Quick, what is the most widely used software product in the world today? Hint: it's not from Microsoft.
by Terrie Lloyd
The answer: Adobe's Flash Player, which is on 97.7% of all PCs globally. Ever since Adobe acquired Macromedia in December 2005, the company owns the two most pervasive software products available today, the second one being Adobe's Acrobat Reader, which is now installed on 87.8% of the world's PCs. As a result, Adobe is now the world's seventh largest software company on the Fortune 500.
It Started in a Garage (really!)
Adobe's history dates from 1982 when two Xerox engineers, John Warnock and Charles Geschke, formed the company in Silicon Valley to bring professional desktop publishing and type-setting to the masses. True to form, they started in Warnock's garage and named the company after the creek behind his Los Altos home. The original master plan was to create a publishing services company, "Sort of like Kinko's," in Warnock's words. However, the strategy quickly changed from services to software licensing after their meeting Apple's Steve Jobs in 1983. Jobs was so taken with their software that he decided to invest in Adobe and made an upfront licensing commitment of US$1.5m to implement the company's Postscript Level 1 language on the Apple LaserWriter. Interestingly, the LaserWriter was a Canon engine - and thus the Japanese connection for Adobe has existed since the very beginning of desktop publishing.
Combining the Adobe software and Apple hardware, along with Aldus' PageMaker desktop publishing application (Aldus being acquired by Adobe in 1994), allowed the partners to create the world's first affordable desktop-to-prepress document publishing system - and it was a huge hit. The new system cut publishing costs to just a fraction of those of the available proprietary systems.
In 1989, the Adobe-Apple-Aldus-Canon system hit Japan when the first Japanese postscript system was implemented on the LaserWriter II NTX-J. Again, a Canon printer engine was used to great effect. As incredible as it may seem, while the four companies were delivering publishing-quality fonts and images that could render just as well at 2,400 dpi as at 300 dpi, the IBM PC was still a year away from even being able to support simple Japanese fonts on a PC screen (DOS-V).
In the 1990s Adobe started producing more user-oriented software products as well as learning how to do M&As. Throughout the decade the company was run in a very hands-on fashion by its two technical visionaries, Geschke and Warnock, who retired in 2000 and 2001, respectively. Both men used to visit Japan frequently, considering this country's pool of manufacturers an important source of partners.
Together, Geschke and Warnock helped evolve Adobe's strategy from fonts to document creation and reproduction, including visual elements of illustration and photographic images, then, through the acquisition of GoLive in 2000, to web-work group and workflow management. After their retirement, Bruce Chizen, today CEO, took over the reins and continued the growth strategy with various acquisitions, culminating in the US$3.4bn acquisition of Macromedia in 2005.
Adobe has now created a full matrix of products, tools, standards, and open source collaboration, which form an integrated platform that allows content creators to connect their output in a managed and automated way to end users. This is a very powerful concept and one that will eventually allow the connection of visual and audio content from any software platform to any server or device. As Adobe says itself, the mission is to revolutionize how the world engages with ideas and information - anytime, anywhere, and through any medium.
This rich content platform, which we will be hearing a lot more about in the future, is known as the Adobe Engagement Platform and is built with Adobe PDF and Flash at its core. Although the structure of the platform may seem complex, in reality it represents the simple, logical layers of the content world fastened together with Adobe glue and open technologies.
A key point, not obvious in the below diagram, is that not only is the Engagement Platform an end-to-end theoretical solution, it is also a practical one in that it addresses some real-world limitations. For example, with a mobile phone, it allows content to be pushed in usable segments down to the phone, rather than the "push-wait-user response-push" model that is standard in most web server-centric technologies. This allows the user to have a smooth, satisfying experience with the content - literally, engaging users rather than frustrating them.
With such a deep front-to-back strategy, one may wonder if the company isn't bent on hegemony. In fact, the experience in Japan so far is that the Adobe Engagement Platform is all about creating an open environment in which developers and customers can quickly implement ideas and workflows using previously nonexistent tools. This approach of providing a framework on which to build and connect is opening up whole new swaths of smart, engaging content for devices as diverse and ubiquitous as photocopiers, autos, and cell phones. Even companies which prefer to make their own technology, such as Tokyo-based cell phone browser king Access Ltd., have embraced the Adobe solution and integrated it to the company's main product. In Access' case, the outcome is Adobe Reader LE for NetFront, which is used on the DoCoMo FOMA 901iS cell phone.
The front man for Adobe in Japan is its President, Garrett Ilg, a well-known Japan-raised businessman who originally hails from Massachusetts. Ilg joined Adobe Japan in January 2006, just after the Macromedia acquisition, thus finding himself with a full plate - not only overseeing sales targets and product roll-outs but also staff relocations and facilities expansion. He was in high spirits on the steamy July day when we met him.
...As well he should be, given Adobe's remarkable success here. Ilg says that Japan is the number two market in the world for the company, thanks to its long history here and the plethora of manufacturers looking for ways to differentiate and better present their products to users. Japan accounts for 90% of Adobe's sales in Asia, and for about 18% of its sales worldwide.
Forty-five-year-old Ilg comes across as an inspired choice for President of the newly merged Adobe-Macromedia Japanese operation. For starters he is evangelical, strongly believing in the building block approach his company is taking in a (Japanese) business culture that loves incremental improvements and abhors being locked into proprietary solutions. Secondly, he holds the right credentials. He started off his career as one of Mitsubishi Electric's first five foreign hires, back in 1984, and as he says, "I learned to pay attention to quality and discipline, values that epitomize Japanese companies." From Mitsubishi Electric, Ilg went on to positions at Walt Disney Pictures and Columbia Pictures, Dow Jones, Reuters, then BEA Systems Japan - where he served as the President and Head of Asia Pacific.
Armed with experience, cultural sensitivity, a strong market position, and a phalanx of products, Ilg is a man with a mission - to make Adobe a core component vendor to Japan's electronics manufacturing sector, a solutions partner to its content and business sectors, and to have a copy of his software in every consumer's cell phone and electronic information gadget. He knows from personal experience at firms such as BEA that Adobe can only achieve these goals if it focuses on providing what the local customers and partners want, rather than trying to superimpose a foreign culture and systems. As he says, "We have to be Japan-specific. We're building features and functionality in products that are purely for the Japan market."
If you really want to get Ilg fired up, just ask him about Adobe's Engagement Platform, the company's comprehensive building block solution set, and ask him what it means for the future. He soon starts talking mobile, a field in which Japan is clearly the global leader. He points out that since cell phones are a mobile device with constricted bandwidth and power, you need to find new ways to move data to it and present that data to users. Adobe's Engagement Platform allows for "slabs" of content to be transferred to the phone, thus eliminating annoying delays for more data to arrive. With such capabilities, it suddenly becomes possible, even in a bandwidth-limited environment, to offer multimedia, video, music, and a lot of other content normally associated with broadband.
Ilg defines the Engagement Platform this way: "What it really comes down to is how people 'engage' with information. Adobe's mission is to revolutionize the interaction. We want to make information stickier and make people stay and enjoy the experience."
Mobile: Proof of Concept
A major success story for Adobe in Japan has been the adoption of Flash as a cell phone content development and presentation standard. Flash Lite version 1.1 was first adopted in early 2003 by NTT DoCoMo and specified for just a few 505i handsets. The company wanted a way to improve the user experience, providing dynamic, customizable graphical content, and also to facilitate the creation of that rich content by developers. They hoped that Flash's integrated development-and-delivery, i.e., the Flash authoring tool and Flash Lite, ecosystem would be the answer.
As it turned out they were right and the technology was a huge hit. As of December 2005, about 25 million DoCoMo users had Flash-enabled phones and were actively visiting about 2,000 official i-mode sites carrying Flash content - about 50% of all official sites. Building on this early success, DoCoMo then decided to take the plunge last year and implement Adobe's FlashCast solution for its groundbreaking i-channel news and information service, which debuted in September 2005.
i-channel differentiates itself by offering a complete distribution system for push-based content. Users get five base channels - for example, news, weather, entertainment, sports, and horoscopes - and are alerted by text moving across the standby screen of the mobile phone. Another 12 channels are available, with about 40 more planned through the end of 2006, and, of course, the quality of the content is both rich and customized. That's a lot of content!
Much like the earlier Flash Lite service launch, i-channel has also been a hit and in less than nine months, through to July 2006, more than 3m people have subscribed to the JPY150 per month service. DoCoMo's famed senior vice president and conceptualizer, Takeshi Natsuno, commented at an April press conference, "Partnering with Adobe, we've been able to develop a great service that showcases the creativity of thousands of NTT DoCoMo content developers while leveraging the power of our network infrastructure." Nice words from the father of i-mode.
How many developers is Natsuno referring to? Surprisingly, more than one million. The Yankee Group reckons that one reason the platform is so popular with developers is because producing simple games in Flash takes just three or four months - clearly an attractive proposition for smaller content companies. Adobe goes a bit further in defining the Flash advantage, having noted in its April 2006 FlashCast press release that the technology is about "three to five times faster than competing solutions." Clearly Adobe has struck a rich vein of support and resulting content.
DoCoMo is by no means the only provider of Flash content, and both KDDI/au and Softbank Mobile (formerly Vodafone Japan) have popular Flash-enabled handsets and content. However, as Adobe's first and certainly largest carrier partner in Japan, DoCoMo appears to have a head start with its i-channel, as both KDDI and Softbank Mobile continue to work on getting their offerings out later this year.
While mobile content elsewhere in the world may be in its infancy, in Japan it's a serious business and both local and foreign carriers know that they have to pay attention to the market here. As Ilg points out, "Mobile players in the world keep their eyes on DoCoMo. They have a great reputation for getting it right and making money. They can point the way to the future."
Publishing and Staying Local
Adobe started in publishing and design space, and so it is no surprise that the company is well established in this sector in Japan. The current line-up of products is built to combine both the leading-edge technology of high-end offerings such as InDesign CS2, and the more familiar graphics products used by a generation of designers, such as Photoshop and Illustrator.
We were interested to hear from Ilg that the company takes its Japan graphics market so seriously that it has rewritten some parts of its products. Given that many companies are reluctant to release diverging code for core products, we asked Ilg why Adobe was allowing it. He said, 'We've been in Japan for 18 years, which in the software business is a long time. We have realized that there are certain workflows in Japan that are unique from the rest of the world - such as publishing."
The wisdom of this strategy has been proven many times during those 18 years, and Adobe has successfully rolled out a number of solutions to the publishing sector. These have dovetailed so naturally with existing practices that even the majors are coming around. Ilg speaks with justifiable pride about how Dai Nippon Printing, the 800-pound gorilla of the Japanese printing industry, is now a major user and moving its most creative operations on to the InDesign platform.
Another company that has adopted the InDesign platform is one of Japan's leading consumer information publishers, another big win for the company. It goes without saying that as these massive companies switch to the workflow solution, they are already heavy users of Illustrator, Photoshop, and other Adobe applications. Pointing out the strategic value of such users, Ilg says, "Once these big guys move to a standard, all the companies connected to them fall into line. Standards can create an amazing ripple effect."
Rolling Out to Enterprises
With its position in the mobile and creative industries so well established, Adobe is now seeking new horizons in the enterprise market. Japanese corporations in particular face major challenges adapting to the realities of a world where information is electronic and thus no longer secure without protection. This applies to their IP, their processes, and to how they present information both to their employees and their customers. Ilg encapsulates the company's approach to such customers by saying, "Adobe's culture and attitude towards our customers are that we respect their needs and desires. Our objective is to build a win-win situation that encourages them to keep using us."
Adobe's solution to help secure, manage, and present data for enterprise customers is represented by two major product groups: the LiveCycle Policy Server and Flex. Review and adoption of these products has been encouraged by the central government's own e-Government strategy, whereby all government offices over time are creating web access to their forms and services. Following suit, major Japanese companies are also finally embracing electronic documentation and workflow management as well. Adobe is right there, making sure that they have the standards and access controls needed to meet new pending regulations. Think J-SOX, the Japanese version of Sarbannes Oxley, looming in 2008, and you have the challenge of data control and privacy - perfectly suited to Adobe solutions. As a result, a number of major Japanese SI companies already involved in e-Government projects are now building LiveCycle Policy Server and other Adobe technology right into their solutions.
Perhaps the most significant of these partners is a tie-up between IBM Japan and Otsuka Shokai, a humungous local SI firm with over 100,000 corporate customers. The tie-up was reported in the Nikkei, a major financial daily, which noted matter-of-factly that the two firms now say that they can deliver an Adobe-based solution to a local government for just JPY15m and within just one month - about 20% of the time normally needed to produce such an application. PR like that must be music to Ilg's ears.
There are other document-handling solutions on the market. What makes Adobe's unique, and desirable for Japanese corporations, is the global standard in which Adobe data is packaged, and thus the ease with which such data can be provided to collaborating firms. Then, of course, there is the depth of the solutions: Flex 2 to handle server-based data management and control of rich data, Flex-Ajax Bridge to input and output XML data into the Flex environment, LiveCycle for security and access control, and many other applications and tools for providing industry-leading flexibility and functionality.
Another example of Adobe's acceptance by leading Japanese manufacturers is the company's landmark agreement with Ricoh, the photocopier and imaging systems giant, to jointly build a core document scanning, security and print solution business based on Adobe's PDF standard and Ricoh hardware and software. The far-reaching agreement includes the integration of Adobe's LiveCycle Policy Server and its print and scan technologies with Ricoh's Document Solutions package and multifunction printer (MFP) and laser printer hardware. Both companies hope that the deep interconnection of skills and products will transform the way office workers, "knowledge workers" in Adobe-speak, can convert paper processes into more secure digital workflows.
And Then There's the Future
When properly executed, Information Technology (IT) frees information and empowers those companies best at managing and presenting it to win customers. The evolution of a company's IT systems makes its actions and results more transparent and thus moves the company to adopt best practices, and this in turn raises customer expectations about how the company will respond to them and their needs. In this way the virtuous cycle of enablement and results begins and the need for technology to better manage data comes to the fore. But for many of Japan's conservative companies, this need to create, present, share, manage, and protect data is a challenge they are ill-equipped to meet.
With the Engagement Platform, Adobe is clearly betting that the creation and management of information is going to become richer and more complex, and thus customers will be attracted to solutions that are reasonably priced and actually work. At the beginning of the year, Adobe announced that it had signed 63 LiveCycle project orders internationally, each worth more than US$50,000 - evidence enough that the demand is there. This level of pricing is certainly within reach of Japanese firms and allows them to buy logical, flexible solutions that pick up their data and manage and protect it, as well as present users with an experience which is world class.
Ilg says, "The Engagement Plat-form, that's what Adobe is really focused on. A lot of people have had a hard time to get their heads around it. But I think it is just materializing. Conventionally, as a company like ours grows, product sequences rarely bundle. But here at Adobe, our products integrate and this time next year [August, 2007] the Japan market will be one which is accepting of highly integrated solutions, with companies buying as much or as little as they need to get the job done. Then you will begin to understand what the power of the Engagement Plat-form concept really is."
The Engagement Platform is the fruit of the Adobe-Macromedia merger in 2005, and shows an inspired combination of tools and back-end systems to create and manage data. Indeed, the product offerings of the two companies have come together quite seamlessly and with very little redundancy, to create an information management environment unmatched by competing software firms.
The outcome of being an overall information solution is that by virtue of its create-distribute ecosystems and years of product development partnerships in Japan, Adobe can create its own class of applications and new markets for them. e-Government solutions is one of these. Digital cameras, home appliance control panels, car navigation systems, automobile and office equipment dashboards are others. The technology is popping up in surprising places in deep integration applications. As an example, Jaguar not only uses Flash for its new XKR marketing web site, the Ford-owned company will also feature a Flash-driven console in the sports car's dash as well.
With mobile under his belt, can things get any better? Ilg and his team are particularly excited this year about a product with huge "evangelical" potential - that is, the ability to make converts of the millions who use it globally and thousands more who write for it. We speak in hushed tones of the new Sony PLAYSTATION 3, which will launch in November 2006 with Flash Player loaded into each console. Not only does this represent a massive design-in win for Adobe's technology, it also ensures that thousands of games development companies writing for the Sony console will be using Adobe specs and most likely Adobe tools to create their titles.
What was that company mantra again?
"What it really comes down to is how people 'engage' with information. Adobe's mission is to revolutionize the interaction. We want to make information stickier and make people stay and enjoy the experience." JI