Two Questions, Two Shocks for Australian Accounting / Neither Xero or Intuit can wave a candle against Reckon’s APS or MYOB’s Accountant Enterprise for large accounting firms. But on the other hand, neither Reckon or MYOB are likely to have an answer to cloud-based practice management for at least a year.

Sholto Macpherson  from Box FRee IT writes: Two questions have been hanging over the future of the turbulent accounting software scene. Last week, in a move that raised eyebrows, Intuit answered both with gusto.

The first question: Is Intuit serious about the Australian market? The software juggernaut, which enjoys over 80 percent market share in the US market, has made a lot of noise in Australia aboutQuickBooks Online, with tours from the CEO and other senior execs.

But there was a feeling that despite the bluster it hadn’t been prepared to commit the troops.

• The product manager for the Australian version of QuickBooks Online was based in Singapore.
• Until a couple of months ago there was no Australian office.
• QuickBooks Online lacks integrated payroll, a key feature to cracking the Australian market.

Industry watchers concluded that Intuit was playing a spoiling role against former distributor Reckon by promoting QuickBooks Online while Reckon tried to establish its own Reckon accounting software brand.

We got the answer to the first question on Thursday. It’s unlikely Intuit would have spent much on Fifo given its short time in the market (less than two years) and its still maturing feature set. But clearly buying up locally developed practice management tools is more than spoiling.

The Fifo acquisition signals that Intuit has committed funds, is building up its Australian presence and is after market share.

Another confirmation is that Intuit has started hiring Australian staff in earnest.

On Friday the body count was 15, with a new hire coming on each day, said Rich Walker, Intuit’s director of global accountant strategy and programs at Intuit. Or Rich Walker, director of accountant and bookkeeper strategy for Intuit *Australia*, under his new, second title.

(Walker says he has been “residing” in Australia for four months in his new role and will be here for an indefinite time. He is still operating in the global role.)

Intuit aims to have 30 staff by the end of the year. Not a patch on MYOB, Reckon or Xero, but it’s worth remembering that Xero’s Australian MD Chris Ridd joined in November 2011 with roughly the same number.

Now the field of accounting software companies with multi-million-dollar budgets is officially five – MYOB, Reckon, Xero, Intuit, CCH Australia – with Saasu an unknown but likely sixth.

The second question could have even greater impact. Can accounting software companies still charge for practice management software?

In February 2012 Xero acquired job management software Workflow Max and began telling accountants they shouldn’t have to pay for software to run their practice.

MYOB and Reckon are “double dipping” by selling accounting software to business owners and practice management software to the accounting firms, Xero CEO Rod Drury likes to say. Xero has been simultaneously developing accounting software and practice management software and giving the latter away for free to Xero accountants and bookkeepers who have sold a minimum number of Xero licences.

Until recently it has been relatively easy for MYOB and Reckon to dismiss this liberation cry as a marketing stunt. Not only was Xero’s software missing crucial features such as tax, the business model of giving away software was simply unsustainable, said the incumbents.

And then Intuit announced last week that it would start giving away practice management software to accountants and bookkeepers too. Not just Fifo, but other tools yet to be built or acquired.

Intuit owns a sizeable library of software around the world. Walker hinted at the possibility of importing tax and payroll from the US and tweaking the calculation engines for the Australian market.

So in answer to the second question, today we have two large, ambitious companies arguing that only businesses should pay for accounting software.

Suddenly “free practice management software” has matured from catchy marketing cry to potential reality.

Two points worth noting. Intuit has not bought into Xero’s philosophy heart and soul. It is only pushing the line in Australia and will continue to sell practice management software in other markets (presumably only while Xero stays out of them).

Second – no-one knows whether it is sustainable to develop two programs (client accounting and practice accounting) but only charge for one, despite efficiencies in distribution and development of cloud software. “Sustainable” in Intuit’s case might only mean “long enough to drive competitors out of the market”.

This is not good news for Reckon and MYOB which derive sizeable revenues from practice management. MYOB, rumoured to be considering a public float in the next couple of months, will have to revise its SWOT analysis and admit to the threat facing this revenue stream.

The threat may take some time to mature. Neither Xero or Intuit can wave a candle against Reckon’s APS or MYOB’s Accountant Enterprise for large accounting firms. But on the other hand, neither Reckon or MYOB are likely to have an answer to cloud-based practice management for at least a year.

This is a problem because server-based software has had its time. Those assets can only depreciate.

Because there’s one thing all vendors agree – the future of software is the cloud.