FSN: CODA and Salesforce.com go head to head with SAP in hosted accounting solutions market.

CODA and Salesforce.com go head to head with SAP in hosted accounting solutions market.

12th May 2008
The hosted accounting solutions market was given fresh impetus this week as CODA the supplier of financial systems formally launched its tie up with Salesforce.com to offer hosted accounting solutions over the web. Talking to FSN in London , Jeremy Roche , CODA's CEO and Polly Sumner, President, Platform, Alliances and Services at Salesforce.com said that the new solution will be firmly positioned as an offering for companies that have a controller or bookkeeper but have not taken a CFO on board.

Roche and Sumner confirmed that this positioning placed the Salesforce.com/CODA solution squarely in the same space as SAP Business by Design, a hosted offering launched by SAP with a fanfare in October 2007, although CODA appears to have a lower entry point. SAP is targeting companies with a 100 to 500 employees whereas CODA says it is looking at anything upwards of 50 users.

The CODA announcement also puts clear space between its hosted accounting solution in the upper mid-market and suppliers targeting the typical SME or start up. Players such as E-conomic and Aqilla (due to be launched later this month) are fighting over the smaller SME's. In this marketplace the relationship with accounting advisors is pivotal and a significant benefit of a hosted solution is the ability of external accountants and the companies they advise to easily share data.

However, Sumner is targeting a different market opportunity. She told FSN, “We are seeing the divisions and subsidiaries of large corporates taking a keen interest in the CODA solution. These businesses are not well served by the large ERP vendors and have been unable to standardise on a single accounting platform.”

Meanwhile, SAP's efforts in the hosted accounting solutions market appear to have stumbled. The company said it is cutting investment in Business ByDesign, and will not achieve $1 billion in revenue and 10,000 customers for the product by 2010. It will now take a year to 18 months longer to reach that level, as it works with customers and partners to fine-tune the product, it said.

SAP expects to engage with fewer than 1,000 Business ByDesign customers in total this year, it said, and will concentrate its sales efforts on just six countries where the most productive early customers are based.

It will delay rolling Business ByDesign out to other countries until next year, and as a result will invest around €100 million ($158 million) less in the product this year than it previously planned. Furthermore, beginning in 2009 there will be no further accelerated investments. The expected expenses related to SAP Business ByDesign will be funded out of SAP's normal operational business.

Roche believes that CODA's tie up with SalesForce.com is a major differentiator in the fiercely competitive market. Unlike new entrants to the hosted accounting solutions market, Roche see significant advantage in leveraging the established Salesforce.com platform. “With around 41,000 customers, SalesForce.com is a trusted brand and people are not going to be concerned about whether it is going to be in business in a year's time. But the same cannot be said of newer venture capital backed providers that have to build and maintain their infrastructure from scratch.”

However, with the initial product offering for the full accounting suite priced at $125 per user per month Roche concedes that the venture is a “long term play”. Competitors are struggling to turn a profit and CODA, which forged the relationship with Salesforce.com before being taken over by UNIT 4 Agresso will need to secure roughly 1,000 customers to start making money. But Sumner told FSN, “The breakeven point assumes that CODA only needs 2 percent of our customer base. Even allowing for the traditional conservatism of the finance community 1,000 customers is feasible.”

Sumner and Roche are expecting interest from established users of Salesforce.com's CRM (Customer Relationship Management) solution on which Salesforce.com built its success to partially drive demand.

Roche told FSN, “There are compelling reasons to integrate CRM and finance such as process efficiency and the ability of the sales force to see what's happening to invoicing and the status of sales orders in the pipeline.”

But Roche said that companies do not have to take the whole CODA solution to benefit from the invoicing and sales order processing. “Our pricing allows them to take the software in pieces if they wish which gives them the flexibility to buy what they need. They can also take advantage of other capability on the Force.com platform such as Google Apps”

Sumner added, “Our solution is also attractive because companies know that they can divorce at any moment and stop using the software. With a rental solution they are not locked in.”

Longer term Sumner believes that structural change in the IT industry will bolster demand. She told FSN, “The phasing out of popular mid-range hardware and consolidation in mid-market ERP will cause companies to look at other options. Our hosted solutions provides a good alternative.”

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