Two years ago, dissatisfied with Intuit’s focus on “me-too” products, CEO Brad Smith sent the company’s senior leaders into the field for new ideas.
“We followed the leaders of the product companies that we admired. Each one of us followed a CEO and watched how they made their decisions, how they engaged their teams, how much times they spent in products, and we changed the way we lead inside the company,” Smith said during Intuit’s annual investor briefing in late September. “The fruits of that labor showed up this year.”
His highlights include an overhaul for Intuit’s tax preparation offering for small and medium businesses, QuickBooks Online, and a newly imagined TurboTax for consumers. Intuit (INTU) also changed the way it handles customer service and ran its first Super Bowl ad, featuring one of its small-business customers, toymaker GoldiBlox.
Based on the series of presentations made to analysts last week, it has much more in store for the next 12 months including a heightened focus on mobile apps, a foray into small- and medium-business lending, a tighter relationship with digital payments company PayPal, and a pipeline of anticipated products for accountants and other tax professionals.
“The best time to repair the roof is when the sun is shining,” Smith said.
Like most software companies around since the early days of the personal computer, 30-something Intuit is fighting for relevance in the era of cloud computing. Sure, it recorded $4.5 billion in revenue for the fiscal year ended July 31, up 8%. (Net income was $897 million.) But for the current fiscal year, Intuit’s guidance is $4.3 billion to $4.4 billion, a decline of 3% to 5% as it shifts more sales into monthly cloud subscriptions accounted for over time. (It forecasts GAAP operating income at $800 million to $830 million.) The company’s stock is up about 50% since June 2013, currently trading around $84 per share.
How’s Intuit’s cloud transition going? Most notably, it wound up last year with 683,000 QuickBooks Online customers with the goal of reaching 2 million subscribers by fiscal year 2017.
To get there, it is relying not only on organic innovation but on strategic acquisitions: last year, Intuit took out its own checkbook 10 times to buy both talent and technology. That’s more than for the past five years, combined. One of those transactions will bring better inventory management capabilities to QuickBooks Online, a hole Intuit executives admit has kept many legacy customers from making the switch from desktop to online.
Another rallying cry is Intuit’s ability to tie together, automate and simplify the processes that keep money flowing in and out of small businesses, much as Salesforce does with its cloud-delivered sales and marketing services.
It’s telling that Intuit’s executive compensation is tied to delivering against three-year plans for revenue, operating income, and relative total shareholder return (although metrics are reviewed very two weeks).
“This is a game plan that we have so much confidence in, that for the first time we’ve given three-year outlooks and expectations,” Smith said on the analyst call last week. “We have greater visibility into this accelerating cloud adoption, increasing our footprint and customer adoption outside the U.S. The predictability of our revenue is such that 73% of our revenue will be recurring, cloud-based services by fiscal ’17. And while we do have a transition year in this current 12-month period because of the change to our accounting practices … we’re going to be existing in ’16 and ’17 with mid-teens growth, and ultimately a company that is on track to get to $6 billion, with $5 in [earnings per share], with margins that are better than they would have been at our current pace and course that we’ve been on.”
Intuit faces literally dozens of cloud-first upstarts, ranging from Xero Software (backed with $244.2 million from investors including Peter Thiel) to Freshbooks (which just picked up its first $30 million venture round in July).
How can it weather the multi-year transition ahead and face down these new rivals? Only by acting like the entrepreneurs it serves, Smith said.
“We want to be a 30-year startup,” he said. “Everybody in the company is a founder. Everybody in the company is an entrepreneur. Everybody in the company has the ability to improve products and come up with new ideas that we will commercialize.”
This item first appeared in the Oct. 7 edition of Data Sheet, Coins2Day’s daily newsletter on the business of technology. Sign up here.
