How Microsoft Is Going To Win The SMB Accounting Battle

(Disclaimer:  I am part of the Small Business Accounting beta – but all information provided in this post is publicly available from both Microsoft’s web site & various technology ‘first looks’ reports)


If you haven’t already heard, Microsoft is prepping a new accounting package aimed at businesses with up to 25 employees.  Small Business Accounting as it is called will be a key part of a new Microsoft Office edition tentatively scheduled to be released later this year – Microsoft Office for Small Business Management


The SMB Accounting market is pretty fierce, with several key players releasing new versions annually.  With Microsoft being the new kid on the block coming into the small end of the market, you may initially wonder how they’re going to compete against entrenched products like Intuit’s QuickBooks & Best Software’s Peachtree Accounting.  Admittedly, Microsoft has an uphill battle in front of them in this aspect – but Small Business Accounting is going to be a much needed blast of fresh air into this market.


So just how is Microsoft going to win the battle for keeping small business’ books?  Well, there are actually two answers to this question.  First and foremost, they’re giving small business users something they aren’t used to having:  native ODBC access to their financial data.  No proprietary data format, no closed database schema, no having to spend extra money on a cumbersome 3rd party product to access their data.  Since Small Business Accounting uses Microsoft SQL Data Engine (MSDE) for its data store, users have the ability to access their financials from any ODBC compliant application, allowing for advanced reporting and analysis using the entire Office suite, including Excel, Word & Access.  IMHO this in itself is huge.


The second part to this answer is that Microsoft is giving Independent Software Vendors (ISVs) the tools necessary to quickly and easily build a wide array of 3rd party solutions for Small Business Accounting – from add-ins that operate within the Small Business Accounting application itself, to industry-specific LOB applications that directly integrate with Small Business Accounting – allowing the 3rd party solution to focus on the industry-specific stuff while depending on SBA for the accounting end.  So how does this compare to what is available on the market now?  It blows it away – plain and simple.  Sure, Intuit provides a Developer SDK – but it’s very low level, requiring the developer to code most of their own functions for manipulating the data.  Best doesn’t provide any sort of SDK for Peachtree, but MultiWare, Inc.’s PAWCOM has long since been considered the best solution available for accessing and integrating with Peachtree.  PAWCOM is a top-notch product, but the one major disadvantage it has compared to Small Business Accounting is that it is a 3rd party product.  Microsoft’s Small Business Accounting team has built extensibility & accessiblity into the product from the ground up, with a complete .net solution  - with key business logic functions exposed for developers and ISVs to leverage.


The combination of open data access and ease of integration for ISVs is going to be the primary catalyst for Small Business Accounting.  ISVs will be more likely to develop add-ons and vertical market solutions for SBA than other accounting applications because with SBA being based on open technologies such as .Net and SQL, ISVs will have a diminished learning curve.  That combined with the presence of already exposed business logic functions will result in a significantly shorter development time thus resulting in lower development costs which in turn makes their solution more profitable.   Users already familiar with Office will appreciate the familiar, intuitive interface.  Admittedly, many users may not realize the benefit of having and open data store, but I would think that most advisors (accountants and IT partners) would bring this to the small business owner’s attention.


One things remains certain:  whether you love or hate QuickBooks or Peachtree (or other SMB accounting applications), the introduction of Microsoft’s Small Business Accounting is going see a flurry of competition that the market hasn’t really seen in a very long time – which can only be good for the small business customer.


For more info on Microsoft’s Small Business Accounting / Microsoft Office for Small Business Management:


Office for Small Business Management:
http://www.microsoft.com/office/editions/prodinfo/smallbusiness/accounting/default.mspx


PCWorld.com – First Look: Microsoft Small Business Accounting:
http://www.pcworld.com/news/article/0,aid,118495,00.asp


The .NET Show: Small Business Accounting Platform:
http://msdn.microsoft.com/theshow/episode048/default.asp

Microsoft Small Business Accounting:
http://www.sbadeveloper.com/

Poor Man’s CRM available for download

Ok – I promised I would make this available – it’s just taken a little time to get it done.


http://sharepoint.laytonflower.com     u:  wssdemo    p:   wssrocks!


The Shared Documents library has a new zip file I’ve uploaded, which contains two files – readme.doc and companywebcrm.fwp.   The readme file provides basic steps for installing Poor Man’s CRM onto a new Sharepoint site.  At this time – I only have a FrontPage backup available – which is the companywebcrm.fwp file.  As a result, you’ll need FrontPage 2003 to complete the process.  I should have a site template available in the near future as well.


This is the InfoPath version of the site, and the InfoPath forms have been updated to point to http://companywebcrm as their source for Sharepoint lists.  As a result, you’ll want the new website you create to have a host header value of companywebcrm, and also create a new alias (CNAME) record in your internal DNS for companywebcrm that points to the machine it resides on.


And don’t forget about my TS2 presentation in roughly 4 hours . . .    :^)

What about the SMB space is so hard to understand?

So, there is a product I like – ok, I *really* like.  The only problem is that they don’t quite ‘get’ small business.  They were really close.  They had a fair price per license on their software – but they required a minimum purchase of 25 licenses.  But – they did have a free version.  It had the same functionality as the full product – the only difference was that it was limited to supporting 10 clients.  The free version was great for so many of our customers, that were within the 10 client limit.  However, as soon as you passed 10 clients, you had to purchase the full, 25 license version.  We have several clients who are sitting at 11-15 seats that could benefit from the software – but they can’t justify paying for 10 licenses that they’re probably never going to use, so they don’t buy it.  I’ve emailed the company several times asking for them to consider removing the license minimums and letting us by exactly the number of licenses we need, no matter how small.


Well, just tonight I noticed that this company had released a new version of their software.  So I went to their download site, downloaded the free version and registered for a license key for the free version.  I received the email message with my license key, and as I read it – I discovered a significant shift from the previous version:  Specifically, the free version of the new release is still restricted to only 10 clients, but now it is only valid for 45 days as a trial.  No more free unlimited-use version for up to 10 clients.  So where does that leave my customers with under 10 clients?  Well – they aren’t going to buy 25 licenses – I know that.  So for one, we aren’t upgrading :^).  Two – we’re going to have to start looking at our options for replacements. 


I’ll admit that I’m stumped.  I just don’t get it.  The SMB market is the hot target market now for technology.  Yet so many big players are trying to penetrate the SMB space, but they can’t seem to ‘figure out’ SMBs.  At a basic level, the SMB space is actually pretty simple:  provide fair pricing, don’t make us buy stuff / licenses we don’t need, and don’t hold us hostage by making it impossible to migrate to a different product down the road.  I don’t know if that goes against everything that was drilled into the enterprise managers and marketing directors during their MBA courses, but so many of the big players just can’t seem to be able to grasp the simple concept of TRUSTING THEIR CUSTOMERS AND TRUSTING THEIR PRODUCT.  That’s one thing about SMBs – you don’t market to the SMB space by traditional means.  We aren’t going to seminars – we have a business to run.  We aren’t going to take your cold call – we’ve got three paying customers on other lines.  We’re not going to notice your direct mail campaign – it’s going to get pitched along with the random catalog, mortgage offer & pre-approved credit card application.  No Thanks.


So just where do SMBs learn about solutions, and who do they listen to?  Other small business owners, of course!  The people who know and understand the unique challenges we face every day, because they’re dealing with the exact same issues.


So for those companies that want to crack into the SMB space – just what do they need to do?  First - most need to change their pricing structure / licensing.  If you could chose between selling 1,000 widgets for $100 apiece, or selling 100,000 widgets for $20 apiece . . . would you rather $100,000 in sales or $2,000,000 in sales?  Take my product above.  We have two customers with between 20 & 25 clients who have purchased the full 25 client version of the software for over $600 (approx $25/seat).  At last count, we had approximately 17 customers using the free version (representing approximately 130 clients).  I know that I could sell the software to each and every one of those customers if they could buy the exact number of licenses they needed – or approximately $3,250 in sales for the software vendor – and that’s just from the customers who are using the free version.  I could sell it to my customers with between 10 & 20 seats as well.  However – with the 25 seat minimum purchase requirement – I’ll be lucky to be able to get one customer to buy it.  


The problem is that most companies require minimum purchases (blocks of 25 / 50 / 100 licenses).  If you’re a small business with 10 users and no plans for growth – are you going to buy a solution that has a minimum purchase of 50 licenses at $30 each?  No way – you’re effectively throwing away  40 licenses that you’re never going to use.  And what is it with minimum license purchases anyway?  That type of requirement does not benefit the customer in any way – the only possible benefit is to the vendor in forcing the customer to buy more licenses than they need.  What so many larger players don’t realize is how much business they’re losing because of those minimums – especially where the SMB market is concerned.  Throw those minimums out the door – let customers buy the exact number of licenses they need – regardless of how little.  Let that mom & pop business buy the 3 licenses they need . . .   and when they add another employee a year down the road – let them buy a single license – don’t force a 5 pack on them.  Software vendors are painfully aware of how much software piracy costs them.  Are they aware of how painful it is to their small customers when they force them to buy licenses they don’t need??? 


Provide fair pricing.  Retire minimum license purchases.  Support your product!!  We’re all human – we make mistakes.  If there is a problem with your product – admit it, fix it and move on.  Take care of your SMB customers, give them a good product at a fair price, and you’ll effectively be hiring a whole new sales force.  SMBs talk to each other – and they talk shop.  They talk about what products they love – and they talk about the products / vendors they dislike.  Get them loving your product – and they’ll talk to each other, and the sales will start coming to you.  Keep your head stuck in the enterprise model of minimum licenses, forced support contracts, etc. – and you’ll stay on the outside looking in at the SMB space.

Coming to a web browser near you . . .

Event Name:     Wednesdays on the Web with TS2:
                         Conversation with a Partner


Event Date:        Wednesday, March 16th 2005


Event Time:        4:00 P.M. CST  (GMT -6:00)


Duration:            60 Minutes


Description:       Join us as we talk with Chad Gross, SBS-MVP
                         about using Windows Sharepoint Services as a
                         business application development platform to
                         increase customer satisfaction and efficiency
                         while providing additional revenue for partners.


To register for this event:  http://www.msreadiness.com/eventregister.asp?eid=1692


*****
The challenge for me with this event is that I’m actually being constrained by a time limit.  And anyone who knows me knows that once I get started talking, it’s pretty darn difficult to get me to stop.  Case-in-point:  about a month ago I presented on WSS to the Washington, D.C. SBS Parnter Group.  I had been down ill for a few weeks leading up to this presentation, which included a 10 day stretch with no voice whatsoever.  I had only regained my voice a couple days prior, and advised everyone that I wasn’t sure how long I’d be able to last.  Well, we ended up cutting it off after 3.5 hrs because it was getting late :^)


My goal with this presentation is to hopefully open some partners’ eyes.  Sharepoint is billed as a collaboration tool – and admittedly does a great job filling that role.  However, how can small businesses (and I’m talking 5-20 users) take advantage of WSS when they really don’t need it for collaboration?  I mean let’s face it – with a small office of say, 10 users all in one physical location (and many times most of which in one large room with their own desk) – you really don’t need much of an intranet / collaboration tool.  It’s just more natural to simply ask Jane what the status of xxx is versus logging on to see   :^)   What is great about WSS is that with a little imagination (and not a lot of effort) it can solve other business problems for these small clients – making them more productive, more satisfied customers – and giving the SMB partner additional customization revenues.  Want details?  Well – you’ll have to register for the event!  :^)


I did want to share that since I am pressed for time with this event, that I thought it would be appropriate to supply supporting materials.  SO – I am working to make the InfoPath version of my “Poor Man’s CRM” WSS demo available for download both as a site template and as a complete site that you can drop in and start using  :^)