State of the UK cloud, Part I - The End of the Beginning

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I recall back in 2011 that much of the discussion about the cloud tended to orbit often quite tediously around the definitions of its basic utility, its then apparently tenuous viability and, frankly, the fundamental likelihood of it even attaining broad acceptance beyond the die-hard early adopter community.

Indeed it was invariably the case that if you analysed software industry chatter three years ago you would have noticed a somewhat polarised debate comprising on one side; cloud natives whose agenda was a take-no-prisoners, everything is going 100% cloud vs. established software companies who were equally vocal in their advocacy for an intermediate, hybrid cloud world where the best of desktop and cloud would co-exist.

My rough and ready analysis of cloud accounting market shares reveal that lot has changed since 2011 - my estimates for the extent of adoption among UK businesses and accounting firms go something like this...

In March 2011, prior to Sage & Intuit's belated cloud products appearing, the UK's most popular SMB online accounting products then were Xero, Kashflow & FreeAgent and I'd estimate the combined UK customer counts of just those three would have been in the vicinity of around 15,000 customers. Add a rough 1,500 for everyone else and you're still well south of 20,000 UK businesses using online accounting only thirty-six months ago.

Today, based upon recent public statements and analyst commentary I'd estimate the combined UK customer counts of Xero, FreeAgent and Kashflow to be now approaching 100,000 businesses.

And of course we now have Sage & Intuit cloud products in market adding possibly as many as another 25,000 to 35,000 UK customers between them over the last three years. My Sage & Intuit assumptions are based upon Sage reporting approximately 21,000 UK & Ireland subscribers in October (including Payroll only subscribers), so having discounted for Ireland and Payroll only, I'm estimating today around 20,000+ UK businesses using Sage One accounting, and Intuit's Quickbooks Online only has a total customer count of 46,000 international customers outside the US comprising mostly Canada, Australia & the UK, so divide that by three. (If representatives of Sage or Intuit UK want to refine these rough estimates, by all means please do so in Comments) 

Finally throw in a generously rounded helping of 10,000 more businesses for everyone else (Clearbooks, e-conomic, Twinfield etc.) and you're not a kick in the backside off 150,000 cloud accounting customers in the UK - almost 10 times the size of community compared with March 2011.

If accurate, these numbers clearly point to the fact that the notion of cloud accounting in the UK has transformed from some kind of early adopter experiment that wasn't for the faint hearted in 2011, to increasingly what looks like the default choice for what will soon be hundreds of thousands of UK businesses.

And as far as adoption among accountants and bookkeepers go, Xero's own research in September last year reported almost 30% were already working in the cloud and a similar sized constituency expected to be in the cloud in the coming year. In 2011 I'd estimate perhaps as few as 500 accounting firms had adopted the cloud, today I'd say that number was approaching five times what it was in 2011.

So, the adoption of cloud accounting in the UK has changed dramatically in just three short years, and anecdotally I'm hearing that UK cloud adoption is trending some way ahead of our continental European neighbours.

With the acceleration in adoption of cloud certainly showing no signs of abating and in the context of a much healthier UK economy today, not to mention around 50,000 new company formations every month, I'd say we're now definitely well into the first phase of a cloud tipping point.    

In the second part of this series I'll dig into what I think this means in practical terms for customers and specifically for cloud suppliers as the demands upon them scale up.

About garyturner

Gary Turner is co-founder and managing director at Xero UK.


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