Planning SaaS for mid-size businesses.
Last week Reckon announced it had would no longer be allowed to use the QuickBooks and Quicken brands from 10 February 2014 after signing a new distribution agreement with accounting vendor Intuit. However, Reckon will gain access to the code for the desktop accounting software on that date and will continue to sell it under its own, unreleased brand.
The agreement also signalled that Reckon would not sell Intuit’s software-as-a-service (SaaS), called QuickBooks Online, in Australia and New Zealand. Where did this leave Reckon with its plans for cloud accounting software?
BoxFreeIT spoke this morning with Reckon’s group CEO Clive Rabie about what happens next. An edited transcript appears below.
Reckon and Intuit
BoxFreeIT: What are the terms of the new agreement with Intuit?
Clive Rabie: We have moved from a limited term agreement to a 100-year agreement with slightly different clauses. We pay no more royalties and will get the code in 2014 which will be ours to use, and we would change the name of our product from QuickBooks to some other name.
BoxFreeIT: Will any other parts of the business be affected?
Rabie: Intuit affects maybe 30 percent of our business. We’re more in the enterprise space (while Intuit’s products are in the SMB space). From an Intuit perspective it’s purely changing the licensing agreement and the name of a product.
BoxFreeIT: What are the reasons behind it?
Rabie: When we joined with Intuit 20 years ago the online market didn’t exist and now because Intuit has an international strategy and a SaaS product they are delivering worldwide they don’t want product confusion.
If they have a SaaS solution which is available in Australia called QuickBooks Online and we have a product sold in Harvey Norman called QuickBooks Pro, Premier or Plus – support, branding, advertising, everything is a problem.
BoxFreeIT: Is Intuit selling QuickBooks Online in Australia? I thought it was only available in North America?
Rabie: There are two versions. QuickBooks Online has been available in the US for more than 10 years. We looked at it eight years ago and it was so complicated it didn’t even travel well so they had to develop another product for the rest of the world.
That product is also called QuickBooks Online and it’s not delivered to the US, only to the rest of the world. It is sold through Singtel in Singapore, it’s in the UK and has a very dominant position in Canada.
But when you see Intuit’s revenue figures for QuickBooks Online that mainly relates to that old product sold in US.
BoxFreeIT: Why aren’t you reselling QuickBooks Online in Australia?
Rabie: Sometime ago we had a chat with Intuit and one of the opportunities was to distribute the Asian product into the Australian market. We had two objections. We didn’t have direct access to the code when we wanted it. We wanted to be able to localise something quickly and that was difficult for them.
The second thing was we wanted the data to be housed in Australia. Even if it was housed somewhere else it had to be kept and copied here in Australia. They weren’t able to do that. So we made a decision to go on our own in the pure SaaS world.
Next page: Reckon to build a more feature-rich SaaS for mid-size businesses
SaaS by Reckon
BoxFreeIT: Your SaaS product CashBook Online is quite basic compared to other accounting SaaS software. Will you build it out with more features?
Rabie: The CashBook product is probably what we compare to be a BankLink equivalent. That’s most probably where it will live. CashBook will have another release very soon around July and that will be closer to MYOB LiveAccounts but the whole user interface will be a lot different. Thereafter we will have another product which will be launched a few months later and that will be quite a big SaaS product and that will most probably share the name of our desktop products.
Rabie: It will be different to Saasu and Xero. It will have general ledger and all the rest of it but we will focus on certain features in the product that will be far more rich than are currently done through Xero.
If you asked where are we positioned versus Xero: If the market is being broken down between small and medium businesses we are in the mid-sized business market. QuickBooks is a very function-rich product and most of where we sit is in that richer functionality.
BoxFreeIT: Why are you focusing on medium rather than small businesses?
Rabie: I think the bottom end, which is more Xero and iBizz and MYOB’s Live Accounts, is going to go through a lot of changes and a lot of price pressures and it will be a nice place to grab your nursery but a very difficult place to transact over time.
There’s a bit of stupidity in the market at the moment and unfortunately that’s going to happen. You’re going to get a guy like (Xero CEO) Rod Drury who has a lot of cash behind him and he can market his way to keep a higher price. And then you’ve got some guys (Acclipse) looking to develop this (iBizz) product in six months or a year and they will try and sell it on price.
Today if you run Xero with two databases you’re paying $1,200 a year whereas if you buy this iBizz product you’re paying $120 a year. (Ed: Xero offers a 25 percent discount for two or more subscriptions which range from $360 to $768 per year.) And that (Xero’s high price) is what’s going to be dealt with in the market.
BoxFreeIT: I’ve heard rumours that Saasu is up for sale. Would that be one option for Reckon to buy and rebrand?
Rabie: Sure, if that takes us to market quicker. We’re always looking at opportunities.
BoxFreeIT: Xero has been heavily pushing the concept of a single ledger. Will you be moving towards that as well?
Rabie: We have a practice management business and Elite, which deals with 3000 smaller accountants. I can see some degree of logic (for Elite) with the single ledger. It is a good proposition for small business accountants but that’s provided you can convince people to work like that.
But we also dominate the top 1,000 accounting companies and they couldn’t even contemplate the single ledger. They need a ledger that can be agnostic to all kinds of data. We could never consider it as an option.
But I can understand why a provider of a SaaS small business accounting product would sell that concept. Because if you are an accountant and can get all your people onto the same product it’s lovely for you for business and it’s easier for your accountant, it does make sense. But then the functionality that everyone wants from accounting products is different.