Sage and Zoho go SaaS Accounting–Quick Insight

A couple of announcements (or in one case a leak) this week for those who follow the SaaS accounting space – both Zoho and Sage introduced products to the market. TechCrunch broke the news that Zoho is introducing an accounting product – I’ve actually known about the existence of this product for over two years, I spent some time with Zoho in India in November 2008 (disclosure – at that time I was co-editor of CloudAve, a blog sponsored by Zoho) and spent quite some time talking to them about the accounting needs of SMBs.

Almost simultaneously, Sage announced its SageOne product, a replacement for the abysmal failure that was SageLive – as always, and not surprising given his ongoing war of words with Sage, Duane Jackson, CEO of KashFlow was quick to pass comment over the Sage offering.

Others have looked at the products themselves but I thought it was worthwhile looking at the two strategies of these companies – one (Sage) is an incumbent player with the additional concern of not cannibalizing its own customer base while the other (Zoho) has the freedom to build a product in a completely fresh area (for them) – as such the relative approaches are telling. It is interesting to note the relative strategies of the big three desktop SMB accounting software vendors (see my disclosures, I’ve worked with several companies in this space) – both Sage and MYOB appear to be taking  direction that sees them develop a very lightweight offering which gives them the benefit of not confusing their customers with conflicting online and desktop offerings – in MYOB’s case LiveAccounts, in Sage’s SageOne (as an aside, these names, and the products they represent, are eerily similar). As an aside, I personally prefer Intuit’s staretgy, which sees it build a platform (the Intuit Partner Platform) which allows third party web applications to integrate with the existing desktop, as well as online, products.

Compare these approaches to that of Zoho Books, a product without the shackles of existing customers. Given this facts Zoho can build a product that will develop into a deeper offering, and also includes (or will soon) an API to aid integrations with both third party applications, and the other Zoho applications. No such joy for SageOne which, at this stage, has no API and no indication of if, or when, one might be released. The application feature-set is surprisingly light given the fact that it’s been at least 12 months in development – that raises some questions about how nimble Sage can actually be, and raises some corresponding concerns about future development.

Zoho Books also has the benefit of an existing invoicing product, Zoho invoice. Books is built over the top of Zoho Invoice.  So, all the existing features of Zoho Invoice will be readily available to Zoho Books users, another benefit of building an open, extensible and web based application. In fact the Zoho approach is best summarized by a tweet from Christian Reilly:

So.. what do these two products mean to the marketplace? Again an interesting contrast here – Sage is the elephant in the room who will be seeking to leverage their significant customer base of SMBs to gain customers for this online product. Whereas Zoho on the other hand will be looking to sell Books to the existing customers of the other products in the Zoho suite. The main question here is what does it mean for existing SaaS accounting vendors, the likes of Xero, KashFlow, FreeAgent and Kashoo?

In the case of SageOne, it is unlikely to have a major effect – the fact of the matter is for all the arm waving by the startups about “mainstream adoption” their products are still very much only touching the early adopters. These early adopters are highly unlikely to utilize a product from Sage. In the case of Zoho however, the situation is different, Zoho has gained something of a following among he early adopters and this is something of concern for the competing startups – especially given the high degree of breadth to Zoho’s existing product line. I’ve long suggested that the first vendor who provides a true suite for SMBs will go a significant way towards capturing the SMB market – if Zoho executes well, they could be in this position.

I have to add a caveat here and that is that Zoho has a somewhat checkered history when it comes to both integrating their own disparate products and providing a seamless integration with third party products. Zoho needs to truly embrace the concept of the “web as the platform” while at the same time accepting the fact that it’s third party developers who will produce the point solutions that truly make the Zoho suite something with widespread appeal.

(See below a Zoho Books screen capture and an intro video to SageOne)

Update – I mistakenly called SageOne SageLive in the post – have amended

zohobooks

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