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MYOB: End of an era

A very significant day today as MYOB is suspended from the Australia Stock Exchange.

MYOB Ltd has been suspended from quotation on January 20, 2009 the compulsory acquisition notice sent to shareholders on January 13.

MYOB has been a great company. One of the pioneers of small business software. In Australasia when you think of small business software you automatically think of MYOB.

Small business software is entering it’s 3rd generation.The 1st generation came in the 80’s with the introduction of the PC. Character based accounting software running on DOS were one of the first small business applications. Introduction of the PC along with the early text based word processors. Usually these were standalone applications.

The 2nd generation was Windows accounting software in the 90’s. The functionality was the same as DOS based products but they became far more usable with the friendlier graphical user interface.

MYOB timed things perfectly with the Australian introduction of GST in 1999 and Y2K. Sales of MYOB took off.

As public companies do, the leaders buy the number 2 and number 3 players and within a few years MYOB had completed a number of acquisitions and had a full set of products covering all aspects of the market. If anyone looked good, MYOB would buy them.

Several New Zealand companies benefited from this. CA Systems (now Acclipse) and Exonet are the examples that stand out. Several New Zealand software developers made their fortunes by selling to MYOB.

In the world 3 major companies dominate this 2nd generation. MYOB in Australasia, Sage in the UK and Intuit in the US.

It’s interesting that the really big global software companies (IBM, SAP, Oracle etc) sell almost no software to the massive small business market. This is because it is very expensive and a fragmented market to sell into. Companies cannot have a $100k sales person selling into an account that returns $1000 of revenue a year.

As time went on it became clear that it was difficult to go after incumbents in existing markets with the same 2nd generation technology. MYOB had forays into the UK, China and the USA but over the last year pulled back from those markets selling their business units. Swapping from one Windows based accounting product to another is a very hard sell. Even Microsoft has found this with their desktop product.

The 3rd generation is online accounting. It’s been fascinating that none of the incumbents have not yet come out with a compelling or credible online product.

We think this is for several reasons, including:

  • 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 acquisitions 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 revenues
  • These businesses 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

That isn’t to say that the individuals inside the incumbents aren’t passionate, it’s just hard to move the big ship.

There does not seem to be any doubt that online software changes the economics of addressing the fragmented small business market. Research keeps upping the size of SaaS marketplace especially the small business sector. MYOB had lots of cash (it just returned $50m to shareholders in December) so you would think they were well placed for growing significantly over the next few years.

Online companies operate on much better multiples.  The PE ratio of MYOB was around 22. Concur is around 94 and SalesForce.com is 114.

So it is very odd that MYOB would delist as a public company.

Many of MYOB’s products are developed in Visual FoxPro, a discontinued language soon dropping out of support. MYOB has a massive investment across it’s range of products to not just move to generation 3, but to keep them running.

Xero drove MYOB into announcing MYOB Business Basics Online that has been roundly panned. It seems the team has been disbanded.

It’s hard to think of many software companies other than Microsoft who have successfully spanned technology generations so the challenges are enormous.

Did MYOB management just give up?

We believe that SaaS requires the transparency of a public company. Who is looking after your data? How are they funded? Will they be around in 5 years?

When private equity comes in the normal model is to slash costs and mine the cash flows and get to another transaction. Investment in product development was signaled to be a place where saving could be made in the Manhattan takeover documents. The motivation is making money, not helping small businesses.

So this feels like the beginning of the end of MYOB and the end of an era. Talent is flooding out of the building.

Accountants in New Zealand and Australia have run their business on MYOB for a generation. Their processes are MYOB processes. We are seeing accountants picking up Xero for supplier risk mitigation reasons.

Obviously this move is great for us but significant because so many Australian and New Zealand small businesses have run on MYOB for 10+ years and it has been the staple for accountants for a business generation.

Looking forward, the sheer number of business running MYOB and using processes developed over the last 10+ that suited a disconnected accounting application has a huge impact on productivity. Desktop accounting software forces business processes that are simply inefficient compared to when accounting software is disconnected.  We covered this in our discussion document on small business productivity.

So this is a significant moment for Australasian business and we think signals the beginning of the 3rd generation of small business management and a fantastic opportunity to improve small business processes and make small businesses more productive. For example http://www.xero.com/blog/runningabusiness

Of course we compete hard with MYOB (and we were probably a bit cheeky running this ad in the Melbourne Age last month) but we genuinely congratulate MYOB shareholders. MYOB was a company that made a difference.

We’re delighted to pick up the baton.

 

Read more about Company News, Australia, New Zealand

 

54 comments

lubos
21 January 2009 #

MYOB is suspended from stock market because majority shareholder is going to buy out remaining 10% of shares. There will be no shares left to trade but that doesn’t mean anything to MYOB customers. MYOB is not going away and will conduct its business as usual. I’m actually shocked you interpret this as the end of MYOB. I know what you wish for but it’s not going to be that easy.

Also apparently you have no idea what P/E ratio means. High P/E ratio would rather indicate that online companies operate on much worst multiples. And that makes sense. Once you make shrinkwrap software, you just keep selling licenses while SaaS providers not only have to make software, they also have to maintain infrastructure and that’s sometimes even more significant cost than developing software itself.

Duane Jackson
22 January 2009 #

Great post, Rod. A very interesting, insightful and enjoyable read.

Now, how long until Sage de-list? : )

Jason Kemp
22 January 2009 #

1. The stock market has a notoriously difficult time valuing companies like MYOB at the best of times which is sometimes a good reason to sit on the sidelines. (but $A480m sound pretty good.

2. 90% of the shares were already owned by Manhattan Software Bidco Pty Limited and they are just mopping up the last 10%. The buyer got to 90% on about 6th of Jan and this triggered the mop up. Archer Capital has 2 billion in funds under management & a significant US based shareholder they can fund out of private equity for what is a LBO.

3. The $A50m return of capital suggests that MYOB management are throwing in the towel by stripping out the cash. Effectively they are saying they haven’t got a good reason to keep the capital in the company because they have no significant projects. (Which can’t be true.)

The cash return did top up the prices being paid for the shares and made it easier for shareholders to sell though.

All of this does add up to the end of an era.

Public statements from MYOB seem to suggest they are moving more towards hr style products and that R&D budgets will dip slightly which doesn’t sound like they are investing at all in the next generation of their s/w.

The really interesting thing is what the investing company does next. Perhaps they plan to sell

According to a note I found dated Jan 13 the shareholders of MYOB are more than $A480m better off so while their future might be in doubt surely that $480m (or some of it) is free for re-investment.

AUSTRALIA – Manhattan Software Bidco Pty Ltd (MS), an SPV formed by Archer Capital Pty Ltd and HarbourVest Partners LLC, declared unconditional its tender offer to acquire the entire ordinary share capital of MYOB Ltd (ML), a business management software developer, for a sweetened 1.156 Australian dollar ($0.758 US) per share, or a total value of A$450.569 mil ($295.348 mil), in a leveraged buyout transaction. The offer was conditioned upon at least 50.1% of ML’s shares being tendered. MS offered A$1.25 ($0.844) in cash per share, or a total value of A$487.203 mil ($328.765 mil).

If MYOB shareholders are smart they will move some of that $A487m across into shares of Xero.

Surely that is a better thing to hope for?

Archer Capital own Onesource in NZ but no obvious synergies with any of their portfolio.

HarbourVest have 41 % of their investments outside the US so that also sounds like a plus to have them as a shareholder.

[...] and delisted from the Australian stock exchange. The news seems to have been interpreted by some (competitors and commentators) as a signal that MYOB is increasingly defunct as a supplier of accounting [...]

Clive McKegg
29 January 2009 #

Unfortunately MYOB just haven’t responded to the market in time. They’ve just changed the grill on the HQ Holden every year so unless they have some big surprise in R & D it’s over.

Cheryl Drought
2 February 2009 #

Sad really that Xero have to stoop to such lows in order to deal with competition. Xero’s product and those that sell it should have an edge over competitors products. It would appear that neither Xero’s product nor its staff have that edge – but would rather have an ambulance at the bottom of the cliff mentality. Interesting, yet rather doomed approach to trying to grab market share.

Tony Laughton
2 February 2009 #

We are one of the companies that have just made the switch to Xero from MYOB. I imagine there are many more.

Cheers

Tony

[...] MYOB was probably ahead pf its time when it launched, but they didn’t appear to keep up with technology improvements which makes it no surprise that they have now scaled down operations and de-listed from the stock market. [...]

Peter Clark
2 February 2009 #

Rod, probably the most delusionary statement I’ve seen from those involved at Xero. Actually the on-line model pursued at Xero is fundamentally flawed when it comes to the accounting space. It is nice to have Internet connectivity for such things as exchange rates and tax rates, but to “trust” your company’s accounting data and processes to the ether of the Internet is just plain dumb. If you look closely at providers like Schwab, activities like on-line share trading are moving back to a C or VB base, Java enabled Internet apps look lame in comparison. I have tried Xero, and it doesn’t stand comparison to MYOB back in 1986 when I first installed it. It was an American company back then.

Christie Durant
2 February 2009 #

Agree that web based software is the way of the future. Agree that MYOB have not produced anything new for a long time. But, is it really the end? Where are those who use MYOB AO going to go?

Brett
2 February 2009 #

It will be interesting to see how this all pans out. Personally, I’m not into making grand statements like “beginning of the end of MYOB” – I heard the same talk when MYOB took over Solution 6. But they do need to change, I wouldn’t be surprised if this current change turns out to be a good one.

Andrew Butel
2 February 2009 #

Christie, today Xero released a major update that helps accountants to manage clients, staff, billing and practice settings inside Xero. This is part of our Accountants Edition, which we are rolling out to help our accounting partners manage all their clients within Xero.

See: http://blog.xero.com/2009/02/one-giant-leap-for-accountants/

Dennis Howlett (accounting commentator @ http://www.accmanpro.com) commented that, “Xero is fulfilling more and more of the vision I’ve had for years that clients and professionals should have a seamless way of connecting in real time for mutual benefit.”

This is our vision too, that business owners and accountants can share data in real time and is why we have partnered with Acclipse to deliver a fully integrated practice management and GL solution that will be able to replace MYOB AO.

Andrew Butel
Product Manager – Xero

Kris
2 February 2009 #

A few more things will need to be added to Xero before it can truly replace MYOB. The lack of inventory control without having to use third party software made me look closely at MYOB. However, I will still sign up for Xero in the next few days.

As for issues with ‘trusting someone else with your data’: having the data in your hand is often less secure than with a third party. A good service provider will have a secure server, take lots of backups and will have all kinds of contingencies in place. What about those who house their data on their laptop or desktop with MYOB? Do you really make backups? What if the computer was stolen, burnt or infected with a devastating virus? I work for a packaged software supplier (not MYOB) and I hear about this sort of thing all the time. Usually people end up re-keying lots of data at great expense. Your data is safer on a reliable host wherever in the world than on your computer.

The SaaS framework offers superior value to provider and consumer alike, so we are also going down that path.

Stuart Bale
2 February 2009 #

Christie, I can understand your concern about the future of MYOB Accountants Office. Please be reassured that here at Xero we are working flat out with Acclipse to provide a complete replacement to the thousands of New Zealand and Australian accounting practices that currently use Accountants Office. Todays release continues to build on our vision as outlined at our recent ‘Future of Accounting’ roadshow held in Auckland, Wellington, Christchurch and Dunedin. We are extending the roadshow throughout the remainder of New Zealand – you can see more at our website here:
http://www.xero.com/future

Stuart Bale
General Manager – Accounting Partners, Xero

Sheryl
3 February 2009 #

Sad to see that Xero is not going full steam ahead with their own practice management system… even a fully integrated system is still separate and will inevitably look and feel different unless you have a direct say on the interface and functionality.

Looking forward to seeing a stock module and Multi currency!

[...] of our readers Sheryl commented today: Sad to see that Xero is not going full steam ahead with their own practice management system… [...]

Stuart Bale
3 February 2009 #

Sheryl, great question … check out this blog post tonight which will help explain why we are excited about our working partnership with Acclipse:
http://blog.xero.com/2009/02/seamless/

Ian
4 February 2009 #

I am an SME software developer and for the past 18 years we have developed business automation software at the higher end of the 2G platform.

The idea that our 2G development platform is becoming redundant because of lack of functionality and expedience is misguided. Development in 2G is still evolving at a very high level of functionality and, in most cases, provides the user with fast and secure levels of control of their business and, equally important, their privacy.

I would like to point out the flaws in the 3G model:

1. SaaS web based development (3G) simply provides the model that enables “Software as a (chargeable) Service”.

2. To own the SaaS model is highly sought by investors because for ever, like the power and telephone companies, they can bill people or cut off the service. It’s a guaranteed income that the user will have extreme difficulty in opting out of.

3. The price can also be adjusted according to the contract’s fine print.

4. Who owns your company records stored in Xero? The data has to be owned by Xero because otherwise, if you failed to pay the monthly fee you could still ask for your data back and run it whilst you sorted out your finances. But if you actually did get the data back, what could you run it on?

5. If the SaaS product did not provide the functionality you wanted, or you wanted to change to a more beneficial deal, could you download and re-import the data to the new product?

The future development of online products is unknown but here are a few ideas that I would put $45M on (if I had it) as being introduced within the next 10 years:

1. Provide silent back door access for the IRD so that they can automatically assess and deduct their taxes. Surprised they haven’t asked yet.

2. When taking out a bank loan the bank could make it compulsory for the business to use Xero so that they can monitor your finances for you behind the scenes. (Always read the fine print!)

3. If the system’s method of analysis and processing was standardized, you could save costs by eliminating the bookkeepers (I think you are already able to do this), accountants and business consultants. After all the system could report directly to the IRD’s platform and do its own sums. I see The Institute of Chartered Accountants have already seen this as a benefit to its future members.

4. Eliminate tax loopholes by establishing verification procedures for certain types of transactions.

These are just some of the many advantages to the global community if you should put your business on the web. You may also find a benefit of being able to email your invoices. Oh that’s a feature available in the 2G platform so we may have to think deeper as to what your actual benefit is.

I can certainly see the benefits for everyone else so there must be one in there for your business and future employees somewhere? Oh that’s another bad one; we won’t need employees, we could get the software to do all the communications and negotiations. Better still we could set up a Trade Me environment where businesses could compete for work like an auction only in reverse. The lowest bid wins.

After all if Xero can get all the banks, Tax Revenue Departments, accountants, and all the businesses to promote and use the same platform, what’s the need to employ anyone?

My comments may be that of a conspiracy theorist but the topics are valid.

2G has its place and in my opinion, it’s not at the bottom of the pile. At SoEasy Accounting we will stick to 2G with web integration

I look forward to the responses that my thoughts are misguided or shared.

Rod Drury
4 February 2009 #

Hi Ian,

Enjoyed your comments. We should video a debate on all of your points – that would be fun.

We especially liked the bank suggestion on making Xero compulsory for loans. We’ll keep working on that but I like your thinking.

You sound like the sort of person that would enjoy this ….

http://www.youtube.com/watch?v=1m71m-LBqFQ

As always, thanks for commenting.

Rod

Brigalow
8 February 2009 #

Hi Rod i find it interesting that in your response to Ian you never actually answered some very interesting questions.

1. Do you have the ability to adjust prices as you see fit and is so what sort of notice would be given?

2. Who owns or maybe more importantly is in possession of the Data and where. Perhaps a business model relying on various companies (or locations) to maintain your data is not the most risk friendly model in todays current economic climate?

3. As to your response about the “bank suggestion” are you trying to attract customers or turn them away? As a potential customer i find it distressing you would advocated to give financial institution’s even more access to my business records not to mention it is another possible security failure point, even banks do get hacked….

I say this because after reading your flimsy response to some interesting questions i do not wish to be associated with any business that has this kind of culture amongst it employees. Considering i am in the middle of making a decision on purchasing MYOB or some other such software this has done you no favours.

Rod Drury
8 February 2009 #

Sure, happy to answer.

1. At Xero our philosophy is that a Xero customer would never pay more for the same service. From time to time we may offer the option of additional services but we always want to look after the customers that have trusted us with their business. Creating happy and loyal customers is key to SaaS businesses so raising prices does not make business sense and we hope that as we scale we keep providing more and more value.

2. The customer owns their data. We invest heavily to ensure it is looked after as best as we can and use specialist providers like Rackspace for infrastructure. Ensuring data is secure and well managed is fundamental for all SaaS companies.

3. If you want credit with your bank then you need to make it easy for them to loan you money. We fully expect that in order to be given credit that businesses will have to provide a certain level of financial records. These covenants are common already. You have full control of who you give access to your accounts. However, I believe it is good practice to send your bank manager your numbers every month so you build a trust relationship with them. Xero makes that easy if you choose to.

Apologies if I offended you. From time to time we do get other vendors posting the usual arguments against cloud computing. There are pro’s and con’s of each approach but we obviously believe that online systems are becoming absolutely compelling for small businesses, but we all still have a lot to do.

We do try to be as transparent as possible and all of our staff would be mortified if anyone thought we would do anything that wasn’t in the absolute best interest of our customers.

Hope to have you aboard,

Rod

Paul Lattimore
9 February 2009 #

Rod,

Just secured a sizable personal loan from BNZ. Giving them the required financials was as easy as setting up a user login for my Bank Manager. Verifcation of the numbers took one phone call from the BM to my accountant who is of course also logged in.

You are dead right – make it easy for the banks and they’ll reciprocate.

Ian
9 February 2009 #

Hi Rod

I have had a lot of requests to take up the offer of a debate on the pros and cons of PC based systems v’s web based and I feel I should take up the point. A lot of people are making decisions to move and it could be a good opportunity to air the point. Is the offer still available?

Rod Drury
10 February 2009 #

Fine.

1. “SaaS web based development (3G) simply provides the model that enables “Software as a (chargeable) Service”.

I’m not sure what that mean but to as SaaS is much more about Service that Software. Do you not charge for your Software? I think SaaS provides much more value as we can leverage our large team across a much number larger set of customers. Our solution is upgraded continuously as we learn more about what customers really mean. Perhaps you should clarify your point.

2. “To own the SaaS model is highly sought by investors because for ever, like the power and telephone companies, they can bill people or cut off the service. It’s a guaranteed income that the user will have extreme difficulty in opting out of.”

Yes recurring revenue’s are nice for investors but it is a massive investment to get there. And customers get a low monthly fee for a service that gets better and better. We (and I can’t think of any SaaS companies that would) would ever cutoff service. Why would anyone do that. Also we (and many other SaaS companies) do not require a contract so customers can leave anytime they like so we have to earn their love each month.

3. “The price can also be adjusted according to the contract’s fine print.”

Answered in detail in the thread above. Trend is most likely down. Our philosophy is not to charge customers any more for the same service.

4. “Who owns your company records stored in Xero? The data has to be owned by Xero because otherwise, if you failed to pay the monthly fee you could still ask for your data back and run it whilst you sorted out your finances. But if you actually did get the data back, what could you run it on?”

Answered in thread above. The customer owns their data. You can get it back. We hope that XBRL standards will lead to a neutral format.

5. “If the SaaS product did not provide the functionality you wanted, or you wanted to change to a more beneficial deal, could you download and re-import the data to the new product?”

Yes, you can get your data back from almost all SaaS services. And we have no term contract. Do you provide that in your product?

6. “Provide silent back door access for the IRD so that they can automatically assess and deduct their taxes. Surprised they haven’t asked yet.”

They haven’t. But authorities can demand financial records from anyone, at anytime right now. Are you saying it’s a benefit that you can hide your books. I think you’ve got bigger issues if you get asked.

I’m sure that any access from authorities would not be silent. We would fight that hard and publicly.

7. “When taking out a bank loan the bank could make it compulsory for the business to use Xero so that they can monitor your finances for you behind the scenes. (Always read the fine print!)”

It is likely banks will require a certain level of financial systems and regular reporting from any borrowers in the short to medium term. Smart business owners, like Paul above, have already worked out how to embrace that.

8. “If the system’s method of analysis and processing was standardized, you could save costs by eliminating the bookkeepers (I think you are already able to do this), accountants and business consultants. After all the system could report directly to the IRD’s platform and do its own sums. I see The Institute of Chartered Accountants have already seen this as a benefit to its future members.”

We believe online accounting empowers accountants and small business owners. Yes the relationship may change but for the better. Most small business owners are not accounting or even business experts and they will always need a hand and the security of an expert adviser. We had 60 accountants do certification training in the last month so I think the industry would disagree with you.

As for reporting directly to the IRD. Yes that is the point of SBR and other industry/Govt initiatives to reduce compliance costs. It may that you don’t even need to do a tax return. Are you saying that is bad?

9. “Eliminate tax loopholes by establishing verification procedures for certain types of transactions.”

That would make sense wouldn’t it.

10. “These are just some of the many advantages to the global community if you should put your business on the web. You may also find a benefit of being able to email your invoices. Oh that’s a feature available in the 2G platform so we may have to think deeper as to what your actual benefit is.”

With Xero you can email from any web browser, not just the PC with your accounting system stored on, and from your mobile phone.

11. “I can certainly see the benefits for everyone else so there must be one in there for your business and future employees somewhere? Oh that’s another bad one; we won’t need employees, we could get the software to do all the communications and negotiations. Better still we could set up a Trade Me environment where businesses could compete for work like an auction only in reverse. The lowest bid wins. After all if Xero can get all the banks, Tax Revenue Departments, accountants, and all the businesses to promote and use the same platform, what’s the need to employ anyone?”

Not sure what you’re on about there.

12. “2G has its place and in my opinion, it’s not at the bottom of the pile. At SoEasy Accounting we will stick to 2G with web integration”

Absolutely. Lots of applications still suit 2G. Retail, stock, warehousing still suit 2G. We may even add client features for some of those functions in the future. What we are also expect to see is that vendors with vertical 2G systems don’t have to rebuild the GL – we’ve done that, so they can invest in high value vertical applications or horizontal features.

My post did not claim the end of MYOB or 2G systems, they’ll go on for years but the delisting of MYOB is a significant event for the SaaS accounting industry.

MYOB have started talking again about their SaaS product …

http://newsletters.myob.com/In_Partnership/February09/index.html

The benefits sound really great …

“Imagine being able to access your clients’ general ledgers at any time, from anywhere. No more passing data files back and forth, fixing mistakes, or dealing with multiple software versions.

With MYOB BusinessBasics Online that’s exactly what you get. It’s an online accounting system for your clients – that you can access.

We’ve designed BusinessBasics Online to create a way for accountants and small business clients to work together. We believe it can re-invent the way you service your clients – opening up a new way for firms and businesses to operate.

BusinessBasics Online provides a general ledger, bank reconciliation functionality, invoice creation, debtor management and comprehensive management and GST reporting – all the features you’d expect from any entry level accounting system. What makes it unique is that you can work with your clients on the same data, guiding them and helping to prevent possible mistakes.

An accountant’s view enables you to see and access the GLs for all your clients that use BusinessBasics Online from a single screen. So you can work with them all simply and easily.

With BusinessBasics Online your clients benefit from an easy to use system. Because it’s web-based they can use it anywhere, anytime and they don’t have to worry about installing or upgrading software.

So BusinessBasics Online provides some great advantages for you, and your clients. If you would like to know more, visit myob.co.nz, email accountants@myob.co.nz or contact your MYOB Client Manager on 0800 94 96 99.”

So even MYOB would seem to agree.

Anything else you’d like me to cover?

Rod

Philip Fierlinger
10 February 2009 #

FYI, Ian responded with an in-depth follow-up that he’s posted on his blog…

http://www.soeasy.co.nz/blog/?p=1

James
10 February 2009 #

I have just read Ian’s response.

I cannot understand how he can claim that the SaaS is too efficient. That it is going to cause job losses and therefore reduce the customer base for small businesses.

And for this reason PC based software is better than SaaS?

I hardly feel that by being a user of Xero, I am contributing to unemployment and therefore destroying the livelihood of my customer base…

Paul Lattimore
10 February 2009 #

Ian, if you are still reading this thread…

As the example being used in this debate, yes I am well aware of the privacy issues you discuss. Firstly I have nothing to hide from either the bank or the IRD so no problems there. Secondly as a non Xero user you may not be aware that users can be turned off at any stage by the logon administrator – in this case me. What my bank manager had access to a week ago he no longer does.

I’m sure that there will still be many users of traditional PC based accounting packages, but I’m not one of them. This is not because of my ignorance of the issues, but more because life is too short to deal with systems that don’t get the job done in the fastest possible time.

Regards,

Paul.

Ian Stephenson
10 February 2009 #

Hi Paul
The option you have for setting security does not apply if people have back end access unless the security is at a file access level and even this can be broken with the right knowledge.

It is not a question of hiding information. It is a question of privacy and the belief that all people have a right to protect their business IP. You do not really know who has access to your data and what their agendas may be.

As for job losses you must recognise the basic tasks of eveyday business can be elliminated. SaaS simply provides a faster rollout of the issue and as the model is cloned from business to business your would see professions dissapear. Extrapolate the model. What new jobs would be created?

Regards
Ian

James
10 February 2009 #

Ian,

Computers reduced the need for admin staff back when pen and paper were used..

I assume you were outside IBM protesting against computers back then too..

James

Paul Lattimore
10 February 2009 #

I can’t compete with that logic Ian. Ban all automation I say until full employment is restored ;)

James
10 February 2009 #

I’ll pay another $50 / month if you stop this boring debate and get back to work developing more cool features. (Got all this spare cash floating around since we stopped employing people for data entry)

Ian Stephenson
10 February 2009 #

Obviously James your main concern is that you don’t yet have all the features you require. PC Based systems probably do.

Yes Paul the logic is hard to compete with.

PC based systems actually created jobs because they introduced a tool that businesses required to become productive, and empowerd people with skills that they did not have such as keeping acounts. This created structures, educational pathways, and a diversity of new professions sprung up including our IT Industry.

With SaaS the objective is to elliminate data entry. This costs jobs and reduces consumers. In the process it also opens the pathway for a reduction in privacy that you and I would not be able to intervene in.

We have not yet heard from anyone who has actualy told us of a benefit of SaaS. Do not get the issue confused with the fact that Xero may have some nice features. What is the benefit that you did not already have with PC based solutions?

James
10 February 2009 #

Main benefit of Saas is probably for the accounting software provider as you only have to maintain and support the latest version.
Some obvious benefits to customer are:
1) access to accounts from any web browser. Create invoices, view reports out of the office.
2) Outsourcing of IT support functions such as backup.

I don’t think the objective of Saas is to eliminate data entry. That should be a goal of all software systems and achievable with PC based systems as well.

Ian Stephenson
10 February 2009 #

Good points.
1. In our environment our software automatically downloads and upgrades the latest version as well so all clients are up to the same version.

2. Accessing accounts from any browser poses it’s own issues. We can also provide the service through Terminal Services (RDC)and many of our clients use this technique. It is fast and does not loose data. The problem falls back onto privacy and security. If using your own PC to connect you can impose a security policy but if using another PC, say at an Internet cafe, you cannot be sure that the system does not have a keylogger. If it does you have immediately opened up your system to a mallicious party. Just imagine if you were an accountant using this service. All your clients data may be vulnerable. The intruder could transfer funds, gather sensative information on the client base and many other malicious acts. If I were a customer of an accountant using the SaaS model I would have to ask them about their security arrangements and I would still think that one day their guard would be down whilst trying to access their system from the hotel lobby in Fiji.

3. Outsourcing is only required if your system does not have the features required. For example, SoEasy provides a Free 2 Gb secure offsite backup service. Built in bulk emailing functions are also available. We are not aware of any outsourcing required.

The SaaS model has an objective of providing a universal platform that can transfer data and process it. (See my example in Point 11 above.) As an experienced programmer I can 100% guarantee our capabilities at building systems that not only illiminate data entry, but we can also elliminate jobs.

The SaaS platform is required to achive maximum data transfer and maximum reduction in the job and consumer market.

Ian Stephenson
10 February 2009 #

If you want portability you can install SoEasy onto a USB stick and access your data by plugging it in to anyone else’s PC. No Internet required and even if there was a keylogger, the application and data is gone when you remove the stick. Try doing that with the SaaS model.

Paul Rushworth
11 February 2009 #

Then try accidentally leaving that USB Stick on the train.

Never, never contemplate this with data you care about, unless you’re using Full Disk Encryption on the USB stick, and have *tested* concurrent backups elsewhere.

Ian Stephenson
11 February 2009 #

Hi Paul
Agreed totally. What our clients are recommended to get is a swivle attached to their car keys. This elliminates the loss of the USB stick. Also the user password system stops others from accessing the data. In additon the process of using the USB stick is to have SoEasy loaded on a main PC. When you want to go, you just push a button which transfers the data to the USB. You still have a copy on your main PC. I have a fingerprint reader on my USB. Total security.

Paul.Rushworth
11 February 2009 #

Ian,

I don’t quite understand what you are saying. Does e.g http://www.lostcarkeys.co.uk/ have a fundamentally flawed business model?

As regards the ‘fingerprint’ USB keys, again, be cautious of the ‘security’ offered by many different models. Heise Security did a report into this last year: http://www.heise-online.co.uk/security/Secure-USB-sticks-cracked–/features/110280

(If anyone is looking for dependable full disk encyption, i’d suggest TrueCrypt.)

Ian Stephenson
11 February 2009 #

Hi Paul. USB stick is just an option. Security steps need to be taken by the individual.

The issue is that PC Based systems can easily provide access to your data in many different ways.

The debate is about PC based systesm v’s web and todate we have not found one single benefit that web has over PC. Any comments?

I appreciate that we have intruded on Xero’s site. It has only been to elliminate the idea that 2G programming is a thing of the past. I will conclude the debate at 12:00 tonight. If anyone else has an opinion on the subject please present it.

Darryl
11 February 2009 #

Ian, myself and 99% of other businesses would say that cutting down on administration work and saving time and money is a massive benefit.

I suggest you do some research, the following is from this website –

http://www.saasblogs.com/2007/05/02/saas-101-the-benefits/

“No client/server software installation or maintenance – that’s right, no more 800-page planning and implementation guides.

Shorter deployment time – potentially minutes as opposed to a phased implementation that could take months (see item #1)

Global availability – sure the technology exists to make on-premise software available outside of the premises, but we’re talking about functionality that is available from anywhere on the internet natively.

Service Level Agreement (SLA) adherence – reported bugs can be fixed minus any rollout overhead. Sure the provider actually has to fix the issue, but assuming they’ve deployed a moderately efficient SaaS application the rollout of a patch or fix should happen in the blink of an eye.

Constant, Smaller, Upgrades – when you use a SaaS application, it is in the best interest of the provider to keep you happy and they can do so by constantly improving the application experience. With SaaS this can come in the form of consistent miniscule changes that add up over time instead of monster patch and upgrades that cost you time and money to implement.

Ease Your Internal IT Pains – This is a big one. Most of the last several points here highlight that SaaS offloads a great deal of IT pains incurred by software consumers in the traditional client/server model. This leaves IT personnel to focus on improving the day-to-day technical operations of your company instead of being called upon to troubleshoot 3rd party software or maintain aging infrastructure. Which leads to…
Redistribute IT Budget – by outsourcing software functionality to a provider, the enterprise realizes a cost savings in infrastructure requirements and IT personnel knowledge requirements. This allows the enterprise to focus on core competencies. It also means that the cost savings from using SaaS applications can be flat out saved, or reallocated to boost productivity through other services.”

Paul.Rushworth
11 February 2009 #

Ian,

It strikes me you are using the word ‘security’ in a very broad sense, and I’m not sure what you mean by it, or what you think you mean by it.

I’m a parent of two young kids, and one thing that (used) to scare me was the thought of losing all our digital photos in the event of a fire, or other event.

(I’ve got fire extinguishers, hard-wired smoke alarms hooked up to a monitoring centre and multiple exit routes at home, and I take the view that most material possessions can be replaced.)

While I do make regular backups at home, I was limited to my ability to store these offsite. I had multiple USB hard drives, etc, and would try to remember to cycle those off site. This is hard to do reliably. We’re all time-poor.

But in reality storing those at a house, not a secure data-site, a few suburbs over offers me dubious protection.

Now I, as an IT professional with far too many computers at home, can design and implement a nightly backup system that stores all these precious files offshore in Amazon S3. http://aws.amazon.com/s3/

My monthly cost to do so is around $1.50 US. (My uploads are scheduled at night when my ISP allows free transfers).

I think what you’re telling Small Businesses owners out there is not only do they have to be HR, Accounts, Sales, Marketing, Tea-maker & the Boss, they now also have to be in charge of IT & Data Security.

Now I could spend my time driving around USB Hard Drives tonight, or I can hop off the train and go for a swim at the Beach with my kids.

I know what I am going to choose.

Ian Stephenson
11 February 2009 #

Hi Darryl

Thank you for your input. Users of the SaaS model still require a PC which is fundamentally the majority of the support issue. The most common support issues facing PC users are: the operating system, email, web, Internet connectivity, and printing.
These issues are not eliminated by the SaaS model.

On the issue of cutting admin time, this is achieved through functionality and at this moment desktop has far more functionality than web. If you don’t experience this you may just be using the wrong desktop package. The point of issue here is that the eventual outcome of the SaaS model will be to send company data direct to the IRD. If the accountants were to realise that they were being phased out they may not be so supportive of the idea. Other positions are also on the line.

Hi Paul

Very much appreciate your concern about back ups. I would say that 95% of the people I meet have never organised their PC systems. I am all for offsite backups, organisation of hard drives etc.

Just to point out, our clients have access to a free 2Gb offsite backup service. They can add more space of course. There is no difference between PC and SaaS in relation to your comment.

PC maintenance takes 10 minutes a week. It’s easy but far too many people do not do what is required. Even in the SaaS model, this maintenance process is an absolute must if you want your browser to keep working.

I am not sure we are making any progress. Which is better, Coke or Pepsi?
The answer comes down to customer choice. However it is important that the 3G industries do not start promoting the idea that 2G is old technology and you must have 3G software. This is simply not true.

What is a benefit that 3G offers that 2G can’t?
This is the crux of the issue.

Ian Stephenson
11 February 2009 #

Don’t forget, debate to close at 12 tonight.

Jack Pivac
11 February 2009 #

At the end of the day its about making life for me as a business owner easier and faster to run my business.

I shouldn’t have to worry about onsite backups, offsite backups, making sure my USB stick is sync’d with my desktop and my server. I shouldn’t have to worry about OS limitations (I can use Xero from a Mac, Windows, Linux, or anything with a browser). Data should be up to date instantly for all of my staff, no matter what computer they are on, anywhere in the world (Without having to deal with VPN’s etc). Internet connectivity is not really an issue in this day and age.

I should be able to focus on my core business, not spend my day trying to work within the constraints of 2G software.

Accountants should be doing more than just tidying up my numbers and feeding it off to IRD. The accountant role is going to become more of an advisor for me to improve my business, cashflow, and profitability. Not the ambulance at the bottom of the cliff.

Jack Pivac
11 February 2009 #

Or to put it in one sentence:

Xero: It Just Works.

pogostick.co.nz
11 February 2009 #

great post rod, possibly a watershed moment in the industry, bold, daring but thats what you need to do to get ahead in this market.

some of your comments are probably a little OTT (foxpro support ending soon – i wouldnt call 2015 soon) but for the main youre bang on – the board have taken their golden handshakes from manhattan and beggared off to play golf, leaving the monkeys at the helm, too busy quaffing company wine and needless junkets to see the big ship is on a collision course with a mine field.

good on you guys for getting in there and providing the punters with a quality alternative, just add the rest of the feature set myob has (e.g. stock, timesheets etc), provide accountants with a suitable alternative to AO (no doubt through your partnership with acclipse) and whammy – myob have lost their stranglehold on the market.

all the best to you guys, and farewell myob – youve milked this cow for too long!

Ian Stephenson
11 February 2009 #

I agree with what you have said about what a business should run like but you have made it appear that efficiency belongs only to the Web model.

Do you keep your stock up-to-date at the moment?

Can you quote a 3 pc + server hardware and network rollout within 15 minutes and when accepted, convert the quote to an invoice, planning sheet, automatically order all the non stocked equipment, shedule who is to do the job, request a deposit/progress payment.

Are you able to manage individual client assets and keep notes on their maintenace?

Can you re-shedule service work and have it automatically organise the jobs for your staff.

Can you analise individual staff performance on a day by day basis?

Can you operate a front POS counter?

Can you organise service and support contracts, keep originals linked to the client in a paperless office environment, and shedule an a periodic invoice to go automatically to the client?

Have a renewal contract automatically emailed to the client at renewal time?

Manage a knowledge base?

Keep a diary linked to your database?

View your work to do shedule?

Produce a job card?

Review a client’s telephone and support enquiries for the past 10 years?

Is your office paperless?

These are just a few of the actual requirements of your business activity. Our 2G software performs these tasks and as a result, you are able to handle more work/sales efficiently and increase your bottom line.

You may have just experience a bad 2G product and your thoughts are tainted with the memory.

Oblige me for a moment. A truck driver was refered to us. His wife had left him, his business was in ruins, and he had no idea as to how he could get out of the mess he was in. All caused because a) his wife ran the books and could not do it b) his billing process was difficult. The software was a leading brand and was just incorrectly specified by the accountant because the accountant only though of the accounts. Not the functionality they actually required. We implemented one of our 28 different packages. In just 2 days his business was 100% up-to-date. He did it himself with a bit of guidance and he has just put on his second truck. His original experience with 2G was bad because he got the wrong package.

A correctly set up VPN and RDC has no problems. We have 100′s of sites set up in that manner and the only issues we have ever had is when the Internet goes down, which it does.

Debate to close at 12:00

Ian Stephenson
12 February 2009 #

Closing Note

Well I must say Xero have been good sports about this. You must feel your blog has been under siege by the competition and will no doubt be glad that I am ending the debate.

This has not been about Xero or SoEasy. This has been about the inference that 2G software can no longer perform and that only 3G can.

When the consumers and the support professions are hit with such a message the problem is that they tend to believe it and we have to re-educate them.

This has been an opportunity for the web and PC software developers and users to have their say.

If the blog stays on line it would enable others to rationalize the differences but I could quite understand if this blog was removed.

One day the only platform that will be available will be 4G. The IT industry very rarely stays static and no doubt 3G will be debating the pros and cons with 4G.

In our own court we are already organising the port to a web and PC based solution (full deploy in 12 months) but we will always offer a PC model as for many of us, privacy is our psychological requirement. The next generation though does not seem to see this and they will be far more oblivious and compliant.

Once again, my deepest respect to Xero and Rod for providing the forum for this debate. We can now all get back to helping businesses to succeed with our software inventions. Thank you to all those who took part and to the readers who hopefully found it entertaining and informative.

Ian Stephenson
CEO
SoEasyAccounting.com Ltd

[...] a year ago I wrote a post entitled MYOB: End of an era. I wrote that post when MYOB was brought by a private equity firm and subsequently delisted from [...]

myob training sydney
30 August 2011 #

This is the great blog, possibly a watershed moment in the industry, bold, daring but thats what you need to do to get ahead in this market.I think, BusinessBasics Online provides a general ledger, bank reconciliation functionality, invoice creation, debtor management and comprehensive management and GST reporting – all the features you’d expect from any entry level accounting system. What makes it unique is that you can work with your clients on the same data, guiding them and helping to prevent possible mistakes.
myob training sydney

Mike Larry
31 December 2011 #

What a great read, I have to say after all that debate, Ian came up trumps.
He brought up some really strong points and seemed genuwine in his approach.
As for Paul and Darryl,nice effort but the answers you gave seemed a little childish and came across more like a second hand car salesman lacking depth and substance.Good luck xero all the best.

Brent
31 March 2012 #

I just read most of the comments. While I agree with Ian in many ways, some of his points are a bit ridiculous. His SoEasy accounting/business management product is a bit more mature than Xeros so claiming that his does so much more is a bit rich – its not like Xero will be sitting on their hands for the next 10 years.

As for security, in a world where all your PCs are connected to the internet, if you run a small business, I am damn sure your security will be better if you are using a Saas model.Not having to worry about data loss or security breaches for small businesses is a massive time saver. Small businesses are notoriously bad at keeping their PCs up to date with security patches let alone worrying about physical security. At the end of the day if someone can access your data, they can decrypt it and view it. I would rather trust a Saas firm whose data stores are constantly penetration tested and run by security professionals than Joe Bloggs who runs a nursery.

To give you an example, I worked for a 300 person organisation that was running SAP. We needed to create a report out of SAP but there were no resources for an SAP developer coming in to do so. The report was simple and SAP data was stored in SQL Server databases, so we simply did a little reverse engineering and grabbed the info we needed. 3 months later a new manager decided to do a penetration test on our systems. They found literally dozens of ways for external users to access our systems. To top it off, we had old SQL Server accounts with access to SQL Server that weren’t cleaned up. Essentially, we had an open door to our accounting data – and this was in an organisation with 10 specialised IT people. You can imagine how vulnerable smaller organisations are.

The reality is 2G is not a thing of the past and will not be anytime soon. But the world is waking up to 3G, it offers a number of advantages over 2G and its drawbacks are getting less every year. I used to be a believer (as a software developer) that 2G would always be better, however with a promise of virtually always connectedness and some of the amazing things people are doing through the online channel, I am no longer convinced.

Myob software
30 November 2012 #

Informative blog…thanks for sharing with us….:)

Peter
12 December 2012 #

Does SoEasy work on 64bit Operating System yet? Last I checked I had to run virtual XP mode to be able to use the Accounting Package.

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