Saas accounting not growing – utter nonsense

by admin on April 16, 2009

in Cloud Computing/SaaS,General

It is irritating to read stories where it is glaringly obvious that a strawman has been set up for demolition. That isn’t objective enquiry, it’s agenda setting of the worst kind. It usually arises because the person has already decided what they want to write and fits what they get to the story, even when it doesn’t make a lot of sense. It does the subject matter no good and puts everyone in a poor light. Such is the case in Accountancy Age: Experts refute Jackson’s criticism of SaaS. A classic strawman headline if I ever saw one.

I’ve spoken to the author in the past. At the time it was obvious she had a flimsy grasp of relevant facts, had been lobbed a few contacts and written an entirely incorrect account, despite my providing her with bags of contradictory information. As it happens, nobody cared and I would hope no-one will care on this occasion. Even so, sloppy once is forgiveable, but downright nonsense is not. Here’s how the story goes and why it’s wrong:

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:

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.

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Ben Kepes April 16, 2009 at 9:48 am

Dennis – Michael Jackson has invested in the SaaS market –…

Dennis Howlett April 16, 2009 at 11:22 am

@ben – has announced intentions – as we both know intentions are not the same thing as ability.

Phil Wainewright April 16, 2009 at 12:30 pm

Maybe Jackson was talking about SaaS at Sage: "I don’t think that accounting SaaS has gone as well as it should" … "it probably needs more investment". Never a truer word :-)

Seriously though we are now – in just the past few months – starting to see the UK market start to take off with vendors like Xero and Kashflow posting tremendous growth numbers (and others in elsewhere Europe, eg e-conomic). So the validity of his comments depends on the time period and the market segments he's talking about.

It probably is fair to say that SaaS accounting has until recently been slower to take off in the UK than people expected but perhaps that's because vendors were following the wrong models. You could also argue that SaaS accounting vendors like NetSuite and Intacct in the US have lagged the performance achieved by vendors in other application categories such as, SuccessFactors, etc. In Intacct's case you could certainly say that was due to lack of investment because the vendor has caught up a lot of ground in the past 18 months since a change of CEO and new funding.

Overall though to state flat-out that "the industry is not growing as fast as people would have us believe" is flat-out wrong, based on the evidence we're now seeing in the market – and compared to the numbers conventional software vendors are currently posting, SaaS growth is rocketing, even for accounting.

Dennis Howlett April 16, 2009 at 1:09 pm

@phil – as I said in my discussion: "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" and yes there is legitimacy in referring to the more recent trends but then I have been seeing consistently accelerating growth for some months – certainly since the late autumn, accentuated by recent year end demand.

Many people predicted 3 years ago it would be 'at least' 5 years before saas accounting made any impression in the UK market. While I would not wish to stick my neck out too far, the current indications suggest we're kinda there.

The investment case is an odd one that depends on segments (which have generally been horizontal so far) and ambition. My sense is that's for another discussion ;)

As Twinfield's numbers show, you don't have to go after hypergrowth to do well enough for your shareholder. Whomever they may be.

David Turner April 16, 2009 at 1:50 pm

No-one was more surprised than me to be branded an 'industry expert', Dennis! I've been in this sector a long time, of course… but as you say, I am an 'insider'. it did make me smile though…

Clearly with CODA 2go we're just gaining momentum, but if you saw how mobbed we were at Cloudforce the other week, after the launch announcement on stage, you'd conclude that interest in Cloud Accounting is massive.

Which is not the same as sales, I grant you… :-)

Dennis Howlett April 16, 2009 at 1:55 pm

I'm not surprised – the EMEA partner guy said to me: "I have the best job in the world – ISV's falling over themselves to partner" – good leading indicator

Richard Messik April 17, 2009 at 4:34 pm

It is quite clear that SaaS (please find a new acronym!) is growing in popularity and, as I have said previously, it is exciting to see so many new players coming into the marketplace. There is little doubt in my mind that it will reach critical mass before too long.

I think the established playeyrs are beginning to run a bit scared as an SaaS model could affect their licence fee model – although it is interesting to see that CODA have gone for an SaaS alternative.

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