SaaS & Cloud Computing and the Channel

One of our core business strategies at Intacct is to work closely with the channel to deliver our applications. Our partners- Value Added Resellers, CPA firms and Systems Integrators bring tremendous experience and talent to the Intacct family – which is very important to CFOs that are looking to implement new financial systems.

As I have written here before, amongst the cloud computing intelligentsia, there is a widespread preconceived notion that SaaS and the channel don’t mix.

I understand why this is – most of the large cloud computing and SaaS companies started out before the channel was ready for SaaS – and as such they focused exclusively on direct sales. Because the early firms grew up without channels, the natural conclusion is that SaaS and channels are not compatible.

But I think this is much more due to timing than some fundamental characteristic of SaaS and the channel. My experience is that channels fulfill demand, they don't create it. In the early days of SaaS and cloud computing, the vendors had to directly sell to clients - customers were not clamoring for cloud computing-based solutions. But in 2010, clients are clearly asking for SaaS and cloud applications - and the channel is responding to this demand.

Early SaaS and cloud companies grew without reselling channels by developing a direct sales culture, and several of these firms hired their sales executives from Oracle, which also has a direct sales culture. Once you’ve got a large direct sales organization and an entrenched direct sales culture it’s very difficult to become channel friendly – there is simply too much channel conflict to manage between a large direct sales team and the indirect channel. Note that I'm talking about reselling channels here - Salesforce in particular has a large and extremely successful ecosystem of systems integrators and consultants.

In the B2C world, consumer focused software companies are actively disintermediating the retail channel by offering SaaS and cloud computing services directly on their corporate websites. While I think this will work for inexpensive consumer products that are purchased, it's clear to me that the "come buy it on our website" approach will not work for more expensive, more considered purchases in B2B world. There is a big diference in my mind between B2C products which are purchased, and B2B products which much be sold.

So all this said, It should be clear that I very much disagree with the premise that SaaS and Channels don’t mix. At Postini, now a part of Google, we had 1,800 resellers and the channel was the key to our success. At Intacct we have more than 100 channel partners and growing.

The nature of the financial applications business is that CFOs only change out their financial systems once every 7 to 10 years – having local, expert partners that make this transition all the time is enormously important – and the VARs, CPA firms and integrators are all great at assisting CFOs in doing this. The channel reduces the cost and risk for the CFO and helps deploy best practices, which increase ROI.

The convergence of SaaS and channels is a win win win – for Intacct, for our channel partners and for our clients. We gain broad, cost-effective distribution, our channel partners gain significant new revenue streams and our customers gain from successful, high value and low risk implementations.

So that’s the perspective from the cloud computing and SaaS industry side – in my next post I’ll look at what I’m hearing about SaaS and cloud computing from the army of existing mid-market ERP channel partners.

Intuit - The $1 Billion Cloud Computing Company

One Billion Dollars. That's the size of Intuit's cloud computing / SaaS business.

I think that it's pretty clear that if you asked around amongst the cloud intelligentsia about the world's largest cloud computing and SaaS firms, Intuit would not be particularly top of mind.

This was in fact the premise of a small group session I attended last week that featured the head of corporate strategy for Intuit being interviewed by the lead cloud computing financial analyst from Goldman Sachs. It turns out that Intuit already has more than $1 billion of SaaS revenue and growing - but people just don't think of Intuit as a cloud computing firm.

The reality is that Intuit sees cloud computing as a strategic from many perspectives - it helps protect them from piracy in their consumer businesses and it makes it far more easy for them to sell add-on products and services in the B2B businesses. It helps them bring products to market faster, deliver more innovation and integrate across their product lines. It helps their overall margins since they can sell direct to their buyers, without the need for retail or CPA or VAR channels.

He said Intuit has around 50 million customers, and SaaS has already helped tremendously with cross selling and upselling across the 50 million. He also indicated SaaS is key to their global expansion strategy.

He said they are starting to think of their core products like gateways - get someone using Turbotax on-line and it becomes the gateway to sell a raft of add-on products and services. In the cloud computing model, it's just that much easier for Intuit to link their products together, and to promote new products from within their gateways. This is great business model innovation coming from what many people think of as a desktop software company.

Intuit's consumer tax prep business is now mostly SaaS, they just acquired mint.com to have a cloud-based personal finance business. In the B2B world, they acquired paycycle for cloud-based payroll, they have several other cloud based small business services, they have a large base of clients in Quickbooks on-line and they are doing very visible platform as a service work in partnership with Microsoft.

To me the most interesting part of this is the potential impact on the channel. Historically, when I thought of Intuit, I thought about going to Best Buy or Costco to purchase a box of software a retail. Cloud computing will change all of this - and the first thing to go will be the retail channel. Why pay to create physical packaging, pay for shelf space at retailers, and pay margin to retailers when you can sell your gateway products through your website, and you can cross-sell all of your other products through your gateway products. Margins instantly and dramatically increase, as does penetration of add-on products.

I still think there are questions about going to direct website and in-product distribution vis a vis the CPA and VAR channels, particular in the B2B market, but overall I'm glad to see Intuit so enthusiastic about their cloud business.

At Intacct we love this because Intuit is effectively priming the pump for a huge number of businesses to run their core financial applications on the cloud. Whether it's the small business that moves to collaborative cloud accounting with their CPA firm, or the midsized business that has outgrown QuickBooks and wants to move to a more advanced system, I love the momentum Intuit is generating for Intacct and the whole cloud computing movement.

Cloud computing and the top CPA firm challenges for 2010

Had a very interesting meeting last week with several of the thought leaders at the AICPA on the topic of how cloud computing (and cloud accounting in particular) aligns with the top goals and challenges of the CPA profession for 2010.

What I learned was that in normal times, the top issue for firm management has consistently been attracting and retaining talent. Not so in today's economy.

In 2009 and 2010, the recession has caused the top priorities for firm management to shift. The top issues for most firms have now become:

1. Retaining clients and
2. Partner accountability

I further heard that clients are doing their best to treat firms like commodities, and are aggressively shopping firms against each other to get the lowest hourly rates for commodity accounting services - after years of building up value-based billing, it has been difficult in the last year for firms to maintain rates.

We had a great discussion about how aligned cloud accounting is with these two top firm priorities and how it can help firms insulate themselves against commoditization of billing rates.

Implicit in the concept of cloud accounting is that the firm moves the client onto a collaborative, web-based accounting system like Intacct Accountant Edition - where the firm and the client both have access to the client's information in real time and where the firm is deeply involved with the client as a trusted business adviser. We in the cloud computing business call this "stickiness" - client retention is greatly enhanced because in the cloud accounting model the firm and the client become tightly intertwined - both at a systems and a business process level.

Partner accountability also improves - because in the cloud computing model, the firm always has access to complete, current client financial data - and can offer both proactive and high value services - all the way up through advisory, strategy and CFO-like work. This means partners can get out of the cycle of bidding against other firms in a downward spiral of lower and lower hourly rates. Trusted adviser services are by definition not commodity services - and as such aren't as susceptible to be arbitraged across firms.

This in part helps explain why there is such interest in cloud computing across the profession - more than 1,000 firms are already in the pipeline for the Intacct Accountant Program, many of the keynotes at last Week's New York accounting conference were about cloud computing, and I counted at least 15 sessions in the Tech+ / Practitioners conference catalog that are about cloud computing - it's not about technology, it's about leveraging the Internet to help improve firm productivity, retain clients, provide better service and increase partner accountability.

Off topic - go buy an SSD

My wife and I went to a crawfish boil last night in Palo Alto, with lots of well connected and technology savvy folks from silicon valley. After a few cocktails, we got talking about the most innovative technology products right now that really make a difference - both to use personally and in business and to invest in.

Cloud computing was of course a hot topic on the business front - but on the personal side of things what surprised me was none of the folks I was talking with, in a very technologically savvy crowd - were using Solid State Drives (SSDs) in their personal PCs.

For the last nine months, I've been using an SSD in my laptop instead of the normal laptop hard disc. It's easily the best personal technology upgrade I've made in years - I like it so much I want to recommend SSDs to everyone reading this blog.

Switching from a regular old hard disc to an SSD made my old slow laptop super fast and a pleasure to use again.

Solid state drives use flash memory chips instead of a spinning platter like a hard drive to store your data. Externally they look just like a regular laptop hard drive - it's just the guts inside that are different (and way better.) They are more expensive than regular laptop hard drives, but they are so much faster that you will be far more productive - the ROI is a no-brainer.

Now I can go from turning on the laptop to having windows running plus have Outlook and my web browser open in under a minute. With the same laptop, with a a regular old hard drive, starting the system and getting into the same applications was at least a five minute process - and it always felt even longer.

Now, with the SSD, new applications start up instantly - they just pop open immediately - there is no lag time at all. Searches for files are also instant. Plus since there are no moving parts in an SSD, my laptop is completely silent and the laptop battery lasts longer too. My laptop is a 3 year old IBM Thinkpad - an SSD is a going to be a huge improvement whether you have an old or a new PC.

I'm using a 120 gigabyte SSD from a company called OCZ. It costs about $320 from Amazon or NewEgg. While this is more than triple the price of a standard hard drive - I figure I'm at least 15-30 minutes more productive every day just by not waiting around for Windows to start of for applications to run or for searches to complete. Literally every task you do on your PC is faster.

There are lots of other SSD choices - Intel makes SSDs, so do Kingston, Corsair and Crucial. I chose the OCZ Vertex because it got great reviews on NewEgg.com, and 120 Gigabytes was the right size for me, and just over $300 seemed a reasonable price.

To install the new drive- you use disc cloning software like Acronis which your IT person is likely to already have, to copy everything on your old drive over to the new SSD. You'll also need an inexpensive USB or eSata adapter like this for the new SSD so you can have both it and your old drive plugged in to your laptop at the same time. It take about 1/2 hour to clone your old disc to the new SSD. Then you just unplug your old hard drive, and plug in the new SSD, and you're done.

SSDs aren't just for laptops and personal PCs - they are making a huge difference in the corporate data center as well. Innovative companies like Fusion-io are doing amazing things in the enterprise server world -with flash-based drives that are hundreds to thousands of times faster than disc drives.

I like this technology so much I thought it was worthy of an off topic post. My advice - if you use a computer much or most of the day, replace your old hard drive with an SSD as soon as you can. It will pay for itself in weeks in terms of making you more productive. It's really that much better.