Opinion: Natural selection drives IT, not revolution
Microsoft’s withdrawal of Office Accounting is part of a long-term shift rather than a sudden change in the industry's underlying dynamics, argues Aqilla's Hugh Scantlebury.
People have suggested Microsoft’s withdrawal of its Office Accounting marks an epoch in the development of software and will bring to an end the use of desktop applications – but this simply isn’t true.
In reality, relatively few people actually used the software compared to those running products from market leaders Sage and Intuit. Furthermore, Microsoft’s attempts at delivering an SME accounting application appeared flawed from the start – it was developed by the Office team as an extension of the suite in an attempt to be innovative and ape the relative success of Microsoft CRM. However, in doing so, it ignored many of the skills and experiences of its own Business Software Division. Its withdrawal, if anything, simply marks a realisation of the importance of being serious about the market before developing and deploying a product that is critical for businesses.
What it has done, however, is to bring the question of the future of accounting software into the mainstream – a debate that’s been ongoing in the industry for a number of years. It is now critical for the vendors to understand what’s going on, as well as for end-users to see how products will change and the benefits this different approach will bring.
No matter what anyone says, there is a gradual move to web-based or Software-as-a-Service (SaaS) accounting, and that’s set to change the industry. Some traditional on-premises vendors are looking at ways to take advantage of this by developing their applications for deployment over the internet, but others are taking the “ostrich approach” by sticking with their licence-based standard models and hoping for the best. We saw a similar situation with customer relationship management (CRM) software and the arrival of on-demand players like salesforce.com around ten years ago.
At the time, the traditional vendors decried it as a flash-in-the-pan and cited similar arguments to those that are circulating in the current market. However, the less expensive on-demand applications that provided the same level of functionality, without the hassle of a long implementation or a large up-front investment, were attractive to businesses of all sizes and led to the demise of a number of significant players – most notably Siebel. The same is set to happen with accounting software vendors, and for some it may already be too late.
In addition to changes with traditional vendors, we’re also set to see changes amongst the new web-based players. There will be a degree of consolidation, with acquisitions made within the SaaS market by players looking to grow their businesses and increase customer numbers. I think it’s reasonably unlikely that any of the traditional vendors will make any SaaS acquisitions in the short term, as it might lead to a rapid cannibalisation of their core business.
We will also see a shakeout in the number of SaaS vendors in this space, particularly at the lower end – where the products are very often functionally limited and not as robust as a business user demands.
Those that survive will be the ones that have rich functionality and capabilities, as well as proven reliability and business maturity – in both the management team and the business plan and product roadmap.
There have only been a few moments in the IT world that have proven as revolutionary – most of the change has been incremental, with gradual shifts in how people use and interact with software in particular. I view this move by Microsoft as part of the IT natural selection process that will see the widespread adoption of web-based accounting applications across the industry over the coming years.
