Recently, Adobe announced that it is moving the Creative Suite (which includes Photoshop and other graphic design applications) to Cloud-based licensing. The company will no longer distribute boxed versions with perpetual licenses. This move demonstrates a growing transition to Cloud-based subscription licensing, which SafeNet pioneered in 2010 with the introduction of the first Cloud-based software licensing service – Sentinel Cloud.

Adobe is positioning this announcement as very beneficial to its users, providing the customer with immediate access to the latest features and upgrades, enhanced collaboration, cloud based storage, and more.

Although Cloud licensing brings many benefits to end-users, Adobe’s decision to abandon on-premise-based perpetual licenses resulted in a huge uproar from users, many of which declared that they will not subscribe to the service and will start looking for alternatives. User concerns can be mitigated with a feature-based subscription licensing scheme which includes a built-in “insurance policy”. I’ll explain this licensing scheme in a moment, but first I’d like to cover the main concerns raised by users:

  1. License installation and enforcement doesn’t work offline. The new version of Creative Suite (dubbed CC for “Creative Cloud”) is still installed on end-user machines, with a 30 day handshake required to renew the license. This ensures that there are no performance bottlenecks, while still allowing disconnected usage during this period. Online connectivity is of course required for this check and also for activation following installation, preventing the software from being used on completely disconnected machines. Among user concerns, there are many professional artists who testify that this is a deal breaker because they have multiple workstations that are disconnected from the Internet for security reasons. Adobe is no longer offering an on-premise licensing option. This may be a business decision, but it may also be due to the technical challenges that stem from having to support both cloud and on-premise licensing, requiring multiple methods to generate and enforce licenses. SafeNet software licensing and monetization solutions support both cloud and on-premise licensing and are continuously enhanced with this duality in mind, allowing ISV’s to more easily overcome these challenges.
  2. Users are practically forced to commit to an on-going endless loop of purchases.  Adobe’s proposition pushes existing users to upgrade, and once they’re on the subscription train it’s very difficult to get off. It all starts with the company including some critical functionality, such as support for new camera RAW files, only in the latest version. Users who plan to skip upgrading and stay with the current (perpetual) version will eventually be forced to subscribe when they upgrade to a new camera. Then, once they are subscribed to the service, there’s no easy way out. Many users feel that by ditching perpetual licenses Adobe is holding their files and creations as hostage. Although the files remain accessible on the end-user drives, they no longer have access to the software that opens them. It’s either renew the subscription, or look for third party applications which may offer some support for the files. The problem is there’s no guarantee about the scope and quality of third party support for proprietary Adobe formats, so the only safe solution is to continue the subscription indefinitely. This is a good example of vendor lock-in.
  3. Subscription pricing risk. The subscription price is $50 a month and there is no guarantee that it won’t be increased. Many users are concerned they’ll be forced to pay even higher prices to retain access to their files.
  4. Lack of control over cost of ownership. The on-going cost of subscription is similar to what users who upgrade every version are currently paying for the boxed version. Many users however don’t upgrade every version. Upgrading the boxed version every other version, or even less frequently, is very common and reduces the cost to half or less compared to subscription. This isn’t an option with Adobe Creative Suite, where users no longer have a way to control costs – they’re either in our out. There are no in-between options.

These are all very valid concerns, but it’s important to note that there are many benefits to subscription licenses. Subscription licenses are an excellent way for users to reduce initial costs and to always remain up to date with the latest versions. In principle it also provides ISV’s an option to reduce the price of the product, converting more evaluators to customers and in turn ensuring that revenue stream remains stable regardless of future versions features and innovation.

Although subscription licenses offer advantages to both ISV’s and users, the disadvantages of a subscription-only offering will likely result in many Adobe customers voting with their wallet. What’s missing here is choice. Some users prefer license delivery and enforcement to be cloud-based, allowing them to easily access and use the software from different machines, while others prefer an on-premise license, supporting completely disconnected usage. Some users prefer a perpetual license, allowing them to control cost of ownership and mitigate vendor lock-in, while others prefer subscription, reducing cost of entry. Choice is a productivity enabler, and is sorely missing from Adobe’s move to the cloud.

Adobe clearly aims to move to subscription licensing and users clearly have reasonable concerns with this move. One way for Adobe to resolve this conflict is to switch to a feature-based subscription licensing scheme which includes a built-in “insurance policy”. In a nutshell, Adobe should tailor its offering to maximize value to users – both new and existing – while still making the subscription a compelling and risk-free option, providing them with fair exit option. They can achieve this by separate offerings for each type of users, for example:

–          Existing customers (e.g. owners of the perpetually-licensed Create Suite CS6) are entitled to use the base functionality the new version (Creative Cloud), without any time limitation. The scope of “base functionality” should be similar to that of the current version (CS6 in this case). To gain access to new features, users need to subscribe. If Adobe introduces features that are compelling enough, many will subscribe. Those who decide to unsubscribe simply lose access to these features, but their files remain accessible, they can control cost of ownership and have a way to resist price hikes without losing access. Subscription becomes a compelling and risk-free option.

–          New customers need to subscribe to a bundle that includes the base functionality and new features. After a certain amount of time (e.g. 36 months) they reach the same status as existing customers above, and are entitled to the same plan. If they wish to unsubscribe, they lose access to the new features, but they retain perpetual access to the base functionality and their files. Here too subscription becomes a compelling and risk-free option.

One challenge that this licensing scheme brings is versioning. “Base functionality” and “new features” can mean different things depending on versions, but this is fully controllable when feature-based licensing is use.

This is definitely a subject worth further discussion. It’s going to be very interesting to see how Adobe adapts to users feedback.