Is this all about the channel?
Just when you thought the Australian accounting software market couldn’t get any more heated, in walks one of the biggest players in the world.
Intuit, maker of Quicken and QuickBooks, dominates 85 percent of the US market for small business accounting software, has 60 million customers globally and employs 8,000 staff.
Ten days ago Intuit announced it was selling a global version of QuickBooks Online, cloud accounting software for small businesses, in 130 countries. Four countries will be receiving special attention during the rollout. The bad news for MYOB, Reckon, Xero and Saasu is that Australia is one of them.
After spending an hour talking with the Intuit team on Monday it’s clear the company is committed to taking a chunk of market share in Australia. (You can read the interview here.)
Intuit has at least four strong advantages.
Money. As Xero’s Rod Drury is fond of saying, writing software is expensive. Xero has raised and spent over $35 million to make and sell “beautiful” cloud accounting software to match its global ambitions. Xero’s revenue for the last financial year was $19 million and Reckon’s $90 million (MYOB and Saasu are private companies and don’t disclose revenue).
Last year Intuit took in nearly US$4 billion in revenue which it predicts will grow 15 percent next year. Not only does it have money to spend, it knows how to spend it.
Over 35 million people bought Intuit’s online services, double from four years ago, which made up 65 percent of revenue. The giant sees the future is in the cloud, has already transitioned nearly two-thirds of its revenue base to online services, and can see the opportunity for online accounting sitting there for the taking.
Culture. Despite its size, Intuit drives its R&D using fast-moving, small groups of developers. Apparently Intuit’s CEO Brad Smith is fond of teams “that can be fed with two pizzas”. This seems to be more than posturing; the Australian version has had two updates in the two months since its beta launch and will have monthly updates, Intuit says. Most desktop software companies struggle to push out updates more than once a year.
Reach. Intuit claims QuickBooks Online already has customers in 130 countries. It can’t have many because the global figures are only 360,000 users, and that includes the US where a version of QuickBooks Online has been on sale for 10 years! But the breadth of distribution is pretty impressive given that the global version only launched this year.
Once Intuit has had a crack at finetuning the software for local requirements in four countries, it could replicate the strategy region by region. Intuit hinted as much in Monday’s interview that the number of priority countries would expand.
Complementary services. QuickBooks Online kicked off with the bare basics in the bank feeds department. If you have a bank account with a financial institution other than the big four then you’re out of luck. But Intuit will never have to turn to financial data service providers such as US giant Yodlee or BankLink to add more Australian banks to its feeds.
Intuit already has very strong, direct relationships with hundreds of banks thanks to Intuit Financial Services, which helps 1200 American banks increase their revenue per customer. “If the Australian market says they want more bank feeds, no problem we can get them,” global product marketing manager Barb Anderson said with a click of her fingers.
One question remains. Why make Australia a priority market? The answer given by Anderson – that the king of small business services and the land of small business are a match made in heaven – doesn’t wash.
Dozens of small countries logically have a majority of small businesses. Why not somewhere in Europe?
The answer no doubt has to do with its former Australian distributor. Reckon must relinquish the QuickBooks brand in 2014 and start selling a rebranded QuickBooks software under its own name (most likely Reckon Accounts). In short, Reckon has to convince businesses to care more about what’s in the tin than what’s written on it. Intuit’s presence is going to make that a lot harder.
But the bigger battle is likely to be over the strong channel of QuickBooks accountants and bookkeepers Reckon has built over the past 20 years. Intuit has a great opportunity to sell itself to accountants and tempt them away before Reckon can establish its own brand.
Will the QuickBooks accountant go with the global giant that owns the brand and can outspend any competitor? Or will they stick with the trusted, local player who knows the Australian market backwards?
Intuit is on the charm offensive and its staff are meeting with “hundreds” of accountants while they are here. The goal is to sign them up to Intuit’s ProAdvisor program which boasts 300,000 accountants.
Geoff Morgan, an Intuit global communications manager, told me the US giant has come to listen to the Australian market “with humility”. Although 70 percent of accounting software is the same in any country, localising the software for Australian tastes is critical. “If you don’t get the 30 percent right you will fail,” Morgan said.