In 2013, Adobe transitioned from perpetual licenses to a subscription model (SaaS). This decision radically transformed the company, resulting in a 50% increase in revenue within three years.
Initially, Adobe was a typical software company, selling flagship products like Photoshop, Illustrator, and InDesign through perpetual licenses. Customers would buy the software once and use it indefinitely. However, the shift to a monthly subscription model, known as Software as a Service (SaaS), significantly changed Adobe's economic landscape.
The SaaS model has propelled Adobe to new financial heights, enhancing its EBIT margin by 15 points. Subscription revenues now dominate overall revenue, allowing Adobe to plan for long-term growth and invest in new features. This strategic pivot has also benefited investors, with Adobe's stock soaring to a valuation of over $250 billion in 2023, inspiring many companies like Microsoft and Salesforce to follow suit.
