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Remaining relevant in the Cloud

News leaked out last week that international software giant, Intuit had laid off 399 employees representing almost 5 percent of the company’s 8,000 strong workforce. No further details relating to the geographical location or business unit were available apart from a reassurance from Intuit Communications Director Chris Repetto that  ‘This decision will have little to no impact on the Accountant and Advisor Group’   The news however is interesting because here in Australia, Intuit has been actively recruiting high calibre staff to support the rollout of QuickBooks Online, its cloud accounting software product and  has also invested a large sum of money in the recent fitout out of its iconic and prestige new office space in Philip Street, Sydney.

For Intuit, these retrenchments are not an across the board belt tightening exercise, rather a controlled response to a change in strategic goals and business model. Intuit has been in existence since 1983 and its mission has always been to ‘improve people’s financial lives so profoundly they can’t imagine going back to the old way’ The mission has never changed but the way it is delivered to customers has been the subject of continuous change and never more so with the move into cloud accounting.

And Intuit is not the only software company to realign its workforce. Interestingly only a few months ago, Xero advised that it too had shed some employees that were no longer relevant to current operating conditions. The skill set and approach of employees needed in the early start up days were not the same as needed by a company in a more mature business phase.

So the message is clear to both employees and business owners – to survive in the current business world, you must:

  • Position your skills so they remain relevant in today’s (and tomorrow’s) world
  • Maintain a customer focussed approach

Right now Cloud accounting software is a booming industry and is fast becoming flavour of the month as more and more business owners and accounting professionals recognise the benefits and efficiencies that operating in the cloud can bring. The increasing demand for cloud accounting software comes not only from existing desktop users that want to migrate to the cloud but significantly from businesses that were not previously using accounting software and are now ready to tap into the flexibility and ease of a cloud solution.

The previous cosy duopoly of MYOB and Reckon is a thing of the past as Xero, Intuit, Saasu and more recently Sage have moved into the space, giving businesses a wider range of options from which to choose. Brand loyalty has also disappeared as customers search out value in terms of both the subscription cost and the productivity gains they can realise. The availability of free or low cost data conversion services means it is no longer a daunting task to change software products.

Further increasing the challenge for the software suppliers is the use of price as a marketing feature. Xero had a few years of virtually untrammelled existence and so did not need to worry about competition and pricing but we are now seeing, first Intuit with QuickBooks Online, then Reckon and now Sage coming into the market with very cost competitive offers. This results in software suppliers ‘buying’ customers which doesn’t help their bottom line in the short term at least, especially when the need to recoup R&D costs is considered.

A brief overview of how the major players are positioned:

  • MYOB came out initially with Live Accounts which later morphed into MYOB Essentials. The product has many concepts similar to MYOB Account Right but without much in the way of bells and whistles and probably, relative to other products, did not cost too much to bring to market.
  • Reckon has had asomewhaty tortuous journey with Reckon One. It too started with an earlier product called CashBook which morphed into Reckon One but was delivered on a platform that was virtually obsolete before it hit the market forcing Reckon to embark on a very expensive rewrite to enable the product to be a viable option. Similar to MYOB Essentials, Reckon One has many concepts similar to Reckon Accounts but is very light in functionality depth and will probably suffer from being such a latecomer to the market.
  • Xero was the first true cloud product to appear in Australia. Back in 2009 when it was first released, the functionality was very limited but releases were delivered with astonishing speed in the early days and to a market that was very forgiving and prepared to wait for features to be added – a luxury that no other product will enjoy now that customers have benchmarks for comparison.
  • Intuit came very gently to Australia in 2012 making only little waves while it readied its product; QuickBooks Online for Australian businesses including a GST module and an integrated Payroll solution followed by a complete revamp of its user interface. The company also set about hiring staff, training them in the product and setting up an office all of which took time and money.
  • The most recent addition is Sage with Sage One – this is still very much in its infancy but coming so late to the market, it is likely to be battling some headwinds as it tries to increase product awareness and takeup.

So although there is an increasing number of businesses looking to use cloud accounting software, this is more than matched by an increasing range of software suppliers looking to fulfil those expectations. So will the pie be big enough so that no one goes hungry? That is a question that many investment analysts are asking right now. Previously with just MYOB and Reckon to consider, it wasn’t too difficult to evaluate how market share would be apportioned but now with so many players, they are increasingly questioning how the market will trend in the coming years.

My thoughts are that the current players have deep pockets for their products and too much at stake too risk pulling out of the race early, but sooner or later some may need to make some tough decisions and rationalise their activities. Increasing the likelihood of success will be; a commitment to the customer experience, remaining relevant to changing business requirements and providing software that will automate and streamline business processes and reduce non-value adding manual activities. To achieve this, employees with relevant skills and an ability to understand customer requirements will remain a valuable asset to the company.

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