The New King of the Jungle

The New King of the Jungle

As Iris Software continues to steal market share from arch-rival Sage, group chief executive Martin Leuw, who this summer led the MBO of the company, explains to Kevin Reed how turning his back on accounting helped make his entrepreneurial dreams come true

For those who doubt that accountants really are managing to evolve from beancounters to strategic enablers, Martin Leuw spins a very convincing yarn.

But then he’s no ordinary accountant: how many individuals have taken on the 800lb gorilla in their market and won?

The gorilla in question is Sage – the technology darling of the FTSE100 and a formidable competitor by anyone’s standards.

But Leuw, group chief executive of accounting and business software provider Iris Software, is incredibly bullish.

And with Iris securing a huge chunk of the practice software market, he has every reason to be.

According to Leuw, the company boasts contracts with 8,000 of the UK’s accountancy practices, representing 40% of the market. And the company’s success in the business market is by no means insignificant.

Around 20,000 small businesses already use Iris payroll and bookkeeping software, although there at least the company is a long way from doing any significant damage to Sage’s dominant position.

Still, Leuw makes no secret of his appetite for expansion. Just three months ago, he led a £102m management buyout of the company to support the next stage of its growth strategy.

‘We are the largest truly independent software vendor in this area,’ he says. ‘Our new investors are technology sector experts, and will continue to build the future of the business.’

The company is certainly going the right way about impressing punters.

Three consecutive annual surveys from the ICAEW’s IT faculty have ranked Iris’s products and customer service ahead of the competition, and this year’s survey – due to be published in a matter of weeks – reveals continuing market share growth at the expense of its competitors.

The survey also found that while few of Iris’s practice customers had plans to replace their software, the same could not be said of Sage.

Leuw’s attraction to and empathy with the entrepreneurial end of the business wedge has obviously stood him in good stead.

‘I was always interested in business growth, entrepreneurial opportunities, people who moved into areas and really changed the way markets work,’ he says.

Leuw always wanted to be an entrepreneur but realised pretty early on that a marketing degree from Manchester University would only get him so far towards that goal.

‘I worked in the holidays with a guy who had a marketing background, but was running a company that was in administrative receivership because he hadn’t really understood the numbers properly. I made the decision that it would make a lot of sense to get a foundation in finance, combining that with what I’d learnt in marketing.’

A job offer from Arthur Andersen after completing his degree in 1984 was the obvious stepping stone, allowing Leuw to gain his all-important accountancy qualification and get some experience working with smaller, more entrepreneurial businesses.

‘Arthur Andersen had a new ventures division, which gave me the opportunity to work with businesses with a turnover of up to £50m-£60m. A lot of my colleagues went into audits of huge oil companies and the like, whereas I had a complete overview of a business right from the very start – you got to feel what that business was all about.’

Moving to BDO Stoy Hayward as a strategic management consultant changed his perspective from historical to forward-looking.

‘It was the first time I could use what I had learnt during my marketing degree and help small businesses develop their business plans.’

During the late eighties he was poached by one of the firm’s biggest clients, British Airways, and then set up a completely new strategic consultancy practice and investment holding group.

‘The opportunity we had was to buy or take controlling stakes in private companies and use our strategic management skills to add value to the businesses.’

Not surprisingly, Leuw has very clear views about the oft-criticised consultancy profession.

‘Consultants have to add value. I know that’s stating the obvious, but I’ve worked on both sides and the last thing a client wants a consultant to do is to tell him what he already knows. You have to add something new to the equation and you need to deliver.’

A pitch to provide strategic consulting to BA’s catering division taught Leuw some important lessons about going head to head with some fairly formidable rivals.

‘We took a small company approach. We didn’t go in with big company ideas. BA was very attracted to taking some of the skillsets used in a smaller organisation and applying them at an entrepreneurial level to a much larger organisation.’

In many ways, the potential for technology to transform business processes among his SME clients has a similar appeal.

‘It is important for practices to embrace new technology in a way that can help them better support their clients. You don’t want to be in a situation where your clients are ahead of you,’ he says.

But there’s a hint of frustration that the accounting profession is, as he sees it, struggling to move into the 21st century.

‘We can help provide technology as an enabler so accountants can use their time more effectively. If you’re charging £50-60 per hour, then the efficient use of software can make a huge difference to your practice.

‘Time is the most valuable commodity. Many small companies are still using manual systems or not using fully integrated software to help them manage their business.’

Despite his obvious bias as someone whose lifeblood is selling software, Leuw’s argument for much greater take-up and more intelligent use of IT among smaller businesses does ring true.

Surveys and anecdotal evidence have long confirmed that SMEs are crying out for IT advice, but many practices are loathe to step up to that mark – either due to lack of knowledge in the subject matter or because it’s not seen as a strategic revenue stream.

Away from the hard sell, Leuw may have a point, as speculation continues about the effects of a raised audit threshold on the revenues of sole practitioners and small firms.

‘It is one of the biggest changes that has affected accounting in the last 20 years, particularly for smaller practices. They have to look for what other opportunities there are with their skillsets to generate new revenue streams.’

As for his view on the next step in his carefully thought-out career path, the answer is simple.

‘I’m delighted with how my career has gone. I’ve always enjoyed the interaction with the people I’ve worked with, and the customers as well, and also in marketplaces where there are opportunities for change.

‘What’s more interesting about this particular job is that it also combines using new technology. Within this marketplace there are always things you can learn, year in year out.

‘It all worked out as planned, but I’m aware that, with a career, you can have a plan and you adapt it to circumstances. I’ve been doing the job for three and a half years, and I’m really happy. But there is still plenty still left to do in the marketplace. I’m very much here for the long term.’ Views from the top Leuw on the Iris MBO:
‘The important thing was to ensure that as the company went forward it had direction for customers, employees and shareholders. The buyout has helped us to remain independent. HgCapital gave me a lot of confidence that it would help me add value. It can also help us spot opportunities, with an independent set of eyes.’ Leuw on Arthur Andersen:
‘I was always quite flattered that, bearing in mind I was more focused on languages rather than scientific subjects, I was offered a job at Arthur Andersen to train as an accountant, and I thought, well, I’ve got three years where they can teach me but I might improve my numeracy as well!’ Leuw on accountancy in the family:
‘To some extent I always went against it. My grandfather was an accountant at Stoy Hayward. He joined as an apprentice, then served as senior partner for many years and was influential in growing the firm during the thirties to the fifties. I always reacted against being an accountant. I wanted to do something different from my family. Then I realised it would be a tremendous foundation for me to go on and do different things.’ Leuw on the potential conflict of interest in working with Microsoft:
‘Microsoft is acutely aware of the software vendors it deals with. The skills and knowledge we have in a particular vertical market, such as accounting, is not an area that Microsoft is likely to get involved in. On the business software side of things, we focus much more on the smaller end of the market, the entry-level or start-up. In the UK, 99% of SMEs have 0-50 employees. Microsoft’s focus for the next six or seven years, I believe, will be at the larger end. There’s room for us all to work together.’ Leuw on the Next Big Thing:
‘The biggest change we will see in accounting in the next few years will be the increasing use of broadband. Three or four years ago the internet boomed and busted, but cultural adoption always lags behind the technology itself. If you look forward, there will be greater and greater use of what broadband can offer. I find it fascinating looking at what my children can do with computers, using voice over IP and webcams. They won’t be satisfied with what is on offer today.’


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