When Intuit talks about the future directions for their QuickBooks family of products they usually divide information into two groups, QuickBooks Online and QuickBooks Desktop. However, I think that there actually are three groups, with QuickBooks Enterprise Solutions being separate from QuickBooks Pro and Premier. Today I want to talk about what I see as the future for QuickBooks Enterprise Solutions.
In my article “What is the Future for QuickBooks Desktop” I talked about why Intuit is so focused on QuickBooks Online, but how they also have a renewed commitment to “QuickBooks Desktop”, based on Intuit’s fourth quarter 2014 report to investors and their 2014 Investor Day presentation. In those presentations there is a lot of talk about “QuickBooks Desktop”, but I think that this is misleading. QuickBooks Enterprise Solutions is being treated differently than QuickBooks Pro and Premier.
Directions for QuickBooks Enterprise Solutions
When Intuit talks about the target market for QuickBooks Online they are looking at the smaller businesses – which also happen to be the target market for QuickBooks Pro and QuickBooks Premier. This is the area that they project the greatest growth in as a part of their research.
QuickBooks Enterprise Solutions serves a different market. In a general sense, Quickbooks Pro, Premier and Online are a good fit for companies under 20 employees. Once you get into larger companies you are starting to look for products that work well with larger databases, that have a greater focus on inventory control, and need a higher degree of control over user permissions. QuickBooks Enterprise Solutions is a better fit here, perhaps competing with products like Sage 50 and Intacct.
Intuit has been talking about how they want to hold on to the “desktop” user until they are ready to convert to the online product, and that they will only be doing incremental improvements to the desktop. So, is Intuit lumping Enterprise in with Pro and Premier?
I discussed this with Jim Kim, Intuit’s Group Marketing Manager for QuickBooks Enterprise Solutions, and here is what he had to say:
“As a company, we recognize the importance of Enterprise to our customers. It fits an important market need for customers that are too large or complex for Pro, Premier or Online. Furthermore, we believe Enterprise plays a strategic role in the marketplace.”
“While QuickBooks Online is the right choice for the vast majority of small businesses and while it also addresses multi-location and multi-device issues seamlessly, we don’t believe it’s a ‘one size fits all’ marketplace. SMB’s are a heterogeneous population of customers, and as such, Enterprise is there to target the high end of the spectrum.”
“We have every intention to continue to invest in the product aggressively”.
Powerful statements that separate QuickBooks Enterprise Solutions from QuickBooks Pro and Premier. However, will Intuit actually follow up on this?
Let’s look at some clues:
- In the 2015 release of QuickBooks, many of the improvements that customers have been asking for were added only to Enterprise. There probably isn’t a technical reason why the transaction improvements were added only to Enterprise rather than all versions, other than to continue to make Enterprise more valuable.
- Enterprise users are more likely to be heavy inventory users than Pro/Premier users, and in the 2015 release the major inventory improvements were all reserved for Enterprise.
- The only major new feature that was added in the 2015 release was Advanced Reporting, which again is only available in Enterprise.
- Intuit has been making big changes in technical support and “customer care” recently. They have outsourced much of this, and in their 2014 Investor Day presentation Intuit talked about how they are working to change customer support from a “call center model” to improved in-product help where a call isn’t needed. However, in the Fall/Winter 2014 timeframe Intuit brought all QuickBooks Enterprise Solutions customer care into the US. Support calls for Enterprise are now handled out of offices either in Oregon or Florida. In fact, with the exception of a small number of QA engineers, all engineering, marketing, and product management operations for QuickBooks Enterprise Solutions are handled domestically now.
But what about Intuit’s statements about how QuickBooks Online customers generate more income per year than QuickBooks desktop? It isn’t clear that Enterprise is being included with those “desktop” figures. In fact, at a conference earlier this year Catherine Fisse (Intuit’s Senior Product Manager for Enterprise) made a presentation where she said that while Enterprise represents 10% of Intuit’s QuickBooks customer base, it represents 75% of the revenue (although this may have changed in the last quarter, as enrollment in QuickBooks Online has been growing quickly). Why? Not just because of the higher unit price, but because Enterprise companies utilize Intuit services (payments, payroll and so forth) at a higher rate than other desktop users. Sound familiar? That is the reason that Intuit said they preferred the online product over the desktop product in their quarterly financial report.
This is why I think that Intuit will put more effort into QuickBooks Enterprise Solutions, because Enterprise customers generate more income per customer company than Pro and Premier users. Intuit doesn’t want to lose those customers, and QuickBooks Online is a long, long way away from being able to satisfy the needs of these kinds of companies.
Enterprise Price Changes
To make this all more interesting, this week Intuit announced that they have changed their pricing policy for QuickBooks Enterprise Solutions. Instead of having you purchase the product and then subscribe to the full service plan as well as optional subscriptions for Advanced Inventory and Advanced Pricing, they have moved entirely to a subscription basis. Note that this only applies (at this time) to new users. Existing users will stay with their current price structure (as long as you keep your full service plan up to date).
The new plan has three levels, Silver, Gold and Platinum. Within each plan there is a scale of pricing based on the number of users.
- Silver will provide you with the base QuickBooks Enterprise Solutions product, a Full Service Plan, and Advanced Reporting. Prices range from $1000 for a single user to $6300 for 30 users (prices may vary, check Intuit’s site for the most current pricing).
- Gold includes all the features of Silver, and adds QuickBooks Enhanced Payroll for unlimited employees, with no extra fees. Prices range from $1300 for a single user to $6600 for 30 users – $300 a year extra when compared to Silver.
- Platinum includes all the features of Gold, and adds Advanced Inventory and Advanced Pricing.Prices range from $1600 for a single user to $6900 for 30 users, $600 a year extra when compared to Silver.
A move to subscription pricing isn’t a surprise, it is one of the goals that Intuit has set financially. They want everything to be on a subscription basis.
Comparing the old to the new pricing structure is complicated because prices vary per the number of users, and full service plan pricing has been changing over the past year or so. Plus, there often is some sort of sale going on. Let’s compare using pricing for five users.
In the old pricing scheme you would be $3,400 for a five user license, with a full service plan price of $2,250 for each year after the first. You don’t have to get the full service plan, you could just buy a new product every three years. However, keep in mind that you must have a full service plan to be able to use Advanced Reporting, Advanced Inventory and Advanced Pricing. Also, the Advanced Inventory and Advanced Pricing products are additional subscriptions that cost an additional $1398 together. So for a five user system:
|Level/Feature||Purchase Pricing (old)||Subscription Pricing (new)|
|Silver – Enterprise with Full Service Plan and Advanced Reporting||$3400 first year
$2250 continuing years
|Gold – all Silver features plus Enhanced Payroll||$3688 first year
plus $24 per employee/year
|Platinum – all Gold features plus Advanced Inventory and Advanced Pricing||$5086 first year
plus $24 per employee/year
That is interesting – your annual cost (after the first year) goes up if you compare purchase pricing vs. subscription at the silver level, but if you want ALL of the features the cost goes down considerably.
Some additional points:
- Existing customers on a Full Service Plan can remain on their current plan, they won’t be switched to subscription pricing.
- Full Service Plan prices for existing users may vary from what I have here, depending on what your renewal date is. And, there is no guarantee that Intuit won’t raise the price for the plan in the future.
- If you are a current “purchase” user, and you drop your Full Service Plan, you can’t get back onto the old pricing by trying to pick up your lapsed plan. You have to convert to subscription pricing.
- There is no “cafeteria” plan where you can pick which of the added features you get – Enhanced Payroll, Advanced Inventory or Advanced Pricing. Want just Advanced Pricing but not the other two? You still have to pay the Platinum subscription price.
- Another advantage to the subscription plans is that you may qualify to get “preferred rates” on the QuickBooks Payments service.
Another interesting aspect of the change to subscription pricing is that Intuit can now offer incremental updates of the product that include new features. In the old model they could only add significant new features (usually) at the annual upgrade each Fall. You only got bug fixes during the course of the year. With the subscription model they now will be able to offer new features periodically throughout the year.
Note that you will continue to have the option to not install one of these incremental updates, so unlike an online product you won’t be forced into the update if you don’t want to. That is important, given the track record for updates over the last year or two.
What Do I Think?
Intuit wants subscription income rather than “unit sales” – they achieve that if they get everyone on QuickBooks Online for the smaller business and QuickBooks Enterprise Solutions for the larger business (with the new pricing structure).
And, importantly, Intuit sees that they generate more revenue per user with their Online and Enterprise products than they do with Pro and Premier.
I’m encouraged by what seems to be ongoing support for QuickBooks Enterprise Solutions. It is going to be a long time before QuickBooks Online can come close to doing what Enterprise can, if it ever does. I don’t actually see Intuit trying to make QuickBooks Online comparable to Enterprise. They’ll let the add-on developers handle the “feature” shortage, but when you start adding up all of the fees you have to pay for these add-ons it is going to get expensive.
We’ll have to see how the “incremental update” process works. Intuit has to put a lot more effort into debugging these updates before they go out before I’ll be happy with that concept. Incremental updates also makes life tougher for accounting professionals who are supporting customers using Enterprise, as we’ll have new features coming out throughout the year rather than just once a year. We’ve already seen how confusing that can be with QuickBooks Online.