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Why ‘move fast and break things’ doesn’t work for accountants

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With a spate of consolidations and collapses behind us and a recession on the horizon, the prevailing model for software development is struggling to deliver for accountants. Tom Herbert asks: is there another way?

15th Sep 2022
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For many years, “move fast and break things” was famously the Facebook internal motto. This adage, so beloved by Silicon Valley startups, goes hand-in-glove with a model that typically involves scaling up at speed, capturing market share with new features and flashy marketing and worrying about profitability later – “land and expand”, to grossly oversimplify things.

But what happens when you apply this model to accountancy? The profession doesn’t occupy a unique place in the software world, but when accounting software users have people’s livelihoods in their hands, trust becomes an important currency. My four-year-old moves fast and breaks things – would I trust her with my bank feed? Dear reader, I think you know the answer to that.

The collapse of US-based expense management company ClearSpend is a recent example of what happens when the model fails. Following its closure, comments came thick and fast from accountants who’d dedicated hours of time to onboard and train their clients on the system, only to find that the plug had been pulled and they had to start again.

Upheaval to come

And if the early indicators are to be believed, we’re in for more of this in the coming months and years. One commentator described the current accounting software market as “like the dot.com years”, and we all know what happened after boomtime. Throw in a recession and cost-of-living crisis, and we could see considerable upheaval in the near future.

We’ve already had consolidation in forecasting, planning and analysis tools that struggled to obtain market share at the rates required by venture-capital backers, and the recent news of Karbon scaling back a quarter of its workforce to “provide the runway necessary to reach profitability” could be the first brick pulled out of the creaking practice management software tower.

Software-adoption infinity pool

All this underlines the importance of accountants doing their research thoroughly before taking the plunge into the software-adoption infinity pool. Along with looking at the price, functionality and value of a product, more finance professionals than ever are adding another factor into the equation and investigating who’s behind the tools, how they’ve funded their operations and if the signs of an exit plan are evident.

The ownership of accounting software developers is a fascinatingly diverse world, and one that’s been keeping me entertained for years, imagining some kind of Anchorman-style showdown playing out in the cloud. The stock market might of Xero, Intuit and Sage, the venture capital (VC) cash behind IRIS, Dext and Bright Group, the bank-backed FreeAgent and Fluidly, and the maverick crowd-funders like Nomisma or Crunch.

While vendors universally point to being customer-centric, “powered by you” or the lesser-spotted “by accountants for accountants”, in reality, those who pay the piper call the tune. Shareholders or fund managers drawn to the accounting industry by the promise of stable, recurring income, eventually want to see returns. We’ve also seen price rises from the likes of Bright Group and IRIS, support cutbacks across multiple vendors and accusations of a lack of product development from Xero and QuickBooks users.

At the recent Zoho conference, the developer’s European MD Sridhar Iyengar quietly prodded the competition, labelling them “fragile businesses not geared up for tough times”.

“In the SaaS [software as a service] world, companies are unprofitable because their cost structures are bloated,” he said. “In inflationary times, costs rise and margins get compressed. We’re in for a painful consolidation ahead and that doesn’t work well for customers of these companies.”

The economic climate means it will also be a tough time to bootstrap a software firm – although when is it not? – and smaller vendors may well be drawn like moths to the VC flame. 

In a fascinating snapshot of life in the software trenches, reacting to the Karbon news on LinkedIn Futrli COO Helen Cockle said: “The challenge is the cost to build any software is in the millions, then to add the customer success teams and support teams that clients want. VC investment is the only option as post-build there is no cash left to pay for it. Then if you add marketing in you hit a whole new challenge – these apps have little chance without funding rounds.”

No magic bullet

Of course, there’s no magic bullet to all of this. No “right” way for a software business to be funded or scaled, either in the accounting world or outside it. Vendors of all sizes and backing can produce great innovations and provide great support (or skim off the profits and skimp on the support).

For those approaching the industry or currently within it, it’s worth bearing in mind that even Facebook softened its internal motto to the more moderate: “Move fast with stable infrastructure”. Perhaps in these straightened times, we could take it a step further for the accounting software world?

“Move fast but remember your customers do your tax returns”?

Not quite as catchy, I’ll admit, but it might help convince accountants that although your software is moving fast, it’s not going to break. Who knows, they might stick around longer?

*15 September 2022: This column was edited to correct an error in the standfirst and add a link*

Replies (9)

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By Hugo Fair
15th Sep 2022 21:04

Shame that Aweb has (presumably) cut back on copy editors ... although I enjoyed the somewhat freudian opening of:
"With a spate of consolations and collapses behind us ..."

From whom do you obtain all those consolations? And, more importantly, for what?

Thanks (2)
Replying to Hugo Fair:
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By Hugo Fair
15th Sep 2022 21:13

More seriously, if phrases like “provide the runway necessary to reach profitability” are deemed to be an acceptable way to describe firing a 1/4 of your workforce ... then we've lost the plot (to those who only believe in RoI via rapid 'exits' - and give not a toss for reputation, or indeed staff or clients).

Culturally & psychologically these are the tenets of the playground bully - and build nothing of value for anyone's future.

Thanks (4)
Replying to Hugo Fair:
Tom Herbert
By Tom Herbert
15th Sep 2022 22:00

Oh no! What a howler. Thank you for applying your eagle eye to the copy Hugo. If it's any, ahem, consolation, that's been fixed now.

All the best,

Tom

Thanks (2)
Mark Telford Chartered Accountant
By Mark Telford
15th Sep 2022 22:58

For those interested in seeing some of the excuses these tech business advocates come up with for why profitability is 'elusive'.

https://www.linkedin.com/feed/update/urn:li:activity:6975726541989154816...(activity%3A6975726541989154816%2C6975799593049452544)&dashCommentUrn=urn%3Ali%3Afsd_comment%3A(6975799593049452544%2Curn%3Ali%3Aactivity%3A6975726541989154816)&dashReplyUrn=urn%3Ali%3Afsd_comment%3A(6976278247214870528%2Curn%3Ali%3Aactivity%3A6975726541989154816)&replyUrn=urn%3Ali%3Acomment%3A(activity%3A6975726541989154816%2C6976278247214870528)

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By Winnie Wiggleroom
16th Sep 2022 12:20

I think more than ever we all need to have a backup plan for our software, always think "what happens if I have to move away from this"

Classic example is Taxfiler, too good to resist a few years ago with massive cost reductions and great functionality, but all good things come to end when they are sold to Iris. Trouble is to move away from it is a huge undertaking and therefore we grudgingly accept price rises until it tips the balance (which it will).

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Replying to Winnie Wiggleroom:
the sea otter
By memyself-eye
16th Sep 2022 13:29

It did, for me, years ago.
Mind you so did 'tax' generally....

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By Lewis Frow
16th Sep 2022 14:56

Years ago I was advised never to buy a new car model until it had been on the market for a couple of years. By then the manufacturers will have ironed out all the bugs, and probably have fitted a few extra "goodies".
The same applies to software, forget all the promises and wait until it has a track record of success before investing money or time in it.

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Replying to Lewis Frow:
By Ruddles
16th Sep 2022 15:15

A similar statement could be made about accountants (sorry, book-keepers) - wait until there is evidence of a track record of honesty before engaging one.

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By Paul Crowley
22nd Sep 2022 12:33

I would indeed look at what is publically available for people new on the street. If only I could figure out who the real company is that is the owner and seller of the software.

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