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Mid-range accounting vendors fight back

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28th Feb 2013
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It’s very easy to be distracted by industry buzz and publicity about the Next Big Thing in technology. For the past year or two, everyone’s been focusing on the rise of cloud accounting systems such as Xero, FreeAgent and Kashflow.

But in reality, the pace of change lags behind the hype and the vast majority of software users are running applications they bought several years ago. Last August, we considered the most recent Sage 50 Accounts and QuickBooks Enterprise upgrades. This article looks into the mid-market sector, which continues to be dominated by same three names that have been around for several years: Pegasus, IRIS Exchequer and Access.

Stuart Anderson, sales and marketing director at Pegasus, summarised a view that could equally apply to his rivals: “We are always looking at the landscape to see how new and emerging areas such as cloud stand to benefit our customers, and indeed, the extent to which they are gaining traction.”

The cloud is a potential threat to this sector, but to ensure the upstarts don’t disrupt them too much, each of the players has been adapting its systems to see them off. Hosting mature accounting solutions (and associated office productivity programs) is increasingly popular among users, which gives them the convenience of web-based tools, but retains the functionality to which they are accustomed.

Read on to find out what the big three mid-market players have been up to during recent months.

Pegasus - The RTI factor

Suppliers such as Sage, Intuit and Pegasus that offer payroll systems that integrate with their core accounting ledgers have been reporting a steady stream of business on the back of the migration to real time information filing for PAYE.

For Pegasus in particular, RTI functionality, and auto-enrolment for pension schemes later in the year, are at the heart of its marketing efforts around Pegasus Opera 3 this year. January saw the release of an RTI data validator that builds on HMRC’s data quality rules to give payroll managers an integrated tool to check employee details are correct ahead of submissions.

RTI is such a big factor for Pegasus that the company ran a promotional campaign where it offered a 25% discount and a free payroll module to customers who switched from another supplier.

“The promotion is still available and having presented both RTI and Auto Enrolment to over 1,000 businesses in the last two months, interest levels have been extremely high,” commented Pegasus sales and marketing director Stuart Anderson.

Payroll will continue to feature prominently in the company’s development plans this year, and Pegasus is in the final stages of developing the Pegasus Web Xchange, a web front end for Opera 3. “This will take discrete parts of the Opera 3 product and allow it to work in the cloud,” Anderson said. A Payroll Self Service module will be the first to appear in the middle of this year and will be followed by web-based Timesheets, Mobile SOP [sales order processing] and other areas according to demand, he added.

Integrated payroll is one area where the mid-market suppliers can differentiate themselves from a lot of the cloud bookkeeping applications. RTI may well be prompting a lot of enquiries for Pegasus, but some would question whether a company would make the decision to overhaul its finances to upgrade its payroll function. This is especially true the closer we get to the RTI go-live in April (though companies with 5,000+ employees will be allowed some extra time to comply).

One area where the developer has responded to the cloud challenge is by adapting its pricing model. Like other software provided “as a service”, Opera 3 is available on a subscription basis over periods of one, two, three or four years. Customers adopting the subscription model, which starts at £136 per month per user, are also entitled to free software upgrades, eliminating additional costs and administration.

IRIS Exchequer - Going mobile

Over at IRIS Enterprise, product director Paul Sparkes does not deny that cloud accounting is a strong trend. In response to customer requests, the developer has already started moving in that direction with a web-based analysis module. When Exchequer launched its version 7 release earlier this month, it was accompanied by a mobile app for iPhones, iPads and Android devices to let users access accounts data on the move.

“We’ve looked at the cloud marketplace. There are some nice products around, but the functionality does hit a ceiling. Some have complexity around the general ledger, but are accounts only. As soon as you go to order processing or stock, there’s no cloud application that can compete with our level of functionality in the UK,” said Sparkes.

It’s all about using the right tool for the right job,he continued: “Mobile is so key right now - people want to have their data on the move.”

In finance  browser-based tools still struggle to keep up with client/server software. “We did some tests in a user experience lab with people entering orders side-by-side. Productivity was nearly three times higher ina non-browser environemtn. You can’t ignore that in a sales order processing environment. Some maturing still needs to happen for cloud applications to match that,” he said.

“Fighting back” didn’t quite match what IRIS Exchequer was doing with its software. “That sounds like we’ve done something different. We’ve always been focused on what customers want and respond to what they ask for. We take their feedback about the product and use that to bring in improvements.

One of the most obvious changes in Exchequer v7 is its new look. The lively colour scheme familiar to many users has been replaced by a more Microsoft-compatible light blue. Sparkes explained that this more modern “metro” feel was consciously based around Microsoft’s Airport design conventions.

“Clearly, most machines in the working offices that we sell to will be on a Microsoft platform. That means that the operators are used to Microsoft standard software. The more our product follows a similar approach the better.”

But, he continued, “We’re not going to sacrifice some of the things that make Exchequer Excheuqer. You can still use the keyboard to go from field to field, or copy a line with F9. It sounds basic, but customers love it. I’d be lynched if we stopped doing that.”

Access - If you can’t beat ‘em, join ‘em

Like IRIS Exchequer (and its practice counterpart), Access Group is responding to the cloud challenge by annexing some of the same territory. Access officially launched its SaaS-based self-service platform, Access aCloud in early February.

While still in its early stages, this cloud-based business management platform is being built around a Portal for viewing and sharing invoices and statements - which should prove useful for those chasing payments. The aCloud suite also includes: an online expenses approval system; automated data capture for processing invoices; and aCloud Document, an online storage system.

The main Dimensions application remains client/server, but integrates “seamlessly” with the aCloud platform. In the case of the company’s recently launched aCloud Insight Finance console, the links make it possible to pull pre-configured summary reports and key performance indicators into a browser viewable on any kind of device.

While acutely aware of the challenge from pure cloud vendors, Access Group chief technology officer Stuart Allsopp says they haven’t really entered the mid-market accounting space. “The likes of Xero or Sage One are just not at the end of the market that we operate in. People who choose Dimensions are looking for a third or fourth generation application where accounting is strategic, and streamlining that process makes a difference to the bottom line,” he said.

“The majority of cloud accounting systems are catering for the first generation of accounting software users.”

Nevertheless, like Exchequer Access does encounter demand from customers looking to take advantage of the cloud. “They wouldn’t move lock, stock and barrel to the cloud, but are looking for point solutions where they can provide functionality for a disparate workforce, for example engineers and people on the road,” he added.

To cater for this need, Access is connecting to the cloud with “point solutions” to give users access to data and reports, and expenses and invoice capture on any device. “If you want to dip your toe in, we’re providing functionality there. You just download a snap-in to our product portfolio.”

The integrated cloud modules can capture invoice and expenses data and start the process of analysing and authorising it for payment and posting in the general ledger system. 

“If you get people to generate their own expense reports, they’re instantly capturable and instantly analysed. The authorisation process helps you code them up for the P&L, so physically posting them to the ledger is a once-over by eye rather than rekeying the data. Instantly captuarable - instantly analysed. The whole point is to reduce the cost of administration,” Allsopp explained.

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By AlanBourke
28th Feb 2013 11:27

Complexity ceiling.

Seems to be true enough in most cases at the minute, and might well continue to be the case until HTML5 is widespread. But what about something like OpenERP in this discussion? 

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By coland
28th Feb 2013 11:53

Cloud, thanks but no thanks

As an Opera 3 user well pleased with what Pegasus has provided. Others such as Iris keep attempting to frighten users into a series of seminars whilst Pegasus has quietly got on with the job.

Cloud is fine if you can rely on constant connection; sadly there are always those with compressors & drills to interrupt connectivity. One's onsite facility is a prime necessity!

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By bencooper
28th Feb 2013 13:35

Eastleigh beckons for mid range vendors!

I would suggest that the mid range vendors should all be in Eastleigh today as they would make superb politicians given some of these responses.

The fact is these boys have been caught napping and dismissed the cloud early on - something which has come back to bite them now as hoards of customers leave in search of genuinely new technology.

(Print and frame this bit as it rarely happens) I agree with Paul Sparkes that there is currently a ceiling in the cloud market functionality but (and here is where reality kicks back in) dismissing this as a long term situation is a fools errand. Unlike the legacy on premise solutions the cloud market is youthful, energetic and agile; it will change, quickly and new functionality will appear every 4-6 weeks, something Iris, Access etc can only dream of delivering.

It is hard to blame the on premise vendors for getting themselves into this position. They have become used to their maintenance base and it is very hard to wean yourself from a cash cow like this. However, I fear that many have left it too late and now that the pressure is on they realise how hard it will be to re engineer their old architecture onto a viable cloud platform. Instead we see these token gestures or small elements of web/cloud based functionality - which dont really offer clients the same flexibile solution.

In 2012 we undertook our first search and selection project where the client specified Cloud only. We were worried that the market was not ready, especially given some of the complexities of the clients requirements. However we were pleasantly surprised by the outcome.

As this article points out many people consider the cloud market to be limited to the book keeping solutions from Free Agent, Quickbooks and Xero - but that belittles a maturing market. Solutions such as Netsuite, XLedger, SAP BBD, Aqilla, Brightpearl and Financial Force are offering a true alternative to the sleeping giants.

I know the mid range vendors will put a pretty dress on their solutions which some customers will accept as an improvement, but it is not a long term solution. I really do like a lot of the on premise solutions and would suggest their time/money might be better spent on re engineering their established and functionally rich products into true cloud solutions as I think the market would be a better place for it.

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By AlanBourke
28th Feb 2013 13:50

I don't think hordes of customers are leaving just yet. Also 'the cloud' is an annoyingly fuzzy heading that encompasses more than just browser-based applications - running the normal 'desktop' versions of current products on a server in a bunker somewhere and accessing them over the internet via RDP is 'cloud' too.

I'm sure a day will come where fast broadband is ubiquitous and almost 100% resilient, and cloud platforms are almost 100% resilient (you will remember to renew your Azure certs, won't you Microsoft), and HTML5 or whatever allows the creation of a UI as rich as can be achieved in .NET or Swing or whatever. Until it does we'll be in a halfway world.

 

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Replying to lionofludesch:
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By bencooper
28th Feb 2013 14:05

Conveniently forgotten

"'I'm sure a day will come where fast broadband is ubiquitous and almost 100% resilient, and cloud platforms are almost 100% resilient (you will remember to renew your Azure certs, won't you Microsoft)"

I love the way in which everyone has conveniently forgotten the times their servers fell over or they had a power cut in their offices and all the staff sat around looking at each other. Ultimately nothing is 100% assured in terms of up time, be that on premise or web based. This is such an old arguement against web based or cloud solutions and one we really should stop trotting out

Thanks though Alan for pointing out my erorr on the broad use of the term Cloud, you are correct about hybrid solutions. However, this is ultimately not new technology just deployment.

 

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By AlanBourke
28th Feb 2013 14:07

Yep, power cuts, and the accounts software data usually ended up mangled!

There's definitely a perception hurdle to overcome, especially with things like payroll in small enterprises. They would need a lot of convincing that there is no chance that when Madge or Bill come to run the hosted payroll last thing on a Friday to make sure it hits the bank, that they have a way out if the internet goes down.

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Replying to Cheshire:
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By bencooper
28th Feb 2013 14:14

POETS

Then give them a POETS day and send them home early to do the payroll from there where they do have internet.

ah now you see, you could not do that with a corrupted server!

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By AlanBourke
28th Feb 2013 14:17

And where would they print 500 dot-matrix payslips to at home? Or would they be printing directly from their hosted payroll application anyway? :)

 

 

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Replying to Montrose:
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By bencooper
28th Feb 2013 14:22

another new technology

AlanBourke wrote:

And where would they print 500 dot-matrix payslips to at home? Or would they be printing directly from their hosted payroll application anyway? :)

 

 

 

Alan I hate to chuck more new technology at you but have you come across email....?

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By AlanBourke
28th Feb 2013 14:26

Name rings a bell LOL
 

Name rings a bell LOL

 

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Tim Fouracre
By timfouracre
01st Mar 2013 08:04

Mid-range accounting vendors are dinosaurs...

John, you forgot to mention Clear Books in your list of rising cloud accounting systems, but I digress!

Simply, the cloud is the Internet.

There is a technological shift underway from desktop software to the community, collaboration and commerce of online applications.

Businesses are increasingly adopting the cloud not just for accounting or payroll software. They are doing everything online.

Email, storage, marketing on Facebook, Twitter, Linkedin, research on Google. Even spreadsheets, documents and presentations with Google Docs. Your own corporate website is part of the cloud. Networking with customers, suppliers, prospects. Even networking with peers on AccountingWeb is in the cloud.

We are in the age of the Internet so if mid-range accounting vendors do not embrace the cloud they are not fighting back. 

Mid-range accounting vendors are dinosaurs and we all know what happened to the dinosaurs...

 

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By AlanBourke
01st Mar 2013 12:24

And are the bulk of their customer bases crying out for it? I suspect not, at the moment anyway.

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