Internet accounting's third wave - ERP as a service

It was questioned whether I’m taking a narrow view. Just a pragmatic one from first-hand experience of “shared SaaS” versus in-house systems. In case I wasn’t clear, I was talking about subsequent software upgrades, not initial data/system migration.

In terms of breadth, I have run 30 events in the “Internet Business Forum” series. Guest speakers have covered a wide range of ways of using the internet for profit, for businesses large and small. It’s interesting that many ideas have thrived, but a few ideas have not.

Here’s one SaaS idea that’s thrived. Yesterday I met up with one of the speakers who ported their offering onto SaaS some years ago. After a slow start virtually every new customer large and small is now choosing the SaaS option. However:
(a) This is a stand-alone non-financial operational application
(b) Its scope is usually only a small part of the user’s business
(c) Interfaces to the user’s other systems are limited. An XML output of activity for sales invoicing is about it.
(d) External links are provided to the mobile network. An in-house operator would otherwise have to set up and manage these, so this facility is a key SaaS advantage.
(e) Larger businesses opt for their own dedicated environment to suit their configuration and give them control not available in the shared offering.

For financial and other core business processes, the balance between pros and cons of SaaS can be very different. It’s just a matter of looking carefully at the specific situation and the specific SaaS offerings available. In some cases SaaS will be attractive, in others not.

Chris Challis

Hi John
Although we're not yet as well known as some of the other online names (probably because of our Northern roots - not too far from CODA!), our software has been around for all the 8 years you've been keeping an eye on the industry - first as an affordable and flexible bespoke solution for multi-million pound multi-national companies, and since 2005, under the name Liquid Accounts, as one of the first SME solutions. The beauty (and difference) of our system then, is that we've taken a fully-functioning, grown-up accounting package and reverse engineered it into something easy-to-use and jargon-free - ideal for the small business owner - but with the potential to grow with the business (meaning that they don't have to go through the time and expense of having to choose a completely new accounting package every time their needs change). And we've approached it from the point of view of the business owner needing to be in control of their business whilst still fulfilling their accountant's needs (and making life easier for both!) - whilst I think that many of the other players are still going for a traditional accountant-centric approach.
I don't think therefore, that we fit your evolutionary model, and I know that we already have more functionality than the new wave of mid-market solutions that you mention AND we have the basic cashbook options as offered by the first wave of online apps.
However, saying all that, we 'onliners' still need to stick together and work together to overcome some of the barriers that still exist to prevent people going online. We recently met most of the 'competition' at the Business Start-Up Show in London, and they seem like a great bunch - I look forward to working with them!
This industry is still in it's infancy and there's so much to come! And I'm excited to be a part of it!
Lisa Kendrick
Marketing Director
Liquid Accounts Ltd
www.liquidaccounts.net

@Chris: I wonder whether you are taking a narrow view. All the data issues you mention are common regardless of system migration so we can dispense with that one.

On the functional front, there is a strong argument to suggest that business processes can readily be standardised across many industries. That wouldn't necessarily provide functional depth but doesn't also mean on-demand becomes redundant. I have yet to come across a business where they had something SO unique, especially in accounting, where anyone could honestly say that it represented competitive advantage. After all, debits are still on the left and credits on the right.

SAP Business ByDesign is taking a different approach that allows companies to acquire a 'unique' system that can have add ons. (FYI - along with Brian Sommer, ex-Accenture, I have developed an in-depth review of ByDesign. It's a paid for item but has been well received. It explains these issues in some detail.)

BUT - contrary to what Dennis Keeling is saying, this is an emerging segment of the software industry which can be more broadly expressed as cloud based platform services.

Hint: Google isn't building cloud based infrastructure for no reason.

DH and DK are both fundamentally right for the two sectors they describe. But accountants are wise to look at the specific pros and cons before jumping into SaaS, as the issues are different from e-banking and e-shopping.

The key point is that SaaS is not right for everyone in every situation. It also makes a big difference whether the arrangement is shared (see my previous comments below), or the application is hosted for each customer separately in their specific configuration.

Chris Challis

DH is quite right about DK being out of date. Furthermore, there are a lot more reasons why DK is way off beam - in fact far too many to address here

In the light of this, the really concerning thing is where DK has come from.

Presumably this mindset is prevalent withing BASDA and with this in mind is BASDA itself so far removed from the real world as to be regarded as a legacy organisation?

Good to see Dennis Keeling back in the ring but I fear he is out of date. I'm sure NetSuite, with their %K+ customers, growing at a rate of 400/qtr, SAP with ByDesign and FreshBooks with 300K+ customers would disagree. But then I fear that so many are missing the point. SaaS offers such a compelling solution opportunity for buyers and sellers that downturns should play well for this market. Factor in that these solutions are often aimed at the lower end and it is easy to see how the accountants' fear can be over-ridden. That fear by the way is quite unfounded. How many people bank online these days? How many shop using online services?

The software industry has been trying to sell its applications as a service for over 10 years – now in the guise of SaaS (Software as a Service) – previously in the guise of ASP (Application Service Provider).

In the frenetic days post Y2K, medium to large organisations were replacing their legacy systems with wall-to-wall solutions from one supplier – the ERP promise – but not anymore.

In the current tight economic climate few companies can afford to replace their systems completely. The market at the moment is for specialist add-ons that will integrate with existing legacy systems without disturbing the status-quo.

Of course ERP did not deliver its promise – today most businesses still have a wide range of disparate systems – loosely coupled together.

The SaaS model is great for stand-alone discrete applications like CRM (salesforce.com) but it has shown to be totally unsuitable for financial systems which rely of many feeds from other applications - like sales-order-processing, invoicing, purchasing, payroll etc. Remote hosted servers and databases are not ideally suited to link to complex in-house legacy systems.

It’s a good try to stimulate discussion, but the idea of holding key financial data remotely still sends accountant’s hearts into palpitations.

Dennis Keeling is a Business Software Analyst .

John points out that “with just one central server to update, developers can introduce enhancements that are instantly available to the entire user base” which can be “more painless” than for [in-house] applications.

I’ve been using a SaaS application for 8 years, for a trading application that couldn’t realistically be run in-house, and have seen the benefits he mentions. But there’s also an important note of caution.

A SaaS service is effectively packaged software on a remote host. Running packaged software in-house lets you decide whether to upgrade, and to do so at a time that suits you. Unless the SaaS service offers it, you have no choice on such matters. There are examples of specific upgrades of well-known non-SaaS accounting software that have had teething problems, and people have held back on upgrading. Does the SaaS service give you that flexibility? Otherwise can you afford for an upgrade to take place at a crucial time?

You may also have little or no chance to test the software in your configuration before it goes live. Nor plan how to configure enhancements, add new master data or organize training. I’ve certainly been caught out where an upgrade changed functionality on which I relied, and a totally new approach had to be rapidly adopted. What if it had been a show-stopper?

SaaS providers need to carefully address these issues for people to readily use SaaS for business-critical applications, especially where there is a practical in-house alternative.

Gareth

Surely it would be all about location and jurisdiction?

Don't forget that in theory the browser based SaaS applications are stateless and it is a relatively simply matter to re-locate the back-end

If a site is hosted in the UK that is one thing but are we really saying that if it is hosted abroad then the country concerned will automatically bow down to the UK authorities?

Gareth - it's too easy to simply say that the tax authorities will "be able to examine all the data without any regard to the rights of the owner who of course has no rights". As someone who is heavily involved with online systems, I can categorically say that every precaution necessary is taken to maintain the confidentiality of customer data. If ever a law were to be passed giving the tax authorities a blanket right to gain access without recourse to the customer then matters might be different, but then it wouldn't just be hosted systems that are affected, it would be bank accounts, telephone records, etc. etc. etc.

John - While there is evidently a (rather slowly) developing "wave" of solutions for the corporate market, it won't obliterate the current wave because the corporate providers will still be too expensive for the SME segment. The corporate players certainly desire to emulate the success of the SaaS pioneers, but their aims are different and they are very unlikely to be agile enough to deliver a profitable service at the price/value point achieved by the current wave of SME-focused SaaS vendors.

on a service because the tax authorities will want to and be able to examine all the data without any regard to the rights of the owner who of course has no rights

I'm not sure where this analysis is going but I thoroughly disagree with Gartner. They don't look at the SMB sector so have little insight into what this segment is looking at or is about. The fact they've not seen deployments doesn't mean they don't exist. They do. Similarly, the internet/saas/on-demand angle is not what it's about. The delivery method is secondary to the value delivery proposition by those who are doing things differently.

Finally - adoption has little do with accountants. They may have a voice but they're not the final arbiters. Most of AccWeb's members are way behind the curve and think in terms of Pacioli book-keeping. As a 600 year old methodology, it is way past its use by date.

For my take, please see this link.

I think it's attractive, because it displays a very academic-focussed attitude. Preserving the integrity of the academic system seems to be a priority, although frankly close up paid ads for such a service seems a fragile response. When the establishment is known by your friends who were  cheerred with the results of the fraternization, about ERP. But don't foreget always to use plagiarism checker run them through this plagiarism detection system for absolute checking and make sure that your material is authentic