Posts Tagged ‘SaaS’

We’re quickly getting lots of new applications integrated with KashFlow. One of the problems we’ve run up against is the sheer number of different e-commerce systems out there.

Those like OpenMindCommerce and and EasyWebstore are easily dealt with – just go to the vendor and work with them to get the integration done. But what about the likes of OSCommerce, ZenCart and Magento where there is no central company to talk to?

Enter CarryTheOne. CTO first started as a simple proxy service between OSCommerce and KashFlow. For a small monthly fee it will take your customer and sales data from OSCommerce and enter it directly into KashFlow for you. I initially thought the “small monthly fee” would be the killer. You’re already paying an ongoing subscription fee to use KashFlow – do you really want to pay another company for the additional services? It would seem I was totally wrong. Businesses are happy to pay the small fee because of the huge amount of time it saves them. CTO have grown and grown and grown and have some very impressive numbers.

As well as OSCommerce they also now support  KashFlow integration with CRELoaded, OSCMax, Shopify, ZenCart and Magento. and there are another half dozen in development.

As well as adding more ecommerce applications on the left side of the jigsaw above, they’re now also adding more accounting applications on the right-hand side of it. Each new application they integrate with, on either side of the equation, hugely increases their potential (and actual) customer base.

A very nice business that I’m sure will just grow and grow and grow.

I suspect as SaaS becomes increasingly popular without any agreed API standard, we’ll see more businesses like Carry The One springing up.

A number of KashFlow customers have got in touch recently to tell me about an email they received from Sage.

Earlier this year we offered our online accounting software for free to anyone that could send us a copy of their boxed accounting software. A little video on YouTube demonstrating the future of boxed software got over 27,000 views and really helped fuel our campaign.

Sage then launched a campaign offering small businesses 25% off their software if they trade in a competing product.

The interesting part is that on their site they list “examples of suppliers that we offer our trade in discount against” for Sage 50 Accounts and list a number of products including Quickbooks and MYOB. But the onlyweb-based accounting software they mention is KashFlow.

When we ran our offer we received loads of software, including lots of copies of Sage. The total “value” of the software was over £10,000. I’m willing to bet Sage wont attract a single KashFlow customer with this tactic.

They can’t be getting much interest in the offer or someone would have pointed out to them that their link to the Sage 50 Accounts product actuall goes to a page for Sage 50 Payroll.

An article posted on the US site SoftwareAdvice  caught my eye today. What with world leaders meeting in New York to discuss climate change I thought it might be an opportune moment to look at the green credentials of web-based software and shamelessly re-work some of the numbers the original article highlighted.

Power Consumption

Let’s first look at power usage.

A typical multi-user, on-premise solution (ie, the old-fashioned stuff that comes in a CD in a box) would use:

1 x Server(7,000 KW/year) +
4 x High Spec Desktop PCs (400 KW/year each) =
A total of 8,600 KW per year.

A web-based solution like our online accounting software uses multiple servers. A Dell PowerEdge 2950 server, Rackspaces most popular server, uses 6,700 KW per year per server. So 13,400 in total.

As most of the data processing and number crunching takes place on the servers, much lower powered computers can be used by the software user. A Dell notebook perhaps using 120KW/year.

So if one customer replaces their on-premise software with our web based solution then their power consumption would be:

2 x Server (6,700KW/year  each) +
4 x Low-power Laptops (120KW/year each x 4) =
A total of 13,880 KW / year

How web-based software wins

OK, the green argument isn’t looking great for web-based software right now.

But web-based applications, or “SaaS – Software as a Service” solutions, can serve lots and lots of customers without the need for additional servers (unless you follow Sage’s Stupid-as-a-Service strategy).

So let’s scale the numbers up to 10,000 organisations. A tiny number considering there are somewhere between 2m and 4.5m small businesses in the UK.

For on-premise software it’s an easy calculation: 8,600 x 10,000 = 86,000,000 KW / Year
For web-based software you take the 4 laptops (120KW x 4 = 480KW) and multiply that by the 10,000 organisations to get 4,800,000KW / year and then add the servers (6,700KW x 2) to get a grand total of 4,813,400 KW per year  

Average Reduction in CO2 Emissions per company 

That’s a whopping saving of 81,186,600 KW per year from just 10,000 organisations moving from locally installed software to web-based software. Or around 8,000KW per year per organisation.

1KW hour of electricity produces an average of 0.43kg of CO2 emissions (varying dependent on how the electricity is produced). So 8,000KW saved equals 3,440KG less carbon emissions per year per company that moves to web-based solutions

The National Energy Foundation says that a bus produces 1kg of CO2 per 10 miles that it travels.

So by moving just one organisation to web-based software saves the equivalent of:

- 34,400 miles of bus journey
- or 13,760 miles in an Aston Martin DB9
- or a couple of return flights from London to New York
- or a lot of cow farts

Other factors

These calculations are very much “back of a fag packet” and only cover power consumption. What they don’t take into account are the many other factors.

No oil-based CDs to produce, no packaging or manuals to produce and ship,  less need to replace hardware (a very old computer can comfortably use web-based software),  more tele-commuting (so less travelling).

No stamps, envelopes or paper used or miles travelled by postmen to deliver invoices or statements as they’re sent by email. Even when you really *have* to send a hardcopy of an invoice, web-based postal services like ViaPost that integrate with KashFlow can seriously reduce the CO2 footprint.

I’m pretty sure I’ve just saved the world from global warming. But please don’t give me the Nobel Prize, it should go to Tim Berners-Lee (can you beleive he doesn’t have one yet???)

But seriously folks…

Even though my numbers may not be highly scientific, I still think there’s a very big green argument to be made in favour of moving towards the web-based model of delivering software.

It’d be interesting to hear thoughts from others that might have a better grasp on the numbers

It’s good to hear Sage haven’t been scared away from SaaS and the cloud after Sage Live, their aborted attempt at a web-based accounting app.

They’ve announced that their SalesLogix CRM system will be available as a web-based offering by early in 2010.

They say it’s a full-featured, ‘single-tenant’ cloud edition of Sage SalesLogix.  It’s a positive sign that they’re using “proper” cloud technologies, like Amazon EC2, to deliver the product. Their problems around Sage Live were irresolvable because they’d used an unsuitable middleware product (which they didn’t own) to deliver the application.

One big problem though. Single tenant? One of the biggest benefits of the SaaS model is that the software is multi-tenanted.

A “single tenant” system means there is an installation of the software for each customer. Indeed, Sage say that users can choose when to trigger an upgrade to the vlatest ersion of SalesLogix, rather than have Sage automatically upgrade them (what’s the betting this will be chargeable too?).

As well as not being ideal for the customer, it also creates problems for Sage themselves. This model of delivering software over the internet simply isn’t scalable, nor does it allow them to take advantage of (and reflect in their pricing) the ability to easily support the software knowing that everyone is running the same code.

All in all, it sounds like they’ll make a better go of it than they did with Sage Live. But it’s still a flawed strategy. For proper web-based CRM, see our partners here.

Perhaps by their 3rd attempt at getting into the cloud Sage wll finally grasp the concept in full.

Update: Good to see Philip Carnelley at TechMarketView agrees with me on the multi-ternnancy issue aswell as making some other very valid points. A saner person would argue that it’s me agreeing with him as he published way before me and our post titles are rather similar - but I swear I’ve only just read it!

They say a picture is worth a thousand words, so rather than a lengthy blog post I’ve put together a video to illustrate my point.

It’s also perhaps an analogy for the future of traditional software companies that don’t embrace SaaS. Turning to dust and blowing away in the wind.

I find the video strangely therapeutic. Enjoy.

Don’t forget, until the end of this month you can send us your boxed accounting software for our big bonfire and we’ll give you ours free. Details can be found here.

We offer a free trial of our online accounting software and we tend to follow up those who don’t go ahead to become paying subscribers to find out why they chose not to go ahead.

Typically we’re told that they love the software, it’s by far the easiest to use and easiest to understand application they’ve ever tried for managing their accounts for their small company or sole-trader business. But they just don’t like the idea of their data being held on the web.

There’s a perception, especially amongst non-technical users, that data held on their PC or Mac is more secure that it would be on our servers.

So let’s look at this for a moment:

Data Security

Home/Office PC: Free copy of Zonealarm (software firewall) – probably not updated very often.
SaaS solution: Incredibly expensive hardware firewall with sophisticated intrusion prevention. Most SaaS providers, ourselves included, have to be what is called PCI compliant and are scanned regularly by a third party to check for security weaknesses.

Security Monitoring

Home/Office PC: No monitoring. Sometimes there might be a software product to alert you to attempted attacks – but this is of no use if you leave the computer on and connected to the internet whilst no one is using it.
SaaS solution:  Monitored 24/7 by security specialists at data center

Risk from viruses and Trojan horse

Home/Office PC: High risk. The computer is often in use and is used to visit websites and has other software installed
SaaSsolution: Virtually non-existent. The computer is only used to serve the application

Backups of data

Home/Office PC: Backups may be taken once a month if at all. And that’s only if you remember to do them (honestly, when did you last backup your data?)
SaaS solution: We have real time live synchronisation to a remote location, so if London (where our main data center is) disappeared overnight, we’d be back up and running with zero data loss very quickly. We also  take regular “snapshot” backups throughout the day.

Physical Security

Home/Office PC: Your computer is often located under the desk or in the spare-room at home. Physical security is usually limited to a burglar alarm (which keeps going off accidentally so now gets ignored by all)
SaaS solution: SaaS companies use  secure data centers. Appointments are needed to visit hardware. Often biometric scans and photo identification are used to gain access

Risk of Fire

Home/Office PC: Smoke alarm under the stairs (no battery)
SaaS solution: Sophisticated ‘dry’ fire suppression system, ensuring no damage to hardware

So by far a SaaS solution is more secure than your home/office system. Logically it’s very easy to prove this. Often though, when faced with the above arguments people say it “just doesn’t feel right” and talk about “gut feelings”. As a programmer by trade I find it really hard to change someones mind when their opinion is based on emotions. So when someone says they’re just “not comfortable” with their data being online, we don’t try to change their minds (we don’t know how!)

Thankfully though, these objections are becoming less frequent. We hear it significantly less often than we did a couple of years back or even 6 months ago. But I think this is by far the biggest hurdle SaaS companies have to overcome when selling

One of the things that’s been lacking in KashFlow has been an integrated, web-based payroll application.

We’ve been integrated with 12Pay for quite some time but a lot of our customers want a web-based solution which, like KashFlow, can be accessed from anywhere with an internet connection – regardless of if you’re using a Mac, Windows PC, Linux or whatever.

Today I’m really pleased to say this is now available. The Payroll Site is a web-based HMRC accredited service that lets you create payslips for your employees from anywhere, at any time. If you give it your KashFlow details it will send over all of the accounting information to your KashFlow account at the click of a button – saving you lots of time and eliminating the potential for human error. They have a free trial available, so feel free to go and have a play.

We’ve also just announced integration with PayEscape. PayEscape are an online bureau service. So you just tell them the hours your staff worked and they do the rest – including automatically updating your KashFlow account via our API. 

These are just the two latest applications/services to be integrated with KashFlow. There are loads more on our Add Ons page, and plenty more to come.

We want to integrate with as many other applications as possible. The way I see it is that the more applications we’re integrated with, the more choice there is for our customers – and the more attractive our product becomes for potential customers. And of course the vendor of the other application gets new business from our existing client base. 

It’s one of those win-win-win situations that I see crop up more and more often with SaaS.

Sage CEO Paul Walker recently told silicon.com:

In the back office accounting area, business solutions, we’re seeing very small, slow growth in terms of demand [for cloud computing]. We have a number of products that meet that demand that so far is relatively modest

It didn’t sound right to me at the time. Why spend 18 months developing Sage Live, (their software-as-a-service offering that later got pulled) if the demand for it is so small and their current product range meets that demand?

Chiefs Disagreeing

Motasim Najeeb, relatively new CTO for Sage North America, made some interesting comments at their Partner event in Nashville. He talked about making Sage products an alternative to cloud-based offerings like salesforce.com. 

In the article linked to at the start of this post, Walker told Silicon:

in two or three years time I’d be very surprised if 50 to 60 per cent of our customers were on [cloud-based applications] but it could be more like 15 or 20 per cent

But Najeeb is quoted as saying that  in three to five years Software-as-a-Service will probably surpass on-premise software.  You can guess who I agree with.

SaaS, not “Cloud Computing”

Sage also seems to be some confused about what their soon-to-be-ex customers actually want. Walker talks about delivering more ”cloud computing” apps - which is a catch-all term that includes just delivering the same old software over the internet (not the same as “the web”) using remote access software. The ex Sage customers we and other SaaS accounting companies are picking up aren’t looking for cloud computing solutions. They specifically want true SaaS applications that will pass The Touring Test.

Sage say they’re meeting the existing demand from their customers. Here’s a quote from a direct message I received on Twitter today which is typical of the kind of thing we’re hearing all the time:

I’m historically Sage oriented but willing to look at online solutions as well and Sage’s offering is ****. Perhaps demo ?

The sender doesn’t want to be named as he still has a relationship with Sage. But needless to say he has now seen our software and it’s the only product he’s recommending to his clients for web-based accounting. He only came to us because Sage have nothing suitable – ie, they’re NOT meeting the demand.

It’s not only Sage resellers, consultant and accountants that are telling us Sage can’t fulfill their needs, but some of their bigger international commercial partners are  too – more about that another time perhaps. 

The demand from the Sage reseller channel for a SaaS app has been so great since the start of this year that we had to develop a reseller programme specifically to be able to capitalise on it.  We don’t have anything online promoting it just yet, but it’s up, running and being used.  (Contact Neil Ballard on 0800 848 8301 if you’re a reseller interested in this)

Plugging into the web

I made a post last year with the title Sage Prove They’re Both Worried and Clueless. The “clueless” in the title was about their lack of understanding of the ‘net and specifically social networks. Since then I’ve been really impressed with the way they are using Twitter to engage with clients. And now it seems Sage, in the US and the UK, are reaching out to industry commentators, like Ben Kepes, that really know their stuff.

I guess it takes a while for a juggernaut to change direction. But all the signs now are that Sage are (very) slowly moving in the right direction.  Hopefully the CEO will listen to his CTO about the technology (the clue is in the T!) and we’ll see a viable product from them one day soon which will give a lift to the whole SaaS accounting industry.

My Tuppence Worth

As Sage seem to be soliciting opinions on their approach, here’s mine just in case anyone is still reading.

They seem to have two major problems:

1. Software for the web bears no resemblance to software for the desktop, they have lots of experience with the latter, but none with the former. The skills are not transferable – that’s what doomed the Sage Live project. Software for the web is not in their DNA.
2. SaaS is a business model as well as a software delivery model. That business model cannibalises the existing models of software companies like Sage. You can’t have the same people responsible for pushing forward a SaaS company and a old-style software company

To me the solution to both problems is pretty simple:

They need to get a new company up and running, owned and funded by Sage PLC (although I know a few VC’s who would happily pour money in)  – give it a big fat budget and some good project managers and let it run independently.

Then recruit developers that are real web developers, not desktop developers. These people can’t be from within Sage - they need to be people that know the web but aren’t tainted by exposure to old-school software houses, their methodologies and blinkered approach. They need to build an app from the ground up using pure web technologies – PHP, .Net, Ruby, whatever.

The new company should be able to access Sage’s expertise on the accounting side of things – but not make use of ANY of their existing technology, code,database structures or concepts of how software should work. That last bit is so important. I can understand how tempting it must be to re-use code and database structures to save time and money. But that would be like a cancer in the new product. Don’t do it!

I reckon they could easily put together something good enough to take to market within 6 months.

From then on, they can revive what I suspect was part of the Sage Live game plan: release the app sooner rather than later and improve it based on feedback from actual users. Improve and release again ad infinitum (a web-app is rarely finished) and price it very aggressively.

Once the product is working well, let them tap in to the marketing machine that is Sage PLC as well as having their own budgets for online marketing.

If done correctly the new business will very quickly start taking customers away from it’s parent company. But these customers were going to be tempted away anyway – better for Sage that they leave for a Sage-owned subsidiary than elsewhere.

Or there’s always Option B. If Sage want to save some time and make a very serious web play that will keep them relevant to the fast changing market then they should just buy 37Signals. That’d shake things up a bit!

Something I really like about Australian companies is the provocative and memorable brand names they create. A typical example being Start Ya Bastard, an “Instant Engine Starter”. In the accounting software space there is the brilliantly named Mind Your Own Business - or MYOB.

I’m told that in Australia the MYOB brand is almost as well recognised as Coca-Cola. That’s quite an enviable achievement.

MYOB was one of the products I tried before deciding to create KashFlow as an easy-to-use and less clunky alternative.  We had a bit of a fracas with them early last year when their top man in the UK personally emailed our support desk to threaten legal action. A couple of months later they withdrew from the UK market.

A big chunk of MYOB was sold to Wolters Kluwer/CCH. Shortly afterwards it was announced that the “leftovers” were sold to Mamut of £1.7m. Mamut are a Norwegian company that, until recently, I’d only ever heard good things about – both in terms of their products and the company itself.

At the time of the purchase, Mamut’s chief executive officer Eilert Hanoa said

Customers will be able to use existing and versions and new version of MYOB for 2008-09, but we will look to give them dual licences so they get a free migration to the equivalent Mamut products, or can continue to use existing products as is best for their business.

Working with both MYOB and our UK partners, we need to make it as convenient as possible for MYOB users – but we hope they will be attracted by the better opportunity Mamut presents with its integrated ecommerce and CRM features

This made a lot of sense to me and I thought Mamut had made a really good move.

Fast forward to this month and it all starts to go horribly wrong for Mamut.

We offered our web-based software for free to anyone that could send us their old boxed software for our bonfire. I was surprised at the number of MYOB  boxes we were receiving. Tom McClelland at 12Pay said he was also getting a lot of sales enquiries from users of MYOB payroll software.

It turns out that Mamut are now trying to squeeze money out of the MYOB clients. Kate from Karate Kid posted on UKBF and said

[Mamut] have today offered to upgrade us [from MYOB]  to their E5 version so that they can ‘better support us in the future’ – the upgrade cost – FREE! Ah, but their OBLIGATORY service agreement is £348+VAT per year – we purchased 2 user licences from MYOB, so assumed that these would remain intact – NO.

We are told that each additional user licence costs £590+VAT, PLUS for every user an additional service agreement at £348+VAT per year!

Kate took advantage of our offer and is now happily using KashFlow for free.

In a bid to clear up the confusion, Bryan Richter from Mamut posted on the forum to say they are sole distributors in the UK for MYOB products but now that MYOB have discontinued the products they are:

 offering a migration path to the equivalent Mamut product and offering very attractive commercial terms to do so

Not quite the situation Kate and other MYOB users were led to expect last year. And I guess ‘attractiveness’ is a very subjective matter.

So now they’ve managed to lose some customers, all that’s left to do is alienate people. Bryan posted (twice!) the following statement:

Naturally, many of our competitors see this as an opportunity to convert the MYOB customers to their own products, as they are very entitled to do. As a result they are happy to spread fear, uncertainty and doubt on these message boards without necessarily declaring their vested interest in the issue.

I’m not arguing about taking the opportunity to convert some customers – it’d be silly not to. But I do resent the implication that myself or anyone else on UKBF (where I’m a  moderator) is spreading fear, uncertainty or doubt – especially without declaring their interest.

At first I thought Mamut had got themselves a good deal, but as more details emerge it doesn’t look so great. If they continue to cock up the migration to their own software then it’ll be a lot of money down the drain and a stain on an otherwise flawless reputation.

As an interesting footnote to this whole saga, MYOB founder Craig Winkler invested £7m of the money he made from the MYOB sale into a company that provides web-based accounting software, like KashFlow,  using the SaaS business model.

Yesterday was the third official meeting of the Software as a Service group. It started out with the heads of a few SaaS accounting software firms getting together and taking it in turns to give money to Fullers,  but has now been formalised under the auspices of Intellect.

The first task we set ourselves was to put together a briefing document explaining SaaS to the uninitiated, starting with a definition of what is and isn’t SaaS. You’d be amazed (or perhaps not) at how some people/organisations want to stretch the definition to breaking point in order to be included in the definition.  I guess everyone just wants to be associated with the latest hot tech.

One of the attendees yesterday was John Patterson of Really Simple Systems. Last year when we won the main award for Small Business Accounting Software, beating all of the traditional software vendors, Johns SaaS firm did the same in the CRM category.

John has come up with a beautifully simple and equally beautifully named “Touring Test”. He says on his blog:

Next time you are on holiday, walk into the hotel lobby and log on to your application using whatever machine and browser they have. If you can access all the data and all the functionality in your SaaS application immediately, without having to download any extra software, it’s a true SaaS product.

I can’t find anything wrong with that definition – it’s about as close to perfect as is possible I think. It’s comprehensible to the non techies, and has a name that make us geeks feel superior to everyone who hasn’t heard of the Turing Test.