Conflating the cloud

by admin on November 27, 2009

in Cloud Computing/SaaS

When you’re working in IT marketing, there is a pre-requisite that you believe your own BS. If there isn’t anything convenient or there’s too much of the same stuff being said then you go to a fall back position: reinvent history. Better still if you can meld the two together and get some page view fueled publisher to fill digital pages with your stuff. That should be enough to start a new trend and you can then be dubbed leader. Sounds like a winner eh?

That assumes of course that nobody notices that what you’re saying isn’t very credible in the first place. Unfortunately, in this day and age of astute and well informed readers, coupled to those not afraid to point out the paucity of what passes as IT marketing and all of a sudden, that’s not such a compelling strategy. Enter Hugh Scantlebury, CEO of Aqilla.

Talking on AccountingWeb, he makes a confusing yet fascinating leap that attributes the death of Microsoft Office Accounting to the rise of SaaS, asserting that the future of accounting software is now a mainstream talking point. Here’s the key set of statements:

What it has done, however, is to bring the question of the future of accounting software into the mainstream – a debate that’s been ongoing in the industry for a number of years. It is now critical for the vendors to understand what’s going on, as well as for end-users to see how products will change and the benefits this different approach will bring.

No matter what anyone says, there is a gradual move to web-based or Software-as-a-Service (SaaS) accounting, and that’s set to change the industry. Some traditional on-premises vendors are looking at ways to take advantage of this by developing their applications for deployment over the internet, but others are taking the “ostrich approach” by sticking with their licence-based standard models and hoping for the best. We saw a similar situation with customer relationship management (CRM) software and the arrival of on-demand players like salesforce.com around ten years ago.

Let’s pick this apart:

  • I’ve been in this game for 30+ years and been writing about it since 1991. I’ve never heard the industry debating its future in the manner he describes. Maybe I wasn’t invited to those chinwags.
  • Yes – there is a move to SaaS but as Philip Copeman of TurboCash points out in comments:

There has been a flood of vendor entrants, simply because it is a whole lot easier to put up a server than it is to go out and grab 1% market share, but the numbers don’t stack up. While the providors of web based systems are really cagey about their user bases it is a simple matter to check it out on Alexa. The traffic on all of them is abysmal.

The market leaders SAGE and INTUIT have 6 Million and  5 Million users each and are effectively static in the growth of their user bases. MYOB has 700 000 and TurboCASH has 100 000. Everyone else is reluctant to reveal their numbers, so you can assume that they are all smaller.

  • Alexa is an imprecise tool for comparison but generally, Philip’s point is well made. He misses out WinWeb and Freshbooks which have hundreds of thousands of registered users but most of the vendors are playing in the low thousands. Even so, economics demonstrate that even at these levels, companies can be profitable. Check out Twinfield’s numbers. What’s more, I’m of the view that there is plenty of room for many players as the industry seems to be quickly adopting a vertical market approach, something with which the large vendors have always struggled.
  • We didn’t see a similar situation in the CRM world. Siebel, the company that Salesforce.com effectively dethroned was far too complex for many. Salesforce.com has on the other hand kept things relatively simple but with the brilliantly conceived idea of creating a platform against which others can build. Hence the emergence of services like FinancialForce.com and the other many thousands of add-on applications it has spawned. That’s a very different argument.
  • Some companies may never move what they see as business critical data into the internet cloud. Accounting data is often thought of in those terms. While I disagree with that premise, it is a fact of life that SaaS vendors need to address. Hugh’s argument doesn’t do that.

As I’ve said before, the SaaS/cloud industry needs to make a much better job of positioning and arguing its strengths. Too much emphasis on cost alone will not do it.

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