Intuit and SMEs

Business 2.0 calls Intuit’s CEO Steve Bennett as “the hottest CEO in tech”.

“When Steve came in, he said the QuickBooks group was a slow-growing unit and a giant opportunity, and we should be growing much faster,” Cook recalls. The evidence, as it happened, had been staring Intuit in its customer-focused face: The standard version of QuickBooks is designed for companies with fewer than 20 employees, yet 5 to 10 percent of its most loyal users were larger — some had as many as 200 employees. In fact, more of them used QuickBooks than brands of software intended for companies their size.

As Bennett looked closer, he realized there was room for more than just an expanded version of QuickBooks. Many small businesses still run with pencil and paper, and of those that embrace PCs, few have moved beyond spreadsheets or simple accounting programs. Intuit estimates that North American small businesses, which it defines as companies with fewer than 250 employees, will buy $7 billion in business software and $11 billion in related services this year. Analysts expect double-digit growth for years to come. In an era when corporate IT budgets have been squeezed dry, this was a rare thing: an expanding market for business software.

Bennett went looking for a replacement to run the group. He soon found one in a former colleague, 20-year GE veteran Lorrie Norrington, whom he lured away with the help of a $750,000 signing bonus and a $5 million interest-free relocation loan.

In her new job, Norrington took all of a month to announce, essentially, that Intuit intended to become the SAP or Oracle of small business. The company would offer software and services for a wide variety of enterprises, from the smallest shops to those with a couple hundred employees. Intuit would help not just with accounting but also with payroll and benefits, keeping track of customers, and managing computer systems. It would also customize its software for specific kinds of businesses, like accountancies or construction firms. The initiative, she explained, would be called “Right for My Business.”

Norrington first turned her attention to QuickBooks. With nearly 3 million users, the accounting program was the obvious beachhead for a push deeper into the small-business market. Bennett had already ordered up a new version — QuickBooks Enterprise Solutions — for businesses with more than 20 employees. Within 18 months, Norrington added 13 more “flavors,” and by the end of this year, QuickBooks will have sliced the accounting market 25 ways, with special editions for the smallest small companies and larger small companies, and specific versions for retailers, distributors, contractors, and nonprofits.

In another example of bullet-train thought, Intuit agreed to open QuickBooks’s source code to independent software developers. The developers write highly specialized applications for specific businesses; with an open interface, they can easily tie their programs into QuickBooks and other Intuit software, creating a kind of small-business enterprise-resource-planning package. To recruit developers, Bennett, Norrington, and Cook have been stumping conferences, including Intuit’s first-ever QuickBooks developers conference, held in November near San Francisco. One of the roughly 6,500 companies actively developing applications is Clip Software in Ijamsville, Md. Some 8,000 landscape maintenance outfits use Clip to streamline tasks such as scheduling fertilizing and making estimates on new jobs. CEO Dave Tucker explains his partnership with Intuit this way: “We don’t want to write general ledger or payroll applications. Intuit can do that.”

To serve the largest and richest companies in their target audience, Bennett and Norrington have begun acquiring small companies that make fully integrated suites of business applications for specific industries. The packages, which Intuit sells for as much as $100,000 per customer, now cover property management, the public sector, construction, and distribution, and there are plans to buy as many as six more in different industries.

Intuit is worth a close study because we too want to be the “SAP or Oracle of small businesses” – only, that out focus is on the emerging markets.

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Contextual Advertising

Business 2.0 writes about what is becoming a growing and effective component of the online advertising business – ads that match what one is reading. This is almost the Holy Grail of advertising, where ads are not really ads, but relevant editorial.

The breakthrough, which I’ll call “contextual advertising,” involves commercial links that appear adjacent to relevant content on websites. Say you’re at Caranddriver.com, reading a review of the Acura MDX. In place of banners for everything from cell phones to cars you don’t care about, you would see paid text links advertising the Acura website, the Edmunds auto comparison site, and leasing companies vying for your business. These are the same links you’d see if you typed “Acura MDX” into Overture’s client portals, like MSN or Yahoo.

Google also plays in this new market with an offering called “content-targeted advertising.” The beauty of both is their ease of use for publishers: Overture and Google automatically analyze the publishers’ pages and insert relevant links on the fly. All the publishers have to do is collect a check. It’s close to manna from heaven.

This natural evolution of the search engine business closes the loop linking search, content, and ad dollars. In the past few years, marketers of all stripes (about 175,000, at last count) have learned to buy paid listings, or sponsored links placed next to “pure” search results. This phenomenon has created billions in annual revenues and a growth rate approaching triple digits. The reason is simple: Paid search is an incredibly efficient way to bring in sales leads — it’s the Yellow Pages, classifieds, and direct mail rolled into a single just-in-time pitch.

This is a new revenue source for the entire Web, one that not only is unobtrusive but, because it’s based on relevance, might even be useful to readers. Contextual advertising “could be much larger than the paid search market,” claims Bill Demas, senior vice president at Overture. Google’s Wojcicki seconds his assertion.

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WiFi in Developing Countries

BBC News writes:

Advocates of wi-fi, in both developed and developing countries, argue that they need to have unregulated, unlicensed and uncontrolled access to the radio spectrum so that they can be innovative and make money.

They believe that the existing model, where governments issue licenses to radio and TV stations or to other users of radio spectrum, partly to ensure that services do not interfere with each other and partly to make some money out of a natural resource, is wrong and out-dated.

The advocates of free spectrum are loud and getting louder. They speak out on weblogs, they lobby politicians and they have the ear of the United Nations.

There is, therefore, a real danger that they will drive a model of development, in this case based around wi-fi hotspots and unlicensed radio spectrum, that fits their own commercial interests and ideological position, instead of being what developing countries really need.

Speakers at the UN conference took turns criticising governments for being unable to manage the growth of wireless, while ignoring the massive success of GSM mobile phone rollout, where the radio spectrum is closely regulated but private companies provide the service.

Bridging the digital divide requires more than a commitment to deregulation and a desire to make money from potential new markets. It requires attention to the real needs and the real interests of the people living in countries without proper network infrastructure.

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