The technology world is moving aggressively and consistently to the cloud, leveraging the accessibility and scalability of the Web.

With the cloud, businesses can reduce their hardware and IT costs by leveraging Web-hosted applications and Web-accessible data centers, and increase system scalability without a proportional increase in software and hardware costs. The cloud provides businesses with anywhere, anytime access to shared data sources without the need to support costly intranet systems

With over 4 million registers users of QuickBooks desktop financial software and thousands of registered users of Intuit's desktop professional tax preparation software Lacerte and ProSeries, the pendulum shift away from desktop applications presents some incredible challenges and equally incredible opportunities for Intuit. How Intuit meets those challenges—how the company makes the most of those opportunities—will, in my opinion, determine the future landscape of accounting technology for the small to midsized business market.

I have a saying—a life mantra: "If you are one step ahead, you are probably a leader. If you are more than one step ahead you may end up a martyr." QuickBooks Online is one of the key components of Intuit’s cloud strategy. Though QuickBooks Online isn't a "martyr" (in that it never "died" for its cause), it was nonetheless ahead of its time. When Intuit introduced this product in 2000, the company employed cutting-edge technologies to produce a functional (though simplified) edition of QuickBooks. QuickBooks Online was a product full of promise and also a product shackled by the market's inaccessibility to broadband Internet and the populace's general distrust in the security and stability of Web-hosted applications.

So, for many years it seemed Intuit sidelined product development of QuickBooks Online in favor of the more lucrative and immediate returns from QuickBooks desktop box sales.

But Intuit recently began backing the product with a significant increase in marketing and R&D dollars. At the Scaling New Heights 2010 conference, B.J. Schaknowski, the former director of Intuit's Solution Provider Channel, announced "big and exciting changes" for QuickBooks Online coming very soon. At Scaling New Heights 2011, both B.J. Schaknowski and Jill Ward, senior vice president and  general manager of Intuit’s Accounting Professionals Division, continued to emphasize the importance of QuickBooks Online for Intuit —as well as the significance of the cloud movement and its impact on the accounting technology market.

Since 2010 Intuit has made good on its promise to our conference registrants, rolling out a wide range of product enhancements, especially in the areas of inventory, payroll processing and collaborative tools for accounting professionals.

I project by the year 2020, QuickBooks Online will have well over 1 million users, representing at least 20 percent of its QuickBooks user base. To get there, Intuit must do the following:

• Allow users to navigate throughout the product with multiple open records. In other words, the user needs to be able to start creating an invoice, navigate to the customer list, and then navigate back to the invoice without saving the invoices or losing their data.

• Allow the user to view multiple screens at the same time without the need to open the screens in new browser windows or tabs.

• Significantly enhance the product's internal reporting capabilities.

• Increase database scalability so users can upload the entire QuickBooks database.  Currently the QuickBooks database (before converting the data for import) must be no more than about 70 megabytes to upload the data. Intuit also needs to support databases well over 1 gigabytes, or even up to 10 GB in size. The software should also support at least 30 simultaneous users.

• Expand the feature set, in the general, so QuickBooks desktop users lose no more than 10 to 15 percent of the features of QuickBooks desktop when migrating to QuickBooks Online. The system should also provide more features that are not available in the QuickBooks desktop software—features that will lure the desktop user to the Web-based edition. Intuit has some features now that are exclusive to QuickBooks Online, but they will need many more to lure users away from the desktop.

• Continue to expand its ecosystem of third-party applications. Intuit has already begun an aggressive campaign to recruit developers into the QuickBooks Online ecosystem, but the scope of integrated products will need to become much broader to accommodate larger businesses and businesses with complex business processes.

QuickBooks Hosting
In my opinion hosting is Intuit's strongest and most immediate response to the cloud movement. The technology is fully developed and is readily available within the market. And, Intuit currently supports the use of QuickBooks in hosted environments, in a broad range of remote access technologies including Remote Desktop Protocol, TS Remote App and Citrix desktop virtualization.

Intuit's plans to leverage hosting technology require no projection on my part. The ability to see their direction with hosting requires no significant insight. It is happening even as I write this article.
Intuit has a hosting program that includes two tiers:

Self-Hosting – for businesses that build and maintain their own hosting of QuickBooks for use within their organization.
• Commercial Hosting – for businesses that sell hosting services to QuickBooks users.

So, the question is not if Intuit will leverage hosting technology. The question is how the company will do it. It seems the partnership approach is the direction Intuit is taking at this point.

Certainly Intuit could offer hosting services directly. But the company will not do so for at least the next five years—if ever. In my opinion, Intuit’s corporate direction right now is squarely focused on the development of "true" Web-hosted products and platforms. Also, hosting is outside Intuit’s core business model, will divert R&D dollars from other more pressing cloud strategies, and will, in the end, not generate as much profit as building partnerships with existing hosting companies.

The QuickBooks hosting industry is a key strategic technology for both Intuit and its customers. I believe this technology will remain the cornerstone of Intuit's cloud strategy until at least the year 2020 and that Intuit will leverage third parties in an Intuit-managed ecosystem through at least the next five years.  The chances of Intuit building its own hosting technology within the next five to 10 years are about 20 percent. The chances it will partner with existing hosting companies are 100 percent (and are already happening).

Intuit is already leveraging hosting technology and has already made hosting technology the cornerstone of its current cloud strategy for QuickBooks desktop. In my opinion Intuit will be extremely successful with its current hosting strategies if it:

• Effectively regulates—but doesn’t over-regulate—the hosting of QuickBooks by third-party companies;
• Empowers rather than competes with its third-party hosting partners;
• Ensures the Intuit Web Connector remains "hosting friendly" so hosted users can fully leverage a wide range of Web-hosted products that integrate with QuickBooks; and,
• Uses hosting as a starting place for a larger cloud strategy that leverages web-hosted applications.

Cloud Applications that Integrate with QuickBooks
As with the hosting model, this strategy is already underway and it is clear Intuit is making a tremendous investment in web-applications that synchronize with the QuickBooks desktop database (.QBW).

This is a two prong strategy for Intuit:

1. Cloud applications developed by, acquired by or branded by Intuit. Intuit is actively (and aggressively) acquiring cloud applications, developing cloud applications and branding cloud applications as part of a strategy to seed a growing community of cloud users from its extensive QuickBooks desktop user base. Some examples include:

• Intuit Field Service Management ES (branded application developed by Corrigo)
• Intuit Proline Practice Management (Intuit developed - pilot)
• Intuit Shared Booked (Intuit developed - pilot)
• Intuit Online Payroll (acquisition of PayCycle)
• Intuit QuickBooks Connect (Intuit developed)
• Intuit Merchant Services

2. Cloud applications developed by third parties. This strategy is nothing new for Intuit. Third parties have been developing Web-based applications that tie to QuickBooks since the 1990s. But within the last few years these Web-hosted applications have begun dominating much of the third-party market. This presents a viable, diverse and highly scalable slate of cloud options for users of QuickBooks desktop.

Perhaps the most game-changing solution on the market is a product called Method. Method stores the QuickBooks data in its own Web-hosted SQL database and synchronizes this database with the QuickBooks database in real time, using proprietary synchronization technology. Effectively, QuickBooks desktop begins to function as both a desktop application and a Web-hosted application simultaneously (within the limits of Intuit's SDK), where the Web-hosted application is highly scalable and supports an unlimited number of simultaneous users.

The Intuit Partner Platform
Web-hosted applications that integrate with QuickBooks are just part of the strategy. Intuit is making a much larger play within the space: the development of a Web-based ecosystem of third-party developers called Intuit Anywhere.

I believe Intuit Anywhere is one of Intuit's largest Web-based initiatives. Through Intuit Anywhere developers can enjoy a single sign-on with all Intuit Anywhere applications they have connected to QuickBooks. They upload their data to, and synchronize their data with, Intuit’s servers once, regardless of how many Intuit Anywhere applications they use.

Intuit Anywhere also supports integration with QuickBooks Online.

Through Intuit Anywhere, Intuit is able to provide a wide range of cloud-based applications for its more than 4 million desktop users while developing and supporting a single "product.” Economically, Intuit is able to benefit from the collective development of hundreds (or soon to be thousands?) of Web-hosted applications. So, through this strategy, Intuit is establishing itself as one of the leading (soon to be the leading?) provider of cloud technology to the SMB in a fraction of the time required by the more conventional means of product development and acquisition.

Intuit's cloud strategy will always involve Web-hosted applications that integrate with QuickBooks. Over the next several years these Web applications will predominantly integrate with QuickBooks desktop—creating hybrid environments comprising both cloud and desktop technology.  I believe many QuickBooks users will leverage hosting technologies in conjunction with these Web-hosted applications for the next 10 to 15 years in order to fully leverage the cloud.

Then, by the year 2020, I project Intuit will begin to gain a critical mass of users who operate on a combination of whatever Web-hosted core application they provide (QuickBooks Online or some back-office database). However, I believe this critical mass will still represent less than 50 percent of total QuickBooks users.

What Intuit Must Do to Get There
Intuit must make the integration process for third-party developers as seamless as possible—and as easy to maintain as possible, with increased levels of access to the data within QuickBooks desktop and QuickBooks Online. Also, Intuit must determine a strategy for leveraging its own technology to replace much (if not all) of the functionality of QuickBooks desktop.  Whatever replacement system the company creates (QuickBooks Online or an entirely new offering) the solution must reside on a highly scalable database and must completely integrate with Intuit's own integration technology.

I believe Intuit is taking the cloud movement very seriously and that it believes cloud technology is the future of both personal and business computing—as shown by the way the company is investing tremendous dollars in developing, expanding and acquiring cloud technologies. As long as it invests its resources carefully, Intuit will not only maintain its position as the leader in SMB accounting technology, it will also expand its reach into other areas of small business operations.

QuickBooks Online is the key. With QuickBooks desktop Intuit enjoys market dominance, but for Web applications there is a much more even playing field. With products like Xero making aggressive plays in the U.S., I think Intuit's success or failure with QuickBooks Online will perhaps have the greatest impact on the "Intuit World of Tomorrow."

Joe Woodard of the Woodard Consulting Group is the host of the annual Scaling New Heights conference for QuickBooks ProAdvisors. He has over 12 years of experience supporting clients who use QuickBooks and has taught QuickBooks to over 30,000 accounting professionals.

This article first appeared on the Accounting Today web site


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