Intuit: Finding New Footing In the Small Business Cloud

For Intuit, small business is big business. The company has long dominated the very small business, or VSB (1-19 employees) accounting market in the U.S. (Figure 1), and in the last few years, has also been campaigning hard to win global business against incumbents in countries such as Canada, U.K., India and Australia.

Figure 1: U.S. VSB Accounting Solutions Purchased/Upgraded in Last 24 Months

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Yet Intuit has had a mixed track record in terms of evolving from a traditional package software model to a cloud-based services and platform company. Although Intuit initially launched QuickBooks online in 2004, the vendor seemed conflicted about how best to navigate its own transition to a cloud based business model for several years. However, it started getting serious about the cloud a few years ago, and today QuickBooks Online has grown to serve over 1,150,000 small businesses.

Meanwhile, the company has continued to wrestle with how to grow its business beyond its core QuickBooks franchise. This past summer, Intuit announced plans to divest several businesses, including its original Quicken consumer finance product; QuickBase, a collaborative workspace to build custom apps; and Demandforce, an automated marketing solution for small businesses. In addition, the vendor laid off about 5% of its workforce this past August.

Given the opportunity to attend this year’s QuickBooks Connect conference, I was curious to learn more about Intuit’s transformation strategy, and how it will grow its small business footprint. At the event, Intuit emphasized plans to:

  • Double down on small business financial management-related services that leverage the QuickBooks Connect platform. With plans to take Quicken, QuickBase and Demandforce off its plate in the works, Intuit can free up resources to concentrate on innovation in small business financial management. The vendor announced new solutions to help retailers and e-tailers automatically connect QuickBooks to inventory and sales data across multiple channels. This includes integrating data from e-commerce providers like BigCommerce and Shopify, as well as integration for QuickBooks Point-of-Sale. Intuit also showcased a new QuickBooks financing option, offered in partnership with OnDeck. The QuickBooks FinancingLine of Credit uses small businesses’ QuickBooks accounting data to qualify applicants for lower-rate loans than those available from traditional lenders. Intuit also highlighted its partnership with Fundbox, which provides advanced payments for outstanding invoices in QuickBooks to help improve cash flow.
  • Bet the future on the cloud and big data. While Intuit will not abandon desktop users, it has shifted its resources (and partner ecosystem, see the next bullet) to the cloud. According to Intuit, QuickBooks Online accounted for 60% of new sales in FY15, and the company expects that to jump to 70% in FY16. As it transitions more customers to the cloud and the QuickBooks platform, Intuit gains access to more customer data that will enable it to create–and monetize–a broader array of financial services for small businesses.
  • Ramp up its ecosystem and platform play. Over the past year, Intuit has grown the number of third-party apps that integrate with the QuickBooks platform from just over 300 apps to more than 1,500. At the event, Intuit announced that it has set up a $4 million co-marketing fund to help developers promote apps developed on the QuickBooks platform. Through the program, the vendor will double developer partners’ marketing investments of $10,000 to $20,000. For example, if a partner spends $10,000, Intuit will double the match to $20,000.
  • Boost its focus on the self-employed sector. Last fall, Intuit announced QuickBooks Self-Employed, its somewhat late counter to rival Freshbooks, which launched in 2003, and now claims to have over 5 million users (though Freshbooks doesn’t disclose the number of paid subscribers). Designed to provide the rapidly growing self-employed segment with tools to organize and manage their finances, QuickBooks Self-Employed enables users to connect bank and credit card accounts to import transactions, and categorize them as either business or personal. The solution also automatically assigns them to the proper IRS Schedule C deduction category. According to Intuit, QuickBooks Self-Employed currently has about 25,000 paid subscribers. At QuickBooks Connect, Intuit highlighted a new partnership with Stride Health, which integrates Stride Health’s personalized approach to managing health insurance, healthcare and compliance within QuickBooks Self-Employed.
  • Strengthen its accountant solutions and network. Intuit introduced Trial Balance within QuickBooks Online Accountant at the event. The solution helps accounting professionals save time by pre-mapping most of the accounts from QuickBooks Online Accountant to an Intuit Tax Online form, reducing or eliminating manual data import, export and entry work. It also gives accountants one, centralized location to store the work they perform for clients. Intuit also launched a New ProAdvisor Fathom Partnership, designed for accounting professionals who want to deliver more frequent, engaging advisory and management reporting services. The new partnership provides ProAdvisors with exclusive benefits, including a free Fathom single company license for life, discounts of up to 50% off licenses for their clients and dedicated support for ProAdvisors and their clients. Intuit also hosted a special VIP event for key accountant partners. Intuit used the VIP event to provide partners with deeper insights into Intuit’s plans, and to tap into partner ideas and recommendations to strengthen QuickBooks small business and accountant solutions and programs.
  • Grow globally. Intuit currently provides localized versions of QuickBooks in the UK, India, Canada, Australia and Singapore, with plans to launch in France and Brazil later this year. Intuit’s commitment to global expansion was underscored by a large accountant and developer representation from these countries, especially the UK, Canada, India and Australia.

Perspective

Intuit has traveled a somewhat rocky road to the cloud, but now seems to be finding its footing. It has elevated QuickBooks Online to flagship status; significantly ramped up developer activity on the QuickBooks platform; is gaining awareness and customers in new geographies; and continues to have a large, loyal accountant network.

This doesn’t mean all will be easy climbing from here on in. Intuit needs to play an aggressive catch-up game in the race to win self-employed customers. Furthermore, while Intuit is focusing on helping small businesses better manage their financials, VSBs (businesses with 1-19 employees) seem more concerned with business growth. According to SMB Group’s 2015 SMB Routes to Market Study, VSBs rank growing revenue and attracting new customers as their top two business challenges–ahead of improving cash flow, maintaining profitability and obtaining financing (Figure 2).

Figure 2: Top U.S. VSB Business Challenges

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Meanwhile, competition for customers in new geographies will be fierce and nuanced with global complexities. And, in all cases, Intuit is competing for limited IT dollars: 62% of VSBs spend just $1,000-$9,999 on IT annually (SMB Group’s 2015 SMB Routes to Market Study).

Figure 3: U.S. VSB Annual Technology Spending

Slide3However, Intuit’s tack to build new, data-driven services for small businesses–such as its new lending service–provides the company with an exciting opportunities to disrupt the status quo and create new revenue streams, such as Intuit is doing with QuickBooks Financing. While other companies may launch similar services, Intuit’s dominant market share in the U.S. provides it with a unique advantage. While its too soon to know how this will actually play out, Intuit’s ability to capitalize on this potential will likely prove to be the biggest factor in spurring the company to the next level of growth.

Note: Intuit hosted me at QuickBooks Connect and paid for my travel expenses.