Channels – Direct or Partnered, Take Your Pick

I had a little online tete-a-tete with fellow SaaS commentator Dennis Howlett recently about market strategies for SaaS accounting companies. Dennis comes from an accountancy background and, from where I can stand at least, seems to have generally been supportive of vendors partnering with accountants as a major part of their go-to-market strategy.

In his recent post however, Dennis appears to take a slightly different track stating (and his comments refer to the UK market but could easily be extended to cover other markets I’m assuming);

There are something around 500,000 book-keepers and accoutants [sic] in the UK. There are 2.5 to 4.4 million end user small businesses (depending on which numbers you choose to take.) Going after the book-keepers when Sage is the monopoly play just doesn’t make sense. There has to be a much more compelling marketing message. Even then it has to be for that small sliver of professionals who are ready to ‘get’ the on-demand message.

I have to confess that I’m torn about this very issue – when I first actively started commenting on SaaS accounting nearly two and a half years ago it was around the time that Xero were launching. At that point I stated that I felt SaaS accounting was a disrupter of accountants and their practices and, as such, a go-to-market that leveraged a relationship with the practices was flawed.

I’ve softened my tone somewhat since then – to their credit Xero has managed to garner a good number of customers and is still pushing hard with its accountant partnership strategy. I spoke with CEO Rod Drury to get a read on where their sales are coming from, a particularly interesting case study specifically because Xero have focused so heavily on the accountant channel. Rod told me that over half their sales thus far have come from accounting partners. Also in an interesting glimpse into where they see the market heading, and specifically where market penetration will come from, Drury said that;

[Accountants] are our mid term scale channel. We expect other channels to kick in later in our life.

On Dennis’ original post, Chris Tanner from Pearl accounting (CloudAve review here) left an interesting comment saying that, in his opinion and experience;

Accountants just don’t have the driving need to change. Sure, Saas vendors can wax lyrical about “benefits this” and “benefits that”, but it’s the small business owner that is feeling the pain and banging their head on the wall with information every evening after work. Give me a phone and an owner-manager and I can sell Pearl any day. Give me an accountant on the other hand …it takes months of work to bring them round to the idea, then they drip feed it out to one or two clients as a taster, then offer it passively as an alternative to Sage, then at the end of the day you get a few small subscriptions for just the bookkeeping functions. Anyone for coffee?

Now I have to say that Pearl is a particular case here – there offering is very broad, giving customers the options of CMS, CRM, E-commerce etc. As such it is a complex sell and one which accountants, focused as they are on the numbers part of a business are not ideally placed to close.

I questioned Chris further about their experience and he told me that despite pushing accountants as well, the real uptake has been from the end user – positive from both a revenue and an added service perspective. As he said;

When accountant partners come on board, and they do the sales work, all we see is a subscription pop up on the system. Which is all very well, but that subscription is just the first rung of the ladder – the £15 a month starter package. We soon realise that all they are using this for is bookkeeping, and the accountant just does not have the skills or drive to get their client really seeing the benefits.

Chris firmly believes that even rolling out their offering to some of the big accounting firms, won’t make much of a difference. While their volumes would naturally be higher, he doesn’t see them gearing up to educate their users about the ins and outs of ecommerce, stock control, CRM and everything else that comes with an integrated system like Pearl. As he says;

Consultants on the other hand, have a real need to do the very best for their clients. That’s their sole purpose in life. They will spend time getting under the skin of the product, exploring it’s nooks and crannies. They’ll see the direct benefits to the business, and then they go in and sell the lot. Then they train the new client. All chargeable work. An accountant can’t charge a client for introducing them to a £15 a month package. SaaS accounting packages are suited to direct-to-user sales. Unless it makes the accounting practice itself more efficient, I don’t see accountants having enough need to push Saas hard to their clients. SaaS apps still don’t have the depth of data required for a good accountant to dig around and find out what they need (although we’re perhaps one of the most advanced on this one – more news on our awesome new Report centre will be out later this week).

All interesting food for thought for SaaS vendors…