Australian firms warned of cloud ‘death spiral’

Australian firms warned of cloud ‘death spiral’

Panalitix founder Rob Nixon has warned that Australian firms need to act fast to avoid the compliance ‘death spiral’ that has gripped their New Zealand counterparts.

Speaking at the annual Sage Connect conference, Mr Nixon noted that as firms begin to convert their client base into the cloud, capacity hours are reduced, and greater avenues of efficiency are unlocked.

“Let’s say your firm requires 10,000 capacity hours to service your client base. After a five-year journey [with cloud accounting] it can take up to 60 per cent less energy and time needed at your end to service that client base,” said Mr Nixon.

Despite the increased potential and efficiency that cloud accounting has unlocked, Mr Nixon noted that many firms are struggling to adapt to the commoditisation of compliance, and are failing to fill their new-found capacity gaps with new clients and services.

Mr Nixon pointed to New Zealand, claiming that despite a 40 per cent cloud accounting penetration rate, research shows the average profit per partner has only risen $14,000 over a 12-year period.

"It should have been over $300,000 and it's just nudging $190,000."

According to Mr Nixon, New Zealand firms failed to price up front for their compliance services, failed to actively market new services to attract new clients, and did not sufficiently fill their capacity gap – methods that Australian firms must employ if they want to avoid a similar fate.

“It’s hard to get out of that death spiral that the Kiwis have got,” he added.

“In the last two years we’ve just seen this start to happen in Australia; profit per partner and revenue per partner on the decline, and the more cloud accounting we get – if it’s not managed – the more of this will happen.”

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Australian firms warned of cloud ‘death spiral’
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