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Great Expectations – Cloud Accounting Software in 2016

2015 was a bumper year in terms of delivery from cloud accounting software suppliers and there is no reason to suppose that 2016 will not be at least as festive or even surpass it. We now have very robust software platforms on which to build, a very competitive market which keeps the suppliers on their toes and a well educated user base that appreciates what we have but continues to demand more in terms of innovation and design.

Globalisation of accounting software

2015 has confirmed that whereas there are geographical specifics, cloud accounting software players are increasingly operating on a global level. During 2015 UK and South African based Sage launched Sage One in Australia, US-based Intuit arrived a few years ago and we have seen Xero continuing to build presence both in the US and UK. Globalisation results in a larger subscriber base with increased subscription dollars translating into bigger R&D budgets and the delivery of world best practice – an all round winner for subscribers.

It is still early days but Reckon has made an effort to tap into the UK market, opening an office in London and launching both Reckon One and SyncDirect (a tool enabling accountants to automate the collection of client data from any accounting software.) Whilst Reckon may be takeover target in 2016, the company has realised the only way to survive is through global expansion since the Australia/New Zealand market is so small.

Missing from the list of global software providers (I’m not counting New Zealand) is Saasu. Initially Saasu had greater  depth of functionality than Xero and attracted users based on this but the company has avoided the path that Xero has taken of raising capital to invest in software development and the limited R&D budgets have taken their toll on subscribers and Saasu is certainly not in a position to go global.

Also missing is MYOB which to date, I don’t believe has given any indication of moving into international markets. Possibly this is the one vendor that doesn’t need to; MYOB already has a substantial market share in Australia which with the stabilisation of its cloud offerings, it is now in a strong position to retain. It invests around 13% of a reasonable revenue base into R&D enabling it to focus innovation in a single geographical market and thus buck the trend and survive in a global market.

The players in 2015

During 2015 we saw a new player – Sage One – emerge, we saw the technical rebirth of Reckon One, we saw the filling of functionality holes in MYOB Essentials and Xero and we saw big improvements to the user experience with QBO.

There were also some common delivery themes across vendors especially in the areas of mobile applications and opportunities to facilitate customer payment of invoices indicating that suppliers are operating on a similar wave length and listening to customers all of which augurs well for 2016.

The players in 2016

I think it is unlikely that we will see any new players of note in 2016. The Australian marketplace is already very competitive and increasing homogenisation of existing products creates a barrier to entry for new products. We are likely to lose rather than gain in 2016. Reckon is threatened with a potential takeover, so much so that it’s more a question of when and who by. Depending on the who– we may see Reckon One disappear which is somewhat unfortunate as the product does have currently unparalleled functionality for job/project costing businesses.

Also at risk of disappearing is Saasu, 2016 could be the year where the lack of revenue to fund R&D  becomes crucial to its survival although I think its hold on the market is more tenacious.

The users in  2016

Cloud based accounting software is now mainstream. Any small business coming new to accounting software – either from a manual/spreadsheet system or a startup – would need to have a good reason to go desktop rather than cloud. The ease of use and automation tools means that start up businesses that may previously baulked at the cost of using a bookkeeper can adopt more of a DIY approach. (Professional assistance is always recommended for implementation and ongoing review.)

The drift from desktop to cloud also continues so these two factors should ensure user adoption will continue to increase substantially.

Should the ATO’s Single Touch Payroll become mandatory in 2016  we could expect to see more subscribers to cloud accounting software but although many small businesses would benefit from using a payroll system, it does not appear likely that this initiative will come to fruition in 2016.

The functionality in 2016

Functionality variances between the various products are gradually being eliminated and development of the add-on ecosystem means that new functionality releases are likely to be more limited in 2016 although there is hope that the payroll module for Reckon One will come out before 1st July.

These are the key areas where I think we will see some key deliverables during the year:

  • Dashboard – this is the screen that is displayed at login so it needs to be crisp and clear, showing both relevant and pertinent information and clearly indicating how to access functions. As part of the focus on user experience I would expect to see more tailoring or tinkering with the dashboard to ensure the first impression is positive and would expect it to become truly dynamic.
  • Mobile – 2016 will see a continuing focus on mobile apps so they cover the majority of features in the software, leaving out possibly just the pure accounting functions such as journals, chart of accounts etc.
  • Automation – this has the biggest potential for development. Business owners have long resented time spent on data entry; it is not seen as a value-add activity and can be prone to errors and/or omissions. There already has been a sizeable delivery in automation tools from Bank Feeds to automated third party Accounts Payable services and this is likely to be expanded in 2016.
  • Banking the close association between banking and accounting means that we can expect to see continued development here.
  • Paperless Workflow This is becoming more of a reality with payables invoices sent to software such as Receipt Bank, attachments held against transactions, publishing of reports online. Again this streamlining is ripe for expansion in 2016.
  • Security – following security scares in 2015, Xero released an optional Two Step authentication process. We are likely to see enhanced security options across all products in 2016 to match customer expectations.
  • User Experience – another area where there is strong emphasis. Xero was developed with this at the forefront of developers designs, QBO has invested heavily in 2015 and all other suppliers can ignore at their peril. Intuitive, easy to understand and a tool for non-accounting business owners is a must.
  • Add-on Ecosystem – this is already mature with QBO and Xero (almost to the point of oversupply for some functions such as e-commerce and CRM) but in its infancy with Sage One and Reckon One. Possibly 2016 will see some of these products being bought out and more solidly integrated with the core product. Add-ons that address niche business models especially will continue to benefit.
  • Accountant Tools – accountant recommendations have always been an important referral source when selecting accounting software but now that accountants can access client data any time, it has become even more important for software suppliers to provide tools to support accountants. Sage is relying quite heavily on its Handisoft accountant base to increase the exposure of Sage One and both Xero and QBO have concentrated on their Practice Management offerings – this is likely to further expand in 2016 to ensure accountants can work fully with the client.

As I said in my review of 2015 – it is becoming a little like the fireworks over Sydney Harbour on New Year’s Eve – each year has to glitter more than the previous. The QBO design methodology is called ‘Design for Delight’ and this is really what is all about – delighting the customer with the product depth and breadth. We have a well educated, technically savvy, demanding and discerning user base in Australia and I think that developments in 2016 will satisfy all but the most rapacious of appetites – it is going to be a great year.

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3 comments on “Great Expectations – Cloud Accounting Software in 2016

  1. Margaret, Saasu makes millions in revenue and is profitable. This post destructively misrepresents Saasu’s continuity of service to our customers. We did a huge amount in 2015 and with a small agile, disruptive team that punches way above it’s weight. We won Westpac, Ozforex deals ahead of Xero. We built innovative features like instant Global Search ahead of them also. See http://help.saasu.com/updates/ for an idea of some headline things we did.

    Marc, CEO of Saasu

    • Hi Mark. I apologise if I have misrepresented Saasu and its position in the Australian market place. I do agree that Saasu has always been ahead of Xero in functionality features with Xero playing catch up I am currently preparing a blog on each of the six products I reviewed in the 2015 review and 2016 expectations looking at functionality and other features and wondered if you or someone else at Saasu would be available to discuss future plans and directions. Regards Margaret

      • Thanks Margaret. It’s best to reach us via media@saasu.com and that way Sofia (COO) or myself will help you with any info you need noting that we don’t reveal what’s in the pipeline unless its approaching release. Cheers, Marc

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