June has been a big SaaS month for Intuit! Over the past few months I had noticed that Intuit had quietly started moving more into the Software-as-a-Service market. These moves became more apparent this month with these announcements:
So what does this all mean?
Well, for a company that couldn’t seem to spell SaaS and has traditionally sold almost all of their products in CD’s, this is a really major shift. Intuit had dabbled in on-line versions of Quicken and QuickBooks but these announcements were a real strategic departure in their business away from the old software model.
Consider the Intuit business franchise for a moment;
* 4 million QuickBooks customers, representing 25 million users
* 1 million Intuit Payroll customers, about 14 million employees. Of this maybe 100,000 are onlinebut that still represents about 1.5 million employees. With the PayCycle deal adding another 80,000 customers.
* QuickBase adds another 250,000 customers to the portfolio.
* The Intuit Developer Network has approximately 75,000 developers enrolled.
These are big numbers, in a market segment, Small and Medium Business, that everyone in the software market is looking to penetrate.
Why Buy Another Payroll Engine?
This was the first thing that crossed my mind when I heard the news. I guess it’s obvious. Moving Intuit’s existing payroll engine over to SaaS would cost too much and take too long, so they bought the leading SaaS payroll product.
Why is payroll important? Because if you think about a sticky application for any size business, payroll has got to be one of the most important. Look at ADP, Paychex and Ultimate Software to see the type of rock solid franchise you can build with a great payroll engine. Considering how many small businesses already use Intuit’s other off-line software products, some basic cross selling of payroll could dramatically increase their revenues and help them to move these customers on-line, where the real revenue play is.
So Once You Get Your Customers On-line, Then What?
This has been one the bigger challenges for most software companies transitioning to the SaaS world, how best to bring along their legacy customers. Just telling your customers that you can get the same application over the Internet, won’t get customers to move. If you are luck you can get 10-25% of them to move to a new platform over their lifetime.
A different approach to getting them on-line is to offer very compelling products that they need and aren’t currently offering as an off-line or on-premise solution. Payroll? This is also where the Intuit Partner Platform comes in. Bob Warfield, in a recent blog post about Intuit’s plans, relays what Bill Lucchini, Intuit’s GM for their IPP, told him about the platform:
1. Need to offer a platform that you can truly build great applications on
2. Partners must be able to build a profitable business on top of the Intuit platform
3. Intuit must offer developers significant cost and time to market savings
The plan seems to be to start offering all types of new products on-line, make it easy and really affordable, then you might have a fighting chance of moving a majority of your customers over time.
More about the Intuit Partner Platform
Intuit really made an interesting decision that was quite a contrast to others in the maketplace by picking a third party technology for their IPP Software Development Kit (SDK), Adobe Flex. Salesforce, Google,NetSuite, FaceBook and every other Platform as a Service (PaaS) player is based on their own proprietary technology, but Intuit must have believed that their best shot at delivering a platform to build great applications on was to use someone else’s technology. Flex is also complimentary to SAP, Salesforce, Amazon and others.
Another thing to like about the IPP is that you don’t have to use the IPP SDK to develop SaaS applications. You can use any other technology or Cloud infrastructure and then publish to the IPP. The advantage to the developer is, develop once but publish in many places. This Federated Applications approach will provide for faster adoption. The advantage to Intuit is that existing AppExchange and other SaaS developers can move their products over to the IPP quickly, which will provide a lot of application choices for their customers. So not only the 75,000 Intuit Developer Network members but also all the other SaaS ISV’s will be able to leverage the IPP to expand their SMB market penetration.
Intuit also provides the Intuit Workplace which allows customers to integrate Intuit and non-Intuit applications using their federated integration and security structure. The Intuit Workplace provide single sign-on to all types of applications, all offered inside of an Intuit Cloud infrastructure.
The ability to access the Intuit customer base is also priced reasonably. Partner revenue sharing ranges from 14-20% plus a small fee for monthly usage. Some early adopters of the IPP include Vertical Response (email marketing), DimDim (web conferencing), Rypple (performance management), Setster (appointment management) and Expenseware (T&E expense reports). It looks like Intuit has about 100 applications in their marketplace today and it will be interesting to check back with them in six months. There appear to be other go-to-market services that can help the partner market, manage and bill for their applications as well.
My general conclusion is that Intuit is clearly making some good moves towards migrating its business model to SaaS, but it is going to take time to make the move and old habits die hard. If I were offering a competitive offering like Workday, Netsuite or Intacct, I would be watching their progress very carefully over the next 6-12 months.
Other commentary on the Intuit Partner Platform include:
Jeff Kaplan, THINKStrategies: Why Intuit Can Become A Major SaaS Platform Player
Phil Wainwright, ZDNet: Intuit makes two-pronged PaaS and SaaS push
Laurie McCabe, Horwitz: Intuit Partner Platform: Changing the Rules of Cloud Platforms with Federated Applications
Intuit Partner Platform on Twitter: http://twitter.com/ippdev
Intuit IPP Blog: IPP Team Blog