A little over a month ago, Canopy dropped a bomb on its tax compliance customers – they decided to discontinue their support for their income tax compliance technology. There were many tax professionals excited about this new cloud tool. The best up and comer to compete with the big dogs. So why did Canopy decide to stop building it right now?
In early December, I jumped on a phone call with the new CEO to hash out what is going on internally. Honestly, I went into the call skeptically, expecting some B.S. company line that made them sound good. Well, I got a story, and it sounded genuine.
The company was building too many things at the same time. Since I work with many Software as a Service (SaaS) companies in my practice, I see this problem often. Tech companies get a bunch of money in investment rounds and then spend it in a million directions without ever perfecting the core of their product offering. Companies that keep up that mentality never build anything best in class and generally peter out or sell to another company at a discount. Canopy was heading down this doom ridden road with the four horses of the apocalypse on their tail. So, they changed direction.
Canopy’s new direction is logical: build their practice management tools first. They are working on making that tool capable of handling more complex tax practices and positioning themselves to be the best in class provider for large and small firms alike. This focus makes sense from a financial perspective – bigger firms will be able to pay more in subscriptions and give them feedback to take their technology to the next level.
The executive team at Canopy reiterated well that their roadmap will impress the tax professionals with regards to resource management, project management, and budgeting. They are also continuing to improve their transcript fetching capabilities. Their additional focus is on accelerating their unified and integrated ecosystem. They believe that these core pieces will actually build into the tax preparation product. The vision they painted of a product capable of handling the tax process from start to finishing, integrating resource management into project management, and document collection into tax preparation is beautiful. If they can build what they described, we will all benefit from it.
They are committed to building the best in class technology for tax practices, from running it to filing forms. When I asked about the timing of the compliance product I was told, “I would love nothing more than to be able to give you a day, month or year, unfortunately I am not able to do that.” When I pressed for a timeframe, I was told it was in their “long term” plan. And, when I asked to define long-term, “I am defining long-term closer to years, but more than that, I cannot say. We will be watching the space closely, and once we believe we have done a really magnificent job innovating practice management, we will work on filing.”
They have significantly committed investors to see them through the development of all the products. They confirmed that pausing the development was not because of external pressures and was an internal decision and renewed commitment to build “amazing, first-class products.” As we all know, tax preparation software is complex and therefore difficult to build, plus it’s a mission critical software. I believe it’s better to build it when they can commit enough resources to build it well. Unfortunately, that is not this year.