The impending reality of Cloud Accounting Software consolidation

27th Feb 2020
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The cloud practice management software market is fragmented and competitive, but consolidation is inevitable.

We know that because, although it’s a new market, all industries eventually fall in line with the consolidation curve.

At present, we’re at the tail-end of phase one – ‘Opening’.

Under the consolidation curve theory, new industries go through an initial phase of vigorous growth. Startups face low barriers to entry and can easily compete with the big players, who are typically less agile in responding to buyer demand.

Lots of new providers try many different approaches, giving buyers all the choice in the world, but at a cost: a confusing and volatile landscape.

Towards the end of this phase, firms with a long-term future tend to be rushing to increase their share of the market and to make it harder for others to enter. Typical ‘barriers to entry’ might include exclusive distribution arrangements with commercial partners, for example.

We’re convinced the second phase of the consolidation curve, ‘Scaling’, can’t be far away. Soon, established players will begin to swallow up smaller ones, or push them out of the market.

The risk for buyers is to avoid investing time, energy and money in one cloud practice management package only to have it pop out of existence after a year or two.

Or, worse, to discover that your subscription is suddenly with a software provider you’d already made a conscious decision to reject, thanks to an unexpected merger or takeover.

How can you narrow the field and feel confident you’ve chosen the right practice software vendor for your firm?

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Ask smart questions

First, look at growth, because growing businesses tend to be healthy ones.

There are various ways to measure growth but when it comes to software, the only one that really matters is the number of clients on the platform.

More users means more revenue to reinvest and, with time, a strong user base becomes a self-supporting community.

Capium now has more than 1,000 clients, having started 2019 with 650. That means we’re comfortably outgrowing others in the market.

Secondly, look for trust signals. Is your software provider accredited? Has it won awards? Is there clear social proof of the quality and effectiveness of the software through reviews, testimonials and endorsements?

A great product will stand out and generate buzz. It delights users and wins not only their loyalty but also their advocacy.

Finally, ask them about their plans for the future. Any software firm that isn’t ambitious – which doesn’t intend to listen to users and keep making the product better – is doomed.

Confidence is a good thing. Complacency and arrogance should be avoided at all costs.

Get to know Capium.

To find out more about Capium’s full suite of cloud-based practice management and accounting tools, get in touch.

We’re always happy to talk to people about where we see the product going and our plans for the business as the consolidation phase hots up, and to hear first-hand what accountants need from their cloud software.