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Cloud suites are here, just as the goalposts move

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It’s been a big week for tax and practice software. In a matter of days, two of the main suppliers in the market went public with their cloud-based compliance and practice management software suites.

12th May 2022
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Almost at a stroke, the announcements about the IRIS Elements suite and BTCSoftware’s cloud app plans put an end to the long-running arguments that practitioners were not ready to move their systems to the cloud. 

In response to these announcements, one AccountingWEB member posted a question on Any Answers this week about whether there were any software vendors left for smaller practices.

I’m sorry to disappoint this member, but any accountant investigating their options for new software will now find that most of the developers they approach will steer them towards online applications.

If there was any lingering resistance to this idea, pandemic lockdowns took care of that. By unveiling their embryonic suites at this point, IRIS and BTCSoftware were not so much forcing their customers down an unpopular technology path as responding to their demands for online tools.

If anything, the prevailing question for practice developers in recent months has been, “What’s taking you so long?”

IRIS, the biggest player in the market, has been signalling its plans to introduce an integrated cloud software suite for years, but on the eve of Accountex, the company finally confirmed that its IRIS Elements project now included viable compliance tools.

In case you missed it, Sage has also been proclaiming its “cloud-first” credentials for more than five years. Until the turn of this year, it hasn’t had much to show practising accountants on that score, but visitors to Accountex got a chance to compare the new Sage for Accountants suite with the IRIS and BTCSoftware equivalents.

While not as big as IRIS or Sage, BTCSoftware is a very influential player among small firms, having bagged seven software awards from AccountingWEB over the past five years. As far back as 2016, BTCSoftware was dropping hints about its intention to enter the cloud practice software stakes.

That leaves BTCSoftware’s closest rivals, TaxCalc and Thomson Reuters (Digita), as the only non-cloud practice suites on the market. Yet TaxCalc now positions itself as “cloud-capable” with its Cloud Connect online database that offers anytime, anywhere access to client data. 

Meanwhile, in our recent Insight webinar on practice management software, Digita user Sarah Bedford said she was sticking with Thomson Reuters because she, too, valued the advantages of integration and had been assured by her supplier that it would be moving its compliance apps online in time for the transition to MTD.

Keep an eye out for Ireland-based Bright Group, too, which bought AccountancyManager in March. With backing from Hg Capital, Bright has long-term plans in hand to migrate Relate’s compliance programs into the cloud to create yet another contender in this rapidly evolving marketplace.

The argument is over

The cloud debate has been running for more than 15 years on AccountingWEB, starting with the birth of KashFlow and FreeAgent in 2004-5 and galvanised by the arrival of Xero in the UK in 2007. While small business bookkeeping led the charge, it took another several years before Gbooks, Capium and Nomisma brought online tax and practice tools to the market in 2014-15, followed not long after by Taxfiler. 

Though widespread adoption of cloud practice and tax apps lagged initially, the trend was galvanised first by demand for practice management apps to help cope with the challenges of Making Tax Digital and then by the need for software to support remote working during the Covid pandemic. The two lines on the chart below show the percentages of firms using cloud bookkeeping and practice from our annual software surveys going back to 2006. Note that the high percentages are based on respondents posting rating at least one app in these categories - the stats do not indicate that 80% or more of all firms and all clients are using only cloud apps. But the direction of travel is very clear.

Practice cloud software adoption 2006-21

What’s the new argument?

Reporting from the show floor at Accountex, AccountingWEB technology editor Tom Herbert said it felt like the cloud product announcements from IRIS and BTCSoftware marked the end of the initial cloud adoption era and that practitioners were moving onto the next phase, which was taking us into the “realm of the suite”.

This, too, is an argument that has been around since the early days of self assessment. The best of breed cloud ecosystem players have enjoyed a lucrative period during the past five years. But it should come as no surprise to hear IRIS chief marketing officer David Turner raising the integrated war cry to herald the arrival of the new IRIS Elements suite ingredients. 

Pointing to the complexities illustrated in our ongoing My Tech Stack series, Turner said that the mid-size firms that use the current IRIS Accountancy Suite stuck with the desktop solutions because they preferred the benefits of a single client database with joined-up workflows.

“Younger, millennial accountants may not know about IRIS, but our job is to excite them and make them realise that life isn’t just about QuickBooks and Xero,” he said. “They won’t help practitioners transform their businesses to cope with MTD.”

We’re bound to hear more of this kind of talk over the next few years. But could we end up re-enacting confrontations from the last great software war rather than looking ahead to the next major transition? 

The next wave

There’s no little irony in seeing all these compliance programs come to life within cyberspace just at the point when the classic Windows-era annual self assessment process is moving into its twilight years.

In 2024, HMRC estimates that another 4.2m small businesses and landlords will come into its Making Tax Digital for income tax filing regime. That represents a lot of digital record-keeping systems, all of which are going to require a method for filing quarterly updates with the tax department. 

An intake of that scale is going to wreak profound changes on the practice software market, which is where we start to notice the likes of Xero, FreeAgent and QuickBooks Online lurking with intent. Xero made the first move and is currently the best positioned to support accountants who want to cater for the MTD ITSA generation. But FreeAgent has stolen the lead with its niche landlord option for one of the biggest client populations in this camp.

A look at HMRC’s list of currently available MTD ITSA programs reveals three names that may be mildly unfamiliar to practitioners: Apari, Cirrostratus and untied. While the nuances of double-entry bookkeeping and tax compliance (not to mention shifting programming interfaces at HMRC’s end), these developers are more data wranglers who see the opportunity to carve out constituencies currently untended by established developers - and accountants. As Richard Sergeant has reported previously, the race for sole trader MTD solutions could be the space to watch as we try to work out who’s going to find the magic formula that shapes the next generation of tax and practice apps.

Replies (10)

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By Peter Bromiley
13th May 2022 11:00

The IRIS Elements suite link needs fixing. It goes to BTC.

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Replying to Peter Bromiley:
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By Hugo Fair
13th May 2022 11:52

He who pays the piper calls the tune!

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Replying to Peter Bromiley:
Jake Smith, AccountingWEB
By Jake Smith
13th May 2022 12:33

Thanks Peter, that's fixed!

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By MCV71
13th May 2022 11:33

The point of my post you refer to has been mis-read by you. I have been using cloud tax software for years. I was asking with the sell-out and mergers of the last few years, and the few remaining independents left seeming eyeing up large practices for clients, what is left for the smaller practices.

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Replying to MCV71:
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By Hugo Fair
13th May 2022 12:19

"The point of my post you refer to has been mis-read by you" ... along with much of the other 'data' I'm afraid.
The article reads like something emanating from politicians - where you decide on the desired outcome before trying to find supporting 'evidence' ... instead of collecting the evidence first and seeing what outcome results from it all.

There's no need for a battle between 'cloud' and 'non-cloud' software (from the user's perspective).
It's a 'problem' engineered by the software companies who can save money three times over via cloud ... 1 vs 2 platforms to maintain, lends itself more easily to the subscription model, and allows most of the support to be (re)moved.

But those who handle large bulk volumes of data, or have intensive processing needs such as complex reporting or data manipulation, or (as reported on recent threads) want to be in control of the data (for error correction and/or audits for example) will never be well served by the cloud model ... as it's not what it's for.

It's like complaining that a river-raft is horrendously unwieldy when trying to traverse a dry river-bed ... horses for courses et al.

Cloud apps have their place (and did before some marketeer invented the label) ... mostly where 'ease of use' trumps poor performance and a lack of robustness ... but there's absolutely no plan by HMRC to replace all their monolithic mainframe databases with a suite of cloud apps with which to run the country's tax system!
They DO need re-designing (the lack of grabbing that nettle is why RTI and many new systems since aren't truly integrated), but even HMRC know that you don't lance a boil by amputating the infected limb!

My forecast, for what it's worth, is that MTD will cause a further rise in sales of cloud software (the power of marketing and fear) ... but that this will peak within 24 months and move on to being regarded as the primary cause of the failures that will seep out of the MTD project (followed by a collapse of the major players).

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By Silver Birch Accts
13th May 2022 14:04

Cirrostratus, I though that was a liver disease caused by alcohol.
No? I will get my coat.

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Replying to Silver Birch Accts:
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By Hugo Fair
13th May 2022 14:27

As should the person who named the company ...
Cirrostratus = cloud forming a thin, more or less uniform semi-translucent layer at high altitude indicating a large amount of moisture.

Thin / more or less / semi-translucent / a large amount of moisture ... take your pick as to which of these would ideally describe your choice of accounting system!

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By MCV71
13th May 2022 16:10

"There’s no little irony in seeing all these compliance programs come to life within cyberspace just at the point when the classic Windows-era annual self assessment process is moving into its twilight years."

We'll see how well this comment ages when MTDfIT is delayed yet again.....

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ghm
By TaxTeddy
14th May 2022 09:07

This article really made me stop and think why I have such a downer on cloud solutions.

I think partly it's because they are over-hyped. I have always had the approach to software that if it makes my workflow genuinely easier and more efficient I am keen to embrace it, although by nature I am not an early adopter who must have the latest, shiniest software package (my current version of Mac OS X is three releases behind the current one).

But do you know what, I think the other thing which really bugs me is the idea of paying for software as a service.

In other words paying a monthly standing order. I cut my computing teeth in times when you bought software and had it for life - and probably you chose to update it at some later date because of all the new features.

That now seems to be turned on its head whereby the supposed new features become a justification for the increase in monthly subscription. So now I am left paying a higher monthly fee for features I didn't want in the first place.

For me, this causes two problems. The first is financial because I am now overpaying for what I actually need in terms of software. And the second thing is recognising that I am approaching "burnout" in learning new software unnecessarily so I therefore have a natural resistance to it.

In a small practice I have enough to do interacting with clients. What I don't need is my software suppliers updating the user interface to make it more "shiny" or changing the way the features work (TaxFiler is a case in point this year as it's now much more complex to add rental data on a tax return compared to 2021) because this simply adds to my burden of things to get my head round - with no tangible benefit.

I realise we are stuck with this because software suppliers are never going to move from the subscription model. Why should they? So the only option left to me is to minimise the amount of software I actually use. It's no surprise that despite looking closely at at least a dozen options we have never embraced practice management software and still work with reliable and flexible spreadsheets.

And, moving forward you might not be surprised to learn that my MTDIT strategy will be entirely spreadsheet based because it will be efficient, predictable, reliable, cheap and exactly what I want - no more, no less.

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Replying to TaxTeddy:
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By MCV71
14th May 2022 10:49

I have found all the PM options overly complicated and more time-consuming than my simple spreadsheets and I've never missed a deadline in 10 years of business using these.
Too often nowdays it feels like using software for the sake of it and almost reminds me of The Emperor's New Clothes fable.
The subscription model is a blight on the industry.

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