Adobe, the leading software company, known for its products aimed at creative professionals recently made a decisive strive towards subscription-based software and online ‘cloud’ services. On May 6, Adobe said it would stop developing its flagship Creative Suite in favor of Creative Cloud, a subscription based service. It had been transitioning from a one-time product licensing model to subscription-based services but recently took a big plunge by removing the option of buying the usual one-time product license.
Experts were quick to point that Adobe’s move is a win-win for the company and its customers. Customers get the benefit of utilizing a more mobile solution along with regular updates and more features at competitive prices. The company on its part would benefit from a simplified and cost effective service/ product updating mechanism.
The reaction to Adobe’s move was mixed on the digital media. Many customers did not like the idea of paying subscription for additional services and features while others cheered Adobe for this transition. The question then arises that, does this initiative from Adobe clearly mark the wave to the future? Can similar transitions be expected from others in the near future?
Well looks like it! SAP, one of the largest enterprise software companies in the world, recently disclosed its plans to launch a cloud service for its fast growing HANA analytics software. SAP, like its rival Oracle, has been shifting from a one-time licensing model and both firms have been pacing in acquiring cloud and software-as-a-service companies: SAP has acquired SuccessFactors and Ariba, while Oracle has acquired Taleo, RightNow and other cloud companies. Oracle and SAP are also buying companies to thwart emerging rivals like Salesforce.com and Workday.
For a look at how the revenue equation would change for Adobe, consider the following: Access to Adobe’s Creative Cloud is $49.99 a month for all applications and $19.99 a month for a single application. Since most plans are annual commitments billed monthly, so Adobe has predictable recurring revenue. In comparison, Adobe’s Creative Suite 6 costs $1,299 to $2,599. It is predicted that the revenue risk to Adobe may not be dramatic since companies these days take their time evaluating large upfront technology purchases and hence could have been slow to upgrade to the latest versions of Adobe’s products.
Adobe has been given credit by analysts for recognizing the switch to cloud computing. Adobe expects to have four million Creative Cloud users by 2015. Is that goal attainable? Well as per analysts yes! And if Adobe is successful with its SaaS model other software vendors may quickly adapt.
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