Google should buy Intuit
March 16, 2007
Google has begun to nibble at the business market, introducing its $50-per-employee-per-month package of personal productivity applications, Google Apps, and buying up some little companies like JotSpot, a purveyor of corporate wikis. Now the time has come for the fast-growing company to take a bigger bite out of the enterprise pie. And the best way to do that would be to buy Intuit. I would argue, in fact, that there's no company that provides a better immediate fit with Google than does the maker of QuickBooks, Quicken, and TurboTax.
Google's strategy in the enterprise market is the same strategy pursued by most software-as-a-service companies: start by serving small and medium-sized companies, then work your way up into larger corporations. The core software program used by smaller companies is the bookkeeping and accounting application. Intuit's QuickBooks holds the dominant position in this market and, as Larry Dignan notes today, Intuit has quietly been moving up into the middle market with its more powerful version of QuickBooks, QuickBooks Enterprise, which provides basic enterprise-resource-planning (ERP) functionality. As Dignan writes:
[QuickBooks executive Gary] Wiessinger says Intuit's plan is to stay focused on mid-market companies looking for simplicity. The division started in 2001 following numerous customer surveys. What Intuit discovered was that more mid-market companies were maxing out QuickBooks as their firms grew. "From those surveys, we realized we had to put a focus on (QuickBooks Enterprise) so we launched enterprise solutions," says Wiessinger. "Our original goal was to keep them in QuickBooks family. Now we're focused on meeting needs of more complex companies by offering greater scale and power."
What Dignan doesn't mention is that Intuit also happens to be a major, if largely unacknowledged, player in the software-as-a-service business. It offers a SaaS version of QuickBooks called QuickBooks Online Edition which has more than 85,000 subscribers (growing at a 50% annual clip), making it one of the most popular Web-based business apps. QuickBooks Online is a fairly rudimentary accounting program, though it has become steadily more sophisticated over the years with the addition of various features such as payroll management. Right now, it would be an ideal complement to Google Apps. Roll an accounting/payroll service into Google Apps, and you have a suite that literally covers all the software required by a whole lot of small businesses. And you have a strong base for moving up into the mid-market.
Intuit also, of course, has Quicken, the leading personal finance program, which is another natural for moving onto the Web. And it has the leading tax preparation program, TurboTax, which has already moved to the software-as-a-service model with the popular TurboTax Online. Weave this stuff together with Google Finance, run it on Google's infrastructure, and you've got the makings of the dominant personal finance service.
If Google were to buy Intuit, it would also fulfill another of its core goals: annoying the hell out of Microsoft. You'll remember that, back in 1995, Microsoft tried to acquire Intuit, only to be thwarted by the Justice Department's antitrust regulators. (That marked the real beginning of Microsoft's legal woes.) Even though, in the long run, Google could end up an even bigger monopoly than Microsoft, I don't think it would run into antitrust problems if it tried to buy Intuit today. (If it waits, though, all bets are off.)
Bottom line: By acquiring Intuit, Google leaps to the forefront of the small-business software market and establishes a foundation for moving up-market with its software-as-a-service business suite, while at the same time gaining a big share of the personal finance sector just as it's beginning a shift to the SaaS model. The acquisition is certainly do-able. Google's current market cap is about $137 billion. Intuit, a nicely profitable company, has a market cap of just under $10 billion, with a little over $1 billion of cash on hand. And just a few months ago, Google and Intuit announced a major strategic alliance, so the lines of communication are certainly open. What's not to like?
UPDATE: In the comments, Isaac Garcia notes that Intuit also has QuickBase, another popular software-as-a-service application for small businesses and corporate teams (which even includes a CRM module). Does anyone know how many companies currently use QuickBase?
"What's not to like?"
Um, Google adding all my personal financial data to their server logs associated with that nifty cookie of theirs.... ;)
Posted by: michaelzimmer at March 16, 2007 02:47 PM
You left out Quickbase from Intuit's suite of products. Also an application that spans the enterprise and SMB markets.
Posted by: IsaacGarcia at March 16, 2007 03:18 PM
"What's not to like?"
And I thought GooTube was bad...
Posted by: Michael Gilronan at March 16, 2007 03:46 PM
Lot's of stuff they could do with google finance and google should further buy an online broker (a small one) like tradeking.
Posted by: howardl at March 16, 2007 04:35 PM
Eh, I don't know... we actually used Quickbooks Online a year or two ago and it was pretty bad. Slow, clunky, VERY un-intuitive (pun intended). I think Google would be better served rolling their own or finding another small SaaS vendor.
Posted by: Jason Kolb at March 16, 2007 06:46 PM
might be an interesting speculation, however to date Google has shown no appetite for large company (particularly large # employee) acquisitions.
their culture seems much more based on acquiring innovative technology from smaller firms (albeit occasionally at large price tags, re: YouTube / dMarc).
however, your observation is likely correct there could be synergy with a copmany that focuses on consumer financial services...
Posted by: Dave at March 16, 2007 09:43 PM
Interesting, I had a couple thoughts [1 + 2] on this very topic recently. Overall, I agree, but I'm looking at Google Checkout as being central to the idea. Quickbooks (and Quicken) could effectively make Checkout a de facto financial transaction engine for the world - consumers to small and medium-size businesses.
Also, Intuit is f'ing up the franchise. They own SMBs with Quicken, but they don't get the Web. Quickbooks Online is a success because there are no other players in the space, by and large. How else could you get away with no APIs, no support for Firefox, Macs, etc. I'm using it now. It feels like Web .20. The API thing will be a huge blunder, if they don't fix. The fact that you can't seamlessly integrate Web transactions with your financial software is horrendous. If they don't fix this, someone will.
The scary proposition for Intuit is Google coming to the conclusion that they'd be better off just building a scaled-down version on their own, ala the Office apps.
Posted by: wtsimmons at March 16, 2007 11:50 PM
Perhaps this would be a necessary defensive move for Intuit. Microsoft's Office Accounting is clearly impacting their business. Intuit still claims 90+% of the retail sales of shrink wrapped accounting software, but this statistic of course misses all the people like me who go to Microsoft.com and download Office Accounting.
There is a noticeable shift in the mix of QuickBooks customer adds over the last few quarters. While the Premier and Enterprise units continue to trend nicely up, adds on the entry level stuff (Simple Start, Basic, and Pro) are not as strong. Actually that is understating it quite a bit. Over the last 6 reported quarters customer add growth on entry level QuickBooks has been as follows: 34%, 30%, 14%, 4%, 2%, -8%.
Posted by: Jason C at March 17, 2007 01:33 AM
I'm not very familiar with all these accounting softwares (being an eternal student) but from my perspective, they are very dependant on life-style: they are many different designs, and one is hardly compatible with another. A family of one, or a couple have different views, and a software intended for one hardly fits the others; a founder of an individual consultancy would never get his mind around an ERP.
More importantly for Google marketers who love network effects, those essential differences are not homophile, unlike, e.g. TV shows: you know people who love the same show as you do, but you generally don't know people who would use the same AccountingSoft as you do.
And, of course, because these are essential figures, the switching costs are huge. My opinion would be that Google should fear a spat on the hand for buying such a large company, too --- and rightfully so: they have been able to innovate so far, why not go on?
Two patterns are likely:
- G Checkout is the direction, and widespread paying services lock into the various AccountingSoft in a very seamless, and very locking-in way;
- Google succeeds in empowering more people, having them write code and applets, and manages to have a few devoted coders to write open scripts to handle the relevant APIs.
What would be more to the point would be to have Google understand the diversity with its spectacular usability studies, and manages to offer one modular & open solution.
Quickbase -- have you actually looked at it? It's so un-Web-2.0... feels like a freight train up against, say, DabbleDB's Ferrari, or 37Signal's ultralight. It's not clear that Intuit "gets it".
djlewis et al.,
I wouldn't underestimate Quickbase. You are correct - its not Web 2.0 - but its a highly customizable, transactional webdatabase.
It appears they've run into a few scale hiccups recently, but I would infer that this is just a small growing pain that Intuit will overcome.
Neither Oracle, Sun, Intuit or Microsoft are very Web 2.0 - but they rake in billions of dollars in gross and net profits every year.
There isn't one Web 2.0 company that does one billion in anything. And if you say Google - you are fooling yourself - Google makes billions on advertising not Web 2.0 business applications.
DabbleDB and 37Signals products are lightweight - and would most likely breakdown if pushed to the transactional limits of what Quickbase is capable. of doing.
Quickbase is not cheap, its cludgy-looking and isn't sexy in appearance- but who said that the factory floor was supposed to be sexy?
Intuit knows that Quickbase is its best kept secret.
Intuit has more than 25 million customers - I think they DO GET IT. They "GET" that execution and scale trumps "sexy" "ultralight" interfaces when a company relies on their software for mission critical business processes. Unfortunately, its most Web 2.0 companies who don't "GET IT."
And, in case you are wondering, I'm not a shill for Intuit - I run a small Web 2.0 collaboration company. (thats sometimes competes against Quickbase)
Posted by: IsaacGarcia at March 18, 2007 01:36 AM
A shorter, more concise way of restating what I wrote above would be:
"If you judge a company and its business viability on the basis of it's user interface alone - well - you're an idiot."
Posted by: IsaacGarcia at March 18, 2007 01:41 AM
This is very interesting - Google buying Intuit. I think it SOUNDS nice, but I don't think so. Google's entire business is to do things to get more eyeballs to sell advertising - right? sure they are now just starting to sell things to enterprises - Google apps - but is this going to grow or is it just a side show?
I think Intuit is the king in software for small - medium sized businesses (not I think - I know) and they have a very clear strategy - selling things to these businesses to make their lives easier. (including taxes and database).
HOWEVER, I wonder if Google's corporate focus is the right fit for them?
I think Intuit teaming up with another company - does make sense. Personally I think Intuit should make some more strategic acquisitions to sell more software online and traditional PC software.
Another thing is maybe TEAMING up with Google for online app selling to MORE small businesses!
Posted by: rayramon at March 19, 2007 02:01 AM
I worked at Intuit and left a while ago. I think your proposition makes a lot of sense and commend you for the insight.
One thing to note is that Intuit (internally and externally) is a business company, not a tech company. CEO and top brass (from GE) are not software geeks, they are in the business of meeting customer's needs and make good money doing just that.
Under the hood their software/data storage is a mess. Scaleability is a big issue for many of their web based product lines. Google would be paying for a lot of good will and strong customer base, but Intuit has starved engineering, waiting for a business case that never seems to emerge for revamping their inards.
In my humble opinion, QuickBase should take over the world. Intuit wants QuickBase to be profitable as it grows (opposite of Google) which has kept it tucked into an obscure corner of the Interverse.
Interesting comment from Willshire above. Intuit in the UK is a pretty poor service company (I'd always assumed it was a technology company that didn't understand service but it appears the opposite).
I use Quickbooks for two companies I work with and the online support and training is really poor. Maybe that's just here in UK but none of the links work, there is no opportunity to buy offline training from resellers or the like. And to crown it all they did a "customer survey" last week and the link to the questionnaire website didn't work.
The day later they sent another email saying somethi8ng like 'we don't know why the link didn't work on Friday'.... I am sure they did. But it didn't come across well to a customer who at the time had been prepared to spend her time filling in the questionnaire. Opportunity blown away by poor testing IMHO.
Posted by: Rebecca Caroe at March 25, 2007 04:21 AM
And you didn't even mention the recent billion dollar acquisition of Digital Insight - millions of online banking users!!!
Posted by: JimmyC at April 23, 2007 08:01 AM
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