X
Finance

European on-demand accounting vendors breaking the dam?

Since I am based in Europe and come from a finance background, I have a special interest in what happens in this part of the world. Over the last couple of years, I've been consistently told by 'experts' that saas/on-demand business applications (and especially those that are finance related) will take another 5-10 years before becoming mainstream.
Written by Dennis Howlett, Contributor

Since I am based in Europe and come from a finance background, I have a special interest in what happens in this part of the world. Over the last couple of years, I've been consistently told by 'experts' that saas/on-demand business applications (and especially those that are finance related) will take another 5-10 years before becoming mainstream. News coming in the last couple of days would suggest those 'predictions' are wrong. At least for the SMB market.

Vendors you may never have heard about but which are making a splash in the UK include CODA, e-conomic, Xero, Aqilla and FreeAgent (disclosure, I have a tiny holding in FreeAgent.) Each brings a slightly nuanced perspective on the term 'splash' but each is adding something to my perception that demand for alternative ways of doing the books is much more than an illusion or wishful thinking on my part.

1. CODA - recently launched CODA2go. Phil Wainewright's economic analysis is a useful pointer. According to Dave Turner, the company's head of marketing:

Nearly a week after the official launch of CODA 2go and we’ve been furiously processing the piles of enquiries that we got from Dreamforce in London. If you were one of those who spoke to us you should have had some sort of response from us by now, but if you haven’t please bear with us… we really were inundated…

You don't often hear that in enterprise software!

2. Xero - a vendor coming out of New Zealand with a full blown accounting application that has already gone into some vertical markets has just announced its first, post-IPO results. Highlights include:

  • 1406 customer acquisitions compared with a target of 1300 in the offer document
  • Cash at May 10th: $8,991,000, $613,000 higher than forecast
  • Subscription revenue: $134,000
  • Net loss: $4.3 million, lower than anticipated due to higher interest received
  • Substantial pipeline

3. Aqilla - hasn't formally launched but tells me that a single shot ad campaign it ran in a UK specialist title drew so many responses, it has taken three weeks to work through the pile. It is beta testing with an 8 country customer. I have more to say about Aqilla in a later posting. The same goes for e-conomic which again spent weeks sifting through enquiries to a single shot ad campaign.

4. FreeAgent - specializes in the contractor and freelance market. It has signed marketing and co-development deals with five British companies of accountants that specialize in this field. From a UK specific launch little more than nine months ago, it already has an international 'version' and continues to add features on a weekly basis.

Back in the US/Canada, I see that FreshBooks has added 300,000 signups since May, 2004. More important, it has hockey sticked in the last couple of years. Closer to home, I hear QuickBooks Online is doing well with a thriving online community ever ready to add its voice.

Compared to the SMB giants like Sage, the small vendors barely represent a gnat's bite.  That's not important. I see these vendors distinguishing themselves by:

  • A willingness to be much more open in their approach to customer service
  • Innovating often with an accelerated release cycle. That shouldn't be a total surprise because all the new vendors are relatively early in the development cycle.
  • Competitive price points compared with incumbent. QuickBooks Online is the exception with rock bottom pricing but I see the models others are offering representing value for the markets they seek to attract
  • Early verticalization. It is a constant complaint that the mega vendors have been slow in providing specialist functionality. These vendors distinguish themselves by being willing to step into the gap. It is no surprise then that they are picking up market share.

It is way too early to declare any victories but the fact each vendor highlighted is exuding confidence is all to the good, not just for on-demand but for an entirely new way of developing and bringing services to market. Perhaps at last we'll see an entire breed of financial applications that break the 600 year old Pacioli mold, putting users first and enjoying the rewards that brings. If that happens then users around the world will have cause to smile.

Editorial standards