The registrations line to enter Reckon’s annual conference in Melbourne last Friday had the feeling of a political party convention. The faithful – Reckon accountants, bookkeepers, key customers – had come to hear the company deliver on its post-Quickbooks vision and were burning with anticipation. The stakes couldn’t have been higher.
Circumstances had forced Reckon into centre stage. The accounting software market, once a cosy duopoly with MYOB, had been upended by New Zealand entry Xero which had morphed into a $2 billion player almost overnight. Intuit, owner of QuickBooks, had not only terminated Reckon’s rights to the global brand but launched a online accounting program, QuickBooks Online, targeting Reckon’s Australian customers.
Reckon had a lot to prove. It had to show its partners it could stand by itself, sell its own name to Australian businesses, and make client accounting software to a globally competitive standard. And it needed to convince them that it could be trusted to continue as a rock-solid supplier of accounting software.
Neither task was simple. Reckon’s reputation as a buttoned-down, blue-chip ASX stock that could deliver dividends year in, year out suddenly appeared a strait-jacket. Today’s new breed of software companies sip from a fountain of youth, pump out updates every six weeks and live to the beat of the always-on, highly connected internet. How could Reckon achieve such a fundamental transformation without shedding its entourage of conservative investors and partners?
When I first met with Reckon, for a demonstration of their hosted software about two years ago, I didn’t think it possible. Reckon was marketing its hosted desktop software as a cloud solution, but without any ability to connect to third-party cloud apps. At a time when Intuit, MYOB, Saasu and Xero were pushing ahead with browser-based accounting programs, Reckon was just rebadging an existing product.
But the company that took the stage last Friday had clearly changed. The young management team introduced themselves and showed how Reckon had restructured itself as a multi-platform software developer. Reckon had clearly understood that it couldn’t just hire a bunch of web developers to make it in the world of cloud software. It had to know hosting infrastructure, open up to customer feedback and use it to drive development.
Reckon’s management appealed for trust based on the company’s experience. While senior executives resigned to make way for new blood, over 100 employees have been with the company for five years and 30 have been with the company for more than 10 years. As a strategy of differentiating itself from the seven-year-old Xero, which has added most of its 500 staff in the past two years, it was clever.
And what evidence did Reckon give of its rebirth?
Reckon has moved quickly to smooth out a lot of rough corners with its cloud app Reckon One since its preview in July, a bookkeeper at my table told me. “The preview had a lot of issues,” she said with an eyeroll. Reckon’s development team appears to have broken through its legacy desktop mindset and is moving at web speed.
(Reckon One is in restricted release for six weeks so Reckon’s partners can familiarise themselves with it before clients start calling.)
Reckon has managed to find attractive points of difference. The customisable dashboard is new to the market and works really well. A user can add many widgets and set the period (by month, quarter, annual) individually. My first impression of the modular pricing was that it was too confusing compared to the small, medium, large plans offered by rivals. But accountants and bookkeepers love the fact they can upgrade transactions or payroll or projects as needed on a monthly basis. Reckon also has the biggest spread of formats – cloud, hosted and desktop – which has renewed appeal given the imminent gutting of the NBN.
The clearest indication of Reckon’s rebirth is in mobile. Mobile is the next frontier for online accounting; Saasu and Xero are prepping big releases next year which will push more features to handsets and tablets. Reckon has made sure it didn’t just work on a browser-based app; it has clearly invested heavily in its mobile strategy.
The mobile app is ahead of the competition and shows the potential use of accounting apps among employees. A business owner can look at his or her dashboard and add bills and invoices on the mobile; employees can add expenses (record receipts by photo like the Xero Touch app) and enter timesheets.
But the biggest surprise of the day was strategic director Dan Rabie’s personal project to create a mobile payments service. Rabie spent a year and a half talking to the big four banks to find a way for businesses to take credit card payments with an iPhone or Android smartphone. Rabie signed with NAB the week before the conference to produce Reckon Pay, due in Q1.
At this stage Reckon has nothing more than screenshots to show of the mobile payment service which is similar to the US-based Square. But Rabie said Reckon Pay would be superior to Square in that the phone cradle will recognise the smartchip in credit cards as well as the magnetic stripe and it will work with EFTPOS. Users will select accounting or payments from the Reckon One mobile app.
A single solution for businesses to run their accounts and take payments in clients’ offices is a very strong proposition. But the fact that Reckon had the ambition and found a backer – after Square and PayPal were allegedly knocked back here by regulators – shows Reckon has what it takes to compete in the next generation of accounting software.
Reckon is finally ready but the fight is only just beginning. Xero is on a streak and has launched a national marketing blitz to establish itself as a household brand. Intuit is quietly building a presence in Australia to market QuickBooks Online and free practice management software. MYOB says it is seeing strong demand for its cloud programs and must be building towards another IPO. The market’s reaction to Reckon One is untested.
One question remains – how much will Reckon have to change? The upfront development costs of cloud software are enormous. Xero has spent many millions on building its apps; Reckon and everyone else will have to do the same. And Reckon is spending on three fronts (mobile, hosted, browser) for two products (client accounting and practice management). How can it still deliver dividends?
Who knows. 2014 will be an epic year, and only one thing is certain. The world has changed and – just in time – so has Reckon.
Disclosure: Sholto Macpherson travelled to Melbourne as a guest of Reckon.
Image credit: Reckon