Following on from my previous post about SaaS being disruptive and hence tricky for traditional software players to deal with, news that former chairman of large UK accounting software company Sage looks set to buy all or part of an unamed SaaS accounting company (guesses anyone? FreeAgentCentral? Xero? who else?).
Sage has 5.5million customers but the company has been criticised for being slow to embrace SaaS for fear of cannibalising sales of its shrink-wrapped software.
AccMan has an interesting take on all of this (but bear in mind he’s a shareholder in FreeAgentCentral). He says that;
If I was on the receiving end of an offer from Jackson would I be willing to sell out right now? That depends on a multitude of factors but the answer is likely to be no. If anything, I would thank him for adding validity to the SaaS story and suggest he think about making angel or early stage investments. Why?
Building out a SaaS business to scale for the very small and small to medium sized business is not easy. Viral marketing can take you some distance in the right markets but not in all segments and not without a good amount of hard work. Even then, operating economically at scale is not as simple as it appears. FreshBooks with its 300,000+ new users since 2004 doesn’t exhibit too many technical problems and is said to be doing very well with zero external investment. But it is only one of many vendors vying for attention in this emerging market. In the meantime, an investing entrant like Jackson, with his years of experience in the accounting market, will most certainly be welcome. If nothing else, it is excellent PR for the SaaS contingent.
Looks like SaaS SME accounting will start hotting up pretty soon.