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Protocol | Enterprise

The e-signature war is going beyond the dotted line

Here's how DocuSign is planning to conquer more of the document world even as Adobe doubles down on the core market.

​President Bill Clinton signs the E-Sign Act in 2000

President Bill Clinton signed the E-Sign Act in 2000 using an encrypted smart card. He also used pen and ink.

Photo: Tim Sloan/Getty Images

Electronic signatures have been legal since President Bill Clinton signed off on legislation in 2000. But even he had to back up his encrypted smart card with a pen. And plenty of ink has been spilled making contracts legal in the decades since.

It took a pandemic, which scattered workers far from their familiar piles of paper and customers who could scribble a "wet" signature on them, to turn e-signatures from convenience into necessity. That's been welcome news for DocuSign and Adobe, which have spent more than a decade trying to convince skeptical businesses and consumers that a swipe on a screen or trackpad is the same as the classic John Hancock.

The federal law seemed like it might have settled things, but states and government agencies dragged out updating regulations and technology, which created uncertainty around e-signatures. Those doubts are fading.

"The conversations five to six years ago were all about: 'Is this legal? Is it legally binding?'" Ashley Still, the general manager of digital media at Adobe, told Protocol. "The conversations today are: 'How does this fit into my overall infrastructure?'"

DocuSign, the industry leader, just reported a 57% increase in sales over the past year to $431 million. Adobe Sign had triple-digit year-over-year user growth in June, July, August and September last year, and high double-digit growth in the other months.

The pandemic caused some specific spikes, like small businesses needing to get signatures to process federal aid. Most analysts and industry leaders don't expect the momentum to subside even as the economy recovers.

The market is only getting more competitive, which, given the relatively basic nature of the technology, might be surprising. According to DocuSign, that's because it's no longer just about your signature. It's now about the entire life cycle of a document.

"As you start to act on agreements and manage those agreements, you break out of this one-time use notion … and DocuSign becomes even more relevant," CEO Dan Springer said. "There's an initial set of use cases people know and want to implement, and then a lot of opportunity for them to expand out."

'It's DocuSign's market to lose'

In Springer's vision, instead of customers just tapping the tool when a signature is needed, users would make changes to the document, send it around and store it all within the same service. The company is on good footing to lead in that market, which could top $7.6 billion in sales a year by 2022, according to MGI Research, which defines it as contract life-cycle management.

While its most recent earnings were blockbuster, DocuSign, which was founded in 2003, has been reporting consistent and substantial growth for years. It's invested in internal R&D, building tools like an SMS alert system and 24/7 document monitoring, but has also gone outside its walls: It purchased Seal Software in 2020 for $188 million to add to its AI capabilities and SpringCM in 2018 for $220 million to build out a contract management system, among others. Those actions have helped propel DocuSign to the front of the e-signature market, topping rivals like Adobe, according to industry analysts.

"The act of digitally signing is more and more going to be a commodity," said D.A. Davidson & Co. managing director Rishi Jaluria. "Somehow Adobe hasn't been able to capitalize on that … and now it's DocuSign's market to lose."

The fact that DocuSign was able to be so competitive against Adobe is a bit startling, given co-founder John Warnock invented the PDF. While not every document is a PDF, there are trillions out there. And Adobe estimates that the number of PDFs opened with its software alone grew 17% last year to 300 billion. The reason it lost ground, according to Springer and other industry experts like Jaluria, is pretty simple: While DocuSign was investing heavily in improving the tech and developing the market, Adobe wasn't.

Adobe remains a powerhouse in the industry, entering the market by acquiring EchoSign in 2011. There were actually preliminary discussions to purchase or partner with DocuSign that didn't advance, according to Springer. Adobe said it doesn't "comment on deals that never happened." Adobe rebranded EchoSign to Adobe Sign in 2016.

Despite ceding some ground to DocuSign, the business remains a focus for Adobe. CEO Shantanu Narayen regularly talks up Adobe Document Cloud, the company's product suite that includes Adobe Sign and Adobe Acrobat, to investors. Revenue in the division grew to a record $1.5 billion last year; the company doesn't break out revenue for Adobe Sign separately. It's Adobe's fastest-growing segment, said Still. The company just announced that government agencies in all 50 states would use its products. And this month it rolled out a new suite of tools dedicated to small businesses.

Much of Adobe's plan is centered around capitalizing on the PDF and layering on new intelligent features. An AI tool helps users create better documents by providing feedback on sentiment and structure. But Adobe differs from DocuSign in one key way: It doesn't want to be the system of record for documents.

"Our strategy of thinking more holistically about the document has been a good strategy. As we look back, I don't think we would change that focus," Still told Protocol. "Where DocuSign has gone is around this system for agreements. And that's the piece that I just haven't seen customers gravitate towards."

The new competitive landscape

As Adobe and DocuSign duke it out, other companies sense an opening to chip away market share.

Dropbox, Box and quite a few others have made acquisitions in the space. Dropbox purchased HelloSign in 2019 for $230 million and DocSend in 2021 for $165 million. Some experts speculate that Notarize, which has an existing partnership with Dropbox, could be next. And Box recently bought SignRequest for $55 million.

It's unlikely either will ever be a true competitor of DocuSign or Adobe; both storage companies integrate with those vendors, allowing users to switch between the programs. Instead, they are gambling that companies will want to sign their documents in the same place they're stored. It's one reason why DocuSign has invested so much in its storage capabilities.

"Storage is a component of manage. We think of it a lot more broadly than" Dropbox and Box, said Springer.

That's where DocuSign's machine learning investments come in, including Seal Software. It's an area where DocuSign could see more acquisitions, per Springer.

But it's a field that is seeing tons of activity. There's contract management firm Icertis. And RPA vendors like UiPath tout an ability to automatically extract pertinent information from any document type.

If you define the market as just getting the signature, DocuSign dominates. But as Springer aims to stretch the definition of what DocuSign does, there's more and more competition.

Machine learning could help DocuSign expand into areas like analyzing document structure or grouping related documents. Technology could even detect areas of high risk within a contract, Springer said. (It doesn't hurt that being the market leader means getting more documents with which to train its algorithms.)

"When you get to the broader agreement cloud, there is no DocuSign behemoth out there in the other spaces. But we're not a behemoth either," Springer said. "There is more of a competitive dynamic."

Some analysts say they're surprised, for example, that Microsoft hasn't sought to purchase an e-signature startup given the relatively low price with which the tech giant could likely snag one and integrate it into the Office 365 suite of products. Right now, Microsoft partners with DocuSign (it was an early investor) and Adobe. The company declined to comment on the speculation.

Despite Microsoft's growing emphasis on Teams as a collaboration platform where documents could be started, edited and finished, Springer doesn't see the relationship changing anytime soon. He does, however, recognize the difficulty DocuSign faces in winning that section of the market. In order for the company to deliver on its promise, the software has to be able to seamlessly integrate with loads of different products, like the partnership with Salesforce that allows users to create contracts directly in the company's CRM system.

"In the act and the manage phases … we are finding that people are looking for an application that really brings those things together," said Springer. "That prepare phase is one that's going to really require a lot of extensive line of business application integration. DocuSign is going to power a great deal of that, but it's not always going to be our application."

That's a big admission for a company that has so effectively owned the e-signature market, not just in the U.S. but globally as well. In the fourth quarter, sales in every market it operates in exceeded the revenue goal, per Springer. The company, which operates in 180 countries, currently has about a 85% and 15% split between direct customer sales and those who sign up independently online.

Expanding to other areas, however, means DocuSign will need to bring its high customer satisfaction for its core signature service to the whole product suite. That's a daunting endeavor. And as DocuSign battles for dominance in the broader market, Adobe seems fine doubling down on e-signatures.

Still, Springer seems confident, and Wall Street appears to agree. DocuSign just raised $690 million in a convertible-note offering in January and is still sitting on $500 million in cash. That's a lot of dry powder to take on all that remaining wet ink.

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