MYOB announced yesterday that the takeover attempt (more here) by Manhattan software has received over 50% acceptance thereby triggering the compulsory acquisition process.
Readers will recall that MYOB is the dominant player in accounting software in Australasia as well as having made forays into other markets. MYOB also recently release an initial SaaS product (review here).
Since the start of this takeover process MYOB has been silent on its intentions with its SaaS product – I invited them to brief me on their expectations but, not surprisingly, at posting time I had received no response.
Rod Drury, CEO of Xero (review here) takes the opportunity to prophesise the beginning of a “new generation” for accounting software with new players (and online delivery) unseating the traditional vendors with their on-premises products.
His rationale for why the traditional vendors are unable or unwilling to do SaaS products properly goes thusly;
- It is difficult to attract the design talent into an industry that has been slow to innovate and seen as boring.
- Internally there is so much drag integrating the various acquistions (sic) and creating a coordinated product strategy
- Maintenance and support drag is enormous
- Multi-tenanted applications are a huge mindset shift
- The channel model for online software is fundamentally different from the high street retail model
- As public companies it is difficult to cannibalize existing revenue’s
- These business generate huge amounts of cash and probably aren’t as hungry as the new entrants are. They are comfy. If a new competitor looks good they can be acquired
Which are all valid and proven contentions.
Further if one looks at the SaaS offerings of the triumvirate of SMB accounting leaders, all of which have recently been release (from MYOB, Sage and Intuit), Drury’s contentions would seem to be borne out.
While nothing thus far gives one any confidence in the ability of the legacy players to really dominate the new wave of accounting software, lets not forget they have some serious cash reserves and some serious market clout that, utilised correctly, could make some fantastic products.
But I have to say that on this one I’m pretty much in agreement with Rod’s perspective. Despite it being written from a biased perspective (as he would no doubt concede) – he’s entirely correct, a new generation is dawning and it’s hard to imagine the incumbents, and especially a soon to be venture capital owned vendor like MYOB, have the commitment to push through into the new world.
I’d suggest the final point is the main reason. One constant with both MYOB and Quicken has been their failure to innovate.
Much of MYOB hasn’t changed for over ten years while the less said about Quickbook’s total failure to deal with Windows Vista speaks volumes of the sector’s mindset.
I’m hoping programs like Sassu ( http://www.saasu.com/) give the incumbents a good shake up. It’s way overdue.
Will be interesting to see if Manhattan Software buy the rights to one of the developed SaaS offerings (Xero, Cashflow etc) and slaps the MYOB logo on it…
Seems only a matter of time till Intuit starts floating offers around also…
@Matt – that’s a really good point – a great way to get the SaaS goods from outside but bring them into the fold…
But didnt MYOB purchase NetSuite in order to get into the SaaS market?
I think that the days of legacy, on premise systems _are_ numbered, as they are a maintenance nightmare when it comes time for upgrades, legislative compliance etc.
This is of course, much to the chagrin of channel partners of the abovementioned systems (of which I am one). But all in all, it is a case of keep up with the times, or join my fellow colleagues in the software equivalent of the Jurassic age.
But I think the biggest challenge is from the end user’s perspective, where we have to engage their hearts and minds to trust their business data, and thus their livelihood to the ‘cloud’ vendors. But that is a whole other story…
Regards,
Devan
Great article! Accounting software is like anything else- in order to stay on top of your game, you’ve got to change with the times!!
The beginning of the end…? No, come on… yes, some of the ‘incumbents’ have been wide of the mark with their early entries, or may be struggling to adjust to the web 2.0 world, but don’t underestimate their (our) ability to catchup…. Why?:
– All the SaaS startups put together wouldn’t add up to a day’s revenue at a big ERP player (rough guess, not based on rigorous calculation, but you know what I mean)
– to characterize ‘the incumbents’ as unable to attract good design talent and slow or unable to innovate is ridiculous. SAP, Oracle and even our humble selves at CODA has some awesome talent, who are pushing the boundaries of software development and sit on the committees and groups around the world that drive new technologies and standards. Innovation in a ‘big ERP’ world might look different to that in a 5-person start-up, but it can be significant and powerful stuff…
– ‘Maintenance and support drag is enormous’ – are yes, woe is us… many start-ups would give their right arms for the multi-million £/$/€ revenue streams from customers, that fund R&D. Yes it brings other priorities with it, but it ain’t such a drag…!
– ‘Multi-tenanted applications are a huge mindset shift’ – yes and no. We (CODA) realised quickly that it was critical to success, but also recognised that others had done it for us – hence our PaaS strategy. Of course, some ‘big ERP’ players missed that when they embarked on SaaS development a few years ago, but seems they’ve spotted their error…
– channel model – different, but not that hard to grasp
– cannibalisation – clearly a challenge, but we’ve been around 30 years so we’ve met that challenge before – this isn’t the 1st technology change to happen in 3 decades…
– hunger – maybe an issue but there are ways around that (set up the SaaS operation as a separate division, for example…). And don’t underestimate their ability to buy…
Anyway, enough for now – my comment is in danger of being longer than the original post!
Interestingly, IDC survey (reported here – http://tinyurl.com/csm6um) finds that “…On the downside, IDC interviews with SaaS providers highlighted several issues, such as cash-flow shortfalls related to slow-paying current clients, liquidity challenges stemming from tight credit at lenders, and — on the horizon — limited resources to scale up with expanded infrastructure to support new customers and new service offerings.”
So, being a SaaS start-up clearly has it’s own challenges!
http://tinyurl.com/csm6um