These are among the conclusions released Wednesday by New York-based consulting firm Access Markets International (AMI) Partners, Inc., drawn from its surveys of small and medium businesses (SMBs) in key developed and emerging market countries that account for almost three quarters of total SMB IT spending. AMI-Partners conducts annual tracking surveys of SMBs in more than 20 countries, including North America (U.S. and Canada); Europe (U.K., France, Germany, Czech Republic, Poland and Russia); Asia-Pacific (Australia, China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, Singapore, Taiwan and Thailand); and Latin America (Mexico and Brazil).

AMI-Partners' annual small business tracking studies show that more than half of all small businesses still do not use any accounting software solution. "These small businesses may be using spreadsheets or even paper and pencil for their accounting needs. However, pressures to operate more efficiently, improve compliance with Sarbanes-Oxley and other regulatory requirements, and the need to electronically exchange information with larger customers and suppliers make it likely that many of these companies will deploy accounting solutions in the future," said Arjun Mehra, research analyst at AMI-Partners.

One aspect of this is having access to an audit trail that mirrors their cash flow accurately. According to Mehra, small businesses are faced with the prospect of managing their finances efficiently with internal staff that is not very technology savvy.

"It makes perfect business sense for SBs to switch to an accounting software solution that is geared towards them and does not require costly training to deploy," he said.

AMI-Partners said Intuit's QuickBooks suite of products -- Pro and Basic -- has long dominated the $150 to $300 price band. Intuit's major strength lies in the fact that they have aggressively pursued this market with their low-end offerings and their product mix ranging from Simple Start (at $99) to QuickBooks Premier (at $499). It is this intense focus on the SB space that has enabled Intuit to ward off competition from Microsoft and Sage Software to date. Simple Start is an ideal low-cost package for small business start-ups, which have the option of upgrading to Basic or Pro as their needs evolve and the company grows. Intuit has ensured that customers can seamlessly upgrade from one Intuit product to the next, keeping many small and even midsize businesses in the Intuit fold.

Prior to releasing Small Business Accounting 2006, Microsoft attempted a foray into the SB financial space via Microsoft Money, which is more geared towards consumers. Microsoft business-solutions products, such as Great Plains and Solomon, have been too expensive and complex for most small business needs. In fact, Microsoft tried marketing a scaled-down version of Great Plains without success. However, many small businesses use Microsoft's Excel. 

Excel spreadsheet for accounting, and its Outlook application for contact management and e-mail. Microsoft's brand, its Office integration story, and the Office-like look and feel of SBA are likely to attract interest from one of its key target audiences -- small businesses that don't currently use accounting software. Customers who already use Microsoft programs may feel comfortable trying Microsoft's accounting software, as it promises to require minimal training to get up to speed. SBA allows clients to import data from Excel, and to port data from their existing QuickBooks software -- features that Microsoft hopes will entice QuickBooks users to its side.

Priced under $200, Microsoft's Small Business Accounting solution -- coupled with Microsoft's extensive penetration of the small business desktop productivity market -- may create the first real threat to QuickBooks' market dominance. However, Intuit customers have proved impervious to rival attacks in the past, and Intuit has proactively announced a new version of QuickBooks -- code-named Denali and slated for release in early 2006 -- to counteract Microsoft's SBA launch.

"One thing's for sure," Mehra said, "Microsoft will help educate many of the small businesses that have yet to adopt accounting software about the benefits of doing so -- which will likely spur sales not only for SBA, but for competitive offerings as well." 

3 October, 2005
by Mark Cox