Managing Director Movemybooks
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Are IRIS finally starting to innovate?

31st Mar 2010
Managing Director Movemybooks
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Yesterday we learned that IRIS has invested in SaaS accountancy software supplier FreeAgent, the financial details are undisclosed.  This news was something of a surprise to me and, since the benefits to FreeAgent seem very clear, got me to thinking what’s in this for IRIS?

It seems obvious that the arrival at IRIS of Phil Robinson, ex Salesforce.com, heralded a renewed interest in SaaS (Software as a Service) or Cloud applications.  So, the link with a SaaS vendor could be expected – and there are likely more to come.  However, what is IRIS specifically trying to achieve here?

The press release states that IRIS will:

“.. gain exclusive rights to collaborate on and resell FreeAgent Central developed products and services to UK accountancy firms.”

And Phil Robinson is quoted as explaining that the “strategic partnership” has been formed to:

“develop and deliver innovative new SaaS solutions for the UK accountancy sector.”

Use of the word “collaborate” in the first quote above is most significant in my opinion.  I think that what we are now going to see is a “forking” of the FreeAgent code, with a new product being created just for UK accountancy practices.  IRIS are effectively purchasing a copy of FreeAgent to develop for their own purposes without having to acquire FreeAgent completely.

This is a smart move and, I think, makes it clear that IRIS have no interest in having their own SaaS accounting product for the general market.  The UK online accounting software market already has significant players, with Xero and Kashflow being two established “big guns” amongst a host of others.

IRIS currently counts 14,000 accountancy practices as their customers (their figure).  However, when one looks at how their accountancy practice software fits into the overall workflow for annual accounts production, a core task for which IRIS provides an integrated solution, there is a “gap” of probably 75% where manual work is required, before IRIS kicks-in to help.

irisproportion

The manual processes I refer to include the accountant getting hold of the client's accounting data, extracting that data, processing it, reviewing it and producing working papers to evidence the checks undertaken.  Only once all of this heavy lifting has been done, can the numbers be entered into IRIS, for IRIS to then automate much of the final stages of the job, through tax computations to filing with the authorities.

But, if the accountant can leave the data where it is (in the client’s own accounting system) and work with it live, before squirting it into IRIS automatically, then that’s a game changer.

This is where the deal with FreeAgent is expected to pay-off, in my view.  IRIS are now looking to provide solutions to help accountants with the manual processes in the 75% gap in blue above - and delivering these on the back of a SaaS accounting product is the only way to do this.  It’s the “One Ledger” approach I wrote about previously, an approach that Xero are, it seems, well down the track on already.  To play catch-up IRIS had no option but to “buy-in” a Saas accounting application.

So, I applaud Phil Robinson’s vision and wish IRIS every success with this.  Change is always good and this is a potentially a major shift in the dynamics of UK accountancy practice.

Then again, I may be reading entirely too much into this.

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