Impact of COVID-19 on Accounting Software Market
Global Accounting Software Market, By Industries, Market Share, 2018 VS 2020
The measures taken to control the COVID-19 pandemic are social and physical distancing, partial or complete lockdowns, and establishment of quarantine zones. These measures have led to the shutting down of various businesses, and losses for many large enterprises. The manufacturing, retail & e-commerce, travel, automotive, transportation, and hospitality industries are among the worst affected. The demand for accounting software is mainly driven by factors, such as the growing need for advanced, automated, and efficient accounting solutions and the increasing adoption of cloud-based accounting software. But since the COVID-19 outbreak, most of the businesses are working on decreasing additional costs, which include costs associated with the accounting software. Also, concerns regarding data security are some of the constraints that hinder the growth of the accounting software market. The costs incurred on the maintenance and customization of the software, the related training, and the computer hardware required to run the accounting software is limiting its adoption. For the subscription of any accounting software, the licensing fee of the software has to be paid, and the software needs to be renewed and updated monthly, quarterly, or annually. Due to the current economic instability, the majority of SMEs are expected to outsource their accounting operations rather than using in-house accounting software. Total
Number of Subscribers of Xero (2017 – 2020)
The integration of artificial intelligence with accounting and mobile/app-based accounting software has presented an opportunity for the growth of the market. Also, the increasing adoption of cloud-based accounting software has led to an increase in the number of subscribers in recent years. However, in 2020, the year-on-year growth rate of the subscriber base is expected to dip due to the economic instability caused by COVID-19. For instance, Xero Ltd. is a New Zealand-based software-as-a-service (SaaS) company and is one of the leading players in the accounting software market. The company offers cloud-based accounting software as well as a mobile app. The figure below depicts the total number of subscribers of the company from 2018 and the forecast for 2020. The Y-o-Y growth for 2017-2018 was 33.9%, and for 2018-2019 it was 31.2%. But as per MRFR analysis, the Y-o-Y growth is expected to dip to 24.7% for 2019-2020.
The retail and manufacturing industries are suffering significant losses due to the COVID-19 pandemic; hence, the demand for accounting software is expected to decrease in 2020. Fashion, furniture, and electronics retailers are facing hardships as consumers forego these non-essential purchases in favor of stocking up on food and household supplies. As per the United Nations Conference on Trade and Development (UNCTAD), the COVID-19 pandemic is expected to cause global FDI to shrink by 5%-15% due to the downfall in the manufacturing sector and the factory shutdowns. The negative impact of COVID-19 on FDI investments is expected to be higher in the energy, automotive, chemical, electronics, and airline sectors.