It's pretty obvious that three vendors in particular are setting the pace at the moment. There is definitely a 'premier league' of FreeAgent, KashFlow and Xero (who have fallen away a little from the other two recently). It's worth mentioning that Xero are a New Zealand based PLC with a global strategy (and funding to match), whilst FreeAgent & KashFlow (and most others mentioned here) are very much UK based with the UK market as their primary focus.
Just to be clear: this is entry-level cloud accounting - SaaS for start-ups and sole traders etc upwards to well below the Sage 50 sweet-spot: with 'simple sign-up - immediate deployment' processes and utilising predominantly self-serve and zero-touch online sales models (though not exclusively as most if not all are active with other channels that offer the opportunity for multiple licence deals).
- market size (very approximately) 2 million
- of which Sage (50, Instants et al) users (approx) 250K - >15%
- users of other trad desktop software (approx) 50K
- both combined much less than 20% of available market
- current amalgamated SaaS vendor user numbers no more than 40K
- still early stage - awareness and education phase - hearts and minds etc
- all combined = no more than 20%. Remainder spreadsheets/pen & paper or 'don't know' as outsource management/control/visibility elsewhere
- top 3 SaaS vendors in UK are firmly in to 'hockey stick' growth
- by end 2012 the top 3 will have 100K users combined
- by end 2013 the top 3 will likely have c.100K each
- combined for all SaaS vendors in the UK by end of 2013 c.400K (easily surpassing user numbers for trad desktop)
- size of market for potential users will grow
- many current UK based SaaS accounting vendors (roughly three dozen - depending on interpretation!) outside the current top 5 will cease trading in next 24 months - one or two will be acquired for the tech - one or two (or even a couple more) will tick along
- SageOne - the Sage attempt to imitate SaaS vendors has appalling take-up - approx 1400 in almost 12 months despite low price and telephone support (red herring!) - proves that can't just trade on brand if don't get the SaaS basics
- the prevalent vendors come 2014 will likely look to use cash reserves and start to acquire complimentary (back-office) vendors (payroll, expenses, timesheets etc) - mirroring front-office/CRM space as before
Of the next tier of vendors of the most notable are Clear Books. This may surprise some, as they have had a pretty rocky time from a PR perspective over the last couple of years. I chipped in with a little comment on just one occasion (there are many other 'occasions' where I chose not to). There are some other notable names in both this tier and what I choose to identify as the third and bottom tier.
It's slightly harder to identify exact market penetration levels at this end of the market because the vendors are typically more secretive and less transparent about what they are doing, not just commercially but also in communicating in general. There are even some who choose to 'fly under the radar' as a strategy. For now we'll let them follow that flight-plan without exposure!
I can't help but point out what must be more than just a coincidence. There is a direct correlation between good use of social media, PR, marketing and confidence in communicating to users, potential users and the world at large and actual commercial success in this space.
Good quality, open and honest communications with all interested parties, on all levels, about all subjects is obviously a good strategy for growth. Being overly sensitive and secretive, probably not!
Arithmo, LiquidAccounts, E-conomic etc etc. There are many. All of whom could surge or falter.
This is just a brief overview. Not the why's and wherefores. Of which there are plenty. And plenty of scope for discussion, views and conjecture of course. I'm sure others have their own view. It's fair to say there's alot of land out there for the grabbing and things are just about to start to get a little bit crazy!
Disclosure. I worked at KashFlow for couple of years up to the Autumn of 2010
Image taken from FreeAgent blog. Thanks to them.