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Turmoil hits the tax software market

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6th Jan 2005
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As it enters the busy self assessment season, the UK tax software industry is experiencing considerable turmoil, with corporate reorganisations and executive departures at several software houses.

This week, for example, IT Zone reported that just before Christmas, MYOB disposed of its Network and Integration Services division. Rival Digita, meanwhile, was keen to let the market know that it had recruited "industry visionary" Nigel Powell from MYOB.

MYOB reorganisation
Some experienced market watchers have warned that MYOB was in danger of "doing a Sage". The comparison is based on what happened after Sage acquired Taxsoft and CSM and then had to rationalise its overlapping tax products. The specialist demands of tax software can prove difficult for developers who are more used to selling high volumes of shrink-wrapped accounting software.

This analysis cut no ice with MYOB Accountants Division manager Simon Crompton. "I couldn't disagree more, they're not at all comparable. We haven't had huge changes and bought lots of different companies. Nigel Powell has left us for various reasons - and we wish him well - but we still have a fantastic team that has been together for many years. We've got tremendous continuity."

The company's strategic review of the Solution 6 operation (and sale of its infrastructure division) would mean "more emphasis on PerTax than before", he said. "Selling NIS was a logical move - we can recommend Tikit to accountants, while we concentrate on software and services."

Sage to close Wimbledon office
In November Sage confirmed it was planning to close its Wimbledon office. Sage UK managing director Paul Stobart told AccountingWEB that the relocation was intended to sharpen the focus of the company's Accountants Division, but as the former base for Taxsoft, the closure demonstrated the potential traps that await entrants to the tax market. The Taxsoft Corporation Tax application, and its development team, were downgraded when Sage reorganised. It eventually opted to base its corporate tax solution Abacus, a spreadsheet-based corporate solution developed by Andersen and now owned by Deloitte. Industry sources suggest that Windsor-based TCSL, part-owned by KPMG, picked up a lot of clients from Sage as a result of the migration.

What's going on at TCSL?
Strange stories have been emerging from TCSL too. While unable to reach erstwhile joint managing director David Hart, AccountingWEB has learned that he is no longer playing an active role at the company. If anything, it appears that TCSL became too successful for KPMG's comfort, and that friction arose between the Big Four firm and Hart over his plans to broaden his user base among mid-size companies. With two of the main corporation tax specialists handicapped by changes in stategy, there are opportunities for rivals such as CCH, PTP and Digita to pick up refugees.

While most of their customers were currently preoccupied with self assessment, IRIS managing director Martin Leuw and PTP's Steve Mayhew both reported it was "business as usual" for corporation tax enquiries. PTP's Mayhew reported that apart from delays in getting CT 600 forms approved, "which are the same for everyone", the corporation tax software market currently offered better growth potential than personal tax.

The turmoil is not confined to the CT sector. As reported in November, the future for TaxCalc is uncertain, as recent departures from Intuit's UK operation indicated it was planning to withdraw from the tax market. Didn't someone already mention something about what happens when mass-market software developers get mixed up with tax?

More seriously, simultaneously keeping up with tax developments can be a challenge for developers who also have to track operating system and hardware shifts. The last great shakeout in the UK tax market occurred when developers had to prepare new self assessment systems just at the point when Microsoft introduced Windows 95. Those who made it through that transition now have to work out what to do about Web services, Microsoft .NET and alternative platforms.

There is one school of thought that the technical complexities will play into the hands of the tax software "supergroups". MYOB's Simon Crompton didn't put it in those terms, but did warn, "These decisions will be client-driven. If they're happy with what they're using, brilliant. But if accountants want a choice, will you be able to support both?"

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