Editor in Chief (interim) AccountingWEB
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Cloud accounting pitches for the mid-market

8th May 2013
Editor in Chief (interim) AccountingWEB
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During the past few years AccountingWEB focused closely on web-based bookkeeping applications for small businesses. There’s no shame in this, as this sector is where all the action has been for most of our members. As the cloud computing revolution took off, KashFlow, FreeAgent and Xero attracting tens of thousands of UK users into online accounting.

The market for mid-range and enterprise accounting applications was slower to react, mainly because sales cycles are longer; organisations with big investments in existing programs are more reluctant to rip out and replace their accounting systems.

Mid-market cloud contenders

Market overview

Aqilla

FinancialForce.com

NetSuite

SAP Business ByDesign

Sage 200

David Carter, who has tested many accounts packages for us in the past, recently turned his attention to mid-range cloud accounting with a review of Aqilla. In his view, cloud accounting won’t take hold in the middle market until it can match the functionality of existing client/server programs.

“We badly need some serious, industrial-strength, cloud-based accounts packages that match the established vendors feature for feature.  The established vendors are themselves obviously giving out cloud-based versions, but software written in a previous generation rarely works well in a new one it wasn’t designed for,” he concluded. 

Market overview

According to Carter, the applications that have the best chance of success will come from previously unknown companies that write their packages for the cloud from scratch.  But they will need some pedigree in accounting to be successful in such a specialist sector.

The three main cloud players courting mid-size organisations in the UK all fit Carter’s profile: Aqilla and FinancialForce.com both have links back to established UK accounting applications (SunSystems and CODA respectively), while NetSuite was part-funded by Oracle founder Larry Ellison and has been pioneering web-based ERP for more than a decade.

SAP Business ByDesign deserves a mention too. While it draws on the heritage of its bigger on-premise sibling MySAP, it also struggles to shake off an association with the expense and disruption of protracted business process re-engineering projects.

Sage cannot be discounted either. As well as the rudimentary Sage One system for small businesses, the country’s accounting software market leader is adapting Sage 200 for Microsoft’s Azure cloud platform.

By common consensus, companies outgrowing Sage and QuickBooks remain the main sales pipeline for mid-market developers as a whole, with additional opportunities for cloud developers coming from “in-fill” applications to sit alongside and plug gaps in existing finance systems.

Most developers would add that the UK mid-market has lagged behind other countries in embracing cloud accounting, but this is changing.

Jeremy Roche, CEO at CODA/Salesforce.com joint venture FinancialForce.com commented: “I had a theory the UK was three years behind the US, but I would revise that now to 12-18 months.”

Faster growing businesses serving new markets have led the way, he added, “But we’re certainly starting to see traditional ones coming through. SMEs started first, but now mid-size and enterprise companies are starting to take advantage of it.”

Aqilla’s Hugh Scantlebury agrees: “Virtually every shortlist has at least one Cloud offering and in some cases, exclusively so. There's a fair way to go, especially given the longer replacement cycles of the mid-market… but things are beginning to really change - for the better!”

If you are considering options for sophisticated cloud accounting tools, here is a brief overview of what you can expect from the leading vendors.

AQILLA

Aqilla sales invoice view

Functionality: Unified nominal ledger, with built in budgeting & forecasting, project costing, timesheets & expenses; and purchase-to-pay facilities.

Target market: Mid-market, service-based organisations, with partners specialising in industries such as hospitality, technology, financial services, social housing and not-for-profit

UK users: c200 companies (1,000 users)

Pricing: Subscription-based licence - £50/month for “Pro” users; £10/month/user for occasional users, plus £100 set-up fee per company, and a number of consultancy days will be required for initial configuration.

True to the mid-market cloud insurgency model suggested by Jeremy Roche, Aqilla describes itself as an accounting “platform” that can grow with users’ needs by linking into customer management, business intelligence and other back-end systems. One of the system’s latest enhancements is an Excel add-in to provide more flexible end-user analysis and reporting.

Aqilla is typically overseen by a dedicated finance director or controller in a service-based organisation turning over £5m-£250m, and competes mainly against NetSuite and FinancailForce.com, plus established client/server products such as SunSystems, Microsoft Dynamics, Access and even Sage Line 50.

In his software lab test Carter noted that Aqilla is a unified ledger system, combining sales and purchase ledgers within the overall nominal ledger, which also supports automated order-to-payment processes for both sales and purchasing, plus project costing, budgeting/forecasting, timesheets, expenses and cash.

The system offers what Carter calls the “multis” that mid-range and international organisations demand: multi-currency; multi-company, multi-language, multiple budgets, multiple tax regimes and so on.

While many of Aqilla’s 200 or so early adopters were specifically attracted by the cloud concept, the company, like FinancialForce.com, has started receiving enquiries from more mainstream organisations such as the Ministry of Justice.

Carter judged Aqilla to be an “industrial-strength” set of financials that matches the products of the established mid-range vendors. “While Aqilla may be relatively unknown now, in 10 years it will be one of the major players in the mid-range marketplace,” he wrote.

FINANCIALFORCE.COM

FinancialForce.com dashboard

Functionality: A single ledger system (like its forerunner, CODA) that handles all the nominal, sales order and billing ledgers, plus as many additional project and product ledgers as you like.

Target markets: Salesforce.com users and other sales-led service-based organisations, particularly for professional services automation (PSA) encompassing project management and accounting, including resources and expenses. Also sophisticated media billing applications.

UK users: Undisclosed; two-thirds of customers are US-based

Pricing: On application - depends on size of installation.

Formed in 2009 as a joint venture between CODA and SalesForce.com, FinancialForce.com draws a lot of business from the Salesforce.com community, “but not to the exclusion of other systems”, said CEO Jeremy Roche. Salesforce.com users have already got a foot in the cloud and have derived enough benefits to continue in that direction, he continues.

Good billing tools have been a hook for many sales, as it produces a great return on investment. “Everyone has to bill,” says Roche. “If you can get accounts receivable smartened up, everything benefits.”

Plugging into the Salesforce.com platform and development tools also speeded up the application’s evolution. The forms and objects defining contacts, sales and invoices are already there, so FinancialForce.com programmers can simply call them in to use elsewhere in the program. This has proved to be particularly important in developing FinancialForce.com’s PSA suite.

“The services market is booming - with growth doubling each year,” says Roche. “PSA solutions are quite old, so it’s an exciting market that’s ripe for disruption. Professional services is about automating and collaborating between remote teams. We’ve designed an application with that right at the heart of it.” Cloud technology allows the developer to extend FinancialForce.com internally and externally, for example with a Facebook-like Project Wall where users can share information and collaborate with their customers and subcontractors on a project.

NETSUITE

NetSuite

Functionality: Full ERP suite, including stock/distribution, ecommerce, CRM, human capital management, and financial reporting & analytics.

Target market: “Two-tier” strategy, with Unified ERP suite catering for 200-500-employee mid-market organisations; and OneWorld version designed for subsidiaries of larger global groups; key markets include high-tech sector, PSA, retail and specialist industries served by implementation partners.

UK users: 16,000 companies worldwide; UK figures not disclosed separately

Pricing: On application

Now in its 15th year, NetSuite is a grown-up cloud enterprise resource planning (ERP) system catering for a wide range of vertical sectors including retail and stock/distribution industries, professional services and e-commerce. Craig Sullivan, NetSuite vice president of international products, commented that the cloud system is now begin taken seriously by “some of the largest enterprises in the world”, who wouldn’t have done so 3-4 years ago.

“When a business looks at run entirety of its systems, a cloud solution becomes even more relevant because it instantly connects people in multiple locations and addresses workflows across departments,” he said.

Though it has been partially discredited by the grand projects that have swallowed up vast sums in software licences and consultancy during the past 20 years, the ERP model does allow users to manage transactions, processes, customers and suppliers on a common platform that can deliver new levels of efficiency and service. For example, after implementing NetSuite, a Leeds-based nail care distributor Sweet Squared said its sales people could see whether they had stock in the warehouse when a customer placed a phone.

While sensing an opportunity to recruit UK companies growing out of Sage 50 Accounts, NetSuite CEO Zach Nelson claimed the company was enjoying success at the upper end, where it frequently takes on the giants of integrated ERP, Oracle and SAP.

SAP BUSINESS BYDESIGN

SAP Business ByDesign

Functionality: A comprehensive menu to choose of 50 or so business processes, including: financials; order processing; procurement; CRM; manufacturing; service support; project management; HR; eLearning; workflow; and reporting/analytics. All the “multis” are supported: companies, currencies, languages and GAAP. Support is available to access data on most mobile operating systems for no extra cost.

Target markets: Services-based industries, along with discrete manufacturing, where UK organisations have outsourced production to foreign suppliers. Also UK subsidiaries of existing multinational SAP users; Business ByDesign shares common data structures with MySAP making consolidations and system upgrades easier.

UK users:

Pricing: From £7 a month per user for “self service” data entry licences, £16/user/month for basic project module; up to £97/user/month for enterprise-level financials. Fifteen users are the minimum installation requirement, but five of those users are covered by the base fee of €1000 a month.

The German ERP pioneer has not sat back idly as cloud challengers like NetSuite started targeting its core markets. It jumped aboard the cloud bandwagon in 2007 and has been enjoying some success with its Business ByDesign (BYD) suite. Strong 2013 Q1 results were driven significantly by organisations switching to the cloud, according to SAP co-CEO Bill McDermott.

“It is clear that many application categories are increasingly transitioning to the cloud, and SAP is in the forefront of this transition,” he said. “We see continued very strong growth in the Cloud, with a 385% year-over-year increase in cloud subscription and support revenue and a 95% increase in deferred Cloud subscription and support revenue.”

Business ByDesign benefits greatly from the parent group’s mature functionality and has a readymade market as a business management platform for medium-size organisations and national subsidiaries of larger international groups.

The underlying reporting and analysis framework in Business ByDesign is very strong, allowing users to add custom fields and report against them in real time. Excel integration allows users to create spreadsheet reports and save them to BYD, so every time they open their Excel view, the data is refreshed by the BYD server.

The CRM/Opportunities module stores all contact information and activity and can track them against marketing campaigns. The contacts database and appointment diary also synch with Outlook via a plug-in, and emails from clients can be attached to their record within the system.

While some of SAP’s rivals talk about gaining footholds within their customers from departmental and “line of business” sales, SAP claimed a number of successes in early 2013 on the back of finance-driven sales.

Coming soon: Sage 200

Sage’s great strength is the huge pool of businesses and accountants who picked up their grounding with Sage 50 Accounts and its predecessors. The company has an upgrade path available for users who outgrow the desktop application, but these are the valuable, fast-growing customers who are being targeted by the mid-market cloud developers discussed here.

How is Sage fighting back?

In May 2012, Sage announced that it would use Microsoft’s Windows Azure cloud platform to develop certain small to medium business ERP solutions, starting in the UK with Sage 200. This is a mid-range accounting and ERP package suitable for up to 50 users that can call on a network of specialist resellers serving specific industries. Modules include: financials; CRM; manufacturing with bill of materials; supply chain; analysis and reporting; wholesale/retail; project accounting; and web timesheets & expenses.

As one AccountingWEB member reported, the system was undergoing testing with pilot users in April 2013. Sage 200 is not commercially available in the cloud yet, but an announcement is expected very soon.

However Angela Eager of TechMarketView told BusinessCloud9.com at the time of the Azure announcement: “Sage’s commitment to the cloud still looks half-hearted and it lacks a coherent strategy. If it developed its international ERP X3 suite for Azure, that would be a statement of intent and drive more competition against the like of NetSuite.”

Alternative approaches

If you’re a user (or supplier) who has a cloud financials/ERP program you think should be listed here, let us know by commenting below. But the five products mentioned here were the ones that cropped up repeatedly as the ones to watch. This demonstrates that the mid-market is more rarified than the small business sector, where there are scores of accounting programs to choose from.

Cloud purists spend a lot of time emphasising the superiority of browser-driven applications over hosted solutions, where a traditional client-server program is delivered via a web-browser.

In spite of the insults, most of the existing mid-market suppliers, including Sage, are in a position to offer hosted versions of the products, often through specialist service providers.

Business may not get the technological convenience of a true cloud application, but they can benefit from the subscription-based payment model, and avoid the need to retrain all their staff members. For many business, how a program is engineered doesn’t really matter if it delivers the functionality they want within their budget.

Replies (15)

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By JC
09th May 2013 08:53

Why is Sage included ....

Good article - but afraid I have to question one aspect

Surely the review should be about existing mid-market products and not wanabe products not yet delivered

'.. the country’s accounting software market leader is adapting Sage 200 for Microsoft’s Azure cloud platform ..'

Whilst one could be wrong, the implication of this comment is that no product yet exists in a completed form. If 'current vapourware' is our criteria then there are a whole host of other products which could potentially fit the bill

It is massively disappointing that Sage initially refused to engage in this medium for many (10 years) when they could have greatly infleunced the initial take-up. Instead they ran legacy software rather than innovate and move forward

And now they manage to get massive pubicity for SageOne and Sage 200 despite being way behind the curve in every aspect of technology except 'marketing' - an area where they excel

Also, how come their first disasterous offering SAGELIVE seems to have been air-brushed out of every subsequent Sage article

- http://www.kashflow.com/blog/sage-live-security/

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John Stokdyk, AccountingWEB head of insight
By John Stokdyk
09th May 2013 09:42

Oh come on, JC...

For once you could take off the red mists of Sage specs and look at the context of the article.

It's all about mid-market applications, where even the rival vendors acknowledge that Sage 50 Accounts (determinedly desktop, unless you opt for a hosted version) is a serious player in the market. All of the other companies in this market know that and are specifically targeting companies that are outgrowing Sage 50.

Due to the epic length of the piece, I chopped out an interesting quote from NetSuite's Zach Nelson on the loyalty of UK users for Sage, "whatever the reason". He continued: "Obviously, it's a local company, particularly in the UK, and there's some loyalty to the product line. But I think that's starting to fade now as Sage has been unable to deliver anything cloud-based, particularly on the ERP side.  So seeing what happened in the last quarter there, I'm very excited about the Sage replacement cycle that's about to happen in that area."

With that in mind, Sage has obviously got to protect its mid-market sales pipeline, and the Sage 200 cloud version is their response. It's at a fairly advanced stage of user testing and I am still waiting to get more detail from the company about it.

Rather than giving "valuable publicity" to any particular vendor, the piece is designed to give someone looking at their options an overview of who they might realistically talk to. In terms of cloud maturity, industry penetration etc, I think the article makes it fairly obvious how Sage compares to NetSuite, SAP or the other two accounting-focused cloud systems.

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By AlanBourke
09th May 2013 10:26

Are OpenERP and OpenBravo

... not contenders in this space?

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By JC
09th May 2013 10:37

Title of article ...

@John Stokdyk

'.. Cloud accounting pitches for the mid-market ..'

'Red Mist' or fact? - Does Sage 200 currently operate in the Cloud or is it in development?

If not, then how many other software houses in the mid-market sector also don't operate in the Cloud, but have future expectations; so why single out a company without an existing offering for comparison against current players?

There was a very interesting article in the Times (05 May), titled 'Sage battles barbarians at the gates' - http://www.thesundaytimes.co.uk/sto/business/Companies/article1254711.ece - indicating Sage being ripe for private equity takeover with a market value of £4bn

Quote - '.. Meanwhile, chief executive Guy Berruyer is doing his best to keep the barbarians from the gate by remaking Sage from a utility-style income stock to an exciting techie one ..'

'.. Sage has been slow to embrace the web revolution ..' - which would seem to back up my statements

So clearly Sage is generally recognised as having failed to initially engage with SaaS and also is not really a technically based organisation in the first place. Their forte is marketing and acquiring others products, which is more to do with buying market share than anything else - hence 6m users and staggeringly healthy results

Also bear in mind the much vaunted maxim of never taking the first release of anything - so Sage 200 v2 could well be some way down the line as a mature product. Again this reinforces the original post about why they were included, when a 'stable' product could well be 6-9 months away and yet is being compared with existing available products

The article makes assumptions on '.. how Sage compares to NetSuite, SAP or the other two accounting-focused cloud systems ..' which have to be based on what one is being fed by Sage, rather than practical hands on experience

and we all know that Sage is unsurpassed with their marketing - even when they released SageLive!

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Replying to KungFuKipper:
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By johndon68
10th May 2013 11:56

Sage 200 Cloud

JC wrote:
Does Sage 200 currently operate in the Cloud or is it in development?

@JC - The current official release date for the cloud version of Sage 200 is 17 June 2013...

 

John

 

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By bencooper
09th May 2013 11:15

I agree with JC

We work with clients to help them select the new ERP/CRM and Accounting systems for their business. Last year we carried out our first search and selection project whereby the client demanded Cloud only solutions in the long list. Previously we had always recommended our clients have at least 1 cloud offering in the long list becuase this is the way the market is headed. Most of our clients are in the traditional mid market space and as this and previous articles alude to, the market has been slow to respond and provide a cloud offering that TRULY rivals the traditional on premise options.

In carrying out a cloud only search we realised just how few options there are, but we were also amazed at how the old guard were dressing their systems up as cloud, when clearly they are not.

Sage, IRIS, Coda and SAP B1 all claimed to offer hybrid Cloud solutions but when you scratch the surface you find it to be a privately hosted traditional system, financed over 3 years - or - a series of web apps that connect to the on premise software. This is not true Cloud as the systems lack the agility that a truly web developed system offers.

Sarah Palin had a good phrase for this. "If you put lipstick on a pig, it is still a pig". - Not saying the old gaurd are pigs - but you get the point.

I fully accept that recoding Sage 200, SAP B1 or IRIS Exchequer (or similar) to a cloud footing is like turning a tanker on a tuppence, but surely pretending to be Cloud is harmful to the good name they have built up over many years? Rather than developing web enabled add ons and apps, I would really like to see some of the traditional on premise authors focussing on recreating their entire systems in a true Cloud environment, as the one thing the mid market Cloud lacks at the moment is competition and the full range of functionality users had come to enjoy with good old fashioned software.

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Nigel Harris
By Nigel Harris
09th May 2013 11:29

Still a moving target

It's interesting to see this mid-market attracting some serious cloud players. A recent newcomer not mentioned here is Xledger (http://xledger.co.uk/), which came from the founders of Agresso, so people who know this market pretty well. I say recent - they have been developing it since 2000, well established in Norway but now making inroads in the UK. I suspect they won't be the last new arrival in this end of market though.

Any bets on when Microsoft will pile in with fully cloud-based ERP?

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By Jo Sutton
09th May 2013 16:32

Thank-you Nigel

This is a very interesting article, giving an unsually clear overview of the mid-market players in the cloud accounting market. I am particularly grateful to Nigel for mentioning Xledger before I had time to add my comments!

Xledger is now expanding actively outside our home market in Scandinavia, with customers in both the UK and the US. We aim to provide more than just ERP functionality delivered by a different technical route. We also offer a number of supporting services, only possible because of the cloud infrastructure.

John - can we talk further?

Jo Sutton

[email protected]

 

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Replying to mrme89:
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By bencooper
10th May 2013 12:18

X Ledger

Jo Sutton wrote:

This is a very interesting article, giving an unsually clear overview of the mid-market players in the cloud accounting market. I am particularly grateful to Nigel for mentioning Xledger before I had time to add my comments!

Xledger is now expanding actively outside our home market in Scandinavia, with customers in both the UK and the US. We aim to provide more than just ERP functionality delivered by a different technical route. We also offer a number of supporting services, only possible because of the cloud infrastructure.

John - can we talk further?

Jo Sutton

[email protected]

 

Further to my previous post, X Ledger was one of the options we looked at with our client last year and I must say it was a great addition to the process and a really nice system. It offers very good value for money and some really neat functionality.

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By Rob Connell
13th May 2013 13:07

Business Analytics

With Smeebi currently targeting the small/ mass market end of the SMEs as a business intelligence add-on for cloud base accounting I found this interesting. Not least as we work with our parent company at the other end of the scale, the enterprise.

Enterprises ERP integrated with accounting systems often fall short of business requirements especially the FDs, well documented by Gartner, in terms of measuring and monitoring, reporting and analysis, planning and forecasting. Hence our parent company works with the likes of IBM to offer better self service reporting and query tools, planning and predictive analytics, either as add-ons to the dashboard or full solutions down to the datawarehouse. So I for one would be keen to hear what these so called mid-market accounting vendors are doing in terms of 'business intelligence' related add-ons and just how much consulting and development by the client is really needed.

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By AlanBourke
13th May 2013 13:16

Customisation.

It also would be nice to have an in-depth overview of the possibilities these solutions offer for customisation beyond their core functionality - new modules, forms, fields etc. This ability is vital if they are to compete in this space.

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By Paul Holborow
13th May 2013 16:50

Spot the difference: hosted 'on-premise' v true cloud?

I wonder if the user would notice the difference. This is quite an interesting if not perhaps too simplistic an analysis from NetSuite to help you decide http://www.netsuite.co.uk/portal/resource/articles/true-cloud-solutions.html. Just as it's expensive for traditional on-premise software houses to now re-write their products to a true cloud platform, it's also expensive for customers to ditch their existing on-premise solution for a true cloud solution. For the moment in the mid-market space I think we will be left with both for quite a while.

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Replying to Accountant A:
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By AlanBourke
14th May 2013 13:16

> For the moment in the mid

> For the moment in the mid-market space I think we will be left with both for quite a while.

Absolutely - due to lack of scope for customisation and the fact that as far as I can see the customer base is not really screaming out for 100% browser-based, cloud-hosted ERP. 

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Replying to lionofludesch:
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By Hugh Scantlebury
14th May 2013 22:21

Extensibility

Hi Alan, I can' speak for others but Aqilla is highly extensible in terms of adding new data entities and attributes, reports, forms, views, application gateways via the two APIs and built in workflow tools...but you're probably right, for now it's the people who want Cloud who are making the move and reaping the benefits.

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By Hugh Scantlebury
14th May 2013 11:07

Full review of Aqilla

If anyone is interested you can read David Carter's full independent review of Aqilla on our website here.

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