I’ve updated my statistics on cloud accounting adoption from the sources to which I have access. There have also been some significant announcements since I last posted these statistics. The key takeaway here is that QBO is dominant in the US, and Xero is the leader outside the US, especially in Australia/NZ/UK.
Key changes in the small business cloud accounting space in the last year or so include the following:
- Wave Accounting has been acquired by H&R Block, who is now offering bookkeeping services to Wave Accounting users.
- Intuit is in the process of implementing QuickBooks Online Select, a new service to help QBO end users with first time setup of QBO.
- Xero discontinued its payroll offerings, and now recommends that people use Gusto for payroll
- Sage acquired Auto Entry, a company which uses AI and OCR to extract data from invoices, receipts, bank statements, credit card statements, and other sources. We expect that Auto Entry will turn into another Sage connected service which will connect to Sage Business Cloud.
I also track the ratio of Intuit’s desktop/online ecosystems, and for the first time ever, the QBO ecosystem had more revenue than the desktop ecosystem.
Intuit continues to lead in cloud accounting adoption among small businesses and microbusinesses in North America, with almost 1.9 MM companies on QBO in the US. QBO continues to make strides outside the US, with 800,000 companies in their latest user statistics. Xero continues to grow in the US, with 132,000 North America users as of the end of March, but we expect that those numbers will grow more quickly due to possible synergies from the Hubdoc acquisition in August.
QuickBooks Online Self-Employed, a product which is designed to track the cash receipts and disbursements of independent contractors, grew to 750,000 subscribers this period. Although the number of subscribers bundling this solution with Intuit’s TurboTax income tax preparation software was not disclosed this quarter, last quarter approximately half of QBOSE subscribers also purchased TurboTax.
Intuit has quietly launched a new product targeted at companies with 10+ users called QuickBooks Online Advanced, with premium support, and priced at $150/month. Industry observers I speak with tell me that they expect this product to go upmarket top serve larger businesses over a period of years. A strategy for involving accounting professionals and software consultants in QBO Advanced has not been launched yet, as the product is not available on wholesale billing for ProAdvisors at this time (9/2018), and we have not heard of a QBES-style “Intuit Solution Provider” VAR program for QBO Advanced at this time.
Despite these improvements, desktop accounting continues to be the dominant platform for small business. Intuit’s most recent revenue statistics (under the old GAAP standards, not the new ASC 606 rules) show that revenue for the QuickBooks desktop ecosystem continues to lead the QuickBooks Online ecosystem by a significant margin. While this will evolve over time, the ratio of QBD ecosystem revenue to QBO ecosystem revenue for Intuit’s quarter ended 7/31/2018 is 1.36:1. (source: Intuit)
While we don’t have a method of providing a true “apples to apples” comparison of QuickBooks desktop user counts as compared to QBO user counts for a number of reasons, it’s clear that desktop has a larger share of revenue. The online ecosystem continues to grow, and it’s hard to quantify the impact of the recent QuickBooks Enterprise price hikes on that desktop revenue. Sage and Xero continue to be a worthy competitor to QuickBooks in many segments, new products like BQE Core and AccountantsWorld Power CAS continue to show promise. Ultimately, if artificial intelligence and machine learning can even partially live up to the hype surrounding them right now, the whole game could change – but for now, the desktops are paying the bills.
I’ve updated the CPATechBlog Cloud Accounting Dashboard for the latest statistics on cloud accounting adoption for the most recent earnings and public company disclosures from Sage, Intuit, and Xero.
Highlights from the most recent updates include the following:
- Intuit continued to dominate the cloud accounting space, with 1.82 million companies on QBO as of 4/30/2018, as compared to 132,000 in North America for Xero. The other competitors in this space do not break out North American adoption stats or are private and do not have to disclose adoption stats to the public.
- In addition to the 1.82 million companies on QBO in the US, Intuit reported another 720K QBO companies outside the US, as well as 680K users of QBO Self Employed. The 720K QBO companies outside the US compares unfavorably to the 1.25 million companies on Xero at 3/31/2018, but both performed favorably against the 431,000 reported on Sage Business Cloud Accounting (the product formerly known as Sage One) at 3/31/2018.
- Intuit disclosed that 330,000 of the 680,000 total QBOSE users bundled the product with TurboTax, which may make some of you practitioners nervous about recommending that product – don’t forget that there’s a way to connect QBO for Accountants to your client’s QBOSE, and Intuit says that they won’t try to sell TurboTax to your QBO self-employed clients – if you need details, drop me a line – Brian at bftcpa dot com.
- I still estimate that the ratio of QB Desktop users to QBO companies is 1.30:1 as of the most recent earnings release. What’s more important for you, the gentle reader of this blog to know is two things:
- While the ratio of QBD users/QBO companies is 1.18:1, the ratio of the desktop QB ecosystem revenues to the QBO ecosystem revenues was 1.42:1 – so desktop versions of QuickBooks are still essential to the QuickBooks business for Intuit.
- The really bad news for users of desktop versions of QuickBooks is the forward looking information about desktop versions of QuickBooks – and I’m quoting directly from their Q3 Earnings Call Script here. “Desktop Ecosystem revenue grew 3 percent in the quarter and is up 7 percent year-todate. For fiscal 2018, we expect QuickBooks desktop units to decline mid to high teens and Desktop Ecosystem revenue to be up mid-single digits.” While we’ve known for some time that Intuit passed on a price increase to QuickBooks desktop users, it tells me that we should probably expect prices on desktop software to continue to climb as Intuit continues to try to make it financially advantageous for users to switch to QBO, where they have more control over the ecosystem, as opposed to QB Pro/Premier/Enterprise.
While Intuit has a lead in US cloud accounting, if the much vaunted machine learning and artificial intelligence capabilities which the cloud brings us in the next few years ever actually happen, accounting software may become something that people used to use – like buggy whips. Truthfully, if the technology winds shift quickly – it’s still anybody’s race.
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I’ve been tracking the user counts of cloud accounting tools for microbusinesses from publically available sources for about seven years now. My latest cloud accounting user counts appear below. Note that Intacct probably shouldn’t be in this list (especially since we also didn’t include other mid-market apps like Oracle NetSuite, as they’re both a little “up market” for most users of this. As you know, FreshBooks and Wave are private, and don’t have to report anything publically, and with Kashoo doing more as a bookkeeping service instead of as a software company, the user counts there (which were hard to get anyway) are a little less relevant here. We expect to have new data from Intuit, Xero, and Sage sometime in late April/early May.
P.S. Tipsters who have good public (non-confidential) data sources for user counts (e.g. court filings, press releases, etc.) which are more detailed or more current than this (as I write this on March 27, 2018), I share Starbucks cards with those who point new things out – I’m @BFTCPA on twitter.
P.P.S. If any software publishers want to be included in this list on a going forward basis (or want any of the analysis which goes along with this), including some work on cloud vs. on premises for user counts, reach out to me and we can discuss.
I was fortunate to be invited to attend an analysts conference for Zoho Corporation. For those of you who aren’t familiar with Zoho, they have about 60 different SaaS applications for all aspects of running a business, including e-mail, calendar, CRM, accounting, reports, HR, e-mail marketing, help desk, meetings, and many, many more. The apps are sold individually, in four bundles (CRM Plus, Workplace, Finance Plus, and IT Management), or in a mega-bundle called Zoho One. I’ve been using Zoho One for a couple of months, and it’s been pretty amazing. Some of the things I’ve done with it include:
Continue reading “Zoho: The Most Interesting Company You’ve Never Heard Of” →
I was pleased to write a white paper with Randy Johnston a couple of years ago for CPA.com called “The Journey from Premise to Hosted to Cloud: A CPAs Travel Guide“, which details the transition from having your IT hardware on site to using a hosting company like Abacus Next, and then the eventual move to browser-based SaaS applications.
While I wrote this a couple of years ago, it has held up pretty well, despite the rapidly changing IT environment. You can download it from the CPA Firm Software site’s page on Cloud Computing