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State of the profession report: Technology

27th Jan 2010
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AccountingWEB editor John Stokdyk reviews the main changes that have affected accounting during the past five years.

There have been some huge changes among the companies that supply the profession, and in the products they provide. Technology has a quicksilver nature, making it hard to grasp hold of as it moves so quickly. The big question for accountants is whether they are keeping up with those changes.

The UK’s leading accountancy software houses grew up with the PC and enjoyed their boom years in 1990s. By the 21st century, the original founders of these companies cashed out or seen their businesses swallowed into larger groups. Most organisations of any appreciable size have now computerised their accounts, so the opportunities that remain are for upgrades and infill sales.

The enterprise end of the market has become a battleground between SAP and Oracle, which along with IBM annexed the biggest players in the performance management and business intelligence marketplace (Business Objects – now part of SAP; Hyperion-Oracle and IBM Cognos).

In the UK, the mid-market is contested by a collection of expanding empires including IRIS Group, Infor, COA Solutions and UNIT4, with Access holding out as the only serious independent UK contender. Internationally Sage and Intuit hold sway among smaller businesses.

But the path to conglomeration is not always smooth. Microsoft, a company that likes to dominate any market it enters, botched almost everything it touched in the financial software sector and last year completed one of the most spectacular crash and burns in years when it abandoned its attempt to take on Sage Intuit and Sage with its own Office Accounting product.

The Windows giant has an extremely lucrative hold on the market for Office and PC software tools, and has within its portfolio an suite of technologies from databases and analytical tools to communications protocols that have produced impressive results at some of its customer sites. But Microsoft doesn’t have enough of a frontline presence to compete with more focused specialist financial software houses and has signularly failed to make the most of the business software assets it controls. More than anyone in this industry, Microsoft should understand that real life doesn’t always run as smoothly as the demo.

Here comes the Cloud
Any time you see wholesale consolidation, it’s worth looking around for the root cause. Something was obviously not right in business software and the more acquisitive the giants became, the more it raised the question of why they needed to annexe new, high-growth areas such as BI. That was because their core markets were stagnating just as a new threat was coming their direction from the Cloud, where the business application is hosted on a remote internet server.

With consolidation taking such a hold in the enterprise and mid-market tiers, the only opening for new entrants was at the low end, where there are still hundreds of thousands of microbusinesses that have not yet computerised their accounts. This is where new Cloud accounting suppliers such as Arithmo, Kashflow, FreeAgent, Liberty and e-conomic are targeting their efforts.

Judging by the responses to our Software Satisfaction Awards survey during the past four years, it seems the new wave is beginning to make a nuisance of itself for more established suppliers. In 2006, just two out of 1,800 respondents said they used a Cloud accounting application, but the numbers have climbed impressively since. A year later, 7.8% of our sample used an online accounting application, rising to 16.5% in 2008 and 37.3% in 2009.

Following the example set by Sage in the 1990s, the SaaS pioneers marketed their hosted via accountancy practices, with mixed results. Although the take-up curve is assuming the 100% annual growth curve of a truly disruptive technology, the Cloud accounting developers are finding it harder than expected to break down Sage’s hold over the UK accounting profession. Some developers such as Xero and FreeAgent are shifting to a more direct approach and as our Software Satisfaction survey numbers indicate, they are finding new markets away from accountancy’s recruitment pool for new software customers.

The huge impact of Cloud accounting software suppliers in our Software Satisfaction Awards shows how the new breed has built strong customer relationships through online technology. The same could also be said about HMRC’s drive towards online filing. As businesses large and small buy into the new utility computing model, it would be sad to see accountants left by the wayside as they cling to software they are more comfortable with.


Replies (8)

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Duane Jackson
By DuaneJAckson
27th Jan 2010 16:25


It took us at KashFlow a while to realise that accountants were one of the key ways to get adoption within small businesses, but once we realised it we focussed a lot of effort on it - building an additional product for accountants to manage and control their clients that use our software and building a sales team focussing just on this part of the business . Sales to and via accountants now equates for about half of our revenue and we have over 200 accountants nationwide that are members of our Partner Programme.

Although web-based software is a real game changer, in terms of the business model for the vendor as well as the delivery model, there are still plenty of lessons to be learned from those who have been here before us.

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By NeilFraserC
28th Jan 2010 11:13

What about growing businesses?

As John says, delivering solutions to the small business clients who haven't yet computerised their accounting system tends to be the focus of many SaaS providers. As a consequence this is the message that they are promoting whilst speaking to practices and we get messages like 'simplest', 'for non-accountants' etc.

However I think the point that is missed is that these businesses grow and also an increasing number of businesses using desktop solutions are looking to the web for replacements. Therefore, looking forward, addressing the needs of the small business client simply isn't enough (unless you want to suggest to clients that they change their accounting system).

If I take just two examples from Liberty Accounts partners accountants:
1. A business needed to post a single invoice of over £1m;
2. A manufacturing business needed to add in depth stock recording and reporting.

In both instances Liberty Accounts could be adapted to cope with the extended needs of the businesses and our partners didn't need to look at replacement systems.

Duane is also correct in his statement above that accountants are key and I'm pleased to see that they are developing an additional module to help accountants manage their business. For Liberty Accounts our accounting partners have always been key and we have always had a cross client reporting as a core part of our integrated service.

Neil Chadwick
Liberty Accounts

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By onesys
28th Jan 2010 17:42

View Software Satisfaction Awards with Caution

Software Awards can be like statistics - open to interpretation.

A 'huge' 100% increase sounds like a lot until you realise that a leap from 50 to 100 clients is just a drop in the ocean.

The relative modest inpact of 'cloud' applications was commented on in this thread - Software Satisfaction Awards

Our view of the consolidation of the software vendor market (good) is also mentioned in those comments. Competition between similar products / vendors is bad for software users and cheap or free software is unsustainable in the long term, which is also bad for users. (Microsoft Office Accounting, MYOB)

Both server-based and internet-based applications will have its fans. There are pros and cons for both but it may be some time before a clear winner is declared in the fight between the new vendors of these internet / SaaS / Cloud Computing applications. Which one is going to win? Which application should you start using?

Perhaps it is safer to stick with traditional accounting software from an established brand for now.


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By User deleted
29th Jan 2010 08:35

Ouch .


Your statement '.. A business needed to post a single invoice of over £1m ..' followed by the fact that the system could be adaped, is an interesting one.

Surely as a basic standard any accounting package will need to cater for up to 9,999,999.99 for data entry & more for reporting. Yes this approach may take up more screen/reporting 'real estate' but that is a fact of life in delivering a proper robust accounting package; one cannot just ignore things because they may be inconvenient!

This just highlights (across the market - not vendor specific) the little nuggets that come out about the latest crop of accounting systems that seem to be highly market focussed rather than products aimed at catering for most eventualities. 

These little 'gotchas' keep being revealed and to a large extent they reveal 'quick' routes to market with the aim of 'customising' later when the need arises. For goodness sake please don't go down the Sage route of Marketing first & program quality/functionality a poor second!

For instance on the user/security side how many of the current crop of applications can cater for different levels of user and access rights - lets just keep it simple by ignoring (add, change, read, delete) and just focus on access/no access to screens depending upon user profile

Perhaps it would be a good idea to have a matrix of all packages and their ranges (limits) so that users can do a comparison against all products as well as functionality; from memory this always used to happen in the past with a lot of products

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By axw001
29th Jan 2010 09:30

Ouch -Clarification

Hello Anonymous

It seems you got the wrong end of the stick, but only because we held it out!

FYI - the adaptation required to process a £1m invoice line was to a simple sanity check being applied to user input; there is no inherent inability to handle larger numbers. Admitted we initially set the sanity check at the wrong level because our largest live transaction line item to date is just shy of £9m so you can see we have some pretty serious businesses using Liberty Accounts.

With an oracle database backend and a hardware/software architecture designed for scalability proven in over 6 years of live operation I am satisfied with the robust nature of our offering, as are the ICAEW since we have recently successfully been through the ICAEW accreditation process, and we also go through regular HMRC recognition validation for our VAT, ECSL, PAYE and P11D online filing.

The point that Neil was making is that Liberty is much more than just software for recording micro-business invoices and expenses in a browser. As well as many sub-£150K turnover businesses the product is also catering for a diverse range of larger businesses who have carefully evaluated the available offerings before making an important business decision to trust Liberty to provide a key element of their business software infrastructure.

Alan Wright


Liberty Accounts


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By User deleted
01st Feb 2010 07:21

Different types of cloud

Neil - a useful exercise would be to define what is meant by Cloud because it seems to be a moveable target depending upon the vendor

For instance are SaaS vendors

hosting in the traditional way and calling it cloud (nothing new here for 10+ years with this type of hosting)using the Amazon etc. cloud based systemsabout to use target MS Azure etc style

If the Amazon style Cloud is being used how are rdbms (Oracle, SqlServer) databases being handled in this scenario because Cloud ideally lends itself to other types of file structure instead; although these may not be suitable for accounting type scenarios?

I am very much in favour of the SaaS approach but clarity over these issues would be nice because the term Cloud has become a 'catch all' definition that could utimtately even be used for Citrix style applications by some vendors

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By NeilFraserC
02nd Feb 2010 10:40

What is cloud?

As far as we're concerned it is just a marketing term and wouldn't want to get drawn into a debate as to what constitutes 'cloud' computing.  It is many different things to many different people.


Liberty Accounts

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By CompupacBiz
10th Mar 2010 14:56

Traditional accounting software vendors evolving?

I wonder if traditional accounting software vendors may also start to see opportunities in the cloud?

Would it be much of an evolution for the likes of Sage to start developing new packages that users can configure and use in a cloud environment?

May there should be three groups:

Tradional VendorsTraditional Vendors exploring Cloud SolutionsPure Cloud Solution Vendors



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