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Who are the Winners in the Cloud Accounting World?

Here is an article from the Sunday Times that shows who’s winning in cloud accounting market place for software.

The clear winner is Intuit with Quickbooks Online. The numbers are quite illuminating.

September 1 2019, 12:01am, the Sunday Times

Sage’s offline software business evaporates into cloud

Author: Ben Wood

As he waxed nostalgic about his turnaround of American tech giant IBM in the 1990s, Lou Gerstner reflected on why some companies succeed and others fail.

“Longevity is the capacity to change,” the former boss said in 2014. “Companies that have lasted 100 years . . . have changed 25 times, five times or four times.”

Sage is another tech behemoth trying to reinvent itself before it’s dragged into the corporate graveyard.

Founded in 1981, the Newcastle company has grown from a poky operation selling accountancy software into Britain’s biggest listed tech company, with a market value of £7.6bn. The rise of cloud computing, however, is threatening its existence.

Sage is trying to wean itself off selling outdated offline accountancy software in favour of subscriptions to products in the cloud. The pace of change, however, has tested investors’ patience. Shares in the FTSE 100 company are down 14% to 700p since July, when an update revealed that software sales had fallen 16% to £195m in the nine months to June.

Sage has made progress under Steve Hare. The same update showed that software subscriptions had grown by 28% to £752m over the same period — accounting for a substantial slice of Sage’s £1.2bn recurring sales.

That is all well and good as long as headline growth is outstripping the competition. Sage, however, is starting to look like a straggler.

Sales at America’s Intuit (which is behind QuickBooks in the UK) grew by 13% to $6.8bn (£5.6bn) for the year to July, while New Zealand’s Xero was up 36% to NZ$552m for the year to March. Xero’s UK customer base also grew by 48% to 463,000 over the period. Sage’s organic sales growth remains in single digits: up 6% to £1.4bn for the nine months to June and 7% to £1.8bn last year.

There are also questions over whether that growth can be sustained. Sage was handed a one-off bump this year when an influx of customers signed up to its new software on the back of a government publicity drive for digitising tax returns.

It has also enjoyed a boost from the Brexit-hit pound. Overseas earnings have been worth more since the pound slumped. With about a third of sales coming from America and 15% from France, Sage has been a net beneficiary of Britain’s currency wobbles.

Analysts at Panmure Gordon said the company’s adjusted earnings per share would be 7% below where they were three years ago if the pound were stronger. With competitors snapping at its heels and the transition to the cloud far from over, Sage looks like it is in for a bumpy ride. Avoid.

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