Maybe the most common response to yesterday’s announcement of Lightroom Mobile has been annoyance at it being tied to a subscription to Adobe’s Creative Cloud. I won’t defend that other than by saying that it was pretty inevitable given Adobe’s sudden switch to subscription sales and also results from the nature of the service. But I did think it worth pointing you to some recent commentary on Adobe’s finances and in particular Forbes magazine’s response to an Economist puff piece about how the drop in Adobe’s profits since CC’s launch had been accompanied by a rise in its stock price. Steve Denning writes:
“Wall Street isn’t entirely stupid,” Roger Martin commented to me. “If a cogent argument is made for a different business model, then it will listen. Most such company arguments lack cogency and that’s why they fall on entirely deaf ears. This is particularly interesting because it has long been thought that a traditional license-selling software company can’t cross the chasm into a Software as a Service (SAAS) model because the transitional hit on revenues is just too brutal. Once you get to the other side, it is great and arguably a superior model with a recurring revenue base. But it is brutal to build up that base. It’s important for Adobe to succeed because it will help Wall Street understand that it is doable. Others will then follow.”
While it’s heartening to see Wall Street for once not totally obsessed by the short-term, one can also ask: is this a bold, creative customer-friendly management decision, as The Economist suggests? Or could it be a desperation move in the form of a financial gadget that is aimed at covering up a lack of innovation?
I think it’s worth making a couple of other points. Notice the word “desperation”, which is quite similar to my view last year – Adobe may feel they have no alternative to going down the subscription route. Secondly, as a former corporate financial planning cubicle worker, innovation is just one approach to pressures on profitability – cost-cutting is another.