Adobe says it is moving to an online subscription-based model
Adobe says it is moving to an online subscription-based model

No more Creative Suite - it's all in the cloud now

ADOBE says it is moving to an online subscription-based model for the software package it sells to designers, web developers, video editors and other creative professionals.

Adobe Systems said today that it will not release new versions of its Creative Suite software package. Instead, the maker of Photoshop, Illustrator and Acrobat, is shifting focus to Creative Cloud, which makes its software available through a monthly subscription that starts at US$50 for an individual if they sign up for at least a year.

Adobe's move is part an industry trend toward selling software as a subscription service rather than as a one-time sale item. Microsoft, for example, makes the new version of Office available as an online subscription. The company, however, still gives consumers and businesses the option of purchasing Office as packaged software.

Lawrence Smith, managing director of New Zealand digital agency Cabbage Tree Creative, attended the keynote speech of AdobeMAX in Los Angeles where this morning's announcement was made.

His initial reaction was that the end of the "perpetual licensing model" could mean an increase in costs, as a cloud based subscription models tied a customer to monthly payments, rather than allowing them to choose when to upgrade software.

However at AUS49 per month, Adobe had made "a seismic pricing shift, essentially now offering the same price globally," said Lawrence.

"This gives us more confidence in adopting a cloud based model" he said.

He said a compelling reason was that the digital space was moving very quickly, and creative professionals had to adopt latest technologies, or be left behind.

"We will definitely move our creative teams onto the new cloud- based tools," said Smith. "I expect the productivity increase alone, by all working with the same set of tools in a more collaborative way, to be worth the money; and that's before considering you have access to the latest and considerably expanded toolset available".

Smith said a question remained about the speed and data allowances of the cloud-based services for Kiwi businesses, but the progressive roll out of ultrafast broadband (UFB) would remove any barriers.

"Additionally Adobe has structured the Cloud based services to consider lower bandwidth users. They can choose to store data locally, and share assets for collaboration on a case by case basis, thus having the best of both worlds; world class development tools on your desktop, connected to the Cloud in ways that you decide."

"Customers have to come to terms with end of perpetually licensed software," said IDC analyst Al Hilwa. "Adobe is ahead of the game."

Scott Morris, a senior marketing director at Adobe, said the shift will help the San Jose, California-based company respond to changes in the marketplace much faster. Adobe's engineers, he said, will be freed up to release updates and improvements much faster than the company's traditional 18 to 24-month upgrade cycle.

Adobe said its Creative Cloud service has gained 500,000 paying subscribers since the company made it available as an option a year ago.

Morris acknowledged that the change will be a "big transition" for its customers. He compared it to Adobe's introduction of the Creative Suite package a decade ago. Until that time, the company had sold its software products separately rather than as part of a set.

"One of the things that make us confident with this change is that customers who are moving to Creative Cloud are loving it," he said, citing flexibility and lower upfront costs.

Adobe's packaged version of Creative Suite 6 "Master Collection" cost US$2,256 on Best Buy's website on Monday afternoon (US time), on sale from US$2,380.

Adobe also reaffirmed its financial guidance for the second quarter and for the fiscal year. It still expects adjusted earnings of 29 cents to 35 cents per share on revenue of $975 million to nearly $1.03 billion for the current quarter. Analysts, on average, are forecasting adjusted earnings of 34 cents per share and revenue of $1.01 billion, according to a poll by FactSet.

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