by John M. Covaleski
Boston - Best Software plans to embrace the accounting community and the approximately 1.35 million small businesses using its Peachtree low-end accounting applications in its battle with Microsoft Business Solutions for supremacy in the small to midsize business software applications market.
Best officials unveiled the strategy during a press briefing here where they declared that the SMB market has come down to a three-horse race consisting of the horizontally-focused vendors that have been most active in making acquisitions in recent years. They are Microsoft, serving the middle market; Intuit, serving low-end businesses; and Best, serving both the middle and low-end.
"There really are just three players left as we see it," said Best chief executive Ron Verni. "No disrespect to the others, but unless you are already large, playing in both horizontal and vertical markets is very difficult."
Verni said he expects the remaining SMB-focused accounting/business management application vendors to be relegated to niche or vertical markets, while Best, Microsoft and Intuit duke it out for the overall market. Those remaining vendors include Accpac International and Open Systems among about a dozen others.
To be sure, most of those other vendors have shown no signs of surrender - particularly Accpac and Open Systems, which each recently unveiled aggressive product development and reseller recruitment plans of their own.
However, discussions at the recent Best conference here primarily cited Intuit and Microsoft as the competition and cited the latter’s lack of low-end small business customers as a key competitive issue. Verni proclaimed that Microsoft will be unable to grow if Best and Intuit - which has 2.5 million QuickBooks customers - hold on to their low-end market shares
"Microsoft is not a player in the low-end at all, which means that between Intuit and Best, we have all the oxygen in the room and that represents the only feeder for business in the middle market," said Verni. He elaborated by saying new applications sales to middle-market companies have been minimal, and that approximately 99 percent of all new accounting/enterprise product sales in recent months have been to businesses moving off of QuickBooks or Peachtree.
Verni and other company executives then unveiled a Best strategy that includes:
- Developing several vertical industry versions of Peachtree products;
- Establishing an Accountants Division and creating new platforms for working with accounting professionals;
- Establishing formal programs for migrating customers among different Best products; and,
- Continued mergers and acquisitions.
"We are acquisitive and we will continue to be acquisitive," Verni declared, adding that Best’s parent, England-based Sage plc has given him "an open checkbook" for more acquisitions, and that the market is ripe with potential deals."With the depressed market, a lot of software companies are finding that they cannot compete and are saying that they have to choose the right partner," Verni said. "And my Best team has been able to execute successfully on our acquisitions so far."
Sage has built Best into a $700 million-a-year company with 1.6 million SMB customers almost exclusively through acquisitions. Those deals include the middle-market accounting software vendor State of the Art in 1998, followed by Peachtree a year later, and then the original Best software company, developer of Abra payroll and FAS fixed asset software, in 2000. Since then Sage re-branded all its U.S. companies with the Best name and acquired nonprofit industry software developer Micro Information Products, customer relationship management software developer Interact Commerce Corp. and more recently, CPASoftware, developer of the Visual line of tax preparation and practice management software for accountants.
Microsoft in the past 18 months acquired the former Great Plains, long considered the leading middle-market financial systems vendor, and Denmark-based Navision, another middle-market powerhouse, and placed them in its Microsoft Business Solutions applications group. However the company has failed thus far to attract any noticeable share of small business end users.
QuickBooks is by far the dominant low-end product. Its developer Intuit has recently taken several steps to develop a presence among larger companies, but has not yet recorded an appreciable share.
"If you want to be the key player, you need both a strong middle-market and low-end presence," said Sage Group chief executive Paul Walker. He noted that Sage’s acquisition of Peachtree is proving to be a pivotal part of Best’s new strategy.
CPASoftware is a cornerstone of Best’s new accounting outreach strategy. "We now have products that we sell through accountants and ones we sell to them, and we will make the most of that combination," said Best chief marketing officer Nina Smith.
Smith heads Best’s new "Accountants Network" program that encompasses the users of CPASoftware products and accounting professionals trained to advise customers and make recommendations on Peachtree products and the MAS90/200 and other accounting applications from Best’s Mid Market division. Best estimates the group has 40,000 accounting and bookkeeping firm members.
The Accountants Network will, among other things, allow members to network with each other, provide training and education on various Best products and give members a platform to establish service alliances with the approximately 6,600 resellers of Best’s full range of business applications. Best at the conference also announced a variety of new programs for those resellers.
Accounting Network members with clients using Peachtree products could also conceivably find it easier to steer those customers to Best’s other products as they outgrow the functionality in Peachtree. This would fit with Verni’s concept of controlling the "air supply" of middle-market customers to Microsoft.
Best’s new migration center is another part of that "air supply" strategy. The center will have staff dedicated to creating programs and providing services to help customers migrate from like products within the Best family. That could include migrating in non-accounting areas, such as moving from Best’s low-end customer relationship management system ACT to its higher-end SalesLogix, but most of the action will likely be customers moving from Peachtree to Best mid-market accounting solutions or its MIP nonprofit accounting product line.
Best also plans to keep Peachtree users longer by refining that product to meet users’ particular needs. Best disclosed plans to release new editions of Peachtree designed for the following vertical industries: accounting, manufacturing, distribution and nonprofits.
Doug Meyer, president of Best’s Small Business Division, which is Peachtree’s home, said the vertical editions might also help Peachtree take market share from Intuit. "When users look for a business software for the first time and look at Peachtree, they will have a suite of offerings that meets their specific needs," he said.
Meyer and Verni both declined to discuss the vertical editions in any detail beyond saying they will be rolled out in 2003. Meyer also refused to comment on speculation that Best is developing a new higher-power Peachtree product that will be called "Turbo."
Verni also declined to specify any new deals when discussing Best’s M&A strategy. However, he indicated he’s interested in acquiring technologies that would round out Best’s current offerings for nonprofits and for accountants.
The Best chief executive did not rule out the possibility of acquiring a reputable vendor of horizontal market accounting/ enterprise applications. He also asserted that those other vendors, many of whom use accountants as resellers, would not necessarily be forced out of business. "There will always be room for niche players," he said.
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