Disclosure – I’ve got or had commercial relationships with almost every vendor mentioned below – for full details see my disclosure statement.
A week or so ago Intuit acquired Australian based accounting workpapers vendor FIFO. My sources suggest that FIFO was not really seeing widespread market success, considering they are a player supplying the Australasian market only and that the biggest ANZ cloud accounting vendor, Xero, bought their competitor WorkFlowMax, it’s not surprising that they found the going tough. As such it would seem that the purchase price wasn’t princely – nonetheless it’s an interesting development, made more so by the announcement from Intuit that they’re planning on offering the product for free.
First some context into the very muddy world of Australasian accounting software. Intuit had virtually no presence in the market until recently when their long term reseller relationship with practice management vendor Reckon ended is what was somewhat acrimonious circumstances. Add to that the fact that reckon has some rights to the QuickBooks name, and that Intuit is now strongly pushing into the Australian market with its own cloud-based products and you have a complex situation. MYOB, the largest of the client side software vendors, has had a very poor start with its own cloud products, and would seem to be very wary of a rapidly growing Xero (who also seem to garner the majority of the attention).
Until Xero started giving its WorkFlowMax product away to accountants, both practice-side ad client-side software had to be purchased. In the case of practice management software this was a significant cost. Xero turned that on its head with WFM – it’s not nearly the fully featured product that Xero suggests – in fact most accountants I talk to are still using one of the “legacy” products. But as natural attrition starts to work its magic, and practices are faced with a new software decision, an 80% solution that costs nothing is a pretty attractive option.
Intuit isn’t stupid and realizes that it needs to create a compelling suite that combines client and practice-side solutions on one platform – the days of wrangling different data files between clients and practices may not be over, but they certainly should be. Intuit recognizes this fact and in an interview with BoxFreeIt said that:
We believe that it is a way that accounting firms today can take advantage of QuickBooks Online and it becomes an ecosystem of apps that work together. QuickBooks Online is an open platform with published APIs (application programming interfaces, which allow it to connect to other programs). Fifo is an open platform and works with many practice management and financial applications. We felt “free” was a bold move and let accountants and bookkeepers in Australia understand the commitment to the customer base and to them as partners.
Of course that last sentence is pure spin. Their “bold” move was nothing but a reaction and emulation of Xero’s strategy and a reflection of a reality for accountants. I have many friends who are accountants but for all the hype that modern software vendors talk about adding value and not just doing the same old compliance, most practices are on a very traditional service provider model. As such there is very little opportunity to add incremental revenue opportunities from customers. So what options do they have to increase profitability – just the age old one, by reducing costs. By giving away practice management software both Xero and Intuit are giving accountants the chance to save a few dollars per customer – and that’s still one of the most compelling messages for practices. They’d never admit it – but no one gives anything away for free unless there is a significant strategic reason for doing so. Others see it differently, Dennis Howlett suggests that:
…vendors must provide the professional accountant with reasons to remain loyal to the core offering by giving them something that makes their lives easier and which provides opportunities to develop outside basic number crunching and tax services
While there is perhaps a small incremental advantage in terms of efficiency for accountants by using the same database as their clients use, I don’t see much in this that lets them develop add on services. While I do come across the odd accountant that is actually doing something new and novel and “value add” the vast majority are about doing the same as before but at lower cost.
Intuit is making suggestions that Fifo could be internationalized and rolled out globally – it certainly needs to do something compelling to stem the tide of a fast growing Xero. the problem would seem to be getting to feature completeness – the number of practices using either WorkFlowMax or Fifo as their sole practice management system is very low – these products just aren’t there yet. But with little innovation happening in the practice management space – maybe they’ve got plenty of time to get there.