Next-Gen Cloud Accounting: Platform-as-a-Service (PaaS) Ecosystems

By | 1 year ago

Let’s face it. Cloud computing is so 6 years ago. We agree it’s a technology trope that has to go. And yet, accounting software executives are still enamored with everything cloud. Enough already, right!?

Unfortunately, the accounting profession’s captivation with cloud is not merely lip service. In 2014, QuickBooks Online generated more than $800 in annual revenue per customer — $300 more than QuickBooks Desktop — according to Neil Williams, Intuit CFO. The same year Forbes also predicted “in the next few years it’s inevitable that you’re going to replace your on-premise QuickBooks system for something cloud-based. You won’t have much of a choice.” Forced upon us or not, we are stuck with cloud accounting. Lucky us.

If we can’t ditch the word “cloud” all together, maybe it is time for a new spin? How about cloud accounting 2.0 or the cloud accounting reboot? Or, how about next-gen cloud accounting. It has a nice ring to it.

What is the focus of next-gen cloud accounting? It’s clear the cloud accounting dialogue is evolving. Conversations (thankfully) do not just revolve around the merits of software-as-a-service (SaaS). Lately, accounting software companies are thinking bigger. They are out to build software empires (read: platforms). And, as a part of their empire, they want to create a thriving third-party software ecosystem.

Next-Gen Cloud: Building a Software Ecosystem
The term software ecosystem is gaining traction and relevance. In accounting software, the small business players (i.e., Quickbooks, Xero, Sage) want to provide a dynamic platform to support add-on software seamlessly.

According to Rod Drury, Xero CEO, building an ecosystem “take[s] hundreds of millions of dollars” and you “need buy-in from users, advisors and both horizontal and vertical service providers.” Drury admits that “no one has fully accomplished it for the small business market.”

The race is on.

Sage Group CEO, Stephen Kelly, discussed the topic with Forbes in September 2015. He said, “There are businesses out there screaming for our technology, so we need a rich ecosystem.” During the interview he explains third-party systems integrate with their platform using the Sage app store. Mr. Kelly says, “Sage is going to be leading that [app integration] charge.”

Time will tell, Mr. Kelly. You have some strong competition. Xero and Quickbooks Online are going to give you a run for your money.

Ecosystem Blunders: Restricting APIs
The key to developing a healthy software ecosystem is a developer friendly application programming interface (API). This usually means an open (i.e. free) API. Restricting APIs can be problematic and many in the PaaS industry are learning the importance of open APIs the hard way.

After a 43% stock drop earlier this month, HfS warned LinkedIn that “closing down many of its open APIs, forcing developers to become part of its partnership program” is a short-sighted strategy because “an open platform is a lever for innovation and value.”

The HfS article also references lessons learned when “Twitter famously restricted the use of its APIs in 2012, with a serious backlash to its developer ecosystem.”

That’s fair warning… take heed accounting software developers. Charging third-party software companies to connect is a highway to the danger zone.

Next-Gen Cloud Winners
I predict whichever accounting software company develops the best third-party software ecosystem will win the market. Customers want a seamless experience without ever seeing the underlying interfaces. They also want to feel confident the data is secure 100% of the time.

It’s obviously a priority shift. The basic functionality development phase is over. Going forward, companies care much more about to how well and securely the platform “plays with others.”

Whoever can manage to build platform with substantial buy-in first (and best) will win over time. Sage and Xero have the potential to unseat Quickbooks from its longtime reign of small business accounting software. As accountants, it’s worth keeping an eye on.

Did we bring you some sunshine on a cloudy day (pun most definitely intended)? Are my next-gen cloud predictions laughable? Share your thoughts.

Image: ASU School of Life Sciences / Sabine Deviche)

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