Intuit to expand Web services

The first step in the strategy is a payroll service, which the company launched in partnership with Computer Resources in the fall; Intuit bought Computer Resources outright in March. Now, Intuit executives say possible areas of expansion include health insurance, 401(k) retirement plans, marketing, billing, and legal services.

"There is this broad gaping hole and we are actively scouting the landscape," said Intuit CEO William Harris.

Intuit is not alone in targeting the small-business market online, but it claims 5.5 million companies use its accounting software, a substantial base for selling add-on services. According to market research firm Instat, the number of U.S. businesses with 5 to 99 employees is 2.3 million, with another 8 million more firms with four or fewer employees. Intuit targets companies with 25 employees and under.

"There is a lot of opportunity to use the Internet to connect the small business person, whether it's to the government, suppliers, or employees," said Forrester Research analyst Brook Newcomb.

Yahoo is moving aggressively into the small-business services market, and Netcenter, recently taken over by America Online, also targets small businesses.

Online firms aren't Intuit's only competitors. American Express's network of millions of small merchants who accept its card give it a strong base too. American Express hasn't been as aggressive as Visa or Mastercard in pushing Internet transactions, but the company has been rumored for months to be plotting a big online push.

In recent years, Intuit has been focused on its online business, including making an early investment in Excite. But Intuit has begun selling its stake in Excite, which could open up new opportunities to partner with other portals like Yahoo, Netcenter, and AOL.

"It's a great strategy to offer services to small companies on the back end, because they don't have a lot of internal management support," said Kneko Burney, senior analyst for research firm Instat. "For (small businesses) not to add a body but to add incremental monthly costs is attractive."

Computer penetration of the small business and small office, home office (SoHo) markets swelled in 1997 and 1998, Burney said, broadening the potential market for Intuit's software and services.

"Intuit's vision is that the small business person is enveloped in paper wherever they turn," said Forrester's Newcomb.

Intuit's Drew Paxton, directory of marketing for QuickBooks, said Intuit will eventually open its marketing channel to other vendors.

"Most of the portals have partnered to provide services faster, rather than build it themselves," he said. "You'll see us over next several years move more quickly with partnerships."