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Microsoft pulls the plug on Office Accounting

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30th Oct 2009
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Microsoft has capped a disappointing year by announcing that it would cease to develop or distribute its Office Accounting application from 16 November. John Stokdyk reports.

With profit margins declining and having announced its first ever wave of job cuts earlier this year, Microsoft decided that Office Accounting had become a lame duck. Originally called Microsoft Small Business Accounting, the program was launched in North America in 2005 and arrived in the UK two years later as Office Accounting in a free Express version, and as a £150 Professional edition.

Although conceived primarily as a rival to QuickBooks in the US, Office Accounting was subsequently hailed as a serious threat to Sage’s dominant hold over the UK accounting software market.

Unfortunately for Microsoft, by the time Office Accounting arrived the small business market wasn’t looking for a new, highly functional desktop accounting package, but easier to use online alternatives to Sage.

What Sage said in 2006:

“I suspect they'll do very badly because accountants don’t believe in stuff when it’s free, and Microsoft don't do support.” Paul Stobart, Nov 2006

For more industry quotes, see RIP Microsoft Office Accounting 2004-09

It appears that the same scenario has occurred across the Atlantic. In a corporate Q&A, the company explained that free Excel templates presented a better accounting option for small businesses, while the Microsoft Dynamics ERP range could cater for mid-range companies.

Distribution will cease for all the Microsoft Office Accounting products in the UK and North America - Office Accounting Express, Office Accounting Standard, Office Accounting Professional, Office Accounting Professional Plus and Small Business Accounting.

All existing versions up to Office Accounting 2009 will continue to be supported for five years from their initial release date. In the UK, this activity will be carried out by the UK wing of Norwegian-owned Mamut, effective from 30 October.

Promising to continue to “invest in product development and services to ensure an easy transition” for the 100,000 registered Microsoft Office Accounting users, Mamut said that it would offer them a free upgrade to Mamut Business Software solutions.  Many of those registered users will have the Express edition. These customers will be offered a free 12-month licence for Mamut Office Mini, with service for £5 a month, Mamut CEO Eilert Hanoa told AccountingWEB.

“We will try to make the transition smooth for all users. We offer a big range and depending on what kind of functionality they have, we will try to match their current offering. Most importantly, they don’t need to do it tomorrow, they can choose when it’s best for their business," Hanoa said.

Mamut has previous experience of stepping in to round up users stranded by other developers, having acquired the MYOB Accounting user base in this country when that developer decided to retrench. While it gives the developer access to new customers, the feedback from AccountingWEB users affected by the MYOB switch shows that it is a high-risk route to growth. No one likes enforced changes to their accounting software, and whatever efforts the new owner makes, there will always be residual resentment.

The payroll element of Microsoft Office Accounting was an interesting feature that used an online calculation engine to process anonymous data batches that were returned to the user’s PC. This was a pioneering implementation of the “software plus services” strategy Microsoft is banking on to counteract the threat from software as a service developers.

“Mamut is probably the highest profile developer to buy into the software plus services approach. The exact fate of the payroll web services engine has not been confirmed, as discussions only started on the subject after the formal transaction was completed. Hanoa expected these discussions to be concluded within a fortnight and added, We will work as much as we can to make the transition as smooth as possible.”

Editor's blog, 2009:

“For a company generally held to be a paragon of ruthless technology marketing expertise, Microsoft’s attempts to expand into small business accounting software have been inept, bordering on catastrophic.” John Stokdyk, Microsoft OAP: How not to market business software

KashFlow founder Duane Jackson saw Microsoft’s departure from the desktop accounting software market as proof that software as a service was prevailing in the small business market

“When Microsoft park their tanks on your lawn, you can’t help but be worried. We were expecting the worst, but [Microsoft Office Accounting] wasn’t anywhere near as competitive as it could have been.” Jackson said.

“If they had come across a couple of years earlier they might have established a larger user base, but by the time they released it here, the market had changed. The world overtook them. When it comes to accounting software, small companies and start-ups look on line.”

Jackson predicted that if Microsoft, the “poster boy” of traditional software can contemplate pulling out of the desktop market, others might well follow. “It’s a good indication that desktop software is old fashioned.”

But Microsoft is already developing online versions of its CRM and Office applications.  “I wouldn’t be surprised if in 2-3 years time they come back with a software as a service accounting product,” Jackson said.

Further reading on Microsoft Office Accounting

 

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Replies (20)

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Tom McClelland
By TomMcClelland
31st Oct 2009 15:13

Are they really leaving their payroll users in the lurch?

The email from Microsoft implies that payroll will cease in Dec 2009.

The fact that this software does its calculations using an anonymous web service was a much-trumpeted innovation. From my point of view, as a payroll software developer, I never truly understood why this is a benefit to the customers, since many updates to payroll calculation routines have revised data-storage and reporting requirements which require update of the client's data and logic anyway so why not update calculation routines on the client's PC at the same time? The benefit of this strategy to the vendor is extremely clear, however, since it allows them to retain an ironclad lock on their client-base, in the same way as SaaS vendors have a lock on their client-base. You simply aren't granted the option of continuing to use the software, at least until the end of the year, unless you keep your contract running continuously.

So, if the servers are being turned off in December, as MS's email implies, they're leaving their payroll clients in the lurch in the middle of a PAYE year. Neither a great advert for web-serviced software nor a great advert for Microsoft nor a great advert for the idea of doing payroll yourself. But maybe I've misunderstood their plans for withdrawing the calculation servers.

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Tom McClelland
By TomMcClelland
31st Oct 2009 15:24

Laugh or Cry? Your decision.

I just followed the Microsoft link from their email that covers, "what to do now that we're abandoning the payroll service you get from us" (I paraphrase)

http://support.microsoft.com/kb/2003422/en-us

Here is the text on their website:

There are several options for payroll service:
1. Leverage your chartered accountant
2. Calculate PAYE manually
3. Use a payroll service or another payroll software program

Wow, it looks as if they've got all the bases covered, then.

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By Greenheys
01st Nov 2009 09:15

MS Accounting

A Shame.  Just as I was getting to like it too.

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By mkcdavies
02nd Nov 2009 15:58

A long time coming

While there were some useful features in MS Office Accounting, it never really took off and I first heard that the product was on the chopping block over a year ago.  The fact that it's been withdrawn in the US too came as a bit of a surprise as I thought that the customer base was much larger there.  Interestingly, product support is not being handed off to a 3rd party over there whereas Mamut gains a bunch of (disgruntled?) customers over here.  I wonder whether Mamut will be able to make any siginificant strides forward by acquiring the UK user base?

MSOA wasn't an online system, although it exploited the internet in some ways.  What did people like about it?

Mark Davies

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By onesys
04th Nov 2009 15:15

Putting Your Hard Earned Cash on the Wrong Horse.

2008 MYOB, 2009 MS Office Accounting and the recession / progress (?) may well claim more software developers, products and support companies before the market sorts itself out.

It's every business owner’s nightmare, choose the wrong brand or product and you have to start all over again. Research the market, shop around / meet with vendors, choose the product, install it, training, transfer your historic data, etc. (if you haven’t lost it in the process)

Time is money and switching software is the last thing anyone wants to do.

Not everyone loves Sage accounting and payroll software but in the long-term it is a safe bet.

We at Onesys have had many potential customers who decided to go for a slightly cheaper, flashier or more suitable application and lived to regret it. We always keep in touch, just in case. On a few occasions unfortunate business owners saw their software supplier get into trouble, but when we offered them a proven Sage product instead, they still chose a cheaper alternative, only for that software supplier to go bust!

In the majority of cases the willingness to pay a little bit more for long-term product development and continuity just wasn’t there. Ultimately that is what everyone in business wants and needs, not competition and unsustainable pricing.

If a functionality issue stops you from buying a Sage product, please speak to a Sage partner such as Onesys or Sage UK direct. This is the quickest way to influence future development of the UK’s favourite accounting software.

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By chatman
04th Nov 2009 15:48

Did it really fail because the market wanted on-line software?

The article says "the small business market wasn’t looking for a new, highly functional desktop accounting package, but easier to use online alternatives to Sage."

Do we actually know this to be true? Having tried some on-line accounting software, and not yet having written it off, I would be interested to hear what led to this conclusion.

I am always looking for new, more functional desktop accounting accounting software, although I confess I am not a statistically valid sample on my own.

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John Stokdyk, AccountingWEB head of insight
By John Stokdyk
04th Nov 2009 16:05

Data from Software Satisfaction Surveys

Hi Chatman,

You are right to challenge unsupported statements in the article. I wrote the first report quite quickly and summarised thoughts off the top of my head. However, the statement is based on more than just Duane's claims and my own hunch. If you follow our Software Satisfaction Awards, you will be aware that over the past two years, software as a service suppliers such as Kashflow, Liberty, Pearl and FreeAgent have steamed past Sage, Microsoft and MYOB (RIP), with Kashflow (2009) and Liquid Accounts (2008) beating traditional on-premise programs to the SME accounting software awards.

As I noted in my even more opinionated blog post, "For all the thousands of copies of the free Office Accounting Express edition that were downloaded, it was almost invisible in our 2008 and 2009 Software Satisfaction Awards surveys while online providers such as Kashflow, Xero, e-conomic, Liberty, Pearl, FreeAgent and Arithmo racked up hundreds of new users between them."

At the low end of the market, we have very clear evidence to show that web-based accounting applications are outgunning on-premise desktop packages.
__________________________
John Stokdyk, Technology editor

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Tom McClelland
By TomMcClelland
04th Nov 2009 16:38

Indeed, It didn't fail because it was a desktop product

If we're going to assert that MSOA failed because it was a desktop product, then presumably we'll have to also assert that Sage's recent SaaS bookkeeping debacle failed because it was an SaaS product (and that alternative claim would be easier to sustain, since the reasons for the Sage failure were actually linked with its SaaS design)

Actually MSOA failed, in my opinion, because it wasn't easy enough to get started with it. It was a giant and lengthy installation that offered relatively meagre functionality and demanded a very powerful PC once you'd got through that installation process. If the installation process had taken 2 minutes from clicking the download link to entering customers/suppliers/invoices etc and the product had been pleasant and easy to use and not demanded a powerful desktop PC then it might well have been extremely successful. And in my opinion it would have been perfectly plausible for MS to offer a near-identically functional product with 10% of the footprint and installation hassle of MSOA.

The mistake that many industry insiders make is to think that the average user cares two hoots about the technology platform that their application is delivered on. If our experience is anything to go by the reverse is true for above 95% of small businesses. All they want is an application on their screen that they can understand and use, delivered with a price and reliability that they find acceptable. SaaS can deliver that, true, but so can a great many highly successful desktop applications, and the rival technology platforms continue to have their own set of distinct advantages.

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By carnmores
04th Nov 2009 19:17

i advertised the demise of MSOA earlier in the week in any quest

it wasnt all bad but there were to many flaws and it was a real [***] to get any meaningful support

quickbooks rule ok

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By User deleted
05th Nov 2009 09:05

re: Software Satisfaction Awards

How many people took part in the voting for this? Are we talking hundreds, thousands, tens of thousands or even hundreds of thousands?

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Tom McClelland
By TomMcClelland
05th Nov 2009 09:20

About 8000 vote in the SSA, but that is across all (20?) categories. So the number in any particular category is pretty tiny. For example, 12Pay Payroll is a numerically insignificant player in the UK payroll market, less than 3 years old, yet we got above 40% of the ratings in the payroll category by the simple expedient of newslettering our user base and asking them to vote. I think that the concept of the SSA is marvellous, an independent poll of actual users, but the rules don't incentivise vendors to persuade the mass of their users to vote and get a truly representative view. Many vendors are much more likely to cherry pick invitations to vote amongst their reference sites to get the best possible score.

Clearly there is an element of self-selection in voting in a web poll; the vote is taking place in the natural environment of the SaaS vendors and because of their operational environment they can identify their users and "get their vote out" relatively easily. They are pretty much certain to have current email addresses for them all, for example. And they are likely to be closer to them than the major box-shifting vendors who deal largely through intermediaries.

SaaS is currently growing exponentially from a tiny base. But the same has repeatedly been said about things like Desktop Linux and Apple Mac in the past without those products/technologies coming to dominate as many industry pundits expected. In fact after years of wonderful progress they continue to linger as an insignficant 2-3% of the market.

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John Stokdyk, AccountingWEB head of insight
By John Stokdyk
06th Nov 2009 09:02

Interesting observations

Thanks for the additional comments, everyone. While I think Tom McC has hit several nails on the head here, I'd like to clarify one point. I didn't say specifically that MS Office Accounting failed because it was a desktop product, but that I thought the company put all its effort into bringing an outmoded product concept to market.

Having downloaded and installed Office Accounting Professional, I concur entirely with Tom about the time & hassle involved in installing all the .NET and SQL Server components needed to get the program running. Contrast this with signing up for a trial run with most of the online packages, which with few exceptions do let you input data and post transactions within a few minutes.

While Tom is also very astute in how he characterises about our Software Satisfaction Awards process (we'll be taking such comments on board to adjust the way it works next year), the growth of the SaaS contingent within our accounting & finance samples (from <5% to >20% in three years) gives us some statistical proof that the market is shifting. Duane Jackson's comment that "small companies tend to look online first" for their accounting software also rings true - after all, that's probably how most former users came to find out about Microsoft Office Accounting.

If I have struct a pretty negative tone about the whole debacle, it's partly out of disappointment. Once I installed it, I liked the OAP functionality and interface a lot. While I thought it benefited a lot from Office integration, one of the key mistakes Microsoft made was not to bind it more tightly into the Dynamics business solutions environment. As Sage has proven, if you want to prosper as a mid-range accounts and ERP software supplier, you really need a desktop product to feed through upgrade prospects.

My other frustration with Microsoft stems from its bizarre fixation on testing everything in the US first, which led to a two-year delay before taking the product to the international market. Business software is an international game these days, but among several other factors, this is something Microsoft overlooked when it planned its ill fated adventure into SME accounting software.
__________________________
John Stokdyk, Technology editor

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Tom McClelland
By TomMcClelland
06th Nov 2009 10:03

Things could have been very different...

First of all thanks for the temperate tone of your response to my slightly provocative comments... :) I look forward to next year's SSA awards which for us, in any event, are a nice opportunity to get independently monitored feedback from our users.

Anyway...

I agree that if you could get past the installation hassle and the hardware requirements MSOA was a nice little product. My frustration with it stems from my sure and certain knowledge that I could have designed and implemented a near-identical-function and appearance application that would have installed in one minute and been up-and-running in another minute, so the time from, "let's give this a try" to, "this is easy" would have been no longer than the time it typically takes someone to sign up for an online application. If Microsoft had done that things might have turned out very differently. But evidently the people in charge of designing MSOA didn't consider the user-experience of someone coming to the software for the first time on regular hardware...

I agree absolutely with Duane that small businesses wanting business software first look on the internet. That is after all how 12Pay has recruited its entire user base (obviously we get quite a few referral sales, but those all ultimately arise from referers who have themselves found us on the internet since that is our only route to market). But that doesn't mean that the actual application delivery has to be SaaS in a browser. PCs are ubiquitous and functional, and good at providing a rich, responsive, and harmonious user experience. It is a fact that the overwhelming majority of actual small-business users simply don't care at all about the technology of application delivery. They want a reliable application that they can understand how to use at a price that they can afford and some support when they need it.  Answering those requirements can be achieved with a well-designed desktop application, and it can also be achieved by a well-designed browser application. To say that installable PC applications are an "outmoded product concept" (which I think is what you're saying, but maybe I'm misunderstanding) is assuming your conclusion.

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By bryanrichter
09th Nov 2009 11:54

I'm not following the logic here

I'm struggling to see how Office Accounting's lack of presence in the Software Satisfaction Awards is a sign that the market is shifting to online solutions. As Tom very rightly points out, the vendors who do well in these awards are the ones who most actively encourage their customer to participate. I would also suggest that the companies with smaller user bases have a better view on who their best customers are and are more likely to respond positively in the survey. They are also the type of companies that typically use this form of marketing to raise their profile.

It would have been rather strange of Microsoft to run a campaign with their customers to get them to say how much they liked a product and then announce a few weeks later that they were going to stop distributing it. That would have been a huge marketing own goal, and one that you would have rightly picked them up on John!

That's not to say that there is no value in the awards, just that we need to be careful what conclusions we draw from them

What is more interesting is the figure of 100,000 registered users of Office Accounting that is mentioned in the article. Can any of the SaaS vendors claim to have acquired similar numbers over the same timeframe?  I would suggest that there is another possible conclusion which is that the market for standalone accounting solutions is becoming commoditised.

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By chatman
09th Nov 2009 17:41

Bryan

 I am sure I am being really stupid, but what does "the market for standalone accounting solutions is becoming commoditised" mean?

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By bryanrichter
11th Nov 2009 07:58

Commoditisation

Hi chatman

I borrowed this definition from Wikipedia as it's rather too long since I studied economics: the business community more commonly uses commoditization to describe the transformation of the market to undifferentiated products through increased competition, typically resulting in decreasing prices.

I'm no expert on this subject, but Microsoft entered the accounting software markert with a free product that competed with vendors who had previously been able to charge premium prices. As a result they rapidly gained a high volume of user registrations. This changed the dynamics of the market and I believe that the impact of this will remain for a long time after their exit from the market as it has set an expectation amoung users for the perceived value of accounting software. To charge a premium in the future, vendors will need to demonstrate they are offering more value. It will not be enough to compete on the features of the accounting software alone.

I guess time will tell.

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Tom McClelland
By TomMcClelland
11th Nov 2009 08:40

100,000 registered users? Don't make me laugh

As all of us who offer trial software (either for download or online use) know, the relationship between "registered users" and "actual users" is thin at best. If 100,000 UK users registered to download and install the software I doubt that there are even 5,000 actual live users today. It wouldn't surprise me to discover that above 90% of the registered users didn't go further than firing up the product once. Above 50% probably didn't even get that far given the gubbins surrounding installing the product. Like the people who sign up for an online software trial and then never visit the site again who I bet vastly outnumber those who go on to use the software.

I'm one of those 100,000 for example, and I know of far more people who downloaded it, tried it, and didn't like it for one reason or another than I know of live users. Far more interesting would be to know the actual take up of the paid "pro" version and/or the payroll/e-payment extensions for example. I'd be mildly surprised if the answer to that one makes 4 figures.

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By onesys
11th Nov 2009 10:30

Commoditisation and that Free Lunch
On the contrary Bryan. Our take on “the dynamics of the market” and the “expectation amongst users” is that, as we stated before, “unsustainable pricing” and “competition” are bad for users and will result in vendors;

1. Leaving the market - either by going bust or by concentrating on more profitable products.
2. Being forced to reduce / stop development of their accounting product
3. Reducing / dropping support, training, etc, in line with the drop in profit margin
4. Reducing the purchase price but charging extra for everything else

Even Microsoft’s cross subsidisation couldn’t save this product, so ‘free’ isn’t the magic bullet.
There is no such thing as a free lunch. Users will realise that for a long-term, reliable, quality software product to survive it and its vendor need to be sustainable.
Only good communication between vendor and users can result in a balance being found between the product plus service the users ‘expect’ and the price they will have to pay.

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By mkcdavies
12th Nov 2009 16:35

Competition/value/quality

Most people would argue that competition is good for the consumer or end user.  It forces vendors/manufacturers to raise their game in order to deliver better value.  Whether this translates to more content/functionality, lower pricing or a combination of the two depends on the approach, of course, but there is no doubt in my mind that the increase in competition within accounting software is ensuring ready access to better value than ever before.

That said.... the number of online accounting systems that have miraculously materialised over the last couple of years gives cause for concern because it seems unlikely that they can all survive.  Not all of them are well funded, well designed and well thought out.  It's definitely a case of buyer beware, but we should not let that reduce our expectations of value and quality.

There are good online systems out there from companies with solid foundations.  No, they are not the same old software companies that dominated in traditional packaged software, but that was almost inevitable because traditional software vendors have almighty challenges to overcome in switching to online "software as a service" (principally in the areas of reveue streams and engineering philosophy).

If you accept the general argument in favour of online interaction with clients/colleagues/business partners and are prepared to make the internal changes needed in order to realise the benefits, then it's possible to find a safe way ahead by asking around for recommendations and conducting due diligence on the likely supplier.

You could decide to wait for your existing vendor, but there are almost no signs of traditional packaged software vendors making a serious commitment to developing competitive online accounting systems.  Unfortunately they are tied to with their existing ways of working and the new online operating model threatens their business fundamentals.  The irony is that they don't have a long term future unless they find a way to transition their business - maybe they'll survive for a few more years, but online will become the standard way of working for most of us in much the same way as we take e-mail for granted today.

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By Steven Tucker
18th Nov 2009 14:56

Customers stats

I found some information on customer numbers, which came from Microsoft, via the Telegraph website.  In summary...

There are just 650 companies using the Microsoft payroll software. The rug will be pulled out from under them on 15th December, so you may get some urgent phone calls about the December payroll your clients are amongst the unlucky 650 and they haven't worked out the implications of the service being switched off.

Of the 100,000 businesses using the accounting software, only about 10% are paying for it.  Their software should continue working a bit longer, so no need to panic.

 

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