A report on ERP and accounting software places the QuickBooks publisher at the head of the SMB segment; Microsoft and Oracle have pull with the midmarket.
Posted May 22, 2006
Intuit QuickBooks, the popular personal accounting application, is far and away the most commonly used ERP and accounting program among very small and small businesses, according to a new report by Yankee Group. Rival products from Sage are relatively stronger with small businesses, defined as those with 20 to 99 employees, but Intuit still rules the roost in total market penetration.
The report, based on data from "Yankee Group 2005 Small and Medium Business Applications and Web Survey," polls 710 U. S.-based SMB end users across all industry segments, examining their business application and Web-site needs, preferences, and purchasing behaviors. "Adoption of accounting and ERP software is increasing, as people who relied more upon Excel and similar programs are being driven by compliance issues," says Sanjeev Aggarwal, SMB strategies senior analyst and report author. Pressure to improve operational efficiency and to exchange electronic data with large customers and suppliers are other major factors.
Results show that Intuit QuickBooks dominates very small businesses (two to 19 employees) with 68 percent market penetration, and 37 percent of small businesses. "Intuit's strengths are its ease of use and the ubiquity of its presence," Aggarwal says. "This is their core focus; tax and accounting is all they do." The also report states that Intuit customers are likely to stick with the company as they grow because of seamless upgradeability from one Intuit product to the next.
Sage Software ranked second, holding 9 percent of both the very small and small business segments. The larger set of businesses rely mostly on Sage's Accpac ERP products, while Peachtree, BusinessWorks Accounting, and MAS 90 attract more of the smaller ones. "Peachtree has versions ranging from the low to the high end of these market segments, as well as an increasing number of vertical packages," the report states. "Recent changes in the Peachtree product line also made the product more scalable and higher-performance. As customers outgrow Peachtree, there is a migration path available to Sage MAS 90 ERP."
Intuit also maintains a market presence among medium businesses, (those with 100 to 999 employees), but the leader here is Microsoft with its SBA and Microsoft Dynamics GP products. According to the report, Microsoft holds approximately 35 percent of medium businesses (100 to 499 employees) and 24 percent of the midmarket (500 to 999). "Microsoft's low-end SBA application introduced last year offers close integration with Microsoft Office and Exchange," Aggarwal says. "Microsoft also has a retail and channel push, and has truly global presence," accounting for the rest of its MB popularity.
Oracle, the leader among vendors to midmarket companies, has about 33 percent market penetration among the 500 to 999-employee crowd, but only 15 percent of the smaller cohort. PeopleSoft is the most-installed Oracle back-office application here, followed by Oracle Financials and J.D. Edwards. "Oracle is losing ground because of confusion," Aggarwal says. "SMBs and others still don't understand Oracle's product strategy, and they are spending a lot on keeping all the product lines going while they finalize it." Aggarwal's report states that this opens Oracle to market share loss to Microsoft, Sage, and SAP.
One surprise that Aggarwal uncovered, and a growth area for vendors to exploit, is software as a service. "There is growing interest in SaaS for accounting; Intuit has 60,000 customers using their software on-demand," Aggarwal notes. NetSuite (which began life as accounting ASP NetLedger) is likely to increase its market share in on-demand accounting and ERP, especially in the software development, distribution, and professional services verticals, while all the leaders will add to their on-demand offerings. "The old prejudices against accounting SaaS are going away."
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