Total Potential Market - or the total universe to which Adobe can pitch Creative Cloud - at around 8 million traditionally defined creative professionals plus 10 million plus at work professionals, an indeterminate number of so-called recreational creatives and finally the education sector.
Milestones
But everything will come in stages. The first milestone to be reached will be 4 million Creative Cloud subscribers by 2015. Garrett says:
"We continue to target that. We think we've got, like I said, a great installed base opportunity that's multiples bigger than the 4 million to drive just the installed base over to that 4 million and that doesn't include, obviously, new users. The 4 million, keep in mind, does not include enterprise users."
Narayen adds:
"We still think that the installed base is a great opportunity for us to get on to the Creative Cloud.We've talked about new customer adoption being more successful with the Creative Cloud. So clearly, targeting our existing customer base, people who are accustomed to doing business with us, showing them the innovation that exists…we want to get them to move to the cloud, continue to attract customers."
That does beg the question however that if by 2015 the hope is to have 4 million subscriptions, what happens to the other 8 million current users? Do they just not upgrade? Do the just-over-half of them on pre-CS6 offerings move to CS6?
To a large extent, it's going to be a case of 'suck it and see' admits Narayen:
"We just don't have as much experience with the Creative Cloud right now in terms of the adoption…Clearly, we would like everybody who's been a user of CS3 onwards to move to the Creative Cloud to be able to attract all of those new customers as well…we expect or we would like to see all of those existing installed base move to the Creative Cloud.
"CS6 will continue to operate. Whether it's an existing CS6 customer or the prior versions, we'll continue to do it. And I think it's incumbent on us as we continue to delight them with all of the new features, and we are clear about Creative Cloud being the only option by which they can get access to the innovation."
So, Adobe will not stop supporting existing users, but it's going to dangle all the nice new stuff over in the subscription model offerings. That makes sense from Adobe's perspective, but it can be imagined that there will be some complaints from the Adobe faithful.
Wadwhani admits that there will be some areas of the installed base that might prove more resistant:
"Where I think we'll see a little bit more in terms of a slower adoption or slower migration are customers that are still very print focused and, frankly, where existing products are sufficient for their needs. But the macro trend here is going to be more towards dynamic digital content, and those customers will also come over time, provided that we execute, we innovate, and we do everything we can to continue to just surprise them on the upside in terms of the capabilities."
Bold
It's a bold move by Adobe and very much a case of putting its corporate money where its mouth is in terms of demonstrating a commitment to a services-led consumption model.
It puts some clear differentiators in place between Adobe and the likes of Microsoft and Autodesk which continue to sell packaged products and digital downloads.
The trick will now be to convince customers used to doling out a one-time payment that its in their interests to shift to paying monthly. Explaining the price point benefits will be critical to this.
Adobe is offering existing Creative Suite customers discounts of about 40% on the first year of service. After that an annual contract costs $50 a month for individuals and $70 a month per user for corporate subscriptions which include cloud storage and administrative tools. The standard packaged design edition of Creative Suite 6.0 retails for $1,299.
Having Adobe's product development living behind a subscription paywall will also help in the firm's efforts to clamp down on piracy - rampant among parts of the design community.
Most of all Adobe has to make sure it drills down on customer service and makes sure that it keeps those satisfaction levels high if it is to remain the de facto toolset of choice for the creative professional.
