QuickBooks Connect (QBC) 2018 signaled the end of an era at Intuit, as Brad Smith formally announced that he’ll be stepping out of the CEO role that he’s held for the past eleven years. During his tenure, Smith successfully guided the 35-year old company’s flagship QuickBooks product from the desktop to cloud to platform and beyond—into the realms of artificial intelligence, machine learning, natural language processing and more. Intuit has prospered during Smith’s direction: in fiscal 2018, Intuit generated $5.96B in revenues, up 15% from the prior year. Smith’s hardworking, but friendly and authentic style also set a positive cultural tone from the top—helping Intuit to earn inclusion on Fortune’s Best Places to Work list for the past 17 years.
Smith will continue to serve Intuit as Chairman of the Board. But beginning January 1, 2019, Sasan Goodarzi, currently executive vice president and general manager of Intuit’s Small Business and Self-Employed Group, will be responsible for leading Intuit forward into its next chapter.
In this post, I recap the key themes that Goodarzi outlined in his keynote. With that as context, I examine the announcement that is likely to have the biggest potential impact on Intuit’s bottom line: QuickBooks Online Advanced, which Intuit developed for growing small businesses and midsize companies.
Focus AI and ML on the Pain Points: Cash flow, Capital and Payments
The main message to small businesses at QBC 2018 is that “Anything is Possible”—but that doesn’t mean it’s easy. To help small businesses increase the odds for success, Intuit has been infusing AI and ML across its cloud platform and solutions (see Making New Technology Work for Small Businesses: Intuit’s Vision for Artificial Intelligence and Machine Learning for an in-depth look at Intuit’s AI/ML strategy).
Intuit first unveiled this strategy at QBC 2016, announcing that it would use AI, ML and aggregated user data to broaden its QuickBooks Online (QBO) platform into a business advice and education platform. At QBC 2017, Intuit launched several initiatives to help connect its customers to the people, information and funding they need to run and grow their businesses.
This year, Intuit focused on three “smart money” initiatives to help solve small business cash flow problems. These include:
- QuickBooks Payments, which helps small businesses get access to their money sooner by enabling invoices for next day payment. Today, small businesses that invoice with QuickBooks Payments are three times more likely to be paid on the same day. With QuickBooks Payments, merchants also receive the benefit of next-day funding for both their credit card and Automatic Clearing House (ACH) payments. Money is moved into their accounts the next business day as compared to two to three days for credit cards and more than five days for ACH.
- QuickBooks Payroll, which allows customers to hang onto their money up to payday if they complete payroll by 10 a.m. Eastern time (instead of having payroll services pull payroll from their bank accounts up to 14 days in advance). This enables small businesses to hold onto an average of $9,000 more per month, and pay their teams faster than comparable payroll services.
- QuickBooks Capital, through which QuickBooks users can apply for a loan of up to $100,000 in minutes. Intuit processes the loan the same day, and (if approved), funds are deposited to a user’s account within a few days. QuickBooks Capital has already provided $200 million worth of loans to small businesses in the past since its inception. The program uses a credit model based on more than 26 billion data points collected from the QuickBooks ecosystem coupled with advanced data science, to streamline the loan process.
QuickBooks Online Advanced: A New Option for Customers that Outgrow QuickBooks
QuickBooks has been the dominant player in the U.S. small business accounting market for years. It has traversed from the desktop to the cloud with QuickBooks Online (QBO), and added a Self-Employed Edition for solopreneurs in 2015.
Momentum for QBO is strong going into 2019. Revenues for its online solutions spiked 41.6% in its first fiscal 2019 quarter (which closed October 31). In the U.S., QBO revenues rose 35% year-over-year, bringing the ranks of U.S.-based QBO subscribers up to 2.7 million. International growth was even stronger, with QBO revenues jumping 61% year-over-year, bringing QBO’s international subscriber tally to 880,000.
Intuit’s success has made it a target for almost every other accounting, financials and ERP vendor. Over the years, vendors as diverse Acumatica, Sage Intacct, NetSuite, Microsoft Dynamics and SAP have vigorously pursued “QuickBooks customers that outgrow QuickBooks.” While this segment represents just a single-digit percentage of QuickBook’s installed base, it adds up to tens of thousands of companies a year.
Competitors offer these customers many options, but most are five to ten times more expensive than QBO, are often more complex to learn and use, and typically require professional services to implement.
With the launch of QuickBooks Online Advanced, Intuit is betting that many of its growing customers will choose to stick with the software they know—albeit with more bells and whistles—than switch to an entirely new solution. Aggressively priced between $1,500 to $2,500 per year for most customers, QBO Advanced adds additional services, capabilities and insights that growing companies need.
While many vendors (and the SMB Group) define medium or midsize businesses as those with 100 to 999 employees, Intuit’s definition is much smaller. The vendor is aiming for companies with 10-100 employees. However, Intuit’s cap of 25 users for QBO Advanced will allow Intuit to extend beyond this 10-100 sweet spot—as a company with 25 accounting users is likely to have more than 100 employees,
What’s in QBO Advanced—and What’s Not
QBO Advanced provides growing businesses with:
- Deeper insights into more data. By aggregating data across the QuickBooks user base, Intuit can draw on billions of data points from millions of QuickBooks customers. This data fuels AI and machine learning algorithms to help customers benchmark and create things such as more competitive and profitable pricing, salary, and contract rates. Intuit is also partnering with Fathom to provide QBO Advanced customers with capabilities for dynamic, custom reports. advanced analytics, and deeper insights.
- More personalized services. Priority Circle Service provides a dedicated customer success manager to QBO Advanced customers with product and technical questions, and to help them get more value from the solution. Customers also get five annual training seats, and support via a Priority Queue that bumps them to the head of the line when problems arise.
- Additional functionality: New capabilities include custom user permissions, which enable much finer management of roles, permissions and features and data access than QBO. Advanced users can do more things at scale—such as importing hundreds of invoices into QuickBooks from other applications.
What QBO Advanced doesn’t include are applications that are standard in many midmarket ERP systems, such as inventory management, ecommerce and bill pay. However, there are 5,000 apps in Intuit’s developer ecosystem, 600 of which are published apps on Apps.com and integrate with QBO and QBO Advanced.
Brad Smith has guided Intuit through what has arguably been the most tumultuous time in the history of business technology. He has successfully transitioned the iconic small business brand from the desktop to the cloud, and charted new technology and solution directions to lead Intuit into the future.
Intuit’s approach to AI and ML-powered technologies and services offers small businesses a pragmatic, yet powerful way to put these technologies to work for their businesses. As important, Intuit can draw on billions of aggregated, anonymous data sources from millions of QuickBooks customers, customers to inform and power these services and initiatives.
Meanwhile, now that QBO is Intuit’s flagship small business solution, the vendor needs to keep more QBO customers in its fold, even as they grow. Although QBO Advanced is not the best fit for hyper-growth companies, it should be an attractive option for many small businesses who have hit the wall with QBO. These businesses need to automate more of their processes, get better insights for decision-making, and perhaps even change their business models. But many don’t have the budget, time or appetite needed to migrate to a completely new solution. QBO Advanced offers them a way to get more of the functionality and intelligence they need, without having to make an entirely new investment,
Furthermore, Intuit already has a good track record of moving customers up in the on-premises space. In fact, even though QuickBooks Desktop sales dropped by 5% in first-quarter fiscal 2019, QuickBooks Desktop Enterprise customers grew at a double-digit pace. QBO Advanced should afford Intuit the same opportunity to keep growing QBO customers on board.
© SMB Group