Lessons learned by Adobe in selling software by subscription

adobe

Adobe is one of the most venerable software companies extant. They had their start in life courtesy of Steve Jobs, who invested in Adobe.  Adobe created the Postscript driver that made Apple’s Laserwriter a breakthrough success, as the Apple/Adobe alliance launched the desktop publishing industry last century (along with Aldus’ Pagemaker).  And as a venerable software company Adobe mov from system software (Postscript) to consumer and professional software entailed shipping their software on disks, packaged in boxes and sold in computer stores.

For those of you, like me, interested in technology history, the VentureBeat article by , Adobe’s path from $200 million to $5 billion in recurring revenue presents the lessons learned as Adobe transformed itself from selling boxes to selling subscriptions – software as a service.

You can’t get close enough to your customer

When Adobe went from shipping software in shrink-wrapped packages to distribution through the cloud they went from customer-blind to seeing the full customer experience, namely their usage.

Adobe SVP of go-to-market and sales Rob Giglio said. “We’re taking signals from customers in real time.” Now, the product is part of the marketing — perhaps even the biggest part.

You can’t have enough data

Adobe now uses predictive modeling  based on usage data  to deliver the right tutorial at the right time. From usage data Adobe can tell which customers are having usability or learning issues, and which ones are at risk of churning.

You can’t stand still

Adobe has gone from yearly updates of their software to continuous improvement –  every day is launch day. “You can make the product better, easier, faster, and more bug-free. Accumulating enough incremental value over time means you not only keep existing customers, but add new ones.”

Test, test, and test again

Adobe runs about 200 tests on Adobe.com each week and wants to up that by an order of magnitude to about 2,000 tests each week.

Automate, automate, automate

There’s no way you can run 2,000 tests every week manually. You can’t interact with millions of customers in totally manual fashion either. So the answer has been automating these tests.

What’s been the business impact of moving from shrink-wrapped boxes to a subscription licensing model? Adobe has gone from $200 million a year in recurring revenue to over $5 billion! And their stock is up 300% in five years. So while some people say cash is king and other say content is king, I say the business model – how you make money – is king. At least that has proven true in Adobe’s case.

Author: Mentorphile

Mentor, coach, and advisor to entrepreneurs, small businesses, and non-profit organizations. General manager with significant experience in both for-profit and non-profit organizations. Focus on media and information. On founding team of four venture-backed companies. Currently Chairman of Popsleuth, Inc., maker of the Endorfyn app for keeping fans updated on new stuff from their favorite artists.

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