Australian Competition and Consumer Commission (ACCC) commissioner Stephen Ridgeway has expressed concerns that MYOB’s proposed 100 per cent acquisition of GreatSoft would result in just two other major suppliers of practice management software to medium to large accounting firms: Reckon APS and Xero Practice Manager.
It notes that while there are other practice management solutions available, they are rarely used by medium to large accounting firms, which are defined by the ACCC as firms with more than 25 seats.
“GreatSoft is a new entrant that has won several medium to large MYOB customers, and we are looking into its potential to grow stronger,” Mr Ridgeway said.
“We received feedback that accountants now have a strong preference to move from traditional desktop-based software, like MYOB’s, to online ‘cloud’ software.
“While GreatSoft’s customer base is currently small, the ACCC is investigating its potential to become a strong competitor as it appears to be a viable choice for many medium to large firms wishing to migrate to the cloud.”
The competition watchdog’s preliminary concerns come after it initiated a review in October last year following the announcement of the proposed acquisition.
The ACCC believes the proposed deal could potentially lead to increased prices, reduction in customer service, or a reduction in investment in product innovation because of a lack of competition in the accounting software market.
It believes the South African-based GreatSoft could be a strong competitor in the market because of its model in supplying only cloud-based practice management software, allowing accounting firms to pick and choose between “best of breed” third-party software modules.
In contrast, the ACCC notes that MYOB and Reckon are mostly desktop-based and generally do not open their software suites to integration with third-party software.
The ACCC also notes that Xero’s Practice Manager is designed for smaller firms, although the cloud-based alternative can be used by medium to larger accounting firms through third-party modifications or adapting to functionality compromises.
“Medium to large accounting firms require more sophisticated features from practice software than smaller firms as a result of their more complex business structures and processes,” Mr Ridgeway said.
“It appears difficult for new competitors to enter this market. Software suppliers have to invest significant time and resources to develop functionality to meet the needs of larger accounting firms, and require a proven track record in order to convince accounting firms to switch software.
“While GreatSoft itself faced some of these challenges, we consider that as it has operated in Australia for the past two years, it may now be well placed to overcome them.”
The ACCC is set to make its final decision on the acquisition on 22 April after it receives further feedback on its preliminary concerns.
This is the second time in three years that MYOB has faced a potential roadblock from the ACCC, after the competition watchdog expressed similar concerns over its proposed acquisition of Reckon’s Accountants Group in 2018.
MYOB has since declined to comment on the ACCC’s preliminary views.
Jotham Lian is the editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.
Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.