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In the fall of 2003, Michael D'Amico was managing huge projects for key clients using spreadsheets and Microsoft's Access database and Project software. But those tools weren't providing the kind of nimble access to data the executive project manager and his team in NCR Corp.'s retail professional-services unit needed to help clients. These include Wal-Mart Stores Inc., which is upgrading scanners at thousands of stores, and Starbucks Corp., which is retrofitting point-of-sale terminals chainwide.
Then D'Amico heard about a Web-based database, collaboration, and project-management application from Intuit Inc. called QuickBase, which a colleague was using to manage sales orders. He signed up for a subscription for 10 concurrent users and 5 Mbytes of online database storage, paying just $250 a month. QuickBase caught on quickly, and use of the software grew to 50 users, then 100, eventually leading to the current subscription for as many as 500 named users and 55 Mbytes of storage for $1,500 a month. "You couldn't get a shareable database backed up on a nightly basis for anywhere near that price" anywhere else, says D'Amico, whose team has used the software as a simple development tool to create 71 password-protected applications, each representing a single customer's project. The modest investment is providing a big payback, he says, delivering productivity benefits worth 25 times the cost of the software.
If you didn't know that Intuit was in the database and project-management business, you're not alone. The $2 billion-a-year company is best known for its popular tax and accounting software for consumers and small businesses. But in the past few years, it has engineered a stealth acquisition strategy to expand into new markets and to add bigger companies to its customer base. It acquired QuickBase by buying Turning Mill Software Inc. in 2000, before the company even released the product. "QuickBase is clearly our best-kept secret, and that's our fault," says Intuit chairman and founder Scott Cook. "Clearly, we haven't explained what a breakthrough it is." Nor has the company much talked up the fact that its acquisitions also have secured it footholds in real estate, electrical-parts distribution, and construction, as well as IT-asset management. Its flagship Quicken software for consumers, Cook says, "is now 5% of our revenue. It was 100% at one time."
Intuit's quiet entry into these markets is in keeping with the personalities of both the company and Cook. Located on a quiet street in a sleepy Silicon Valley business park, Intuit's headquarters stand in sharp contrast to the more ostentatious homes of the valley's other big-name companies. Visitors are welcomed into a small foyer, not a lobby with soaring ceilings, and may meet with the company's decidedly unostentatious founder in a modest office that seems more suited for a midlevel manager than a billionaire chairman.
The vendor's aspirations as it plunges into new markets are seemingly modest, too. Intuit isn't aiming to become a big enterprise player like SAP or Oracle, Cook says. "The reason why these businesses are succeeding is because we're not an enterprise-software company," with its attendant cost structure, Cook says. "The personal intimacy and drop-dead ease of the solutions is only possible if you're a consumer-driven company."
It's a smart approach, Forrester Research analyst Bob Anderson says. "A lot of folks say Intuit is a big company with a lot of money in the bank, so why don't they move up in the market?" he says. "In fact, they have, in what some would say is a more enlightened way. They've realized that they have the capability to go to the special solution market and find vendors with strong brand loyalty."
Intuit has plunked down just over $400 million on five key acquisitions since 2000, all except Turning Mill being small companies that were growing increasingly important in their niche markets: OMware, a maker of software for managing small construction businesses; Management Reports, which was a rising power in the nascent property-management software market; Eclipse, a long-established distribution-management software provider in the wholesale durable-goods sector; and Blue Ocean Software, an IT asset-management vendor that had a growing presence in midsize companies. (During the same period, it also bought seven other software companies, most of which brought additional capabilities in the areas of financial management and tax preparation.)
"We're not an enterprise-software company," chairman and founder Scott Cook says--and that's a good thing.
Photo by Markham Johnson
What the acquired companies do gain is the ability to tap into Intuit's mature human-resources and financial processes and its expertise in developing simple user interfaces. Where Intuit has invested--although it won't divulge to what extent--is in the areas of marketing, customer support, and customer-driven innovation.
That philosophy seems to sit well with Intuit's acquired customers. Van Meter Industrial Inc., a $200 million-a-year electrical wholesaler with locations throughout Iowa, runs its entire business on Eclipse's software, now a part of Intuit Distribution Management Solutions, from finance to purchasing to inventory control, spending more than $200,000 a year on maintenance, support, and custom modifications for the company's 350-seat deployment. "When Intuit first purchased Eclipse, it ran through my head, 'What are they going to do to this company?'" VP of IT Dave Cahill says. But the last couple of years have allayed his fears. "They can bring some of their software-development processes to Eclipse," says Cahill, whose company has adopted some of the newer innovations of Distribution Management Solutions, including its radio-frequency technology and an XML-based transactional application that lets it connect to customers while saving the network fees associated with EDI.
There's been a noticeable improvement in how product-enhancement requests are handled since Intuit bought Eclipse, says Jeff McCamy, executive VP in charge of IT for Roden Electric, an electrical wholesaler serving Alabama, Georgia, and Tennessee. "In the past, if you needed something, you'd ask for it, and Eclipse would say, 'OK, that'll be $5,000,'" McCamy says. "Then they went off and came back with a product that may or may not have been exactly what we needed. Today there's a process that ensures we're going to get what we paid for." Among the processes Intuit's Six Sigma approach has introduced: more extensive beta testing and reviews of specifications before enhancements become part of the code base.
Intuit has infused its new businesses with its philosophy of regularly visiting customers to see how they're using the product so it can make needed improvements. "That's quite a reversal," says Noel Clark, CIO of Arden Realty, a $440 million-a-year real-estate investment trust that manages 18.9 million square feet of office space in Southern California and uses the commercial-property-management software now known as Intuit Real Estate Solutions. Additionally, under Intuit's ownership, the unpredictable upgrade schedule Management Reports had followed before it was acquired has been replaced by a steady schedule of new releases every six months, and the software is configured to accommodate customizations during upgrades. "We used to procrastinate on upgrades, and now we can't wait," says Clark, who spends $40,000 a year on upgrades and maintenance in support of a 170-seat deployment of Intuit's software.
That excitement is paying dividends for Intuit. The company won't break out numbers for its individual units, but for its fiscal year ended July 31, revenue in the three key vertical markets Intuit now serves--construction, distribution management, and real estate--was up 17%, to $96 million, representing 5% of its total revenue. The company's real-estate business boasts 50,000 users at 1,800 companies, for example, while the distribution-management business has 31,300 users at 523 companies. For its first quarter of fiscal 2005, Intuit's small-business unit, which includes the company's vertical offerings and IT-asset-management products, saw revenue increase 13% over last year to $66.7 million.
The company hasn't scored with every acquisition. in 2002, Intuit boughtAmerican Fundware, which makes fund-tracking software for government and nonprofit customers, for $22 million in stock and $4 million in cash. It hasn't been a successful move, with the unit posting flat revenue and modest losses since the acquisition, so Intuit unloaded it last week to Kintera Inc., a software vendor focused on the not-for-profit market, for $11 million. Forrester's Anderson says that single failure isn't going to deter Intuit from its vertical strategy, but the company may have to be more careful in scouting future acquisitions.
Another analyst wonders if Intuit is thinking more about how it integrates all its acquisitions. Using a services-oriented architecture to assemble software components into new applications would let Intuit deliver more-comprehensive suites to larger customers, says Ray Boggs, VP of small and midsize business research at IDC. "I'm not sure that's their plan, but it would certainly make sense."
While Intuit says it's not trying to compete with the big enterprise-software players, one very big name in the business says there's no doubt that competition between it and Intuit is growing. As D'Amico's experience at NCR shows, QuickBase is emerging as a frequent alternative to Microsoft Project, and earlier this month, Microsoft unveiled a small-business accounting initiative with partner Automatic Data Processing Inc. that clearly targets Intuit's small-business payroll services. The two companies have been moving closer to each other, with Microsoft reaching down-market while Intuit moves up, says Dave O'Hara, VP of small business for Microsoft Business Solutions. "It's been natural that we'd compete more," O'Hara says. "We have respect for those guys. They run a good business."
O'Hara even suggests Microsoft can learn from Intuit. "They've always had a goal of making the products really easy to use, and that's a goal we share," he says.
Small businesses that began using Quicken to manage their books in the early 1990s, before Intuit came out with its QuickBooks accounting software, were the first to discover that Intuit's products were both affordable and easy to use. Now bigger companies are discovering the same thing. Simplicity and cost savings were the main reasons Barnes & Noble.com became a Track-It asset-management customer after Intuit purchased Blue Ocean in 2002. The online bookseller had been using BMC Software Inc.'s Remedy HelpDesk to manage its support activities and audit its technology assets. It made an initial investment of $200,000 in BMC's software and was paying an additional $50,000 a year in maintenance for a help desk that supports 1,000 users, a figure help-desk manager Michael Frank calls "outrageous." Frank also had to have an experienced Remedy administrator on staff spending all his time managing the application because no one else could navigate the interface.
Since Intuit bought Management Reports, customers have more say in product enhancements, says Noel Clark, CIO of Arden Realty
In retrospect, Frank says, the presence of Intuit attracted him to a product he might have overlooked otherwise. "I said, 'Wow, if you've got a company like Intuit, which knows how to do banking, which is pretty complicated, it must be a pretty good product,'" he says.
The power of Intuit's reputation is helping it make conquests in new industries and among bigger customers, even as it retains its focus on the consumer and small-business markets that have been its bread and butter for years. But as its evolving strategy steers it down new paths, chairman Cook and company won't shy away from taking business from larger enterprise software vendors when the opportunity arises. "If someone's happily ensconced [with a product], they should stay," Cook says. "But there are enough people who come up every year who say, 'Our system just isn't hacking it for us.' We just want to be able to win our fair share of that new business."
So far, so good.
Also, read our interview with Scott Cook by Tony Kontzer, "Intuit Founder On Expansion And Customer-Driven Innovation.".