Are SaaS advocates expecting MYOB’s fat lady too soon?
Australian accounting software firm MYOB has been taken over by Manhattan (a consortium of private equity firms Archer Capital and HarbourVest Partners) and delisted from the Australian stock exchange. The news seems to have been interpreted by some (competitors and commentators) as a signal that MYOB is increasingly defunct as a supplier of accounting solutions for small business. The basis for this thinking seems to be (a) the stated intentions of Manhattan to reduce development effort on MYOB’s existing products; (b) a prejudice against private equity acquirers as owners of R&D-intensive businesses; and (c) an understandable prejudice against on-premise software providers and their historical difficulties rolling out software-as-a-service, the hot favourite technology for future delivery of SME business applications.
Personally, I agree that MYOB and other on-premise software vendors have struggled to make a credible SaaS offering, but I wouldn’t be so quick to rule them out in future. Neither would I ascribe a short-term-only view to private equity acquirers. There are undoubtedly opportunities to trim the fat out of MYOB’s R&D operations, especially if, like many long established development shops, it’s got stuck in its ways and spends too much on old products. However, PE guys don’t usually buy technology businesses just for short term cashflow. They’ll have a bigger game plan. I fully expect them to focus a much tighter R&D spend on a suitable SaaS offering. Indeed, I wouldn’t be surprised to learn that they have a SaaS-based acquisition waiting in the wings which they can back into MYOB’s marketing and support machine.
The fat lady hasn’t left for the auditorium yet, let alone got up on her feet to sing.
Disclosure: Isambard Investments owns shares in SaaS accounting provider Xero.
Trackback uri
January 22nd, 2009 at 1:57 pm
Thanks Jim - I’m not quite as down on MYOB’s chances as Rod is. It’d take a culture shift (and part of what a takeover can achieve is that shift) but there some potential there.
It’s probably a little too early for competitors to start dancing on the grave, commentators have a little more flexibility when it comes to things like that
February 19th, 2009 at 3:19 pm
I think this call was made a little prematurely, although looking at two of Xeros’ latest blog posts I would be very afraid if I was MYOB.
Xeros growth rate is current 20 customers a day…
http://blog.xero.com/2009/02/1000-in-50-days/
24% of Xero.com customers are coming from MYOB
http://blog.xero.com/2009/02/where-do-you-come-from/
That means nearly 5 MYOB customers a day are changing over to XERO! Incredible