Adobe (NASDAQ:ADBE) is the preeminent software vendor for creative professionals. The company is most known for its media editing software, which includes Photoshop, Illustrator, and After Effects. However, in recent years the company has expanded beyond creative solutions into enterprise marketing software, and now cloud document storage and collaboration.

A newer area of growth for the company is its Document Cloud, which has seen usage explode due to the situation created by COVID-19. Adobe's Document Cloud doesn't get much attention because it is a relatively small part of the overall company in terms of revenue, but it's growing quickly.

DocuSign (NASDAQ:DOCU) may provide some clues as to what this business could be worth for Adobe. DocuSign is a pure-play cloud document storage and solutions company that has seen its business and stock value soar this year. DocuSign isn't an exact clone of Adobe's Document Cloud, but is fairly similar, highlighting that Adobe's Document Cloud would be worth quite a bit as an independent company.

What is Adobe's Document Cloud?

Adobe Document Cloud includes Adobe's PDF and electronic signature software, known as Adobe Scan and Adobe Sign, across multiple platforms.

With Document Cloud users can create, review, approve, sign, and track documents both on desktops and mobile devices. Adobe makes money off these services by charging a subscription-based fee. The company's customers include enterprises, individuals, and teams.

Document Cloud is an extension of Adobe's core products, which are productivity and creative software. With Document Cloud you get access to Adobe Acrobat, allowing users to create and edit PDF files, as well as convert them to different formats, share them, and sign them.

a hand reaching through a laptop screen to sign a document

Image Source: Getty Images.

Comparison to DocuSign

DocuSign helps simplify the process of signing an agreement. The company's software is used to eliminate paper, automate the agreement process, and connect to other systems. This allows for reduced turnaround time and costs compared to the traditional agreement process.

DocuSign's flagship product is its Agreement Cloud, which is the company's cloud software for automating and connecting the entire agreement process. This software includes DocuSign eSignature, which allows users to sign documents electronically on multiple devices.

When comparing DocuSign to Adobe Document Cloud, there are more similarities than differences. Both allow the same end goal, which is the ability to sign documents and capture legally binding digital signatures. The key difference is that Adobe's Document Cloud has a much greater scope in the solutions it offers.

Adobe Document Cloud encompasses multiple productivity tools for the end user, with Adobe Sign being only one part of it. If you were to compare just Adobe Sign to DocuSign, then -- based on just the eSignature landscape -- DocuSign estimates that it holds 70% of the market, while Adobe comes in second with 20%. The remaining 10% comes from numerous other smaller market players. In other words, DocuSign dominates the eSignature use case today, but Adobe Document Cloud has additional features that can create deeper customer relationships and expand the value of each contract.

Metrics Adobe Document Cloud DocuSign
Calendar Q2 Revenue $375 million $342 million
YOY Growth % 22% 45%
Market Capitalization N/A $40 billion

Data Source: Adobe and DocuSign financial reports.

Competition between Adobe and DocuSign

Adobe's Document Cloud is a larger business, but DocuSign is growing much faster. This is because DocuSign is the most visible player in eSignature, and there has been a rapid shift toward adopting the solution during the COVID-19 pandemic. In fact, many Adobe customers are likely not even aware that Adobe offers a competing product, because it is fairly new -- it was launched in 2019.

However, DocuSign should be worried about competition from Adobe. Adobe is a strong competitor in other markets, and is focusing on the document market now that it has shown promise with customers. Furthermore, Adobe has a tight alliance with Microsoft, which has led to Adobe Sign being the preferred e-sign solution for Microsoft's suite of products. It would not be surprising for Adobe to take some market share from DocuSign in electronic signatures.

The other interesting insight is that DocuSign is a highly valued company with a market capitalization exceeding $35 billion. Given that Adobe Document Cloud is an even larger business, it would likely be worth something similar in the market as an independent company. Investors are not focused on this part of Adobe's business because the company's creative and marketing software businesses are much larger and dominate the conversation. This suggests that the Document Cloud business is a hidden gem within the larger organization that could one day be more appreciated.

Acceleration due to the work-from-home transition

COVID-19 has been a huge catalyst for the cloud document industry. Workflows that have been transferred to the Internet are unlikely to transfer back, which should lead to the creation of long-term value for DocuSign and Adobe.

Both companies have significant promise for growth in the software industry. DocuSign has been operating longer in eSignature and is currently winning in this product use case, but Adobe Document Cloud is a fierce challenger. If Adobe can leverage its resources and industry partnerships, it could propel its Document Cloud and potentially take market share away.

Either way, this should be an interesting space to watch in the coming years now that working from home has become ubiquitous and companies have widely embraced the cloud.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.