It can also reduce piracy by requiring users to authenticate every time they run the software.

This has significant business advantages as support is always for the current product, while system developers only ever support two versions: a live environment and features that are in development as they prepare for deployment. Every customer pays and while it might allow them to “pause” their subscription, you are able to remove that long “tail” of users on old software versions. Subscription revenue, as any utility company will tell you, delivers stable income month-in, month-out.

That left increasing the price of its software, but there was limited scope in the long term for this. The problem for Adobe was that the creative industry, its primary customer, was relatively small and the 18-24 month software release cycle limited the number of perpetual licenses it could sell. Perhaps inevitably, Adobe just announced a 13% year-on-year growth for the first quarter of 2023 with revenue at $4.66 billion.īut why transition to SaaS at all if the traditional model was working? Cynically, as a publicly listed company, Adobe needs to realize a profit for its shareholders, which meant increasing both revenue and margin. It has carved out a niche in the creative sector since its foundation in 1982 and built up a hugely successful (and traditional) perpetual license software business across its wide range of products that (by 2011) generated $3.4 billion in revenue (with a remarkable gross margin of 97%).Īfter the switch to software as a service (SaaS), Adobe hit $15 billion in 2021 and grossed over £17 billion in 2022 which (crucially for investors) has significantly increased its stock price. Adobe as a Case StudyĪdobe is perhaps one of the best-known “software as a service” (SaaS) vendors, alongside Microsoft. As PetaPixel has commented, the cost of developing software is expensive and perpetual licenses just don’t work for some businesses, but that may well be a convenient excuse for generating higher shareholder returns.

The so-called “ Loyalty Programme” turned out to be nothing of the sort, with a simple one-time discount for existing perpetual licenses. Interestingly, the perpetual license has been left open as an option, something not available with Adobe’s Lightroom.

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