Cloud was a natural evolution for us: Shantanu Narayen

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We expect the growth rates for Adobe to grow by 20% over a three year CAGR. I think the company’s transition is behind us, so it’s starting to reflect in the more traditional business model where revenue and earnings will start to show significant growth. We have been rewarded for that”

“We were the first company to have said that we are going to move into the cloud-based subscription so our business prospects and opportunity have never been better as a company,” he tells Sudhir Chowdhary in a recent interaction. Excerpts:

Adobe has undergone a complete transformation from being a provider of pricey, shrink-wrapped software to one that charges users a monthly subscription fee to access its applications online. Tell us something about the company’s re-invention and the benefits of the new business model.

The company’s vision has always been about how we change the world through digital experiences and there were two aspects of reinvention—which I will touch upon. The first was that around the world there wasn’t a single piece of content that wasn’t touched by Adobe software—magazines, video on the web etc. What we thought was that everything was happening with the cloud and mobile. Fundamentally there was a reason to reimagine the process—to be able to innovate at a faster pace and not have a 12-18 month traditional product cycle because technology was evolving at a much faster pace.

To be able to build to a new subscription base, to be able to have a more affordable upfront pricing so people could actually try out the software and to be able to build a more recurring revenue stream. When we thought that we could fundamentally reimagine the process, by using desktops and mobile apps and services—it was a fairly easy decision to take because if we don’t reimagine the creative process, somebody else will.

The fundamental vision behind Creative Cloud was to reimagine the creative process and move at a much faster pace in terms of innovation. Around that same time, we also spoke to ourselves that Adobe was focused on content creation but the real challenge that we thought our customers would face was how we are delivering that content and managing it. With video soon going to become something which people consume from mobile devices, if we didn’t focus on delivering a broader spectrum of solutions to our customers, we would have missed out on a much larger opportunity.

We also realised that in digital marketing—a lot of things were automated from finance to HR, and supply chains in enterprise but nobody had bought to bear technology. It was the thinking of reimagining the creative process and saying if we can bring art and science together, we can help them to create this content, now let’s help them manage it, monetise and mobilise it. We embarked on this journey through a number of acquisitions to build a more technology comprehensive platform. Cloud for us was a natural evolution to the problems we were trying to provide for our customers.

Adobe Systems has added a third pillar to its Internet cloud-based services strategy—Document Cloud. Give us a sense of the big story emerging out of Adobe. Where is it headed?

We spoke about the Creative Cloud as to how we want every creative individual in the world to be able to express their creativity with some piece of Adobe software. If they want to capture a colour and make it seamless within their application—we have phone apps. If they want to draw something with a stylus, we have tablet applications and we have our desktop applications as well.

With documents as well, the reality is that PDF as a franchise is only growing. There isn’t a single company in the world that doesn’t adopt PDF because of its efficiency in moving from paper to digital—whether it’s paying a mortgage, government providing citizen services, filling a form etc. We looked at it and said that we have that same opportunity. With services like signatures, to be able to complete, automate an inefficient paper-based workforce.

Why is your physical signature any more legitimate than your digital signature? That’s why we embarked on this complete reinvention of the document platform so people could deliver documents. With the Mobile Link, people can have access to any of their documents, you can sign documents on any device and process these documents electronically and every government in the world, including the Indian—like the Digital India initiative—is trying to say how can we have documents more automated?

Document Cloud was a natural next step to the PDF reader and Acrobat. There are tens of millions of people who use Acrobat every single day.

How does Adobe view its role in a dynamic technology ecosystem going forward?

It’s a great question and from our point of view, we have to both deliver end user solutions which we do, but we need platforms because we are not an island in our self. If you look at the very inception of the company, Post Script was an open standard which is how the digital publishing flourished; PDF is an open standard which is why people adopt PDF across every statement or bill; Marketing Cloud is an open standard. We recognise that not only do we have to deliver end user value out of the box but all of these systems. Take our marketing system—if it doesn’t interface with the CRM or the finance system, how do we move our business online? We think about it as both end user value and as well as a technology platform and we have developers and API (s) that enable us to extend it. All successful companies have to be both a platform company to generate an ecosystem and as well as deliver end user value.

We were the first company to have said that we are going to move into the cloud based subscription so our business prospects and opportunity have never been better as a company.

How is Adobe performing in India?

When I think about India, I think about it across multiple vectors. First and foremost—it has been a place where we have had a phenomenal R&D organisation that has served the company well. There isn’t a piece of Adobe product that isn’t developed in India. So, from the point of view of our R&D centres in Noida and Bangalore—we have been extremely successful.

From the point of view of partners, virtually every one of our global partners now has a presence in India. So if it’s companies like Infosys, Wipro that we have partnered with because they are creating their own digital practices or global companies that have massive presence in India. The meat for us in the Indian developer ecosystem is to educate people on our offerings. We support a number of our Indian customers from all around the world.
For Marketing Cloud, every company is moving digital. We have seen some phenomenal adoptions by customers in technology right now to transform themselves such as Make My Trip, Infosys and Wipro. Their business is also moving online and they are our large customers.

In terms of digital marketing— those markets are exploding in India and we think there is more opportunity as we address the piracy issues from cloud-based services. All our desktops products are standards in India. There isn’t a single Indian firm in publishing or travel that doesn’t use Adobe’s software so I think the future is very bright.

Prime Minister Narendra Modi has announced a slew of measures to streamline public service offerings and make government functioning efficient and transparent. How could Adobe partner with the government in this initiative?

If you look at the large verticals that Adobe has, the government is actually the largest vertical. When we think about what we are doing whether it’s in Washington DC or whether it’s in London or Canberra or in Singapore, digital governments are using our marketing solutions to enable citizen facing services, which has been an area of significant growth for us. Even in India, I think some of the things that are happening with the Prime Minister’s website like delivering their message, he has embraced technology in a way to communicate with the citizens and a lot of that is Adobe technology.

Two things I would say I am fortunate about that I serve on President Obama’s management advisory board and I think the whole idea behind that is how do you use digital and how do you take best practices from the private sector and use them in the public sector. When Prime Minister Narendra Modi visited New York last year, I was fortunate enough to spend some time with him and we were looking forward to see him in Silicon Valley because the value is all about technology whether it’s the Digital India or the Make in India initiative—software and technology is going to be at the heart of it and I think we have more role to play and participate in that.

How excited are you by the opportunity that is coming from the government side?

The amount of money that government spends in citizen facing services is massive. Every single government around the world is saying I have to accelerate my paper to digital transformation and in the US billions of dollars are spent on technology. I am sure that’s true in India and everywhere else around the world and if we get our fair share given that we are leaders in that, it’s going to be one of biggest growth opportunities for Adobe as a company.

I think what is even more enriching about it is that we have impact because we are enabling a citizen whether it’s getting their pension faster, whether it’s getting their benefits, whether they are being able to get their driver’s license—I think the customer facing journey is not just for the private sector but even the public sectors have to completely transform themselves to deliver the right experience. Mobile is going to be such an enabler of government delivering better services so it’s hard not to get excited about it.

Let me ask you about the Adobe Marketing Cloud because the growth there has beaten your own expectations. What more do you expect and how do you anticipate growth as far as Marketing Cloud is concerned?

If you think about every enterprise in the world, technology is either going to disrupt it or they have to make an enabler to transform themselves. There isn’t a single president or CEO of a company in the world that isn’t talking about digital transformation, if they are thinking about it proactively or digital disruption in terms of what might happen to them. We are such an early stage of people completely re-platforming their website, thinking about their marketing spent and the efficacy of the marketing spend. I think the results we have seen for Adobe are reflection of the massive movement that’s happening online.

In terms of video, billions of dollars are spent on adverting in a traditional TV. All of the video is eventually be going to be delivered through IP-based networks where you are going to get personalised advertisements that are relevant for you. So if you think these billions of dollars that were being spent, that entire media spend is increasingly going digital. We think digital marketing is $20 billion market opportunity and we are the clear leaders but we are little north of a billion, that is why we are excited about the growth ahead of us. As far as who is adopting the Marketing Cloud in India is concerned, I think it is clearly a mix of the large enterprises as well as small and medium businesses.

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