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No Surprises in Accounting Software Market
May 20, 2006 | Anita Campbell
In the category of “no big surprise” comes the Yankee Group’s report that Intuit, Sage and Microsoft lead the market in accounting and ERP software among small and midszie businesses (SMBs). CRMToday notes:
“Yankee Group finds that within this market, Inuit’s QuickBooks and QuickBooks Online products dominate the 2-to-99-employee market, followed by Sage Software. Microsoft leads the 100-to-999-employee mid-market, followed by Oracle and Sage.”
The report also suggests that the market opportunity is growing for accounting software.
I would agree that the opportunity is growing. My only comment to all this is to suggest that Yankee and other research companies need to start issuing separate reports for small businesses defined as under 100 employees, and for midsize businesses defined as 100 and up employees. Reason? The product needs and the market dynamics are dramatically different for the low end of small businesses (under 100 employees), versus the higher end (100 and up).
For instance, CRMToday goes on to report:
“Many SMBs still maintain and manage their financial data on Excel spreadsheets, which provides vendors with opportunities to seize greater market share. Additionally, pressures to comply with the Sarbanes-Oxley Act and other regulatory requirements, along with the increasing need to electronically exchange information with larger customers and partners, add to the demands to improve operational efficiency — which makes it more likely for companies to deploy real accounting solutions.”
If you examine this quote closely, it seems like a jumbling of different issues affecting different size businesses. Yes, it is true that some small businesses still use spreadsheets to run their businesses (some of them still use paper ledgers!). But generally that is going to be the smaller end of the market — under 100 employees and most likely under 10 employees.
By the time you get into the size of business that is subject to Sarbanes-Oxley, you really are talking about a midsize business, because to be subject to Sarbanes Oxley (SOX) means the company is public. The designation “small” in this context is relative. A “small” company whose stock is publicly traded will have little in common with the typical company of 17 employees. What’s more, it is exceedingly unlikely that a publicly traded company of any size is still relying on spreadsheets. While businesses subject to SOX have a need for more and better technology, it’s not to move from spreadsheets to accounting software for the first time. They need to move from an existing accounting package to one that offers more robust reporting and auditing capabilities.
These kinds of reports make for lots of confusion about the small business market. All of which goes to show that we really need to slice and dice the small business market more finitely and distinguish between the truly small business and the smaller business (i.e., the business which is smaller than the large corporations selling to them).
