Tag Archives: Product Delivery Margins

Cloud, Sofas & Economies of Scale

gotcouchAdobe recently announced its moving all its “boxed” software to the cloud under a subscription service. Some analysts claim that this is due to changing customer tastes. However, there is a stronger underlying reason. It’s to exploit economies of scale via the cloud, reduce costs and increase direct margins from product delivery. The decision might seem risky but it makes absolute sense. The only other facet of concern might be when reporting revenues. GAAP rules mean that Adobe will have to change from transaction based revenue – i.e. one time revenues need to be booked gradually. This deference in revenues will mean depressed earnings when the switchover happens.
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