Saas accounting not growing – utter nonsense

The former chairman of Sage has said internet-based accounting software is growing slower than most people think, causing an outcry from experts in the IT industry.

Michael Jackson, who was chairman at Sage, said the software as a service industry was ‘growing slower than people think’ and that the market has ‘a way to go’ yet. The comments undermine recent attempts to talk up SaaS as the next big shift in accounting software.

He continued: ‘I don’t think that accounting SaaS has gone as well as it should’ and added ‘it probably needs more investment’.

First up, do you see how the author has set up the argument? Get someone who has put a toe in the water but is not invested in this market knowing that others will cry foul but with no facts to back the strawman? Worse still, the author has gone to a ’source’ that is not qualified to comment. He comes from a different era and a different mindset. His old company is on the back foot in this market with nothing to say. Where was the follow up question – such as: ‘Oh, so does that mean you are still looking to invest? And if so what kind of thing are you looking for?’ (BUT SEE ENDNOTE) As I explain below, investment is not the issue but go to market is inhibiting some growth. That might be solved by investment but that is not a given. Next:

Business software analyst Dennis Keeling said: ‘Nothing is growing in the software market. The market is contracting so, if SaaS is continuing to grow, even if by a small amount, it is a growing market.’

That’s plain wrong or confusing, depending on your point of view. I have great admiration for the past work Keeling did for the UK software market but he’s out of touch with this segment. Try these questions on for size:

• If nothing was growing then how the heck did Xero report a hockey stick with 2,000 in the UK where there were none 2 years ago?
• How is it that I know vendors onboarding customers at the rate of HUNDREDS per week?
• How is it that CODA has found entirely new markets from the tactical needs of business?
• What about the fact CODA2Go has clearly rattled Sage or that others are finding markets in which they can grow in double or triple digits?
• How about the potential replacement and extension to the MYOB market?
• Did the writer notice FreshBooks’ presence in the UK which stands at some 56,000?
• What about WinWeb’s success reported as some 200,000 most of which has materialized in the last 2 years?
• In the wider world, did the author know about the Intacct deal?

Did all these recorded and searchable stories pass the author by? Apparently so.

The fact is the UK saas accounting market is nascent but able to tap into as yet unmet demand across multiple segments. If it wasn’t so then AccountingWeb would not be pimping the crap out of BusinessCloud9 and finding fresh saas angles to the accounting story. Neither would CloudAve be spending Zoho’s marketing dollars on pursuing this topic area. Next:

When asked about the progress of accountancy SaaS providers, Jackson said ‘the industry is not growing as fast as people would have us believe.’

Who are these people? Where are the numbers? I’ve been in this market a long time and know of only a very small handful of people who are making a serious attempt at credibly following the numbers. Neither of the ’sources’ is among them and do not figure on anyone’s radar when it comes to saas analysis that matters to either buyers or sellers. Of course there are discussions around the numbers topic and these are perfectly legitimate as real experts grapple with an issue of importance to both buyers and sellers.

The author did get one thing right:

David Turner, marketing director of Coda, which launched its latest SaaS accountancy model this week, said: ‘It’s definitely a mistake to underestimate SaaS and how quickly it is growing.’

Does Dave qualify as an expert? Not quite though he sure is an expert on CODA. Dave’s an industry insider, a different thing though I’m sure he won’t mind being branded as such, even if that does mean the odd ribbing at the next Intellect meetup

I am bound to be criticized as a hand waver for saas/on-demand/cloud. I make no secret of the fact I believe it is both disruptive and credible as an alternative delivery model with the potential to drive customer value. It is that last part which is more important than anything else. What I can say is that over the years I have been looking at this market, almost everyone who has not done the work to understand saas gets it wrong. The time for misinformation is well over. There are enough facts in the marketplace for reporters to make a decent attempt at understanding the story so far.

What would have been far more credible is if the author had polled professionals. Here, the position is relatively clear. While there is interest, many professionals don’t know how to respond to this fresh wave of innovation. Many are driven by inertia that keeps Sage in the building, despite the use case issues the on-demand vendors can easily demolish. This is not uncommon when new technology waves come along.

Vendors are still figuring out how to approach professionals with value propositions the practitioner can digest. This is something I have discussed with both professional partners and vendors. When the dam breaks on those issues then we will see across the board breakthrough growth. Can I predict the timing? No – but I can and do help firms understand what they need to know.

ENDNOTE/UPDATE: Ben Kepes from CloudAve reminds me in comments that Michael Jackson has invested but with the intention of moving a company over to the saas model. In those terms, Jackson has faith in the general saas market but intentions are not the same as action. Very few vendors have successfully made the transition. Also, the divisions within the acquired company are not in the accounting space. I should add that in the last year I have not come across a single vendor that doesn’t have some sort of saas strategy, however well or poorly formed.