Offshore data storage concerns influence Reckon’s decision to end Quikbooks agreement

Concerns over the legal implications of hosting users’ data overseas have played a part in accounting software group Reckon’s decision to terminate an agreement with US-based supplier Intuit, the company behind the Quikbooks range of accounting software.

The company’s shares fell 6% yesterday after it announced the split, saying the two companies’ online strategies were beginning to diverge.

Reckon chief executive Clive Rabie told SmartCompany this morning part of the concern with the online system was that users’ data would be hosted in Asia, making it subject to the legal jurisdiction of the country in which the data was hosted.

“You’d be subject to Asian law if that were to occur,” he said. “For instance, in America, the law states the government could have access to your data at any time if need be.”

“If you go onto the Azure platform then your data is stored in Europe, or America, and we’re not comfortable with that. We’re not even comfortable having it in New Zealand, we want users’ data here.”

Businesses have been concerned over local laws in other countries regarding data storage for some time, with experts warning the legal issues could prove to be a nightmare, especially if data is stolen or corrupted.

Reckon and Intuit signed an agreement in 2010 regarding the marketing and distribution of its desktop products. The basis of the agreement meant the two companies could terminate the contract if they felt their online strategies were diverging too much.

Reckon will be able to use Intuit products until 2014, but after that it will have to market its own versions of Intuit products. It won’t be able to use the QuikBooks brand, either.

The company will save $6 million in royalty costs, but will need to spend more money in developing more products – that revelation caused shares to fall 6% yesterday to $2.24.

But Rabie says the decision will have a positive financial impact.

“This is going to be a good thing, financially. We know who are customers are, they won’t change, and Reckon is a well-known brand. We sell a number of services to them.”

“We’re not rebranding our business, and that’s something I don’t think people are understanding. They want to feel safe with that Intuit brand there, but I think over the next few weeks we’ll see people begin to realise this is a good decision.”

Rabie cites a number of other Reckon products, such as QuickBooks Hosted, APS Private Cloud and its elite practice management software, as evidence it can provide solid software.

He also says the obligations of localising software also influenced the decision to terminate the contract.

“When it comes to publishing an online product, it gets a little bit more complicated. We localise code for a desktop product and send it to market, but for an online product we don’t have direct access.”

“If we want to change the code, we have to put a request in and we may not get those changes for a week or six months.”

“It’s far more difficult for us to deal with…that played a part in the decision.”