Accounting, Consulting, Future, Technology

17 Predictions for 2017

2016 reinforced that life doesn’t always pan out the way one (even the experts) might rationally expect…

  • Leicester won the English Premier League for the first time in their 132 year history, after starting the year 5,000 to 1 rank outsiders
  • Cleveland, a city full of major sporting franchises with empty trophy cabinets, finally broke a 52 year drought when Le Bron returned and the Cavs won the NBA (despite the Cleveland Indians losing the World Series baseball final to the Chicago Cubs, who were themselves 108 years in the wilderness!)
  • Brexit, according to the experts, was apparently a 3 to 1 outside chance of happening, the day of the election…in a 2 horse race!
  • In August 2015 you would have received odds of 25 to 1 on Trump being the next President, and as much as 5 to 1 on the day of the election!
  • The Western Bulldogs were rank outsiders going into the 2016 AFL finals series at 67 to 1, just 4 weeks before they won the competition, their first in 62 years!
  • Potentially the greatest brain in Rugby League history, Jack Gibson, was proven wrong! He once remarked on the expectation of the Cronulla Sharks ever winning the Rugby League title akin to “leaving the porch light on for Harold Holt”…. Well they won their first title in 2016 after 49 years trying!
  • The All Blacks were beaten by the Irish rugby team for the first time ever! The Irish were paying 9-1 in a head-to-head match!
  • Australia had only one prime minister for the entire calendar year – who could have predicted that? If you did, did you predict how impotent he would be…?
  • And John Key is no longer the commander in chief of New Zealand – what is wrong with the world..?

So I don’t feel too bad that my 16 Predictions for 2016 fell a bit short – the universe was just conspiring against me!
But here goes. I’ve sucked it up. Learnt from my mistakes and have saddled up ready to have another crack. This year a little more scientific. A little less subjective. As always cheeky and ultimately optimistic for where business technology is heading:

1. Xero to announce 1 million subscribers with their FY2017 results

(YE March 31 2017). So last year I predicted this would happen by December 31, without sitting down and truly doing the maths. A year on, gut has been replaced by maths, with my models projecting it to be VERY close. If they keep the 1H17 growth rate (which was supported by NZ and Au financial year end accelerations), they’ll hit 1m, on March 22, but one can suspect they might slow in the 2H – the question is can the UK and the rest of the world make up for any post financial year slow down in the antipodes? I’m saying yes!

2. Intuit to announce 2 million QBo “ecosystem” subscribers with the FY2017 results

(YR July 31 2017). Intuit themselves are forecasting 2-2.2m subs, so I’m cheating a little here. My maths says closer to 2m than 2.2m. Noting this includes QuickBooks Online and Self-Employed subs (for which the latter is a WIP, with (I expect) significant churn, low comparative margin and low Customer LifeTime Value). I’m guessing the target for the Australian team might be ~75,000 subs by July 31 (an uplift of ~50% YoY).

3. Bain to exit MYOB


MYOB is currently 57.7% owned by private equity firm Bain Capital. They’ve pretty much already doubled their money on the acquisition from Archer in August 2011. I personally can’t see significant growth opportunity for MYOB, with Xero consistently beating them on growth in their core market and now Intuit getting very serious in market as well. I’m sure Bain recognise this and will sell, likely (in my mind) to institutions rather than another Telstra2 style tranche. For me, by mid-year, but we’ll see.

4. Reckon not to be listed (in its current form), by year end

OK so this is a copy and paste from last year. Like many, I expected the involvement of Macquarie in late 2015 meant Reckon were preparing to be sold off – by my prediction, through a break-up and trade sale of a division or divisions.

The reality is, the same environment exists:

  • Growth will be tough for Reckon going it alone, henceforth
  • If Intuit were serious about Australia, even a hostile take-over makes more sense than continuing to burn $20m+ per year trying to re-establish a brand Reckon had already built for them…
  • MYOB have shown an appetite for growth by acquisition…
  • as has Sage who might see APS + Handtax as a solid base to launch their new Salesforce offering to whilst sweating the asset…
  • Greatsoft from South Africa are a growth focused Cloud practice management software company and eyeing off Australia, perhaps an APS division might look good under their control, given their headstart on cloud in this space?

All in all, I personally think some sort of sale of Reckon would maximise the return for its shareholders in the coming year – and there appears some likely options.

5. Significant senior management changes at Sage Australia

I have liked what I have witnessed of Sage’s “saviour” CEO Stephen Kelly. I can only assume he is surrounding himself with smart people who can help him execute on his strategy to reinvent Sage as a technology company (historically they were an acquisitions business).

Sage Australia have a MAJOR credibility (and hence brand) issue. They were the out-and-out cloud deniers. They were the definition of company silos (their many divisions rarely talked, let alone collaborated). Now they claim to be a united company, all about the Cloud. “Leap-frogging”… The market is having a significant issue buying what they are selling.

Sometimes to change the culture you’ve gotta change the people

I don’t believe the same “old heads” that guided Sage Australia into the position it was in post Softline and beyond, can reinvent themselves and the brand to be a competitive force, diametrically opposed to what they once stood for. And I can’t fathom that the UK head office, under Stephen Kelly’s leadership wouldn’t agree with me.

And this one isn’t just from the “what would I do” school of gut feel. The mounting facts support the likelihood. The Sage Group reported 3,000 new employees in FY16, yet kept their headcount steady ~13,000. That is, there was staff churn of around 23% worldwide in FY16! Then late in December, AccountantsDaily published this.

I think its a strategic necessity. The stats suggest staff are churning. The reports are this is now entering the leadership ranks. If it quacks like a duck…

6. Machine Learning really starts to disrupt the Accounting & Bookkeeping Industries

Sage have already released their bot Pegg.

Intuit showed off their new and improved auto-coding of banking transactions (already released) and “QB Bot” (for release this year) at QB Connect late last year.

Xero showcased their removal of coding (by auto-coding of customer and supplier entries) as well as their Xero bot via Facebook chat and Amazon Alexa at XeroCon 2016, for release this year.

Whilst it is not official, it is in the public domain…Ben Ross (former head of Product and Platform at MYOB), has what appears to be some sort of joint venture with MYOB (note his LinkedIn account states “Entreprenuer in Residence” and note the logo colouring) with myadvisor.ai.

My take on AI, the more data a company can analyse, the better their bot has the potential to be. Case in point New Zealand. Xero can know what is happening in the NZ economy, in almost real-time, better than even the NZ IRD (who only get GST data bi-monthly). With about 1/3rd of businesses using Xero there, transacting, you would think, with the other 2/3rds of businesses in the country, it is no longer about random sampling, its about “all of population analysis”. With the right categorisation. With the right algorithms, Xero won’t take long to be better at coding transactions or giving better advice on cash flow etc for New Zealand businesses, than most people.

As mere mortals, our limited frame of reference and ability to analyse based on finite spheres of education and experience, simply cannot compete with the ability for algorithms to perform the same task.

And here’s my point, 2017 is the year that the naysayers and those with their heads in the sand still busy with basic BAS compliance, bank rec’s and data entry, will start to see real-life consequences of technology on their old business models.

“Cloud Accounting” was NEVER going to be just about a deployment model people. The Cloud is data aggregation and what you do with it!

7. The rise of Governance consulting

In 2016 I completed the Australian Institute of Company Directors (AICD) Company Directors Course. During the course I had an epiphany. Governance seems a logical evolution for accounting professionals. Not just trying to come down into technology and operational “advisory services” (that bots will ultimately automate), but shifting up into recurrent governance oversight consulting and helping organisations in key areas such as strategy, compliance and risk management.

There will likely be at least one BIG common law case in Australia in 2017 (7-Eleven and/or Dreamworld perhaps?), plus the handing down of the “Royal Commission into Institutional Responses to Child Sexual Abuse” that will evolve the obligation of governance on directors and increase awareness of the need for directors to fulfil their duties of oversight (beyond those imposed by the Centro case in 2011).

There’s also a rising tide of business owning baby boomers approaching retirement with little to no succession plans. Clear governance of strategy, growth and risk seems a logical way to separate the individual from the entity and drive up sale multiples. Its seems a logical service offering that accounting professionals can deliver.

Accounting professionals hold a significant position of trust with their clients. They are respected for their knowledge of compliance when it comes to business obligations. Governance is an aligned, value-add to the existing relationship between client and accounting professional. It offers absolute recurrent engagement opportunity. I’m so convinced, I’ve joined GovernRight, the world’s leading Good Governance technology platform, to make sure I’m on top of the tidal-wave! InMail me if you’d like to know more!

8. More of the same from NetSuite

In 2016 one of Larry Ellison’s businesses bought another. That is Oracle bought NetSuite. Larry made a cool $3.5b in ca$h on the way through. What to expect of the kind of new ownership?

I don’t expect much will change. There’s a big gap between what the likes of Xero are doing at entry level and where NetSuite are growing and taking their product and service offerings. Whilst they claim to be targeting SMEs, they are really pushing upward. They clearly don’t get small business as they continue to ignore banking or any sort of development of a decent bank reconcilation solution. They already push smaller businesses to JCurve. And now JCurve are out selling full NetSuite…

Competitively they are priced above MYOB Advanced and even the likes of Microsoft Dynamics Enterprise (formerly AX). I see Oracle continuing the strategy, focusing sales efforts in the mid-to-enterprise marketspace. Hopefully Oracle do a better job with NetSuite then they did with Micros POS. Either way, I don’t see much changing in 2017.

9. Single Touch Payroll will be delayed, again…

Hey, I’m a fan of the idea of Single Touch Payroll for Australia. A MASSIVE fan. It will drive significant efficiencies throughout the economy, particularly around the ease and enforcement of compliance. It is just that the ATO has a history of missing deadlines and delaying enforcement. Look how long it took for SuperStream to finally be delivered.

The original date for single-touch payroll was July 1 2016. Now it is July 1 2017 for the optional compliance from employers with 20+ employees and July 1 2018 for compulsory compliance for those employers. Ultimately it will be the technology providers that will need to drive compliance and adoption. There is something like 198 of those in Australia, each with their own development cycles and focuses. I have my doubts on the July 1 2017 timeline!

10. But the ATO will meet some deadlines: Simplier BAS and GST on Intangibles

The political (and budgetary) imperative on the delivery of these two initiatives will see them delivered.

Without meaning to get too political, forcing foreign entities (like Intuit who avoid all tax in Australia via billing from Singapore and LinkedIn via Ireland) with turnover above $75k to charge GST in the same way as local entities, is nothing more than logical. Enforcement will be difficult, but nonetheless if the “big boys” all comply, it will be significant. This has to be delivered on time, there’s not much for the ATO to do…?

Simplier BAS is a logical step. Few accurately complete the existing BAS worksheet anyway. Effective from July, but available to new entities from January 19, this simple compliance change should put further downward pressure on accounting and bookkeeping fees associated with BAS lodgement.

11. The New Payments Platform will be delayed

Its now 2017. Australia’s infrastructure underpinning payment processing is old and needs replacing. Why do payments take days to clear? Why does our payment processing operate on standard business hours when we live in a 24/7 world?

The good news is, we’re not just waiting for blockchains and crypto-currencies to disrupt the incumbents to fix things. The APCA has embarked on a project to deliver real-time payments. And they are due to deliver phase 4 by mid-year, with BPAY supposed to deliver the first “overlay service” 2nd half 2017.

I’m excited, but sceptical. I’ll go as far as to predict we won’t see anything of the New Payment Processing (NPP) system in the real-world in 2017.

12. The new Microsoft Dynamics will do well in Australia

Microsoft, in my mind (certainly not Rich at KeyPay’s mind) is on the verge of a great resurgence. In the accounting tech space, they have announced the new Microsoft Dynamics suite, kinda/sorta converging their CRM and ERP offerings.

Dynamics Business (formerly Project Madeira) will offer a platform integrated tightly with Office, combining accounting and CRM for small business, competing with the likes of Intuit and Xero.

Dynamics Enterprise is the new converged AX and Microsoft CRM for mid to large businesses.

Throw in single sign-on for practically all business apps, Microsoft PowerBI, the new Microsoft Teams, even LinkedIn integration…wow, if they execute, I can see Microsoft Dynamics, running on fleets of Microsoft Surfaces, (maybe not connected to Microsoft phones) being a very compelling offering for businesses!

Their challenge will be the gap between Dynamics Business and Enterprise seems too large (maybe the guys at www.go-gravity.com will fill the void?). And whilst they seem to want to bring Enterprise (aka AX) down-market, they’ll need a new channel as the existing partners will resist mid-market implementation price expectations…

13. Microsoft PowerBI to grow rapidly

I am regularly surprised by the lack of market awareness for Microsoft PowerBI. For me, its the best reporting components of Excel and Access, rethought for the modern world. Whilst there are a million and one competitors, the ease of use, familiarity to Microsoft UI, the sexiness of the visual delivery, the fact the desktop version is free…I just can’t see a scenario where PowerBI won’t dominate reporting and analytics for the masses in years to come. And 2017 is the year market awareness will grow!

14. vSure – my app to watch in 2017

If there is one word I associate with 2016 (apart from underdog), it is Populism. There is a growing tide of protectionism and anti-foreign worker sentiment. Pauline Hanson has 4 seats in our senate. Trump was elected. Brexit was successful. The Adani coal mine was approved, on the condition there were no 457 visas!

We are witnessing a growing attention on foreign workers and their “right to work” in Australia. The Migration Amendment Act 2013 enforces obligation on ALL employers to check the work rights of ALL their employees and contractors. And keep checking the work rights of any foreign workers, throughout their term of employment. Both the Department of Immigration and Border Protection (DIBP) AND Fairwork can audit your staff at any point in time to ensure ALL are not in breach of their visa conditions. Hefty on the spot fines apply to employers, directors and individuals where a breach is found – and we are not just talking intentional breaches. If you haven’t been running regular VEVO checks on your foreign workers then that may be considered not meeting your obligations and constitute a breach!

vSure is perfectly placed to address the emerging compliance issue for any organisation or software developer working with a volume of foreign workers. They have relative clean air from a competitive perspective and there are significant barriers to entry for competitors (the DIBP API sucks). The app and API is clean, simple and specific to purpose. Again, full disclosure, I am so convinced that vSure is about to take off, I’ve joined the company! InMail me if you’d like to know more!

15. The Accounting Business Expo to deliver a successful inaugural event

With most recognised vendors (barring Reckon only at this stage) committed to attending, it appears National Media’s foray into the successful UK Accountex model down-under with the Accounting Business Expo looks set for success.

The big question mark now is can they get the foot traffic required to keep the vendors happy and get them a return on their investment, so they’ll be back in 2018? I think the novelty of the new darling harbour venue, coupled with the fact vendor conferences like XeroCon and MYOB Incite seem to be proving a demand in the market, should see attendance into the thousands and I think, this will translate into a successful event all-around.

16. Xero to revisit their entry level offering

Intuit are going hard with QB Self-Employed and express a great argument when describing the future of work and the rise of the “gig economy” and supplementary income sources like: Uber driving; Airbnb and online sales. I’ve seen stats like 40-50% of people will have some sort of self-employed income in the not too distant future.

I know Xero have left this market previously, and re-entering this space would affect metrics like churn and LTV, but the argument seems strong to me and a simple, “self-employed” offering is probably something they should revisit. And I reckon they will, in 2017.

17. MYOB will make another “legacy” mid-market acquisition

Last year it was Greentree. MYOB have stated that they are open to further acquisitions. Its a great way to grow revenue without having to sell volumes of sites. Its a great way to push more asset into the balance sheet, with minimal short-term affect on expenses/COGS. Net affect looks good from a P&L perspective AND it helps them move up-stream, away from the heavy competition in the small business space.

All-in-all, a good strategy to help Bain exit at a nice premium. Here’s my previous article on who might be their targets:

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There they are. And once again, I won’t shy away from reviewing as the year progresses. Please feel free to like or share. And please, comment at will, positive or negative!

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