Having problems with QuickBooks? Neil Williams wants to hear about them. As CFO of Intuit, the company that owns QuickBooks (among other product lines), Williams says one of his main missions is to stay close to customers and understand their frustrations. To that end, he and other senior executives devote up to two hours each quarter to meeting with small groups of customers and integrating their feedback into business plans. “First-time experiences and ease of use are particularly important to us,” Williams says, noting that most new customers now come in through the online version of the accounting program.
That means Williams, who will mark three years at the company in January, is listening to a wide variety of market segments. With about $4 billion in revenue, Intuit derives 40% of its sales from small business–related products, including QuickBooks. Another 40% comes from consumer tax programs such as Turbo Tax, and related software for tax professionals. The final 20% comes from a variety of buckets, including Quicken and international business.
Here, Williams talks to CFO about what’s next for QuickBooks, how the cloud and mobile computing have affected product development and go-to-market strategy, how the European Union debt crisis affects his stock, and why he doesn’t mind meeting with short-sellers.
What features do QuickBooks users generally say they want, and how is that fueling innovation?
The biggest feature that customers want is [for it to be] easy to use, and to be able to get in and out very quickly. That’s [sparked] the switch to QuickBooks Online, where they can access their books from anywhere they happen to be.
A big item for us also has been the shift to mobile apps. We now have about 30 apps, where people can do jobs on their phone or iPad and sync with QuickBooks. We have one where you can accept payment from a mobile device. Others let you approve payroll and track time. [Other apps] will populate data from a QuickBooks file so you don’t have to enter all their information again. [QuickBooks is also testing an app that will allow customers to take pictures of invoices with their phone’s camera and import them into the program. Similar apps already exist, but this one would be integrated with QuickBooks.] It makes sense; increasingly, small-business customers are doing their jobs in the field, outside their offices, so we’re investing in mobility.
Given the interest in cloud-based services, how is your business now split between those and traditional desktop licenses?
About two-thirds of our revenue comes from software-as-a-service and connected services, connected services being [a hybrid solution] where data is on your desktop but we have a copy that we can access. With payroll, for example, we can access your payroll tables from the cloud, even though [they’re] also on your desktop. Most of the data is on our servers; some is hosted with a third party. It’s clearly a journey; we expect 75% of our revenue to come from SaaS and connected services in the next year.
Most new customers come to us through online products. The trend is overwhelmingly toward connected services. QuickBooks Online is growing 30% year-over-year, compared to low double-digit growth [for the desktop offering], and is now [almost] two-thirds of sales.
Most customers don’t switch [from one to another]; most new customers, people starting new businesses, come to us through online. Younger people are more comfortable shopping online. But we don’t do a lot to incent people to go one way or another. We love our desktop customers, so we continue to invest to keep them current, but we think mobile devices — the smartphone and the tablet — [are the future], so that’s where we’re heavily skewing our R&D spend.
How is Intuit responding to security concerns around mobility, especially with financial transactions?
We have an app that allows smartphones to accept credit and debit payments. As the payment is scanned, it encrypts the card number. It has two-factor authentication, the same as online banking, and works the same way on the phone as on a desktop computer. We’re working on a single sign-on process where the same ID will work throughout Intuit. But today there are still separate sign-ons for separate apps.
Do businesses outgrow QuickBooks?
Yes, they do, but it’s very seldom. We have 4 million QuickBooks users, and there are some fairly large companies [in the mix]. We have companies with 250 to 300 employees and multiple locations. The price-point differential is a big one. The most expensive QuickBooks solution, our Enterprise edition, is around $3,500 a year; you’ll have to pay $75,000 to $100,000 for the next solution, which is typically NetSuite or one of Microsoft’s products. And it’s not just the expense you’re taking on, it’s a quantum leap in complexity. [Editors’ note: QuickBooks Enterprise is $3,000 for the initial license for up to 5 users, $5,000 for up to 15, and $8,000 for up to 30.]
What is the limiting factor when companies do outgrow QuickBooks?
Usually the number of locations, particularly for companies that need to manage a lot of inventory in multiple locations or that have multiple processing sites [for data and transactions]. If you’re a worldwide company and have 25 to 30 branches, you probably need a more enterprise-type solution. We would all wish that more small businesses grew up to that level, but the truth is, most of them stay [small].
Does Intuit use QuickBooks?
No. Most of our core systems are Oracle-based. We use Oracle financials, Oracle’s Siebel customer relationship management systems, Workday for HR and payroll. At 8,000 employees, with 50 different offices, Intuit’s too large for QuickBooks. Trust me, there are plenty of times I wish I were on QuickBooks, but we’re not.
How affected are you by international events, including the euro zone debt crisis?
The international market is definitely a big opportunity for us. . .[but] it’s not as simple as changing language and address conventions. We have to change [other parts of the product, including] workflows. So international is about 5% of our total revenues right now, growing a little faster than the rest of the company but not a lot faster. We are primarily in Canada, the U.K., Singapore, and India: English-language countries.
The EU debt crisis doesn’t really affect us. Our business isn’t very international, and our customers are too small for it to affect them. But it certainly affects our stock price. [Editors’ note: Intuit’s stock traded in the $50 to $58 range throughout 2011. It hit a low of around $40 in August. On December 20, it closed near $54.]
How much time do you spend meeting with investors, and how valuable are those meetings?
We think they’re incredibly important. They’re less about trying to find new investors or trying to get people to buy more stock than they are about keeping existing investors informed. We meet with our top 20 shareholders twice a year; our CEO Brad Smith and I split them up so I see each one once a year.
Does that include short-sellers and hedge funds?
We don’t proactively reach out to meet with those types of investors, but if they reach out to us, we certainly take the meeting. They have a job to do. They’re making a market in the stock. Whether we agree with their strategy or not, the more they know and the more we know about them, the better off we are. We don’t use [these meetings] to try to persuade. The important thing for me is to hear their questions.