The Battle for the Small Business Accounting Market

With Microsoft Office Accounting coming on to the market with free downloads and inclusion in certain versions of Microsoft Office Suite, it might appear as though Intuit's QuickBooks will have a hard time keeping the market share that they've enjoyed for so long. But there are a couple of factors which are likely to ensure Intuit's longevity at the top of the small business accounting food chain, and these factors actually have nothing to do with the quality of the accounting software.

While the accounting and bookkeeping aspects of the system are essential, it must be recognized that accounting theory doesn't change from application to application. Whether developed by Intuit, Microsoft, Sage or anybody else, the fact of basic accounting principles is embedded into all commercial accounting systems. The accounting may just not be as apparent - as "in your face" -with some systems as it is with others. With QuickBooks, for example, Intuit embraces the philosophy of simplicity. Perform the task, and let the accounting take care of itself. Even with the higher-end accounting systems, however, the actual accounting is being hidden more and more as applications aim towards a workflow or service orientation to the user interface. If you look at the interface for Microsoft Office Accounting, for example, you will see a fairly simple workflow type of navigation that has become somewhat of a standard for small business accounting applications.

Setting aside the application interface and the simplicity (or not) of use, one of the big elements that keeps QuickBooks at the top of the small business finance market is the ease of managing the data files. Even with the frustrations introduced with the new database structure in the 2006 versions, Intuit never moved away from the encapsulation of the data into a single file. The structure of the file may be more robust, but the simple fact of it being one file is the key. The data file is portable - it can easily be transported from one PC to another; from one system to another. This is important when users need to work temporarily on a laptop or portable computer, then move the file to their desktop when back in the office. It's important when the small business wants to send their books to their accountant. And it's important because a single file is very simple to identify, backup, and restore. In the ASP or application hosting environment, it makes sharing the data file between an accountant and their client easy, as it's all done with file system folders and permissions. With most other systems, the data is not contained in one single file somewhere on the hard drive. The data is usually stored in either a series of files on the hard drive or, more frequently these days, within a database managed by a separate database management system (such as Microsoft SQL). It seems silly that the nature of the data file would have such a profound impact on the adoption of certain applications, but in this case, it has.

Another reason for Intuit's solid placement in the smb finance area is their ability to speak directly to the small business owner in their marketing. By virtue of having gained a large community of individual users with the Quicken product, Intuit was able to latch on to the emerging small business with a similarly simple and personal message. While the software is indeed business software, and is being marketed in more commercial venues due to the Enterprise edition now available, QuickBooks remains the only commercial accounting product which is broadly and directly accessible without the participation of a consultant, reseller, or accountant. Looking at the Sage accounting products, you find resellers, consultants and accountants heavily involved in the front-end of the sale. The same is true with the vast majority of accounting and finance applications in the market, Microsoft included. Only QuickBooks has managed to develop the momentum from the ground up, creating and environment where accountants and consultants must support the product because that is what the consumer has. Further, because the business started out with the QuickBooks product, upgrading to a "bigger" edition frequently makes more sense than converting to an entirely new software system, and certainly presents less of a barrier to the business owner. From the Simple Start to the Enterprise Edition, the range of QuickBooks applications is being extended to reach further into the next higher level of the market, making it that much more difficult for the competition to get the opportunity.

Microsoft has a significant challenge in front of them in this respect. While they have proven success in delivering products to the consumer-level of the market, the bulk of these offerings are more oriented towards entertainment than business or finance. When it comes to business tools for the small business market, it is the Office Suite (Word, Excel, Powerpoint and Outlook) that represents the foothold for Microsoft. By introducing the small business accounting product as part of this suite, Microsoft may be able to get the application in front of users, but the jury is still out on whether or not the application will actually get used. The effort could be supported by a community of bookkeepers, accountants and consultants who are able to get the small business users working with the accounting application and who can support them long term. But the perception by many is that the Microsoft channel partners, those who resell and support the business solutions, work with larger businesses and more complex solutions. And, of course, charge accordingly. Without a visible, experienced supporting channel for the small business solutions - a channel experienced in dealing with very small businesses and with non-technicians - it will be difficult to build a lot of momentum around Office Accounting. There may be over a million downloads of the Express version of the software, but it will be interesting to see how many of those turn into actual users.