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IRIS snaps up KashFlow

17th Oct 2013
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IRIS Software Group has acquired cloud-based bookkeeping software developer KashFlow to create a joint subscriber base of more than 60,000 accounting firms and SMEs across the UK.

IRIS claimed the combined business will lead the market in supplying cloud-based accountancy, payroll and bookkeeping solutions to small businesses and accountants.

KashFlow, which was founded by Duane Jackson in 2006, will benefit from IRIS's nationwide sales, marketing and support teams, and takes its place in the company's growing portfolio alongside IRIS OpenBooks, a rebadged version of KashFlow's competitor FreeAgent in which IRIS holds a 10% stake.

IRIS will continue to provide IRIS OpenBooks to existing customers, but expects KashFlow to provide “even deeper levels of functionality” for accountants and small businesses through integration with KashFlow.

IRIS chief executive Phill Robinson said KashFlow was a “perfect fit” with his existing suite of products and explained to AccountingWEB: “[IRIS OpenBooks] has been a good product, and does well, and we want to continue supporting customers that have chosen it. There’s no concept of that partnership dissolving or going away, or not being supported.”

While IRIS would continue to support OpenBooks, if it was approached by a new prospect looking for a bookkeeping solution, it would sell them KashFlow.

“It’s clear that FreeAgent is good for some things, but we thought that KashFlow was better at many others,” he said. “FreeAgent’s heritage is in supplying a solution that supports contractors and sole traders, but we feel that KashFlow has a broader appeal across the SME marketplace. 

IRIS estimates that cloud solutions account for 9% of the UK bookkeeping marketplace, with penetration likely to rise to 25% over the next couple of years. Moving for KashFlow now gives the company the best opportunity to cash in on that growth, Robinson explained.

Jackson said IRIS clearly understood the importance of the cloud and the benefits it can bring to small business owners. “Being part of the wider IRIS Software Group not only gives us direct access to a significant section of the UK accountancy and SME sector but it also makes us part of a wider suite of cloud offerings,” he said.

He added that working with IRIS would be a short cut to get KashFlow to where he wanted it to go. “Rather than going and raising some money and taking the time and risk of converting that cash into tangible results, we can actually leap-frog that whole process and go straight to where we are today with payroll products and 50% of the accountants in the UK. So overnight it’s an absolute no-brainer.”

In his blog Jackson added: “We have access to all the resources I wanted. The game has changed. We can now get on with improving the lives of many, many more business owners. Exciting times!” 

Until now KashFlow has lacked a payroll solution, but now it can take advantage of the web-based IRIS OpenPayroll tool launched earlier this month.  “The first thing on our list will be integrating into that,” Jackson said.

“But more important for accountants, is the back-end side of things when it comes to things like accounts production and tax calculations. IRIS have got some well respected and heavily-used products there. Now we can do some really serious integration.”

Robinson confirmed IRIS would also look to work with KashFlow’s Orbit product for practitioners.

“The thing that Orbit provides like no other, is the capability to have the accountant log into Orbit and have a single common view of his customers to control and manage from a single solution. It’s really deeply functional and unique,” Robinson said.

Robinson also confirmed that IRIS would retain the KashFlow brand.

"I think that Duane and the team have done a fabulous job of building a really vibrant and successful business over the years, and it would be a real shame to let that go or diminish. The technology that KashFlow has will also make its way to a number of IRIS products as well, but overall we want to maintain a commitment to the KashFlow brand,” he said.

Ed Molyneux, FreeAgent founder and chief, responded in an Any Answers post: “Just to clarify, FreeAgent is and continues to be an independent company and is not owned by IRIS although they are a minority shareholder.”

He further told AccountingWEB: “I think IRIS's acquisition of KashFlow further confirms that the market is tipping towards the SaaS model and it's great news for accounting practice customers (and clients alike) to have two to three serious and capable competitors working hard for their business.

“We're primarily interested in the micro-business end of the market rather than the generic 'small' business which really encompasses up to about 50 employees in size. There's just a world of difference between an independent florist and a 45-person manufacturing company, a difference that we don't even try to span - a fact which our customers really appreciate.”

Since the vast majority of UK businesses are 'micro', FreeAgent was happy to focus on this sector, Molyneux added.

After being frozen out of the practice market by its previous arrangements with IRIS, the company was now free to provide cloud accounting software directly to accounting practices. It has launched a ‘FreeAgent Friendly’ campaign to do just that.

Gary Turner, Xero managing director, echoed Molyneux's sentiments: “Deals like this signal that the market is now consolidating around a small number of cloud vendors that have the ability and resources to operate at scale as the cloud migration gathers pace. However the fact that in doing this deal IRIS appears to have compromised their earlier cloud investment in FreeAgent would suggest this was more opportunistic than it was strategic. Time will tell if their cloud by acquisition strategy is actually viable or not.”

The terms of the transaction have not been disclosed.

What are your thoughts on this deal and the future of the cloud accounting market in the UK?

Replies (17)

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By Mouse007
17th Oct 2013 13:04

NOOOOOOOOOOOOOOOOOOO

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Man of Kent
By Kent accountant
17th Oct 2013 13:19

Blimey

 IRIS (Kashflow and FreeAgent)   V  XERO

Let the battle commence!

 

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Teignmouth
By Paul Scholes
17th Oct 2013 13:38

Makes sense

Per comment on Any Answers this is a logical progression for Iris which is rich at one end of it's offerings but lagged behind at the other end. 

With Xero being moderately well off at one end and declaring a desire to get up to scratch, in the UK, at the other end, and with other independents like Clear Books also extending their offerings, as KA indicates, interesting times ahead.

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By ireallyshouldknowthisbut
17th Oct 2013 13:40

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I have a softspot for Kashflow given it was the first cloud package I used, but it was bound to happen, they must have been really struggling against Xero being totally outclassed. 

 

 

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By Ken Howard
18th Oct 2013 09:41

KF needs a boost

Having also used KF since it's early days, I do feel it's lost a lot of ground lately and hasn't been responsive to market needs.

Just take automatic bank feeds - most of the competitors now do it but Duane has been too outspoken against the third party link that KF now looks isolated and would lose face if he changed his position.  He wrongly went against the banks expecting them to change their ways for him.  Now with IRIS in control, it'll be easier for them to start accepting bank feeds which they desperately need to do otherwise they'll lose market share.

Also, I've noticed in the past couple of years that they ignore suggestions for improvements etc.  In the early days, you emailed them with a suggestion and many would be actioned within weeks.  Just look at their "updates" history - go back a few years and there were changes all the time, but recently it's really fallen off and it's started to look as if we were stuck with what we have.  I've certainly made numerous suggestions which would be relatively easy to make but nothing has happened.  They seem to have been preoccupied with doing links to other online systems and forgotten about their core product which is increasingly starting to look dated and lacking compared to the competition.

Let's hope that IRIS breathes new life into KF as I really do think it's run out of stream lately.

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By ireallyshouldknowthisbut
18th Oct 2013 10:23

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@Ken I think that echos our experiences, I have taken our last KF client over to xero about 12 months ago (kicking and screaming I might add) but they seemed delighted once I had as did the other few, I only had 5 or 6 on it peak.

I would bet that their user base has been in decline for some time. 

hopefully with some cash on the table they can catch up with the market leaders. 

The last thing we need is another SAGE in the markeplace, the ideal is 4 or 5 products all with their own specific niche but enough competition to keep everyone working hard for us, not for themselves.

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By mgh
18th Oct 2013 11:29

Practice management in the cloud
We don't use Iris, but I believe all existing practice management software providers need to move to cloud based systems. This will not be easy for them as the software will need to be completely re- engineered. Xero sees this need and seems to be well ahead of its competitors in this area, with Workflowmax and Workpapers, and UK accounts production hopefully not that far away.

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Replying to legerman:
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By jonbryce
18th Oct 2013 12:53

Re: Practice management in the cloud

Why do they need to move to cloud based systems?  I feel much happier when I can actually see the server my data is on.

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By boaters
18th Oct 2013 12:09

Iris or Xero or both

The question for those of us who are serious users of Iris and Xero is how do we integrate the two so we can make use of the best of both market leaders?

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By [email protected]
18th Oct 2013 12:32

Exciting times!

Having come into the KF arena quite late I for one am looking forward to see what happens next.

With the integration they are talking about it could make for a interesting package indeed! Submitting VAT returns is one thing, but for the software to prepare and submit self assessments and CT600's that does look promising. Even the Payroll options look as though it may work for me!

I can only hope Duane stays on and helps improve on what he started!

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Teignmouth
By Paul Scholes
18th Oct 2013 14:05

See the server my data is on

Hi jon - I looked at my servers for years and paid them particular attention when they needed a kick, refused to re-boot, updated Windows, refused to back up, would only talk to a doctor or just played dead.

Then I let a hosting company do it and so all I do now is switch on my pc, laptop, wife's ipad or client's kit, from where ever I am, to get to "my" server.  I don't need to see it, or to even see the state of the art building/bunker it's sitting in, to know that it and my clients' data is 100 times more safe & secure than it was when it sat behind me in the corner gathering dust and mice droppings.

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By boggey79
18th Oct 2013 15:07

The public cloud

Just following on from Paul's comments.. What about some of the big public cloud providers like Amazon Web Services and Microsoft Azure. I'm a programmer not an accountant but I can see a great opportunity here for those tentatively moving towards the cloud. There's a great deal of redundancy built into these systems.. triple replication, incremental backups along with all the native data integrity features of Windows, Linux etc. You can fire up a cloud server in just a few minutes and use Remote Desktop to access your data anywhere in the world. Just a thought!

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By carnmores
18th Oct 2013 18:57

if you read my comments after Accountex

you will see that i talked about this sort of thing

 

https://www.accountingweb.co.uk/article/more-cloud-accounting-tools-hit-uk/543034

 

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By nickr
19th Oct 2013 07:48

KF
Too dated and not kept up to date with the trends - never liked the package from day one!

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By bharathathi
19th Oct 2013 23:32

Cloud Based Accounting - Clear books

There is another great alternative which has not really been mentioned.  Clearbooks is a great cloud based accounting software that we have started using over the last 8 months for all our new clients.  The system works really well and we are in the process of migrating most of our existing clients.

Clearbooks give Zero and other similar systems something to think about and long may it remain independent.

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By makingiteasynow
21st Oct 2013 21:06

IRIS will probably raise prices and

IRIS will probably put the price up and lock people in like they do with their accounts software. Can you tell I bon't like their contracts...

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By post131
19th Nov 2013 16:39

Iris Accounts Office Online (IAOO)

I have been using IAOO for nearly two years now and lately I am  having lot of problems with Iris servers being down during peak hours. It is very frustrating when you are locked out for several hours on a week day in the middle of your postings. 

Also, Iris is doing a "Sage" on cloud accounts........hiking up the price in Year 2 and 3 with no significan improvement in software or service.

If this continues I would be looking for an alternative supplier very soon.

(Disappointed Iris user, Birmingham)

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