SM: Can you talk about the Adobe experience a bit more? Where did you find the Creative Professionals business?
JH: There was a lot of work going on in bundling Adobe applications together. We figured out how to go beyond just bundling different applications in a box and we created synergy between the products. In addition to getting them on the same product cycle, we got them in the same box and we got them to work together. We called it version queue, but it was just a file sharing capability which allowed usage between different programs and different users, which had not been done before. It made the suite of products more useful than the individual pieces. The timing was also very good because we were coming out of the bust and a lot of creative people needed the product.
SM: Adobe did not really encounter much of a bust did they?
JH: The two years prior to my arrival, the creative business was pretty flat. I inherited a business which was about $400M, and by the time I left it was $700M. A lot of that was timing. The Adobe business is very heavily weighted towards Mac users. A lot of that success was due to the OS 10 switch. A lot of people bought new hardware which came with OS 10, and they needed to upgrade their software applications to match.
SM: How did this compare to the upgrade cycle and recurring revenue at Intuit?
JH: You still had the upgrade cycle, and the thing you had going for you there was, unlike Quicken which is a discretionary product, the creative software was used by creative studios every day as part of their business core. When you are using it every day, you are inclined to upgrade more quickly. The Quicken upgrade number might have been once every 2-3 years, and in a creative market it was once every cycle.
SM: In terms of channels, the creative professional suite is still sold through retail channels, including upgrades. Does that mean it is also primarily a marketing play?
JH: Adobe has a lot of big enterprise customers now too, so they do a lot of volume licensing. They sell a lot to the big media players. That is all enterprise selling.
SM: That’s true. But still, Adobe’s business also includes a huge pool of SMB and what you called VSB (Very Small Business) customers.