AccountingWEB's guide to what to watch for in 2006

Last year ended on a high note for small business with the triumph of Mr and Mrs Jones in the Appeal Court in the Arctic Systems case. Other big issues which cropped up last year, such as the implementation of UITF40, will continue to attract headlines in 2006, as will the call for the simplification of the tax regime - which may gain impetus under the new Better Regulation Commission - and less red tape for small business. But there will also be plenty of fresh issues to contend with.

Continued...

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Comments

functionality is what it's all about

David Carter | | Permalink

Alastair is right. For me functionality is everything. The point I was making was that if some of the SAAS providers had come along and said: "Hey, we've got some great software here, you must see it!" I would be interested.

However, they never talk about how good their software is, just about the technology behind it. It's as if they think that one package is very similar to any other, so why bother about the software at all?

But functionality is crucial. All packages may have sales ledger, order processing etc, but that means nothing. The key question is: "How well they do it?".

Once you get beyond statutory accounts some packages are a lot better than others. The differences are even greater once you get into the operational side of the business. Some packages are vastly superior to others, even though according the label they both do exactly the same thing.

PS. Small point. I didn't actually use the words "hot air" when offering my ideas for this article. And one important thing was omitted - I believe that Excel add-in packages for management reporting will become widely used by accountants in business.

SaaS..... hot air? Part II.

Anonymous | | Permalink

I did not want to offend anyone with my post ealier. If I did I am very sorry!

Technical proplems were given as reasons for the "problem" SaaS scenario. So I responded to those issues with techn. points.

We developed our accounting product not because we wanted to compete in the accounting software market, put because we wanted to move the accountant into the clients business. No other current concept can do this with acceptable cost to the accountant and client, but SaaS.

We also integrated a cashflow tool to help accountants to service their clients better and in real time. I believe it is as difficult for some small business owners to understand P&L concepts, as it is for most of accountats to understand bgp routing.

However I believe that small business will understand a simple cashflow model to keep them out of trouble. And accountants are the best advisors for small business and as such can help with this task and add extra value to the business. This is only one small example were SaaS works well.

We had a lot of complaints from accountants about being an outsourced IT support department for software vendors!

Not only is this problem much reduced with SaaS, but to make this completly trouble free, we added no cost 24x7 live online support.

Furthermore clients get a website, e-Shop, e-Invoicing, e-Statement, e-Quote, credit card payment and so on. All these modules are integrated into the accounting software. These modules also help the cashflow.

Our accounting system is by any stretch of the imagination not the most sophisticated accounting software around, but do our clients need the ultra sophisticated software or rather something they can use easily. Some of our clients only scan their receipts in and the accountants book them online and connect the scanned file to the accounting entry. It's a bit like the "MS-Word syndrome", I bought over the years 10 or more copies of word, but I use still the same functions as I did 20 years ago, yet word has become more and more sophisticated.

We don't see ourself as accounting software vendors, but rather as a small business infrastructure provider. Enabling business to work together with its advisors and in real time.

Our software is easy, does not need installing, etc., but you also do not need to get someone to install the software for you and set it up. That kind of sophistication is only needed for lager SMEs and above. Small business needs advice on how to get started and run a business and that is best done by sharing real time information without much cost and hassle. I believe that accountants and some other advisors (marketing, pr, export, etc.) need to be able to work closely with business to have the best possible impact.

The functionality of the software is largely the same, that never was "the news" about SaaS.

dahowlett's picture

Let's clear this up

dahowlett | | Permalink

I make no secret I am betting SaaS will be a very big thing. The worst thing that can happen is I end up looking silly - it won't be the first time (Windows accounting apps? Over my dead body...)and I doubt it will be the last.

David C:
I don't understand the 'functionality' issue. But since you raise the point, rank the players and let's have that discussion.

My take on functionality is simple. If I can get 80-85% of what I think I need then is the other 15% *really* worth the grief and cost? Upgrades are almost always a problem in these circumstanced. (Oracle 10x>11i is the big example. mySAP is another in the enterprise space.)

If the SaaS players are leading with a tech play then that's inappropriate. They should be making the value play. That's easily fixed.
But to dismiss them *because* they made the tech play is unfair (IMO). The tech play is an important component which, with this technology, needs airing. I guess you already know that from your questions over security.

The people who impress me most are customers. You heard Larry Phillips and Philip Woodgate who talked about functionality for the service they chose and where they made a comparison with others. These gentlemen are at the coal face of managing clients so I'm going with them until I hear otherwise.

I should make clear, the SaaS thing is not a personal crusade on my part (there are far more important things in life) but a recognition there is no discernible innovation among the mainstream vendors. I've written a ton of stuff around this recently from a variety of angles. Just to take one issue I've yet yet explore:

Why is it after nearly 13 years of Windows applications and more than 20 years of packaged apps, there is still no way of auto configuring packaged apps for 80% of the required functionality in any specific industry segment? It's a disgrace and I fail to understand why (except in a very small number of cases) vendors don't deal with this. They all operate in segments they could address.

I don't buy the 'where's the demand' argument. Clients may not care where stuff comes from but they sure as heck care about value for money.

Alastair:
Sage is being very smart with Verus. That is a service play dealing with an important gap. How it plans on making the whole thing credible is moot but again, I've written about this from a variety of angles. Whether it comes to the UK remains to be seen. I guess there'd be a ton of FSA stuff to deal with but I don't know that for a fact.

I am still awaiting a briefing on Sage's position regarding the general SaaS question it's unrealistic to pursue this at the moment. I would be surprised and concerned if Sage is ignoring the issue. Not for the company but its users.

SaaS isn't a one-size fits all (today) and I've been careful not to make that case though I believe the reasons not to go SaaS are diminishing rapidly.

david_terrar's picture

SaaS means business

david_terrar | | Permalink

Lot's of good words from you all. We SaaS vendors do spend a lot of time explaining technology, but also the delivery method and the business model, because they are such important parts of the solution. In David C's earlier post he said:

"I'll buy this. The on-line approach clearly offers a lot of benefits where the users are spread around in different locations."

Exactly, and isn't that always the case between accountant and client? As Dennis has highlighted with his Goodman Jones podcast, it is the component they are using to change the way they do business with their clients. Are our solutions better? We are just putting together a functional comparison for our website between our product and a couple of the key competitors to try to answer that. But one of the things that good SaaS authors do is focus on ease of use and efficiency (need to keep their users on board) and to increase the functionality with what the customers want. Our product has developed comprehensive time & expense handling and billing, project accounting, WIP functionality, because our business services customers wanted it. That's why consultancy DPA Financial People have 1,000 users on Twinfield (replaced Oracle Financials).

And I agree with David C when he said:

"I believe that Excel add-in packages for management reporting will become widely used by accountants in business."

Our Excel plug-in, Twinfield Analysis, provides direct access to a selection of pre-built data cubes so you can do your sophisticated reporting with pivot tables and all the stuff David loves. We are also piloting an additional product which will work on those same data cubes to provide a visual dashboard of KPIs and performance monitoring. And it's the technology approach which makes this possible - the 1:Many use of economies of scale, so you can bring the high end, corporate style solution down to an easily affordable level for the SME or sole trader.

I don't understand where Alastair is coming from. The change is upon, whether you give it the revolution title or not.

David C's made contact with me directly, and I hope I can convince him that SaaS is about real business benefits, not just technology for technology's sake.
David Terrar
Mailto:dt@d2c.org.uk
web: http://www.d2c.org.uk and http://www.twinfield.co.uk
blog: http://www.businesstwozero.com

listerramjet's picture

Software as a Service?

listerramjet | | Permalink

It is strange to try and position software as a service when increasingly users are buying software as a generic comodity. I think David Carter is correct, users are after better functionality.

dahowlett's picture

Does this make sense?

dahowlett | | Permalink

I don't understand Alastair's point. If software is becoming more commoditised then surely the delivery mechanism takes on greater importance?

What does his claim that users want 'better functionality' mean? Functionality that does what it says on the tin or more functionality? If it is the former then I understand that. As for the latter - I don't see any users saying they want 'more.'

Reading David Carter's original post on this, he says those that are punting SaaS are doing so because it is in some way 'better' in the context of functionality. Wrong. That isn't the argument at all.

SaaS allows organisations the means to do what they need at a reduced overall cost but with benefits you simply cannot get with desktop or client/server apps.

For those that find this argument hard to believe, I defer to Goodman Jones managing partner Larry Phillips.

listerramjet's picture

Are Sage bothered?

listerramjet | | Permalink

Dennis has made an interesting analysis of the impact on Sage of adopting a SaaS model, but judging by their most recent acquisition you have to ask are they bothered? They seem to be positioning into value added where a web delivery would be a sensible step forward!

davidwinch's picture

And my vested interest is . . .

davidwinch | | Permalink

My vested interest is in the Third EU Money Laundering Directive and its implementation in the UK.

I am cheating here as it is not required to come into effect in the UK until December 2007, so this is not a prediction for 2006.

However it could be of significance to suppliers of accounting, book-keeping and tax services (in the UK) who are not members of one of the CCAB bodies.

Article 37 paragraph 1 of the new directive says:-

"Member States shall require the competent authorities at least to effectively monitor and to take the necessary measures with a view to ensuring compliance with the requirements of this Directive by all the institutions and persons covered by this Directive".

This means some sort of monitoring (of their compliance with anti-money laundering requirements) will be required for those accountants, book-keepers and tax advisers who are currently not subject to any monitoring by a professional body or government department.

I do not see how non-CCAB accountants, etc can be monitored without some sort of registration requirement and a consequential prohibition on practising by persons who do not register. Where could that lead?

Could be interesting!

David

P.S. The same applies to estate agents who are currently not subject to monitoring.

dahowlett's picture

Money laundering

dahowlett | | Permalink

David Winch is right to bring this issue up now. Many of the predictions centre around compliance issues and it's interesting to note the current flux around IFRS.

In the case of IFRS, there was huge confusion among people about its impact - a confusion that didn't start to come clear until late 2004. At that time, I was warning that 2005 was the year to really look at this from an operational perspective. Guess what - compliance related audit costs are up.

The problem I've observed is that interest groups don't seem to latch onto the implications until very late in the day and then all hell breaks loose.

If this is something David believes should be kept alive then I'm happy to run with it at AccMan - once I understand what the heck it really means!

David - I can be reached at: dahowlett [at] gmail [dot] com if you want to take this forward.

dahowlett's picture

Scalability in saas

dahowlett | | Permalink

I should have mentioned this before but I have always been concerned about scalability for SaaS. It's such a crucial issue because if these services take off big time then they have to keep running.

I raised this point on my site and Stefan Topfer, CEO of Winweb responded saying:

"We are paying by the Mbit for data transfer and have currently 6 upstream providers. The telco is going to be happy with 5 million impressions."

That'll do for me!

david_terrar's picture

More on scalability

david_terrar | | Permalink

Dennis,
Bandwidth on the Internet is only one of the aspects, but scalability is vital. We work with a number of SaaS offerings - we have one with excellent performance and 17,500 users (13,500 paying, 4,000 in universities and colleges) and rising, and others which aren't so good. That one that's good has the best architecture, but has to add processor power on a regular basis to stay ahead of the curve. As a SaaS provider you can't afford to let that service level drop or your users will defect with their data to another provider.
David Terrar
Mailto:dt@d2c.org.uk
web: http://www.d2c.org.uk and http://www.twinfield.co.uk
blog: http://www.businesstwozero.com

SaaS..... hot air?

Anonymous | | Permalink

Once we accept, that the accounting software is only one small part of the IT need of our clients we can easily see the way forward.

The SaaS model delivers in it's current state so much more that the out of the box software model ever can, to mention but a few:

No need to install software, platform independent, free and instant software upgrades and bug fixes, security system and data back up system no single SME or SOHO client could afford, increased mobility for the business and business processes, enormous self-service and integration potential for clients customers, suppliers and advisors, seamless integration with other online processes like e-Quote, e-Invoice or even the good "old" online shop, online file storage with linking of scanned receipts to the accounting transaction, practically zero recovering time from a PC or hard disk crash, collaboration with advisers in real time, and so on.

While the internet connection could be a problem, a back-up via a mobile 3G data card or your mobile phone with bluetooth is certainly enough to work with our system.

This all coupled with 24x7 live support is currently a unbeatable offering at no extra cost.

I remember in 1995 I was selling internet connectivity and the "old" online shops, people used to say it was all hot air. It seems to me technology changes, the arguments against the change stay always the same.

I would be very happy to discuss any concerns with our SaaS model with anyone, I am sure not everything we do is great and could be better. But with all respect, all this talk about bandwidth, scalability and service level agreements are yesterdays problems. I do not believe anyone in the SaaS arena sees this as a problem, as all of these and a lot of other issues are solved as part of the current internet infrastructure (bgp multi-homing, server housing in Telehouse and other facilities, etc.) or the current web server technology.

I believe our biggest problem is security, be the application on your own PC or as a hosted service. And I am not talking about someone deliberately spying on your accounts, that is a childish notion, certainly for SOHO and SME businesses. The indiscriminate malicious virus or spyware attack is a problem for our networked world. But I content that our clients data is safer with us then with them.

dahowlett's picture

Confused? you should be

dahowlett | | Permalink

To David's points:
1. CRM the next big thing for SMBs right? Ok - salesforce.com is taking significant share from all other players and SAP/ORCL in particular - hosted only service with orders etc going over the wire and integration into static back office systems - successful because of cost advantage - this is no different
2. The Goodman Jones partners talk about several things - collaboration is one, speed to advice and quality of that advice is another, with a signficant cost benefit to everyone along the way. It's about giving clients a higher bang per buck. (There's a written case study coming out soonish that goes into more detail but I won't spoil anyone's enjoyment of that)
3. The argument ignores the the significant amounts of data (orders>settlement) that pass between financial institutions every day. Or the vast amounts of data flying around between retailers and their suppliers, same in automotive, aerospace, pharma, telecoms, power utilities. What they are doing is looking for a machine to machine connection so the integrity of the data is maintained. Increasingly, those same companies are turning to Internet based protocols because they are much more secure than say 3-5 years ago. And they are an order of magnitude cheaper than VPN/VAN - Keeling talked about this years ago.

In SaaS, the same broad principles apply and it is one of the first things developers have to take care of - along with scale. Ask to look at Twinfield's security model (which was only skated in the recording although Larry Phillips made the point - 'If you're happy with online banking then you'll be delighted with this.') It's been raked over by BDO and KPMG and I'm sure those people would have given this more than a cursory glance when considering THEIR reputations.

richard.murphy's picture

Tax

richard.murphy | | Permalink

Let's change theme

I predict the reputation risk for companies that pay less than the tax expecyed to be due by them will increase in 2006

Dennis is right though - I have a vested interest in this one

david_terrar's picture

SaaS/hosted security, 4 walls, response to DC

david_terrar | | Permalink

David,
I could write a long post explaining our security model, but in deference to Richard's wish to change theme, it would be good to talk it through with you. One of the big benefits of the SaaS approach is that every user benefits from the economies of scale you get by the 1:many approach - putting together a single disaster recovery approach that is used by many. It means the little guy gets an approach that the major corporation would be proud of. Please drop me a mail with contact details and let's talk.
Mailto:dt@d2c.org.uk
web: http://www.d2c.org.uk and http://www.twinfield.co.uk
blog: http://www.businesstwozero.com

after the podcast

David Carter | | Permalink

Thanks David, I've now listened to Dennis Howlett's podcast and it's very illuminating.

The key benefit the partners identify is that they and the client can both look at the data simultaneously, even if they are physically miles apart ("sharing and collaborating" as they call it). So they can talk things over with the client, post adjustments onto the system there and then, print reports and discuss them as if they were all together in the same room.

I'll buy this. The on-line approach clearly offers a lot of benefits where the users are spread around in different locations.

But I'd still be wary of handing over ALL my precious company data to a 3rd party. Perhaps accounting data is OK, since if we lose it for a bit (phones go down etc) nobody will notice.

But with enterprise data such as orders and stock balances, if anything goes wrong the entire company immediately grinds to a halt. I don't think you could ever persuade me to let THAT data go outside these four walls.

dahowlett's picture

The problem with predictions

dahowlett | | Permalink

I love predictions because I almost always know that most won't come true (including my own.) That's because the folk making them have:

1. a vested interest
2. a vested interest
3. a view that's informed by the world they live in and rarely by the macro factors surrounding the environment.

So here's the deal - search is the killer app defining just about everything of any importance in 2006. Take it from there.

BTW - anyone notice that China is training 300 mill people to be fluent in English - each year? Doesn't seem related does it?

Ooh - and did I say something about vested interests?

david_terrar's picture

SaaS isn't just hot air - it works

david_terrar | | Permalink

For David Carter and Gary Turner,
It's interesting to hear David and Gary talk about SaaS in terms of hot air, no panacea, and some sort of passing fad. The first thing - it's not just us SaaS vendors doing the talking. How about this from IDC's top 10 tech trends for 2006:

IT delivery has been shifting from products to services over the past several years. But in 2006, IDC expects this model shift to accelerate. The most obvious evidence of this shift reaching a tipping point will be the announcement in 2006 of next-generation versions of applications delivered as an online service (e.g., Salesforce.com) from one or more of the packaged application leaders (SAP, Microsoft, Oracle).

The second thing - proof, pudding, eating… David asks "but who's excited about that?". Why not go and listen to two partners in practice that are excited about how a SaaS approach is going to help them increase value add and win more clients, in Dennis Howlett's podcast.
David Terrar
Mailto:dt@d2c.org.uk
web: http://www.d2c.org.uk and http://www.twinfield.co.uk
blog: http://www.businesstwozero.com

dahowlett's picture

So here's the real deal - part 1

dahowlett | | Permalink

When we have bad dreams, waking is both terrifying and a relief. It all happens in an instant. Sometimes nightmares disturb us as they reflect deep truths we struggle to comprehend. Here is the start of the nightmare scenario for all of you who think the discussion - ostensibly around SaaS - is 'hot air.' You're right. But it's actually a raging inferno. But you only see the signs from afar.

It is a proven fact that we can assemble all the pieces necessary to run a business. That is: accounting, banking and telecommunications as the primary infrastructure. Without these, nothing happens.

In addition, it's also a proven fact the infrastructure described above can be augmented with other essentials like stock and quote, cash flow and export management, invoicing and purchasing.

In a third layer, we've now got yet more we can add-in: to do notes, calendaring, marketing communications and simple PR, consolidated phone/fax/email and a high level of secure, online storage for essential files I might generate at the desktop.

All of which is delivered through the mechanism of a service that's built around a telco class infrastructure.

Is the penny starting to drop? No? Seen what's happened to the US automotive market? If not I'd recommend spending 5 minutes obtaining a synopsis.

This is a cross-link to the same thing I'm saying (with a little more of a clue) on AccMan

listerramjet's picture

point well made

listerramjet | | Permalink

Dennis makes the point for SaaS well - as he has done before. But there is little evidence of the revolution which is the usual follow up line.

David's point is well made - users do not seem to care how the commodity is delivered, but rather what it can deliver.

Perhaps users do not understand the benefits that Dennis envisages, or perhaps they do not value them?