Matt Paff joins the podcast to discuss what he means by his article "Hey Mid-Market, Xero and Intuit are coming!" on Digital First. We learn about the vary definitions of the term "mid-market" between the United States and Australia, why mid-market vendors need to wake up and start innovating fast, and how Matt's background in mid-market software gives him insight into the future of software and the accounting profession.
Stories in this episode:
Blake Oliver: Welcome to the Cloud Accounting Podcast, a show for accountants using technology to make their jobs more strategic, and impactful. I'm Blake Oliver-
David Leary: And I'm David Leary.
Blake Oliver: We have a special guest today. His name is Matt Paff, and he hails from Sydney, Australia. Matt is an experienced business-software consultant, executive advisor, non-executive director, presenter, blogger, and aspiring futurist. Matt, thanks for joining us today.
Matt Paff: Thanks for having me, gentlemen. I [00:00:30] guess I should say G'day.
David Leary: G'day.
Blake Oliver: I hear that you have a great view that we, unfortunately, cannot see.
Matt Paff: I will take a photo and send it to you. I'm at a client's office, right in the middle of Sydney, looking at the Harbour Bridge, and the Opera House. It couldn't get more quintessential Australian, I don't believe, unless I had a kangaroo walk past me, at the same time, maybe.
Blake Oliver: Or one of those giant spiders, right?
Matt Paff: Yeah.
Blake Oliver: I do aspire to eventually visit Sydney. I've never made it [00:01:00] there, but I'm excited to have you on the show, today, Matt, because we were just talking about you on our last episode, and I have been a long-time reader/admirer. I've been enjoying watching you, or seeing you, on LinkedIn, post all these articles, we might say somewhat critical of vendors in the accounting-software space, and calling them out, which is great, because not too many people do that.
David Leary: What's the title of your articles, Matt, where it's like, "This is one nobody [00:01:30] dared to write"? What do you always title them?
Matt Paff: My event reviews are, "The review no one else will write." I noticed a lady in America picked up on that, and she did the same thing for Scaling New Heights, recently. So, someone else has taken my brain, and then, run with it [crosstalk]
David Leary: Give it back to Matt. Give it back.
Blake Oliver: It's the ultimate flattery.
Matt Paff: It is, yes.
Blake Oliver: Well, Matt, your latest article caught both my, and David's attention. It's titled, "Hey Mid-Market, Xero and [00:02:00] Intuit are coming!" and you published it both on LinkedIn, and on Digital First. Matt, we wanted to give you the opportunity to come on the show, and explain what do you mean about this? What's your argument here?
Matt Paff: Just a bit of background on myself, I used to actually run a mid-market accounting-software vendor, so, I'm coming at this from an angle of someone, dare I say, who has experience in what I'm talking about. I really [00:02:30] started to pay interest to what's happening in the cloud, whilst I was general manager of said vendor, and was really looking, "Okay, 5-10 years down the track, how does a mid-market vendor compete with, effectively, what Xero, and QuickBooks, in particular, are building?" Because, you only had a little bit, wat had already happened with Salesforce; what was sort of, in a way, already happening with NetSuite, and see where this idea of platform [00:03:00] in the cloud really came about.
Interestingly, if you have a look at Sage's journey, in recent years, Sage was the cloud-denial company. Then, they got a new CEO in Stephen Kelly, and all of a sudden, they were all about the cloud. Effectively, they made what I thought at the time was an odd decision to go with Salesforce as the basis of all their new technology. In hindsight, it was actually recognition that the future [00:03:30] is about platform, and it's not an overnight thing that you can build. You can't go and build a platform in five years.
If you have a look at Xero's investment, it's been over 10 years; if you have a look at Intuit's investment, QuickBooks Online is now over 16 years old. If you have a look at NetSuite, it started in 1998. It's now a 20-year-old platform. Platforms take a deep amount of investment over an extended period of time. When I was actually looking at what's the future of the mid-market, I was actually [00:04:00] looking at what already existed in Australia. We were dominated by MYOB. I was also looking at what's coming, as far as platforms. I'd actually struggled with how do we differentiate as a traditional accounting-software player, when all of this is happening?
The article that you commented on was really me, as an outsider, now, no longer running that mid-market company, looking at what has transpired over the last three years, since I left there. I [00:04:30] haven't seen, really, any innovation from the players that continue to operate in the big market. As I sort of talked about in the article, I then help a client out, who is then told that they can't go with - I'll say it here - QuickBooks Online, because of these seven reasons that just were fallacies. They were the reasons that we used to sell against QuickBooks Desktop, and MYOB Desktop, 15 years ago, but you can't [00:05:00] keep trotting out those same old reasons, when we move to the cloud, and platforms. That's really where it all came about.
David Leary: Matt, before you jump into those reasons a little bit, you told me this story ... I think we were at Sydney. We were drinking a beer, or whatever. I was in Sydney, a couple weeks back, and I think you were telling me this story ... Ultimately, you built what was being sold to this person in what? Two days? Using basically off-the-shelf QuickBooks Online, and off-the-shelf apps, and you built their whole entire workflow for pennies on the dollar. Can you go into [00:05:30] that a little bit, before you jump into all your six, or seven points?
Matt Paff: At the end of the day, I did it as a challenge to myself. It was a former employee of mine, who'd made a decision to go with what you guys know as Acumatica. We call it MYOB Advanced in our market. Effectively, an implementation of Acumatica, with a mid-market consultant, you're not getting out of bed for less than $50,000; generally, higher than that.
When I looked at this client, [00:06:00] there were four employees in the accounts department, and 20 employees who were approving purchase orders. I looked at it, and went, "Well, if you go with MYOB Advanced, you're going to lose bank feeds. You don't get bank feeds. You're gonna have a system that's not as user-friendly." I actually did it as an experiment. I said, "What if I could give you exactly what you want, using a Xero, or a QuickBooks?"
I'll go into the reasons why I actually recommended QuickBooks over Xero. At the end of the day, I'm [00:06:30] completely unbiased. It was just that this is a not-for-profit client. They needed roll-up budgets. They had more than 200 staff on the payroll. These are limitations of Xero. They're not limitations of QuickBooks, and KeyPay, in Australia.
We ended up recommending QuickBooks, and invariably, I set about going, "You know what? I think I can do this." The client didn't believe me. They were on a product we know, these days, as Sage 300 Construction [00:07:00] and Real Estate. Historically, it was known as Sage Timberline, which is a mid-market ERP solution. They looked at direct replacement. They looked at NetSuite, they looked at various products, and then I come in, and say, "Well, for $35 a month, you can get QuickBooks Online," and they don't believe me. "Can't possibly do what we need ..." Yes ... I go, "You know what? I'm gonna do an experiment. I wanna try and set this up."
Using ApprovalMax, and QuickBooks Online, I was able to basically [00:07:30] create their workflows, in a period of two days, with their data. I got their event codes, I got all their suppliers, and customers, and we actually set up a working version of what they wanted. I went back, and demonstrated it to the executive team, and they just sat there, slack-jawed, and couldn't believe what they were seeing. They kept asking, "I get all this for less than a hundred dollars a month? Are you kidding me?"
The user-friendliness of ApprovalMax on a mobile phone, or these sorts of things, you just don't get them in a mid-market equivalent. They're [00:08:00] not as user-friendly. They have the functionality, and they can be customized, but they're just not out-of-the-box easy to use, and intuitive. That's really where I have the issue with the mid-market, at the moment, is, at some point, flexibility is being traded off for complexity, and that you need to find the balance between flexibility, and end-user/user experience, I believe. I just don't think [00:08:30] anyone's there yet.
Blake Oliver: Yeah, I will completely agree with you, Matt, that most of the mid-market vendors have just done a terrible job of updating their products, of building easy user experiences. It's just terrible, right? The lack of bank feeds, in most ERP systems, is just staggering to me. I come from the opposite point that you did. I started in the small-business-accounting world, so I was very comfortable with the concept [00:09:00] of being able to connect to the bank, and download transactions, automatically, and credit cards, and whatnot.
Then, I get into the mid-market, and I find out this is not even possible. How is this not possible? All you have to do is copy what people have already been doing for 10-15 years. That is amazing, and I think there are some really easy opportunities, like the one you pointed out, where you can take a company that was looking at ERPs, mid-market solutions, but gonna pay [00:09:30] a lot of money. You can use QuickBooks Online, Xero, and add-ons to give them 90 percent of the functionality that they need, or even more.
Matt Paff: I'll just interject, and say, this isn't actually a new thing, and it's not just a cloud thing. If you look at the mid-market, and try and define what mid-market actually means in Australia, in my mind, mid-market ... The best definition I can come up with is a medium-sized business. I think, Blake, I've heard in your podcast, you talk about where they've got their own internal accounts team. There's people [00:10:00] on staff, rather than necessarily using an external bookkeeper. I wholeheartedly agree with that.
Invariably, to put a demographic around it, to try and quantify what is the definition of mid-market, the Australian Tax Office, in Australia, and this is gonna sound horribly small for the American audience, but the Australian Tax Office defines a medium-sized business as having more than 20 staff, and less than 200. That's very different to your definition of mid-market in the U.S., I realize that. but I wanna give you another stat. In [00:10:30] Australia, there are only 3,888 companies with more than 200 staff, as of December, last year. You're talking about the Australian business environment is very much small business. There's about 50,000 businesses with between 2 and 200, and then, there are less than 4,000 with more than 200 staff.
When you look at that, you start to go, "Okay, the mid-market in Australia is quite different to what the mid-market [00:11:00] is in the US," so, the vendors that service that market are quite different. Interestingly, if you have a look at that 2 to 20- sorry, the 20 to 200, what products are they using? The majority, the vast majority, are using what other people would term small-business software packages. They're using MYOB AccountRight. They're using what we call Reckon, but what you guys call QuickBooks. They're using Xero into that market space. In fact, I wouldn't hesitate as to [00:11:30] say about 65 percent of medium-sized businesses in the Australian market are using small-business software.
The way they've been able to do that is that there've been add-ons into that space for many a year, and in terms of the U.S. market, you've had Fishbowl. If someone basically starts to outgrow QuickBooks, and they're and inventory-style business, you just go, and get Fishbowl, and you can add it on. That happens here, in the Australian market, with the Reckon product. We also have products in the Australian market, one called Ostendo; another called Data Pill. They're [00:12:00] effectively ERP-functionality solutions, who happen not to do the general ledger, and bank rec in the back end, but they do most of the other things.
The very definition of what is mid-market, from a software perspective, is it is something that ... It's not new, this ecosystem thing, when it comes to cloud, and APIs, because everyone I've just mentioned relates to desktop. What is new is that the average small business is now using cloud software in Australia. We're about 50-percent penetration on [00:12:30] the cloud. If you're a mid-market vendor, you're trying to sell to someone who's using the cloud, and you're still on the desktop, how are you gonna convince them to go away from having bank feeds, and not having to enter customer payments? I can't tell you how to do it. I've spoken to people-
David Leary: There's no migration path. Logically, there's just no migration path up, yeah.
Matt Paff: I've spoken to people at NetSuite ... Surely, in Australia, you guys are now coming up against it, where someone can't understand why you don't have bank feeds. Here, you can go get an add on like Nolan, [00:13:00] which is tens of thousands of dollars a year, just to give you a fraction of what Xero, and QuickBooks, and MYOB do out of the box. It's a really difficult thing. Invariably, the way they're selling ... I've spoken off the record to a number of the salespeople. They just try not to talk about that during the sales cycle. We'll leave it up to the person doing ... They do. They leave it up to the person doing [crosstalk]. If the customer doesn't ask, then it's the customer's fault.
Blake Oliver: Dirty secret of sales.
Matt Paff: That's [00:13:30] really what I'm saying is that this isn't new that small businesses will continue into the medium-sized space, using add-ons. As I said, Fishbowl, in the U.S., is the classic example of that, with a mid-size. In fact, I remember speaking to Sasan Goodarzi at QBConnect, last year, in San Jose. I asked him, "What is your aspirations on the mid-market?" He very arrogantly, and I don't mean that in a negative way, but he very arrogantly said, "Matt, we already own the mid-market. If you have a look at the number of customers who are medium-sized [00:14:00] businesses in the U.S., most of them are using us." I think, David, you quoted how long Google were using QuickBooks Desktop for, and these sorts of things. There is this thing that there are mid-market vendors, and they see, negatively, the small-business vendors, but in reality, they're already their biggest competitor.
Blake Oliver: Matt, this is this is fascinating to me. I had no idea that the definition of mid-market was so different in the in the U.S., versus Australia. What was the employment number you said, the range [00:14:30] that's typically accepted?
Matt Paff: Well, you'll never get vendors to basically describe what the mid-market is, and all agree, but ultimately, what I'm trying to do is quantify what is it? In Australia, the Australian Taxation Office, the ATO, and the Australian Bureau of Statistics, both use the definition of a mid-sized business is 20 to 200 employees.
Blake Oliver: Okay, to put that in perspective, in the U.S., the U.S. Census Bureau, which is actually not the authority in this case, but the [00:15:00] government says that a mid-market business has between a 100 million and 3 billion in annual revenues in the U.S.
Matt Paff: If you talk to the mid-market vendors in Australia about what the revenue profile would be, it's about 3 million to 100 million. We're talking very different spaces. I think you have Sage Line 100 over there. That's really where our mid-market starts. [00:15:30] When you then talk at the upper end, yes, certainly NetSuite is a mid-market product in the Australian market. Interestingly, they've just launched their SuiteSuccess for rapid deployment, but, interestingly, in Australia, we have a company called JCurve. JCurve negotiated the license from NetSuite many years ago to effectively bring NetSuite at a cut-down price into the Australian market. They're selling as a mid-market vendor, but at a very [00:16:00] cut-down license, for want of a better term, the NetSuite platform-
Blake Oliver: It wouldn't make sense to sell it at the price they do, here in the U.S., to companies substantially smaller, in Australia. I cited that U.S. Census Bureau figure; that's actually not how most people define the mid-market, here in the U.S. I found two ranges. There's a narrow definition, and a wider definition. The narrow definition is about 50 [00:16:30] million to 500 million, and there's about 39,000, call it 40,000, of those businesses in the U.S. It's a lot; a lot more than you would have in Australia. The wider definition would be about 10 million to a billion dollars a year in revenue, and that's 200,000 businesses like that. Very, very different definitions. Totally changes the way I view, the way I interpret, now, what you're saying, and makes total sense to me that a [00:17:00] business with a couple-hundred employees could easily extend a Xero, or a QuickBooks Online to get what they need with add-ons, absolutely.
Matt Paff: Interesting that the quantum is about the same. You talk in terms of 40,000 up to 200,000, depending on which range. As I said, what I'm determining here, as mid-market in Australia, is about 50,000, and thrown in another 10,000 in New Zealand, because often, we bundle Australia, and New Zealand together.
David Leary: I'm just gonna mention, if you, and I look back historically at QuickBooks Desktop, people just stay on [00:17:30] that forever. It's almost like mid-market's defined by when you finally give in, and buy the next $50,000 package, you move from a ... Best, if you bought every single possible thing for QuickBooks Desktop, maybe you're spending five grand, every two years, or three years. I think mid-markets are almost defined by that day you give in, and you finally say, "Hey, we're sticking in a $50,000 system, you know, $70,000 system." Maybe that's really the definition [00:18:00] is as soon as you buy that system, okay, I guess you're officially mid-market, right?
Matt Paff: I'll tell you about a trend that's happening, and I've validated this with a number of people, recently, is that people are getting very frustrated with the lack of user-experience design in those mid-market, and even up into the corporate products, that they're actually now going, "You know what? It's worth the sacrifice on functionality for us to go back to a more user-friendly environment." I [00:18:30] was speaking to - I hope he doesn't mind me saying this - Simon, who's the distributor of Fishbowl, in Australia. A lot of his new business is actually coming from mid-market, and enterprise solutions coming back on to Fishbowl plus a Xero, or Fishbowl, plus a Reckon, as we call it here, rather than effectively going the other way.
Matt Paff: He actually commented that a lot of his new business is actually people just tired of the [00:19:00] cost, and complexity, and going, "You know what? Even if we don't end up with all that flexibility, and all that comprehensiveness, we're still getting a pretty good solution that's user-friendly, and we get things like bank feeds, and we get things like mobility, and we get some cool features that we just don't get in these very expensive big-end systems." It's fascinating to me how it's all starting to play out. What is that point? In Australia, it's a very narrow point that it's becoming. U.S., you've [00:19:30] got such a large economy, the largest economy in the world-
Blake Oliver: Well, for now.
Matt Paff: You're always going to be ... Yeah, for now, exactly; with one of the worst banking systems in the world, but I probably shouldn't say that. As far as the technology, I'm still blown away by how many people still use checks in the U.S. It's unbelievable.
Blake Oliver: Yeah, paper. I was gonna say, you really aren't gonna get a lot of pushback on our banking system, here, or the fact that ... Here, we have something [00:20:00] like 3,000 banks in the U.S.; they can't get their act together, so they can do electronic payments, which is finally starting to come to an end. Still, like 50 percent of businesses are using paper checks. U.S.
Matt Paff: Unbelievable. Everything is electronic. I remember, when Sage Live first came to Australia, it was an American who did a demo to me, on Sage Live, and I'm going, "Okay, so where's the ABA file?" The ABA file, in Australia, is something called the Australian Banking Association file. It's a 30-year-old [00:20:30] file that's text-based, but it's how every bank in Australia accepts it. The person doing the demo said, "What's that? Is that like the ACH, in the U.S.? We've got third parties who do that." I'm like, "Ah, no. No, it's not like that at all. It's a free thing, here in Australia. Everyone does electronic payments and has done for 30 years."
David Leary: What is there, seven banks in Australia? [Crosstalk]
Matt Paff: The reality is there's four; there's four big ones. There's four that are top 20 banks in the world, but we've had, effectively, [00:21:00] a legislative environment that has strengthened those banks to the point that they are among the four of the biggest banks in the world, and certainly four of the most profitable banks.
Blake Oliver: I have a story for you guys about paper checks. I did a bit of work for Xero a few years ago, when I was in between jobs. I sent my invoice into Xero U.S., and I got back a paper check in payment, and I thought that was really [00:21:30] ironic, but, yeah, it was the only way-
Matt Paff: I shouldn't say this, that they don't use Xero. They use NetSuite, so blame it on NetSuite.
Blake Oliver: Yeah, that's right. When is Xero going to be on Xero is the question.
Matt Paff: Well, if Rod Drury was still the CEO, I would say it is still an aspiration, because that was always Rod's dream, but with Rod no longer steering the ship, I wonder.
Blake Oliver: It's interesting, there was another article that popped up on Digital First about transaction volume, and [00:22:00] a takeaway, what I came away with, from the article is that it's not really a big issue, and that you can pretty much run as many transactions as you need to, in Xero. I feel like most of the limitations of the platform, in terms of the mid-market, as David and I discussed in our last episode, has to do around dimensional tracking, and reporting. When you build the product, so that you can only have two dimensions, from [00:22:30] the start, it would be very difficult to recode it so that you could have more and give people those custom fields.
Matt Paff: I'd argue that point, because that's where projects come in. Both QuickBooks, and Xero have added projects recently. If I looked at my options around dimensions, in QuickBooks, as an example, I have projects, I have classes, I have five levels of classes, I have locations, and I have customer - all as dimensions that I can use in all my transactions, throughout the system. Xero, [00:23:00] similarly, has these. How many dimensions does the average organization need? I'm not saying that there's not ... The general-ledger system in NetSuite is very strong, and dimensions are great, but sometimes, people overcook it, and they end up with more dimensions than they actually need.
Blake Oliver: No, no, you, David.
David Leary: Matt, are you saying, then, that ... I think this is your argument, right? People are rethinking this, like, "I don't need an 8x8-dimension report. [00:23:30] I need bank feeds, and I'm willing to sacrifice some ridiculous report for some one-off manager in one of the divisions of my company, so my accounting staff can get their job done 90-percent faster."
Matt Paff: You have just nailed it. My actual argument is 10 years ago, I had to sacrifice a lot to stay on a user-friendly product. I had to sacrifice transaction volumes. I had to sacrifice speed. I had to sacrifice a whole heap of things, if I wanted a user-friendly system in Australia, like MYOB, or QuickBooks, as it was known back then. Today, [00:24:00] the things I have to sacrifice are diminishing. I can go, and get an add-on, like ApprovalMax, that gives me ERP-level approvals, without leaving Xero, or QuickBooks.
The things that QuickBooks gives me, and Xero give me, as far as bank feeds, and artificial intelligence, and all that coding, are not even being [00:24:30] talked about in the NetSuites of the world, the Intaccts of the world, these other systems. People, when they're ... When I'm looking at it, I'm going, "Well, why would you wanna give up all their coding?" Why do I want to enter a customer payment in 2018 in any accounting system?" The first people who should have done this is the high-volume-transaction people, who have lots of customer payments going through their systems.
My bank feed is telling me when a customer has paid me. Can't [00:25:00] you just automate that process? It still ... It dazzles my mind that I have to go, and get an add-on, like Nolan, for NetSuite, to do some rudimentary level of bank feeds. I just don't understand it. It frustrates me, and what I'm saying is that that gap between what I have to sacrifice to get that flexibility has absolutely narrowed about things ... Sorry, [00:25:30] the other way around. It's widened. The things I have to sacrifice have become greater to get flexibility. That's what, really, I'm arguing.
David Leary: Touching on a comment Blake made, when we recorded that episode, a week ago, or whenever somebody's listening to this ... Could be a couple weeks ago ... Blake made a comment that the people buying this up, or making a decision are different. The person that's buying this mid-market-enterprise-type software is the CFO. Are [00:26:00] these mid-market packages solving for that CFO, and not actually solving for the CFO's employees, who are gonna use the software? Is that a real problem, here, and this is why things like bank feeds never get added, because the CFO doesn't care about the bank feeds?
Matt Paff: I think Workday is a little bit of a disruptor. I heard a story, and I hope it's true that Workday have a policy that their front-end-design team must be under 30, and their back-end-dev team have to be over 30. Now, it may or may not be 100-percent true, but, effectively, the premise [00:26:30] is that someone who is young understands what intuitive design is, and how I minimize the number of keystrokes and [crosstalk].
David Leary: The iPad generation.
Matt Paff: Yeah, and then, someone who's a bit older understands databases, and how to get that functionality. The Workday guys are the same people who developed PeopleSoft, so they understand the grunt work, but they ... If you have a look at Workday, the way that it transitions between screens, it’s just pretty, and people like that, these days. I think what's happened [00:27:00] is the mid-market, in particular, they've sort of a little bit rested on their laurels, because, in effect, is an uneducated market that they're selling to. I'm actually agreeing to your point, here, David. The CFOs aren't necessarily asking for these things, because they don't know what they're missing. They haven't actually grown up on Xero, and QuickBooks Online, yet. They've basically grown up with the old-school Sage 50s, and-.
Blake Oliver: Oracle, SAP-
Matt Paff: -come from the [00:27:30] other end, and they're used to basically throwing people at a problem, because the business hasn't got enough money to solve those problems. There is a famous saying from Henry Ford, "If I asked my customers what they wanted, they would've got faster horses." If you have a look at Apple's success, it wasn't from Steve Jobs going to the market, and saying, "What do you want?" and then building what the customer asked for. I think what the mid-market has done is it's gotten too narrow-minded [00:28:00] in asking its customers what it wants, and they want back-end stuff, or they want the flexibility to change this field, or whatever. They're getting in the development path of doing all that, and you actually lose sight of what's going on around you, and behind you, and in front of you. I think that's what's happened. I think they haven't actually paid enough attention to the Xero, or QuickBooks evolution, and I think it will come to bite them, because I think they'll find it very hard to move someone, once [00:28:30] they're on those platforms.
Matt Paff: At the moment, it's probably not a big deal, because they're still shifting people from desktop, but in the Australian market, we're hitting 50-percent penetration of cloud-accounting software. Where are those mid-market vendors going to get their next customer from, once we're up 60, 70, 80 percent of the market are coming from a cloud solution that has integrated bank feeds, and artificial intelligence, or other coding? Where are they gonna come from, because they can't go, and build that functionality overnight. It's taken 10 years for Xero to get [00:29:00] there. It's taken 16 years for QuickBooks to get there. It's taken 20 years for NetSuite to get where it is, and it still doesn't have these things. That's really what I'm arguing and frustrated by.
Blake Oliver: Well, let's hope that some engineers, some a product people at Oracle NetSuite, at Sage Intacct hear our voices, or whatever ERP company you work for. That's a great wrap to this episode. Thank you so much, Matt-
David Leary: Yeah, thanks, Matt.
Blake Oliver: If folks [00:29:30] who are listening, if they want to follow you online, get in touch with you, how should they do so?
Matt Paff: @MattPaff, M-A-T-T-P-A-F-F, or, @ValueAdders. My consulting business is set up to see where we can add value, in any way, and ValueAdders was a logical name. @MattPaff, or @ValueAdders, always the best way to get me, either mainly on Twitter, or LinkedIn.
Blake Oliver: David, if our listeners wanna tell us about a story, or be on our podcast, where [00:30:00] should they contact you?
David Leary: Twitter is easiest, @DavidLeary.
Blake Oliver: I'm @BlakeTOliver. Thanks, everyone, for listening. Thanks, Matt.
Matt Paff: Thanks, guys.
David Leary: All right, Matt, I'm gonna not stop the recording, just yet. Last time we had our last guest on, we had a little non-accounting-related conversation, for a second. I'd love to kick something around. You and I talked to my kids a little bit ... How many kids do [00:30:30] you have?
Matt Paff: I have three kids.
David Leary: Three kids. I have three kids, too. Blake's missing out.
Blake Oliver: I just have one. I have one, but he's a handful, so ...
Matt Paff: I've got three, here handfuls — six, three, and nine months. I'm in the deep-dark depths of parenthood, at the moment.
David Leary: I'm surprised you had time to do this, actually, at that age.
Matt Paff: I've got a very good wife.
David Leary: Wow. Amazing, amazing, amazing. You ran a company, for a while, right?
Matt Paff: Yes, I ran ... You wouldn't have heard of it. Can I tell you a story?
David Leary: Yeah, absolutely. [00:31:00]
Matt Paff: The company I ran was a company called Attaché Software. In late 1970s, IBM were talking to Panasonic, who were called Matatsu at the time, in Japan, about building them what they called the personal computer. a guy in Sydney, called Gary Blohm, basically, was the number-one distributor of Panasonic, in Australia. They were talking to him about, "What do you think of this idea [00:31:30] of the personal computer?" Long story short, shift to 1981, and IBM had decided to go build the PC, themselves. Gary, being a smart, enterprising entrepreneur, basically decides that whatever ... This is the thing that's gonna make every business in the world buy a computer.
Until that point, it was micro-systems, and mini-systems, and very, very few companies had a computer. When he hears about the IBM PC, he thinks it's gonna change the world. He said, "What people need is they need the hardware, [00:32:00] but they also need the technology, the software, to run on that hardware. In fact, what we should do is we should package up the software, plus the things they print - the invoice layouts, and all these things - plus the manuals, and we should put it into a briefcase." He said, "What I might do is I might ... Let's set up a company called Briefcase Software, and we'll sell ... Every time we sell an IBM PC, we'll sell a Briefcase, and the Briefcase could contain everything you need to run a business." They thought about-
David Leary: Except for the PC, right? Except for the PC. which, at that time, did not fit in the Briefcase. [00:32:30]
Matt Paff: They would've sold alongside each other. Anyway, they thought Briefcase Software was a silly name, so they came up with Attaché Software, because attaché case, attaché to the PC. The idea was that he went, and got two companies; one, who did micro-system-accounting software, and one who did mini-system-accounting software. He said, "As soon as this IBM PC comes out, and it's got this DOS product on it, we need to basically [00:33:00] engineer one of your two products, so that we're first in the world to be on DOS.".
Basically, they did a joint venture, and they set up a company called Attaché Software. On the 12th of August 1981, IBM launched the PC with PC DOS as the operating system, and by the end of 1991, Attaché had been able to port the micro-business system across, onto the DOS environment. In 1982, a U.S. venture-capital [00:33:30] firm heard about what was happening in Australia, with this Attaché product, and they took Attaché to the U.S., and effectively, there was only two accounting systems in the U.S., in 1982. It was mainly Great Plains, and Attaché. There were some great photos of some conferences, and stuff of Attaché, in the U.S., in 1982.
That's the company that I ended up running. The long horror story to the U.S. is that the guys who started it in Australia took the VC money, which was $8 million, [00:34:00] and basically ... Sorry, my phone was just ringing. They took the $8 million, and they spent it very loosely. They moved to Ann Arbor, Michigan, which is a university town. They basically were Aussies, who were in their 20s. They left their wives; they partied hard. They found [crosstalk]. They spent $18 million in 18 months.
Long story short is that Attaché, Inc. ended up being owned by the Bank of Detroit, because [00:34:30] of the largest creditor, or something like that, at the time, and the Australian and New Zealand assets were sold to a guy called Mike Rich, in Australia, in 1985. That's the company, the Australian subsidiary of that company, I ended up running. Attaché, Inc., in the U.S., effectively died a slow death, through the 80s. It was effectively the first DOS product with accounting software in the world, and it [00:35:00] ... They were the first software company in the world to ever sign an agreement with IBM. IBM used to prepackage the software with the IBM PC. It's a fascinating story, and that's the company I ran for a for a number of years. Obviously, not all the way back then. I'm only 41, but basically, in the last five years is when I was running that company.
David Leary: That's cool. That's a great story. Beautiful.