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Should accountants worry about the software sellouts?

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It’s a pain when your favourite software sells up to the man, but should it put you off looking at new vendors? Tom Herbert goes back to the 90s to explore the concept of the ‘sellout’ and examines whether potential buyers are right to be concerned.

19th Apr 2024
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Do musicians ‘sell out’ these days? Is the term ‘sellout’ even part of the musical lexicon in 2024? 

In an era where 100,000 Spotify plays will just about cover the petrol costs, my guess is they can’t afford not to. A few conversations with people much younger and more relevant, and a quick look at Google trends tentatively confirm my hypothesis that selling out to the man just isn’t a big deal anymore.

Back in the playgrounds and park benches of north Bristol in the early 90s, it was a big deal. A big, big deal (at least for the key ‘teenage jackass’ demographic).

Crucial topics tackled included whether Nirvana had ‘sold out to the man’ because Nevermind was released on a major label, if The Offspring were more credible because they were on independent Epitaph Records, and whether legendary punk venue 924 Gilman Street was right to ban Green Day after they went mainstream.

Fortunately, I didn’t realise Bad Religion put out three albums on Atlantic rather than the independent label owned by its own guitarist – I think my primitive teenage brain may have just melted with the contradiction of it all.

Welcome to Paradise

So why am I blathering on about rambunctious rockers from 30 years ago? Well, I’m back from a couple of days stalking the conference halls at the Digital Accountancy Show and NetSuite’s SuiteConnect, and for the first time since the days of flannel shirts, Tamagotchis and flip shades, I’ve been discussing the concept of selling out.

The conversations on the show floor all roughly went like this: “I really like the look of [software x, y or z], it does everything I need it to do and the price is good. I’m just worried they’re going to sell out.”

Sell out? Woah! 1994 called, it wants its terminology back!

It also made me feel a bit sorry for the new or smaller vendors out there, making their way through the choppy waters of the accounting software world. Not only do they have to contend with genuine corporate behemoths and the government switching the compliance tracks at regular intervals, now they’re sellouts-in-waiting as well.

The Man Who Sold The World

I get it. It’s a pain when your favourite small system sells up. The new owner inevitably jacks up the price and eventually consigns it to the great recycling bin in the sky, and you’re left to pick up the pieces with your clients or business. 

But should it put you off looking at new vendors? I’m not calling anyone naive here. Your job is to help your clients or your business, not to monitor the intricate highways and byways of the software world.

But when exploring new software, it might be worth finding out more than just the product specs. To borrow a phrase that never fails to elicit a hard eye-roll from my children, what’s the ‘origin story?’ Why are they in business? Where’s the money come from? What are your plans for the future? 

And most importantly, does this all stack up against your hopes and expectations for the product?

In every ‘sellout’ conversation I had this week, no one had done this, either because they were too polite, or just didn’t think to ask.

On a Hot Fuzz ‘greater good’ level, as an industry, we’re relatively lucky to be well served with software alternatives, and every sale leaves a gap to be filled by a budding Rod Drury, Evan Goldberg or David Guest.

And if you were worried about how Green Day got on after being branded sellouts, I hear they’re doing just fine.

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Replies (11)

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By pjd17mini
19th Apr 2024 09:51

Greater Good (had to be done.. it was filmed close by..)

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Replying to pjd17mini:
Tom Herbert
By Tom Herbert
19th Apr 2024 09:59

As a fellow south west-er, the fact they made the supermarket a Somerfield was a real 'chef's kiss' moment.

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By NewACA
19th Apr 2024 10:20

Most people starting out in business (including accountants) under-charge.

This is the far and away number one reason why the software sell-out happens. Seasoned practitioners should know that if they are buying software that is under-priced, that someone is going to buy it and put the price up to where it should be. The current owners will get to a point where they are desperate to sell, as cash is running out fast and so they want an exit.

If they don't put the price up significantly (like everyone else does, Xero, IRIS, Sage etc etc) it is a question of when, not if.

Software that is really not that good, but free or next to nothing in cost is often bought to close down a cheap competitor and then just turn the software off.

Practitioners can protect themselves from all this by looking at the financial statements of the software owner. If it has organic on-going year on year profits, the owners are rarely going to sell, as they know its value is increasing, they are self-funded, so will always get a higher price if they wait longer and can afford to wait. Software takes 10 year to mature in terms of its customer base leveling off. Of course the pr8ce might go up still!

When an accountant likes the software and says they like the price, but are worried it will be taken over or disappear, this is a clear message to the vendor they aren't charging enough and the practitioner knows that, but doesn't want to say.

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Replying to NewACA:
John Toon
By John Toon
19th Apr 2024 12:10

I don't agree with most of this. The reason most smaller apps (and some larger ones sell) is simple economics.

The owners either have a plan (loosely defined or concrete) to exit or they get an offer they can't refuse. Whether they charge enough or are making money is mostly irrelevant and is determined by the lifecycle of the business.

The purchasers invariably have a plan - close down the competition, get better tech or enhance their product/suite. What they pay is determined but a multitude of things (including desperation to remain relevant!)

Ultimately, as the end user what matters is what happens post acquisition. Does the pre-acquisition development plan get stuck to or changed and does this align to your business needs? Does the pre-acquisition support/engagement improve or worsen? Does the price increase/decrease and does it still represent value for money? Will the business be closed down or rolled into something else and is this good/bad for you as a user?

Most of the above can't be predicted but you can get close enough to the relevant people to find out and make your strategic choices.

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Replying to johnt27:
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By Rgab1947
19th Apr 2024 17:12

Agree. Most of my clients are in It. The ones developing a product all talk a 5 year horizon then to sell it to a large player. Often with a role in the larger org.

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By johnthegood
19th Apr 2024 16:39

Thats all very well Tom, but what do you think Mr Taxfiler would have said a few years go when you asked them what their plans were for 2023?

I think we all knew deep down that with the prices they were charging it was never sustainable but we all enjoyed the ride while it lasted.

The problem is that you get very used to using a particular software and you build your prices around it and its not really that easy to change.

Its not the selling out that bothers me, its the buying in - If for example Iris had bought Taxfiler and said look lads we just cannot carry on charging these prices but we really want to keep the brilliant software we have just bought the same, they could have doubled the prices and no one would have moved, instead they just destroy it. Seems bonkers to me.

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Replying to johnthegood:
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By quixoteofthenorth
19th Apr 2024 19:01

" they could have doubled the prices and no one would have moved, instead they just destroy it."
Couldn't agree with you more. Added to which - what a firm Iris is! Transferred last weekend, decided to forego the trial period, and entered my DD details. Four days on, only a notification that the DD would be taken out next week.

Meanwhile, after reading all their gobbledygook, it still won't let me use it. Spent an hour on the phone today hanging on the line after an initial surly greeting from their operator, before giving up. What a shambles!

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Replying to johnthegood:
By Charlie Carne
26th Apr 2024 14:30

I'm no fan of Iris, but I use Taxfiler and don't have a problem with the move to Practice Essentials. It's the same product, but just has a new colour scheme and is on a new (more stable?) platform. The only significant change I've noticed is that a sole trade now needs to be set up as another (linked) user, rather than being just an extra data input page within a SATR. Why are so many Taxfiler users annoyed with this? It needs to keep being developed, so long as it doesn't change significantly, and it hasn't.

quixoteofthenorth wrote:

Transferred last weekend, decided to forego the trial period, and entered my DD details. Four days on, only a notification that the DD would be taken out next week. Meanwhile, after reading all their gobbledygook, it still won't let me use it. Spent an hour on the phone today hanging on the line after an initial surly greeting from their operator, before giving up. What a shambles!

Why did you forego the trial? Test the new system and then migrate the data over. As for payments, I agree that Iris's invoicing and credit control has always been a mess but I persevered over a few weeks and have just paid my new fee for the year to March 2025 at exactly the same rate I paid last year, with a 10% discount for paying up-front.

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Replying to charliecarne:
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By djames
30th Apr 2024 18:02

You've obviously not had any problems yet with the software, hope you're saying the same in a few months.

In the 10 years or more that I used Taxfiler I not once had to contact them regarding problems using the product.

In the 5 or 6 months since I've moved to Iris elements, I'm on my fourth problem - the latest has still not been resolved (apparently been sent to head office in Europe and they'll 'get back to me' when someone has had 5 minutes to look at my issue). This particular issue is regards the 'buttons' for various add on sections to the CT600 not functioning, meaning that you can't save, cancel or delete a section. Not just on one client either. After several emails/online chats with Iris, the only work around is to delete the whole CT600 and start again.

Add that to the unsolved problem of the software frequently logging out whilst entering data and the horrible front end of the software and what we have is something half as good for 3 times the cost.

The only saving grace of the software is that it is currently on a pay as you go basis and so I'm not tied in. As soon as I find something as good as this software used to be I'll be moving.

I have no problem with small software companies 'selling out'. I have a major problem with global companies buying up all the opposition, massively increasing prices (knowing they are cornering the market) and sticking two fingers up to customer service and a reliable product.

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By FactChecker
19th Apr 2024 20:34

"Sell out? Woah! 1994 called, it wants its terminology back!" ... OK, now we know your age, Tom!

But (in a more schoolmasterly tone) you're wrong twice over with your strained analogy.
1. 'selling out to the man' (in the music industry) was a very common insult back in the mid/late '60s - when the second that an 'underground' band wrote a song with a tune or signed to a major label, they were accused of becoming breadheads and selling out.
2. And selling out meant nothing more than seeking some/any financial reward for your work as a musician - it was 'all about the vibe, man and sharing enlightenment', not getting paid (which of course also meant not expecting to pay for anything - rent, clothes, food, possessions, etc).

The 'sellout' then was the act of acknowledging or even accepting capitalism and 'joining their club', whereas the modern version (as per your article) assumes that the entrepreneur has VERY much adopted the capitalist way of life - and is merely seeking to expedite the best return on their initial investment. Which is fine, but the antithesis of the original meaning in the music biz.

FWIW the real problem (and I speak from personal experience here) is the rapid acceleration that now applies to the lifecycle of a software product - coupled with the vast expense of trying to have that 2nd hit (back to the music analogies) which few manage without spending most of what they created with the 1st hit.
More and more software developers have spotted this (it used to be known as creating the 2nd wave before the 1st one loses height) and so seek to cash in before it gets really difficult/expensive ... which leaves the field to the agglomerators (money people with no real feel or knowledge for the chosen market - unlike the typical original developer).

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By GDavidson
25th Apr 2024 10:54

I am not sure "sell out" is the correct term. Twenty odd years ago Sage bought the much better product TAS with lots of noise about how they were going to develop etc. But then they shut it down and ported all the customers over to Sage. Bingo - tens of thousands of new customers that didn't want to be there.

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