It’s been a year since Bain Capital bought accounting software provider MYOB for a reported $1.3 billion. The big question is can MYOB continue to generate super-sized returns from its SME market? So far, the verdict is open.
MYOB continues to be the dominant market player in SME accounting software. With significant structural shifts occurring in the accounting software space as vendors move from desktop applications to cloud-based systems, MYOB looked like the perfect target to capitalise and exploit these changes with its significant market power and presence.
This move into cloud computing is an important growth area for all software vendors, not just MYOB. Locking in the revenue streams from cloud computing users becomes far more valuable than the occasional purchase of off-the-shelf software through retail stores. MYOB’s new owners even publicly recognised the growth in Australian entrepreneurs and the tapping of these revenue streams to generate substantial returns.
But did Bain underestimate the market in a way that it should have foreseen?
There are two key areas where Bain seems to have missed that market leading edge. I have named them the ‘Google’ factor and the ‘accountant’ factor.
Entrepreneurs love the Google factor. Something that has a ‘wow’ to it, sells a message, and is market leading.
In fact, many start-ups use Google infrastructure as a platform for managing their business because its displays many of these traits. Its story and popularity speaks for itself but also came with plenty of downside to the established market player at the time, Windows.
But in making its purchase did Bain even recognise the main competition to MYOB?
Founded in 2005 and listed on the New Zealand stock exchange, Xero is tapping into the same entrepreneur’s market as MYOB through its cloud accounting software. Labelling themselves, somewhat indulgently, as beautiful accounting software, entrepreneurs seemingly love it and are surprisingly engaged in an aspect of their business that they traditionally dislike.
Showing why this level of engagement is of concern to established market players, we turn our attention to the data that really shows what people are thinking – Google search. Why? Because people Google with intent.
The diagram below shows MYOB losing a large chunk of search terms in 2011 before stabilising in 2012. Reckon QuickBooks is bleeding customers at a higher rate of 10% each year. Xero search terms have grown by nearly 300% over the same period. Are we seeing the Google factor starting to come out and play?
Important marketing steps taken by MYOB in 2012, such as free websites for SMEs in Australia, have had a positive impact on their visibility and stabilised search terms. But does this lead to greater revenues for MYOB through software take-up?
Andrew Sadauskas is a former journalist at SmartCompany and a former editor of TechCompany.
