Pegasus wriggles but to no avail
April 3, 2008
It’s interesting to watch how the incumbent accounts software providers wriggle and squirm, often contradicting themselves as they try and come up with a credible response to the on-demand providers who are snapping at everyone’s heels.
Today’s contender is Pegasus, that maintenance mode throwback to the early 1990s, which claims that nearly 20 per cent of its current sales are to new customers. That’s the claim of Pegasus commercial director Kevin McCallum who says:
"There are a lot of upgrade sales around for the Sage 50 base - as it is for everybody, including Sage. It’s a well established brand and product, but has certain limitations and we want to supply the next step up for those businesses."
It’s true to say that Sage has been experiencing a draining away from its Line 50 business but this usually happens when the customer needs something more. In the meantime, it is backfilling with fresh acquisitions. But let’s look at what this means for Pegasus.
First up, a lot of its sales are for its Excel XRL product. Even if we’re to be charitable and ascribe 10 per cent of its revenue to former Sage customers, that’s still a fleabite. The elephant in the room is Microsoft which has torn lumps out of every player in the last year or so, creating a $1 billion business in the process.
McCallum can’t resist having a go at what John Stokdyk refers to as:
…web-hosted "on demand" business software suppliers who are building up a significant presence, particularly among smaller companies.
Good to see John finally acknowledging what I’ve been saying for some time. But back to McCallum. He answers by asserting:
"I still believe there’s a gap between what software is purported to do for the business and what it can do if someone is there to make the system work for you…Every week there’s a new software as a service (SaaS) from Scandinavia - but they’re still coming from nothing."
Duh? So is it my imagination or is Twinfield’s 18K+ customers ‘nothing.’ Or how about Xero’s 100+ accounting partners? Or Kashflow’s 2K+ customers. OK, so those numbers pale into insignificance when comparing to Sage’s 500K customers. But Sage has had 27 years to get this far. In recent times it has adopted an acquisition strategy to fuel growth where the on-demand players have to grow organically.
Yes I know that on-demand is in its infancy and yes, most services are feature incomplete compared to bloatware. But that entirely misses the point.
The on-demand players are going after niches from day one rather than trying to be a silver bullet for any business. That’s a model for the 21st century and one that even Sage acknowledges through its recent vertical market acquisition strategy. On-demand vendors are way more agile than the incumbents, largely because they’re not saddled with outdated code and can take advantage of modern development environments that allow high speed functional deployment.
But here’s the acid test: They can only grow by continuing to delight their customers. While we don’t have long term data, I see no indication that on-demand vendors are failing at anything like the rate of the incumbents.
The end of the software suite?
March 27, 2008
There have been rumblings here and there about whether the on-demand software suite might replace the behemoth systems usually found today. Yesterday, I came across this piece on Sandhill by Michael A Braun, CEO of Intacct which purports to support the thesis.
Apart from the fact it is appallingly written, the case it makes is so overblown, muddled, full of hyperbole and short on fact, you’d have to be a complete novice software buyer not to see straight through it.
Fortunately, the media we have access to today allows anyone with an opinion to express how they see a particular story. Needless to say, most commenters (rightly) dismissed it as a piece of puffery, even though whomever really wrote it (it’s usually the PR department), attempted to make the odd good point.
As an exercise in futility, the piece reminded me that regardless of how much you or I might believe in a particular approach to software, there is always the risk of believing your own bullshit to the point of looking faintly ridiculous. This is a good example. As a reality check, it’s not wasted.
More on Xero
March 6, 2008
I promised to say more about Xero and have now had time to sift through some of the customer stories. Regular readers will know I place far more credence on these than I do on what a vendor has to say. They’re encouraging. Even more encouraging are the words of Andrew Sandiford, Head of Business Advisory and Assurance at Target, Chartered Accountants:
Target see themselves as Financial “Guardian Angels” to businesses, and this is now possible using Xero, as Andrew explains:
“We can keep an eye on client’s accounts as and when we want to; we can just login and look at what their current financial situation is, and contact them as required. We offer the monitoring services of an FD to companies that could not afford that level of expertise otherwise. But we can only do this because of how Xero works.”
As to what using Xero means for his Accountancy firm, Andrew is clear: “Xero offers us the unique chance to really be integral to our clients’ businesses like we have never been before. We will add greater value to the relationships we have with existing clients, and I know this will mean we attract more clients in the future.”
The full case study can be found here.
Xero is still very much in the ‘testing the waters’ stage to figure out what works and what doesn’t but even so, having this kind of endorsement from a firm of professionals can only do them good.
I like they’ve organized all the essential data any business needs into a dashboard that’s readily understood. As the old saw goes: a picture is worth a 1,000 words. Having embedded help tips for each section adds value for end users.
It will be interesting to see how Xero progresses in the UK, especially given they’re aiming at the ’spreadsheet hell’ crowd that wants to keep a full set of books but doesn’t want the hassle normally associated with book-keeping, yet is prepared to put the modicum of effort required to do the job properly. That won’t be everyone but the market is large enough for it to be attractive to on-demand players of all kinds.
During my discussions with co-founder Hamish Edwards, we talked about alert mechanisms. I like the idea but figuring out how it works is tricky. As a professional, do you want to know every transaction that might be incorrect, once a day (where applicable), weekly, monthly? Think about this from a marketing perspective. If you’re able to help clients solve their problems in a pro-active manner, then you’re fostering a strong relationship. You’re delivering value by focusing on the most important ’stuff’ and ensuring that clients know you care. That’s simply not possible with desktop and client/server applications.
That’s why, rather than talking about software as a service (saas) I am now leaning towards business as a service or BaaS. That’s how it should be, don’t you think?
So-SAAS or the real deal?
February 9, 2008
Last week, Ed Molyneux and I briefed Dale Vile of Freeform Dynamics. As someone who has been on the analyst side of the fence I know it can be a nerve wracking experience. Dale has no illusions about many of the saas/on-demand services he sees and which he described in The Register in these terms:
When I challenged some of the purist SaaS thinking in a blog post recently (see Dissecting SaaS), I got a lot of phone calls and emails from SaaS providers offering to ‘educate’ me on how their particular service was as an example of why the SaaS delivery model was so compelling. After listening to a few of these stories, I was still singularly unimpressed with most of what I heard – essentially far too much ‘me too’ reinventions of traditional applications that typically did less than the solutions they were supposed to be replacing.
This is what Phil Wainewright (who we will be briefing next week) calls So-SaaS. Ed was demonstrating FreeAgent which now has just shy of 500 registrants and is transitioning beta testers onto a paid regime at a steady clip. Dale liked the fact the service puts the user in control or, as he prefers to say:
Interestingly, if you look at service provider authored SaaS applications in this way, i.e. by asking what new they bring to the party in terms of capability, then the SaaS delivery element sometimes becomes a bit of red herring. Will offerings like FreeAgent, for example, be successful because they are SaaS-based or because they fill a gap? – in this case the need for ‘cut the crap’accounting, billing and tax management designed for IT contractors and the like that are not well served by traditional players like Sage.
We believe there is genuine value in cloud computing models especially where it allows for easy collaboration between interested parties. That’s why we encourage professional accountants and customers to work together to get the best out of the system.What is more interesting though is the manner in which our support systems are developing. We use another cloud service, GetSatisfaction.
What we’re seeing is very different to what I expected. Support systems are usually peppered with bug issues that don’t get fixed in a timely fashion and which leave users befuddled. We’re finding that a combination of fast response times (many queries are answered with a few hours) plus appropriate acknowledgment of problems leaves almost all customers happy with the service. We’re also receiving interesting questions about treatment of individual expense line items. That’s unusual. This sometimes strays into the professional accountant’s turf but wherever possible, we provide an answer. Where we can’t, we will happily refer it to a professional who understands the FreeAgent value proposition.
Why is this working as an alternative model for support?My sense is that a combination of cloud models enforces a level of transparency which we cannot avoid and should embrace. Transparency keeps you honest but more important forces the service provider to exercise a level of care that is not required when the service is disconnected from the user. At the very least, it forces other players to question the value of their delivery mechanisms.
